FIRST DIVISION

[G.R. No. 114761. January 19, 2000]

ALEMARS SIBAL & SONS, INC., petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, NLM-KATIPUNAN (representing the
group of CHARITO ALIMORONG), respondents.

DECISION

PARDO, J.:

The petition before the Court is for certiorari[1] to set aside the resolutions of the
National Labor Relations Commission[2] dismissing the appeal of petitioner and
upholding the order of the Labor Arbiter to proceed with the execution of the decision
rendered in favor of private respondent.

On January 30, 1984, private respondent NLM Katipunan, representing the group of
Charito Alimurong, filed with the Department of Labor and Employment a notice of
strike,[3] raising charges of unfair labor practice (ULP) and illegal dismissal against
petitioner. Thereafter, the charges were elevated to respondent National Labor
Relations Commission (NLRC) for compulsory arbitration.[4]

On April 29, 1985, Labor Arbiter Emilio V. Pealosa rendered a decision[5] ordering
petitioner to pay private respondent separation pay equivalent to one-half () month
pay for every year of service.

On December 23, 1985, the Research and Information Unit of the NLRC submitted its
computation of the separation pay due to private respondent, which amounted to a
total of P207,365.33.

On January 4, 1988, private respondent filed with the Labor Arbiter a motion for
execution of the decision of the Labor Arbiter. Petitioner did not file any opposition
thereto.

At the hearing held on April 19, 1988, petitioner and private respondent agreed to the
computation of the separation pay. The terms of settlement are as follows:

"As agreed upon by the parties, a downpayment of P20,736.53 will be

paid in May 1988 which is equivalent to 10% of the total money
judgment. In June 1988, P41,473.06 will be paid by respondent and the
rest covering the initial forty four (44) will be paid July 1988. The
balance of the P207,365.20 will be spread over a fifteen (15) months
period."
 "(Sgd) Counsel .....................(Sgd) Counsel
for Complainant.....................for Respondent"[6]

Thus, Labor Arbiter Jose de Vera directed petitioner to pay the agreed amount of
P20,736.53 representing 10% of the total amount of the separation pay due the
complainants on May 16, 1988.

On June 10, 1988, the Rehabilitation Receiver of petitioner submitted a Manifestation

with Motion,[7] alleging that petitioner was not yet in a position to comply with the
directive of Labor Arbiter de Vera for the reason that it was still under Rehabilitation
Receivership by virtue of the order of the Securities and Exchange Commission (SEC)
dated August 1, 1984. Thus, it sought deferment of such payment until the SEC will
issue an order formally approving the rehabilitation of petitioner and allowing
complainants to file their claims with the Rehabilitation Receiver.

Due to the failure of petitioner to comply with its obligation to pay the first batch of
complainants their separation pay, the Labor Arbiter granted the motion for execution
of private respondent in an order dated July 18, 1988.

On August 5, 1988, petitioner filed a motion for reconsideration of the order granting
the motion for execution, contesting the amount computed by the Research
Information Unit of the National Labor Relations Commission.

On September 9, 1988, Labor Arbiter Jose De Vera denied the motion, stating as
follows:

"respondent failed to manifest any objection or to submit its comment

on the computation made by the Research and Information Unit, this
Branch. In fact, on March 17, 1988, it submitted a proposal as to how
the complainants claim for separation pay would be satisfied. Further,
when the complainants agreed to accept payment of their separation
pay on scheduled basis, the first payment of P20,736.53 scheduled in
May 1988, which was agreed upon by the parties, said respondent
failed to comply and instead, it filed a Manifestation with Motion
praying for the deferment of execution until the Securities and
Exchange Commission issues an Order formally approving the
rehabilitation of the respondent.

Besides, the respondent Motion for Reconsideration is filed out of time

considering that as per bailiffs return, respondent received the
questioned Order on July 26, 1988 while its Motion was filed only on
August 5, 1988, or more than ten (10) days from receipt of the
Order."[8]

On September 26, 1988, petitioner filed with the Labor Arbiter a Motion to Suspend
Execution,[9] citing as reason therefor the order issued by the Securities and Exchange
Commission which states:
 "All actions for claims against the corporation before any court,
tribunal or body are suspended accordingly."[10]

On October 27, 1988, petitioner appealed the Labor Arbiters order[11] for the issuance
of a writ of execution to the NLRC. In a decision dated October 13, 1993, the NLRC
dismissed the appeal. On February 2, 1994, the NLRC likewise denied the petitioners
motion for reconsideration.

Hence, this petition.[12] Juris

Petitioner contends that public respondent should have denied the order of the Labor
Arbiter for the immediate payment of separation pay in favor of private respondent.
Petitioner insists that a stay of execution of monetary award is justified in this case
because of the order of the Securities and Exchange Commission suspending all
claims against petitioner pending before any court, tribunal or body.

The Solicitor General, in his Manifestation,[13] recommends that the petition be given
due course without prejudice to the subsequent receipt of separation pay by private
respondent in accordance with the preference and concurrence of credits under the
Civil Code, the Insolvency Law and Article 110 of the Labor Code.

Respondent National Labor Relations Commission, on the other hand, contends that
petitioner is bound by its agreement with private respondent as to the computation of
separation pay to be paid. The NLRC emphasizes that the order of execution made by
the Labor Arbiter had reached finality and stresses that petitioners succeeding motions
had been filed out of time.[14]

We note that at the time this petition had been filed on May 4, 1994, petitioner had
been placed under rehabilitation receivership. Jurisprudence has established that a
stay of execution may be warranted by the fact that a petitioner corporation has been
placed under rehabilitation receivership.[15] However, it is undisputed that on March 5,
1997, the Securities and Exchange Commission issued an order approving the
proposed rehabilitation plan of petitioner and placing it under liquidation pursuant to
Presidential Decree 902-A. Subject to the control of the SEC, the liquidator, Ledesma,
Saludo & Associates,[16] was ordered to "wind up the affairs of the corporation,
continue to manage the corporation for purposes of liquidation in order to protect the
interest of its creditors and avoid dissipation, loss, wastage, or destruction of the
remaining assets and other properties of the corporation and to ensure orderly
payment of claims against such corporation in accordance with applicable
laws."[17] Scjuris

Thus, petitioner pointed out that the SECs order suspending all claims against it
pending before any other court, tribunal or body was pursuant to the rehabilitation
receivership proceedings. Such order was necessary to enable the rehabilitation
receiver to effectively exercise its powers free from any judicial or extra-judicial
interference that might unduly hinder the rescue of the distressed company.[18] Since
receivership proceedings have ceased and petitioners rehabilitation receiver and
liquidator, Ledesma Saludo & Associates, has been given the imprimatur to proceed
with corporate liquidation, the cited order of the Securities and Exchange Commission
has been rendered functus officio. Thus, there is no legal impediment for the execution
of the decision of the Labor Arbiter for the payment of separation pay.

Considering that petitioners monetary obligation to private respondent is long overdue

and that petitioner has signified its willingness to comply with such obligation by
entering into an agreement with private respondent as to the amount and manner of
payment, petitioner can not delay satisfaction of private respondents claim. However,
due to events subsequent to the filing of this petition, private respondent must present
its claim with the rehabilitation receiver and liquidator of petitioner, subject to the
rules on preference of credits.

WHEREFORE, the Court hereby DISMISSES the petition and directs private
respondent to file its claim with the rehabilitation receiver/ liquidator of petitioner in
SEC EB No. 81 entitled "In the Matter of the Liquidation of Alemars Sibal & Sons"
pending before the Securities and Exchange Commission.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago,

JJ, concur.2/17/00 9:47 AM

[1]
Under Rule 65 of the 1964 Revised Rules of Court.
[2]
Dated October 13, 1993 and February 2, 1994 in NLRC NCR Case No. 4-3492-84.
[3]
Docketed as NCB-MS-015-84.
[4]
Docketed as NLRC NCR Case No. 4-3492-84.
[5]
Rollo, pp. 43-48.
[6]
Rollo, pp. 26-27.
[7]
Rollo, pp. 50-51.
[8]
Rollo, pp. 51-52.
[9]
Rollo, pp. 55-61.
[10]
Rollo, p. 63.
[11]
Dated September 9, 1988.
[12]
Filed on May 4, 1994.
[13]
Dated September 19, 1994, Rollo, pp. 79-93.
[14]
Comment filed April 3, 1995, Rollo, pp. 108-115.
[15]
Alemars Sibal & Sons, Inc. vs. Elbinias, 186 SCRA 94 (1990)
[16]
As per Order of the Securities and Exchange Commission in SEC EB No. 81 entitled "In the Matter
of the Liquidation of Alemars Sibal & Sons," Rollo, pp. 148-149.
[17]
See Order, Rollo, p. 148.
[18]
Bank of the Philippine Islands vs. Court of Appeals, 229 SCRA 223 (1994)
 THIRD DIVISION

[G.R. No. 142049. January 30, 2001]

GERMAN MARINE AGENCIES, INC. and LUBECA MARINE

MANAGEMENT HK LTD., petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and FROILAN S. DE
LARA, respondents.

DECISION
GONZAGA-REYES, J.:

On 17 October 1994, private respondent was hired by petitioners to work as a

radio officer on board its vessel, the M/V T.A. VOYAGER. Sometime in June, 1995,
while the vessel was docked at the port of New Zealand, private respondent was taken
ill. His worsening health condition was brought by his crewmates to the attention of
the master of the vessel. However, instead of disembarking private respondent so that
he may receive immediate medical attention at a hospital in New Zealand, the master
of the vessel proceeded to Manila, a voyage of ten days, during which time the health
of private respondent rapidly deteriorated. Upon arrival in Manila, private respondent
was not immediately disembarked but was made to wait for several hours until a
vacant slot in the Manila pier was available for the vessel to dock. Private respondent
was confined in the Manila Doctors Hospital, wherein he was treated by a team of
medical specialists from 24 June 1995 to 26 July 1995.
After private respondent was discharged from the hospital, he demanded from
petitioners the payment of his disability benefits and the unpaid balance of his
sickness wages, pursuant to the Standard Employment Contract of the parties. Having
been assured by petitioners that all his benefits would be paid in time, private
respondent waited for almost a year, to no avail. Eventually, petitioners told private
respondent that, aside from the sickness wages that he had already received, no other
compensation or benefit was forthcoming.[1] Private respondent filed a complaint with
the National Labor Relations Commission (NLRC) for payment of disability benefits
and the balance of his sickness wages. On 31 July 1997, the labor arbiter rendered a
decision,[2] the pertinent parts of which are quoted hereunder

In the case at bar, there is no issue on the propriety or illegality of

complainants discharge or release from employment as Radio
Operator. What complainant is pursuing is limited to compensation benefits
due a seaman pursuant to POEA Standard Employment Contract, Part II,
Section C, paragraph 4(c) and paragraph 5, which reads:
SECTION C. COMPENSATION BENEFIT

xxx

4. The liabilities of the employer when the seaman suffers injury or illness
during the term of his contract are as follows:

xxx

c. The employer shall pay the seaman his basic wages from the time he
leaves the vessel for medical treatment. After discharge from the vessel, the
seaman is entitled to one hundred percent (100%) of his basic wages until he
is declared fit to work or the degree of permanent disability has been
assessed by the company-designated physician, but is [sic] no case shall this
period exceed one hundred twenty (120) days. For this purpose, the seaman
shall submit himself to a post-employment medical examination by the
company-designated physician within three working days upon his return,
except when he is physically incapacitated to do so, in which case the
written notice to the agency within the same period is deemed as compliance
x x x.

5. In case of permanent total or partial disability of the seamen [sic] [during]

the term of employment caused by either injury or illness, the seamen [sic]
shall be compensated in accordance with the schedule of benefits
enumerated in Appendix 1 of this Contract. Computation of his benefits
arising from an illness or disease shall be governed by the rates and the rules
of compensation applicable at the time of [sic] the illness or disease was
contracted.

The aforecited provisions of the POEA Standards [sic] Employment

Contract is clear and unmistakable that its literal meaning should be
preserved.

Thus, the only question at which the liability of respondents is anchored is

whether complainant was really fit to work in his position as radio
operator. If this is so, it could mean that he is not entitled to disability
compensation which respondents vigorously disputed, citing in support the
certification made by Dra. Victoria Forendo [sic] Cayabyab, allegedly the
officially accredited and designated physician of respondents, which is
likewise, accredited with the Philippine Overseas Employment
Administration where it is stated that Nothing [sic] his job description as a
radio operator, Mr. de Lara may be allowed to go back to work. (Annex D &
E). Complainant on the other hand disputes respondents above posture
contending that the more persuasive and authentic evidence for purposes of
deciding his fitness or lack of fitness to work is the certificate issued by Ms.
Naneth [sic] Domingo-Reyes, MD, FPMA where it appears that after
submitting himself to another medical examination by his attending
physicians at the Manila Doctors Hospital on December 4, 1996, to verify
possible mistake in his post treatment examination on March 25, 1996,
firmly was classified under partial permanent disability and is not fit to go
back to his previous work due to mental state. (Annex C, complainants reply
to respondents position paper).

We have gone into a judicious study and analysis of the arguments and
exhibits particularly the ones relied upon by the parties and find that of the
complainant worthy of consideration. Looking closely at Annexes D and E
of respondents position paper, there is hardly any clear affirmation that
complainant was fully fit to resume his work as radio operator. Although the
document alluded to, declares that complainant may be allowed to go back
to work, the tenor of the same seems uncertain that complainant is fit to
resume his work, and that assuming that such was the message, the words
may be can not be taken as overriding that coming from the Manila Doctor
Hospital which in the beginning handled the medical case of complainant
and to which respondents unconditionally referred him and by reason of
which six or seven medical especialists [sic] of the hospital took turn[s]
studying and reviewing his uncertain ailment after release by
respondents. Otherwise stated, unlike the message of annexes D to E of
respondents, annex C of complainant is clear and unmistakable and confirm
complainants partial permanent disability and his definite unfitness to go
back to his previous work due to his mental health. Some pronouncements
in this exhibit mentions also that when complainant was admitted an
emerging basis for drowsiness, behavioral change and off and on fever and
different procedures were resorted along his case, like emergency CT scan
on the brain and his admission in June 24, 1995 was catastropic, whereas,
more could be said in three document[s] issued by Dra. Victoria Florendo
Cayabyab.

Finally, respondents contend that the annexes issued by Dr. Domingo-Reyes

of the Manila Doctors Hospital should not be given weight because it is not
issued by the hospital or doctor duly accredited by the POEA. Neither would
a close look on the applicable provision for seamen show that a duly
accredited hospital or doctor is needed for purposes of the grant of
compensation benefits to a such [sic] or ailing seamen. We are more
persuaded based on the arguments of the complainant among others, that it
is absurd to require an ailing seaman in high seas or in a foreign land to still
wait until the ship where he is working land in the country to secure
treatment in a duly accredited hospital or doctor.

On the basis of the above therefore, and convinced that complainants partial
permanent disability which was contracted in the course or on account of his
employment as radio operator in foreign principals vessel, he is entitled to
disability benefit in accordance with the schedule of benefits enumerated in
Appendix 1 of the Contract, the maximum of which is US $50,000. But
since the amount prayed for is US$25,000.00 which we presume has a more
realistic basis, the same is hereby granted.

Concerning the sickness wage, respondents averred that the same had
already been paid. However, there is no evidence that the same has been
paid except the payment to the complainant of P49,546.00. Since
complainants salary as US$870 and a seamans sick wage entitlement is
fixed to a maximum of 120 days, his sickness wages would rest to a total
sum of US$3,480 or its peso equivalent. On this, complainant has been paid
only [P]49,546.00 (US$1,943), thereby leaving for complainant a balance of
US$1,537. Finally, it is also argued that as regards the balance, the same has
been paid citing as proof the Sickness Release and Quitclaim signed by
complainant (Annexes C & C-1). Complainant, on the other hand denied
this, and contended that the quitclaim and release is invalid. Considering
that there is no proof on record that this balance of US$1,537 was paid,
unlike the P49,546.00, the same is granted.

WHEREFORE, premises above-considered, a decision is hereby issued

ordering respondent German Marine Agencies Inc. to pay complainant the
following sums:

(a) Disability benefit - - - - - - - - - - - - - - US$25,000.00

(b) Sickness wage balance - - - - - - - - - - US$1,137.00

all in the aggregate of Twenty Six Thousand One Hundred Thirty Seven
Dollars (US$26,137.00) or its peso equivalent, the claim for damages being
hereby dismissed for lack of merit, plus ten (10%) percent attorneys fees.

SO ORDERED.

On 29 July 1998, the NLRC[3] affirmed the labor arbiters decision in toto and
declared that the latters findings and conclusions were supported by substantial
evidence.[4] After its motion for reconsideration was denied by the NLRC on 20 May
1999, petitioners repaired to the Court of Appeals.[5] The appellate courts assailed
decision was promulgated on 1 December 1999, upholding the decision of the NLRC,
with the modification that petitioners were ordered to pay private respondent
exemplary damages in the amount of P50,000.00. The appellate court reasoned out its
decision,[6] thus -

The basic issue here is: Whether or not petitioner is liable to pay private
respondents claim as awarded by the NLRC, and whether or not there was
abuse of discretion on the part of the NLRC in affirming such decision on
appeal? To resolve this issue, this Court took time in looking closely at the
pertinent provision of the Standard Employment Contract Governing the
Employment of Filipino Seafarers on Board Ocean-Going Vessels,
particularly PART II, SECTION C, par. no. 4 (c), and par. no. 5, which
states as follows:

SECTION C. COMPENSATION AND BENEFITS

4. The liabilities of the employer when the seaman suffers injury or illness
during the term of his contract are as follows:

xxxx

c. The employer shall pay the seaman his basic wages from the time he
leaves the vessel for medical treatment. After discharge from the vessel the
seaman is entitled to hundred percent (100%) of his basic wages until he is
declared fit to work or his degree of permanent disability has been assessed
by the company-designated physician, but in no case shall this period
exceed one hundred twenty (120) days. x x x x

5. In case of permanent total or partial disability of the seaman during the

term of his employment caused by either injury or illness the seaman shall
be compensated in accordance with the schedule of benefits enumerated in
Appendix 1 of his Contract. Computation of his benefits arising from an
illness or disease shall be governed by the rates and the rules of
compensation applicable at the time the illness or disease was contracted.

xxx...

A cursory reading of these applicable contractual provisions and a thorough

evaluation of the supporting evidence presented by both parties, lends strong
credence to the contentions and arguments presented by private respondent.

The award of disability compensation has a clear and valid basis in the
Standard Employment Contract and the facts as supported by the medical
certificate issued by Dr. Nannette Domingo-Reyes of the Manila Doctors
Hospital. Petitioners contention, that Dr. Domingo-Reyes is not company
designated is far from the truth. The designation of the Manila Doctors
Hospital by petitioners as the company doctor for private respondent cannot
be denied. Their very act of committing private respondent for treatment at
the Manila Doctors Hospital under the care of its physician is tantamount to
company designation.The very act of paying the hospital bills by the
petitioners constitutes their confirmation of such designation. Hence,
petitioners cannot resort to the convenience of denying this fact just to evade
their obligation to pay private respondent of his claims for disability benefit.

This Court also finds no basis on (sic) the petitioners contention that the
company-designated [physician] must also be accredited with the POEA
before he can engage in the medical treatment of a sick seaman. There is
nothing in the Standard Employment Contract that provides this
accreditation requirement, and even if there is, this would be absurd and
contrary to public policy as its effect will deny and deprive the ailing
seaman of his basic right to seek immediate medical attention from any
competent physician. The lack of POEA accreditation of a physician who
actually treated the ailing seaman does not render the findings of such
physician (declaring the seaman permanently disabled) less authoritative or
credible. To our mind, it is the competence of the attending physician, not
the POEA accreditation, that determines the true health status of the
patient-seaman, which in this instant case, is [sic] the attending physicians
from the Manila Doctors Hospital.

As to the award of the balance of wages, this Court is inclined not to disturb
the factual findings of the NLRC. The failure of the petitioners to present a
strong and credible evidence supporting the fact of alleged payment of the
balance of sickness justifies the award of such claim. The long standing
doctrine in labor cases that in case of doubt, the doubt is resolved in favor of
labor applies. For there are indications that the evidence presented by
petitioners appears to be of dubious origin as private respondent challenged
the petitioners to present the original copy of the quitclaim and the vouchers
in a motion demanding from petitioners to produce the original copy of
those documents purporting to show that he had received the alleged sum
of P39,803.30, which allegedly shows the payment of the balance of his
sickness wages. This motion was vehemently opposed by petitioners. To our
mind, such opposition only created more doubts and eroded the veracity and
credence of petitioners documentary evidence.
As to the award of attorneys fees, the same is justified by the fact that
private respondent actually hired the services of a lawyer to vindicate his
right to claim for his disability benefit which is being arbitrarily denied to
him by petitioners. Had it not been for the arbitrary denial of petitioners,
private respondent could not have been compelled to hire the services of a
lawyer to pursue his claims in court, for which he is presumed to have
incurred costs.

With respect to private respondents claim for damages, this Court finds that
the NLRC overlooked the attendance of negligence on the part of petitioners
in their failure to provide immediate medical attention to private
respondent. It further appears that negligence not only exists but was
deliberately perpetrated by petitioners by its arbitrary refusal to commit the
ailing private respondent to a hospital in New Zealand or at any nearest port
deprived of his right to immediate medical attention by petitioners, which
resulted to the serious deterioration of his health that caused his permanent
partial disability. Such deprivation of immediate medical attention appears
deliberate by the clear manifestation from petitioners own words which
states that, the proposition of the complainant that respondents should have
taken the complainant to the nearest port of New Zealand is easier said than
done. It is worthy to note that deviation from the route of the vessel will
definitely result to loss of a fortune in dollars not only to the respondents but
likewise to the owners of the cargoes being shipped by the said vessel.

By petitioners own statement, they reveal their utter lack of concern for their
Filipino crew. This kind of attitude cannot be taken to pass by this Court
without appropriate sanction by way of payment of exemplary damages, if
only to show that the life of a Filipino crew must be accorded due attention
and respect by the petitioners. For after all, had it not been for the toils of
this crew, among others, petitioners would not be doing as good in their
business and making fortunes in dollars.

In affirming the decision of the Labor Arbiter, this Court finds that the
NLRC never abused its discretion nor exceeded its jurisdiction.

Hence, this Court finds no valid basis to disturb the findings of the NLRC.

WHEREFORE, the decision of the NLRC dated 29 July 1998, and the Order
dated 20 May 1999, are hereby AFFIRMED, and in addition thereto,
petitioners are ordered to pay exemplary damages to private respondent in
the sum of Fifty Thousand Pesos (P50,000.00).
SO ORDERED.

Petitioners motion for reconsideration was denied by the Court of Appeals in its
Resolution of 11 February 2000. Hence, the present appeal.
Disability Benefits
Petitioners contend that the existence and degree of a seamans disability must be
declared by a company-designated physician who must be accredited with the
POEA. Following this line of reasoning, petitioners claim that private respondent is
not entitled to disability benefits because he was found fit to return to work by Dr.
Victoria Florendo Cayabyab, the designated physician of petitioners, who is also
accredited with the POEA.[7]
Disagreeing with petitioners stand, the labor arbiter ruled that, for purposes of
determining compensation benefits under the Standard Employment Contract, an
ailing seaman need not have his condition assessed by a doctor or hospital accredited
with the POEA. Consequently, the labor arbiter gave more weight to the opinion of
the specialists from the Manila Doctors Hospital who treated private respondent and
declared him as having sustained a partial permanent disability and unfit to go back to
his previous work.[8] Meanwhile, the Court of Appeals held that petitioners act of
committing private respondent for treatment at the Manila Doctors Hospital and of
paying his hospital bills therein is tantamount to company-designation, and therefore,
the certificate issued by Dr. Nanette Domingo-Reyes of the Manila Doctors Hospital
describing private respondent as suffering from a partial permanent disability should
be construed as decisive in the matter of private respondents entitlement to disability
benefits. The appellate court also declared that nothing in the Standard Employment
Contract requires the company-designated physician or hospital to also be accredited
with the POEA.[9]
In the case at bar, the parties are at odds as to the proper interpretation of the
POEA Standard Employment Contract Governing the Employment of All Filipino
Seamen On Board Ocean-Going Vessels (Standard Employment Contract),
particularly Part II, Section C thereof, which provides that
xxx xxx xxx

4. The liabilities of the employer when the seaman suffers injury or illness
during the term of his contract are as follows:

a. The employer shall continue to pay the seaman his basic wages during the
time he is on board the vessel;

b. If the injury or illness requires medical and/or dental treatment in a

foreign port, the employer shall be liable for the full cost of such medical,
dental, surgical and hospital treatment as well as board and lodging until the
seaman is declared fit to work or to be repatriated.
However, if after repatriation the seaman still requires medical attention
arising from said injury or illness, he shall be so provided at cost to the
employer until such time he is declared fit or the degree of his disability has
been established by the company-designated physician.

c. The employer shall pay the seaman his basic wages from the time he
leaves the vessel for medical treatment. After discharge from the vessel the
seaman is entitled to one hundred percent (100%) of his basic wages until he
is declared fit to work or the degree of permanent disability has been
assessed by the company-designated physician, but in no case shall this
period exceed one hundred twenty (120) days. For this purpose, the seaman
shall submit himself to a post-employment medical examination by the
company-designated physician within three working days upon his return
except when he is physically incapacitated to do so, in which case a written
notice to the agency within the same period is deemed as compliance.
Failure of the seaman to comply with the mandatory reporting requirement
shall result in his forfeiture of the right to claim the above benefits.

xxx xxx xxx

5. In case of permanent total or partial disability of the seaman during the

term of employment caused by either injury or illness the seaman shall be
compensated in accordance with the schedule of benefits enumerated in
Appendix 1 of his Contract. Computation of his benefits arising from an
illness or disease shall be governed by the rates and the rules of
compensation applicable at the time the illness or disease was contracted.

xxx xxx xxx

Petitioners contention that the existence and grade of a seamans disability must
be pronounced by a physician accredited by the POEA does not find any support in
the abovecited provision, nor in any other portion of the Standard Employment
Contract. In order to claim disability benefits under the Standard Employment
Contract, it is the company-designated physician who must proclaim that the seaman
suffered a permanent disability, whether total or partial, due to either injury or illness,
during the term of the latters employment. There is no provision requiring
accreditation by the POEA of such physician.In fact, aside from their own gratuitous
allegations, petitioners are unable to cite a single provision in the said contract in
support of their assertions or to offer any credible evidence to substantiate their
claim.If accreditation of the company-designated physician was contemplated by the
POEA, it would have expressly provided for such a qualification, by specifically
using the term accreditation in the Standard Employment Contract, to denote its
intention. For instance, under the Labor Code it is expressly provided that physicians
and hospitals providing medical care to an injured or sick employee covered by the
Social Security System or Government Service Insurance System must be accredited
by the Employees Compensation Commission.[10] It is a cardinal rule in the
interpretation of contracts that if the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulation shall
control.[11] There is no ambiguity in the wording of the Standard Employment Contract
the only qualification prescribed for the physician entrusted with the task of assessing
the seamans disability is that he be company-designated. When the language of the
contract is explicit, as in the case at bar, leaving no doubt as to the intention of the
drafters thereof, the courts may not read into it any other intention that would
contradict its plain import.[12]
The word designate means to specify, to mark out and make known, to identify
by name, to indicate, to show, to distinguish by mark or description, or to set apart for
a purpose or duty.[13] The Court agrees with the appellate courts ruling that petitioners
act of committing private respondent for treatment at the Manila Doctors Hospital and
paying the hospital bills therein is tantamount to company-designation. By such
unequivocal acts, petitioners clearly set apart and distinguished the Manila Doctors
Hospital, together with its team of specialists, as the ones qualified to assess the
existence and degree of private respondents disability and thereby resolve the
question of the latters entitlement to disability benefits under the Standard
Employment Contract.
In addition to their having been effectively designated by petitioners, it was the
physicians from the Manila Doctors Hospital who examined and treated private
respondent for a little more than one month, subjecting the latter to a series of medical
procedures, such as medical therapy, neurological surgical drainage for brain abscess,
bilateral thalamic area S/P craniotomy (Burr Hole), and opthalmological (orbit)
surgery for socket revision and reconstruction of his left eye. The extensive medical
attention given to private respondent enabled the Manila Doctors Hospital specialists
to acquire a detailed knowledge and familiarity with private respondents medical
condition.[14] No doubt such specialized knowledge enabled these physicians to arrive
at a much more accurate appraisal of private respondents condition, including the
degree of any disability which he might have sustained, as compared to another
physician not privy to private respondents case from the very beginning. Thus, the
appellate court was not mistaken in giving more weight to the certificate issued by Dr.
Nanette Domingo-Reyes of the Manila Doctors Hospital dated December 4, 1996,
than to the one issued by Dr. Victoria Florendo Cayabyab.
On the strength of Dr. Domingo-Reyess medical certificate which stated that
private respondent can be classified under partial permanent disability and is not fit to
go back to his previous work due to his mental state, the labor arbiter awarded
$25,000.00 as disability benefits, which award was upheld by the NLRC and the
appellate court. Petitioners insist that there is no factual basis for the award of
$25,000.00 since there is no finding as to the grade of permanent partial disability
sustained by private respondent, in accordance with Appendix 1 of the Standard
Employment Contract (Schedule of Disability or Impediment For Injuries Suffered
and Diseases or Illness Contracted), and therefore, no means of determining the exact
amount of compensation to which private respondent may be entitled.[15]
 The Court does not agree with petitioners position. Under the Standard
Employment Contract the grade of disability suffered by the seaman must be
ascertained in accordance with Appendix 1 of such contract, which is partially
reproduced herein -

Appendix 1

SCHEDULE OF DISABILITY OR IMPEDIMENT

FOR INJURIES SUFFERED AND OR ILLNESS CONTRACTED

HEAD

Traumatic head injuries that result to:

1. Apperture unfilled with bone not over

three (3) inches without brain injury . . . . . . . . . . . . . . . . Gr. 9
2. Apperture unfilled with bone over
three (3) inches without brain injury . . . . . . . . . . . . . . . . Gr. 3
3. Severe paralysis of both upper or
lower extremities or one upper and one
lower extremity . . . . . . . . . . . . . . . . . . . . . . . Gr. 1
4. Moderate paralysis of two (2) extremities
producing moderate difficulty in
movements with self care activities . . . . . . . . . . . . . . . . Gr. 6
5. Slight paralysis affecting one extremity
producing slight difficulty with self-care
activities . . . . . . . . . . . . . . . . . Gr. 10
6. Severe mental disorder or Severe Complex
Cerebral function disturbance or post
traumatic psychoneurosis which require
regular aid and attendance as to render worker
permanently unable to perform any work . . . . . . . . . . Gr. 1
7. Moderate mental disorder or moderate brain
functional disturbance which limits worker
to the activities of daily living with some
directed care or attendance . . . . . . . . . . . . . . . Gr. 6
 8. Slight mental disorder or disturbance that
requires little attendance or aid and which
interferes to a slight degree with the working
capacity of the claimant . . . . . . . . . . . . . . . Gr. 10
9. Incurable imbecility . . . . . . . . . . . . . . . . . . . . . Gr. 1
Each grade under Appendix 1 has an equivalent disability allowance or benefit
expressed in terms of a percentage of the maximum amount of $50,000.00. This is
specified in Appendix 1-A of the Standard Employment Contract -

APPENDIX 1-A

SCHEDULE OF DISABILITY ALLOWANCES

Impediment Grace Impediment

1 Maximum Rate x 120.00%

2 x 88.81%

3 x 78.36%

4 x 68.66%

5 x 58.96%

6 x 50.00%

7 x 41.80%

8 x 33.59%

9 x 26.12%

10 x 20.15%

11 x 14.93%

12 x 10.45%

13 x 6.72%

14 x 3.74%
Maximum Rate: US$50,000.

To be paid in Philippine Currency equivalent at the exchange rate prevailing

during the time of payment.

Private respondent asked petitioner for disability benefits in the amount of

$25,000.00, or fifty percent (50%) of the maximum rate of $50,000.00, which, under
Appendix 1-A, is awarded when the seaman sustains a grade 6 disability. One of the
grade 6 head injuries listed in Appendix 1, specifically number seven (7), is described
as a moderate mental disorder or moderate brain functional disturbance which limits
worker to the activities of daily living with some directed care or attendance. This
coincides with Dr. Domingo-Reyes diagnosis of private respondents condition, as
follows -
xxx xxx xxx

Work-ups and Management:

Patient was admitted on an emergency bases for drowsiness, behavioral

change and on and off fever. This started with headaches since the first
week of June 1995 while on duty (on voyage). Patient progressively
deteriorated and arrived here already dehydrated with high grade
fever. (emphasis supplied)

Emergency CT Scan of the brain revealed rounded masses in both thalamus

on the brain; the larger mass was situated at the right.

Burr hole at the right parietal and drainage of the right thalamic abscess was
done on June 26, 1995. Repair of shallow fornix of left eye and biopsy was
done for culture studies thereafter.

Mr. De Lara stayed in the hospital for 33 days and was still in bedridden
state when discharge. He became ambulant on mid-August 1996 but his
cerebral functions (cognitive and behavioral) remain impaired.

This is his 18th month of illness. His admission last June 24, 1995 is
considered catastrophic. He now can be classified under partial permanent
disability and is not fit to go back to his previous work due to his mental
state.[16] (emphasis supplied)

xxx xxx xxx

Thus, the medical certificate of Dr. Domingo-Reyes is more than sufficient basis for
the award of disability benefits in the amount of $25,000.00 in favor of private
respondent.
Sickness wages

Petitioners assert that the award of $1,137.00, representing the balance of the
sickness wages owed to private respondent, is erroneous and in absolute disregard of
their documentary evidence - particularly the three check vouchers in the total amount
of P89,354.80, all issued in 1995 in favor of either private respondent or his wife, and
the Sickwages Release & Quitclaim - which, according to petitioners, taken together
would prove that they had paid private respondent the total amount of P89,354.80, or
$3,480.00, corresponding to the 120 days sickness wages as required under the
Standard Employment Contract.
Contrary to petitioners assertions, the labor arbiter held that only P49,546.00
($1,943.00) was paid by petitioners and that private respondent is still entitled to the
balance of the sickness wages in the amount of $1,537.00. According to the labor
arbiter, petitioners failed to prove that they had paid this amount to private respondent,
notwithstanding the document entitled Sickness Release & Quitclaim introduced by
petitioners in evidence, which was not given credence.[17] The NLRC and the Court of
Appeals concurred with the labor arbiter on this issue. The appellate court held that
the documentary evidence of petitioners was insufficient to support their
contentions.[18]
The Supreme Court has always accorded respect and finality to the findings of
fact of the NLRC, particularly if they coincide with those of the Labor Arbiter, when
supported by substantial evidence. The reason for this is that a quasi-judicial agency
like the NLRC has acquired a unique expertise because its jurisdiction is confined to
specific matters.[19] Whether or not petitioners actually paid the balance of the sickness
wages to private respondent is a factual question. In the absence of proof that the
labor arbiter or the NLRC had gravely abused their discretion, the Court shall deem
conclusive and cannot be compelled to overturn this particular factual finding.[20]

Damages

We affirm the appellate courts finding that petitioners are guilty of negligence in
failing to provide immediate medical attention to private respondent. It has been
sufficiently established that, while the M/V T.A. VOYAGER was docked at the port
of New Zealand, private respondent was taken ill, causing him to lose his memory and
rendering him incapable of performing his work as radio officer of the vessel. The
crew immediately notified the master of the vessel of private respondents worsening
condition. However, instead of disembarking private respondent so that he may
receive immediate medical attention at a hospital in New Zealand or at a nearby port,
the master of the vessel proceeded with the voyage, in total disregard of the urgency
of private respondents condition. Private respondent was kept on board without any
medical attention whatsoever for the entire duration of the trip from New Zealand to
the Philippines, a voyage of ten days. To make matters worse, when the vessel finally
arrived in Manila, petitioners failed to directly disembark private respondent for
immediate hospitalization. Private respondent was made to suffer a wait of several
more hours until a vacant slot was available at the pier for the vessel to dock. It was
only upon the insistence of private respondents relatives that petitioners were
compelled to disembark private respondent and finally commit him to a
hospital.[21] There is no doubt that the failure of petitioners to provide private
respondent with the necessary medical care caused the rapid deterioration and
inevitable worsening of the latters condition, which eventually resulted in his
sustaining a permanent disability.
In light of the foregoing, petitioners are liable for moral damages for the physical
suffering and mental anguish caused to private respondent.[22] There is no hard and
fast rule in the determination of what would be a fair amount of moral damages, since
each case must be governed by its own peculiar circumstances.[23] In the present case,
the Court considers the amount of P50,000.00 in moral damages as proper.[24]
Meanwhile, exemplary damages are imposed by way of example or correction for
the public good, pursuant to Article 2229 of the Civil Code. They are imposed not to
enrich one party or impoverish another but to serve as a deterrent against or as a
negative incentive to curb socially deleterious actions. While exemplary damages
cannot be recovered as a matter of right, they need not be proved, although plaintiff
must show that he is entitled to moral, temperate, or compensatory damages before
the court may consider the question of whether or not exemplary damages should be
awarded.[25] In quasi-delicts, exemplary damages may be granted if the defendant
acted with gross negligence.[26] Coming now to the case at bar, the appellate court
found that

negligence not only exists but was deliberately perpetrated by

petitioners by its arbitrary refusal to commit the ailing private
respondent to a hospital in New Zealand or at any nearest port which
resulted to the serious deterioration of his health that caused his
permanent partial disability. Such deprivation of immediate medical
attention appears deliberate by the clear manifestation from petitioners
own words which states that, the proposition of the complainant that
respondents should have taken the complainant to the nearest port of
New Zealand is easier said than done. It is worthy to note that deviation
from the route of the vessel will definitely result to loss of a fortune in
dollars not only to the respondents [petitioners herein] but likewise to
the owners of the cargoes being shipped by the said vessel.

Petitioners never denied making this statement. Given the prevailing circumstances,
the appellate courts award of P50,000.00 as exemplary damages is adequate, fair, and
reasonable.[27]
Although the labor arbiter awarded attorneys fees, which award was subsequently
affirmed by the NLRC and the Court of Appeals, the basis for the same was not
discussed in his decision nor borne out by the records of this case, and should
therefore be deleted. There must always be a factual basis for the award of attorneys
fees.[28] This is consistent with the policy that no premium should be placed on the
right to litigate.[29]
WHEREFORE, the 1 December 1999 Decision and 11 February 2000
Resolution of the Court of Appeals are AFFIRMED, with the modification that
petitioners must also pay private respondent P50,000.00 as moral damages and the
award of attorneys fees is deleted.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

[1]
Rollo, 72-73.1
[2]
Ibid., 41-52.2
[3]
First Division, composed of Commissioners Vicente S.E. Veloso, ponente; Rogelio I.
Rayala, presiding commissioner; and Alberto R. Quimpo.
[4]
Rollo, 54-65.
[5]
Thirteenth Division, composed of Justices Omar U. Amin, ponente; Hector L. Hofilena, chairman;
and Jose L. Sabio.
[6]
Rollo, 71-89.
[7]
Petitioners Memorandum, 11.
[8]
Rollo, 49-51.
[9]
Ibid., 85-86.
[10]
Labor Code, Book IV, Title II, Chapter I, Article 167(u), (v).
[11]
Civil Code, Article 1370; Palmares v. Court of Appeals, 288 SCRA 422 (1998).
[12]
Cruz v. Court of Appeals, 293 SCRA 239 (1998).
[13]
Words and Phrases, Permanent Edition,Designate, vol. 12, 415 (1954). Citing State v. Noah, 124
N.W. 1121, 1126, 20 N.D. 281; Colgrove v. U.S., C.A. Cal., 176 F.2d 614, 617; Lankford v. Pope, 57
S.E.2d 538, 540, 206 Ga. 430; Thrailkill v. Smith, 138 N.E. 532, 534, 106 Ohio St. 1; Hall v. Cotton,
180 S.W. 779, 781, 167 Ky. 464, L.R.A.1916C, 1124; State ex rel. Rocky Mountain Bell Tel. Co. v.
City of Red Lodge, 83 P. 642, 643, 33 Mont. 345, quoting and adopting definition in Webst.Int.Dict.;
Lowry v. Davis, 70 N.W. 190, 101 Iowa, 236, 239; Jewel Tea Co. v. City of Geneva, 291 N.W. 664,
669, 137 Neb. 768; St. Louis Police Relief Assn v. Tierney, 91 S.W. 968, 974, 116 Mo.App. 447.
[14]
Rollo, 49-50, 86.
[15]
Petitioners Memorandum, 12-13.
[16]
Records, 154.
[17]
Rollo, 51.
[18]
Ibid., 86-87.
[19]
Travelaire & Tours Corporation v. National Labor Relations Commission, 294 SCRA 505 (1998);
Suarez v. National Labor Relations Commission, 293 SCRA 496 (1998); Autobus Workers Union v.
National Labor Relations Commission, 291 SCRA 219 (1998); Prangan v. National Labor Relations
Commission, 289 SCRA 142 (1998); International Pharmaceuticals, Inc v. National Labor Relations
Commission, 287 SCRA 213 (1998); Villa v. National Labor Relations Commission, 284 SCRA 105
(1998).
[20]
Gandara Mill Supply v. National Labor Relations Commission, 300 SCRA 702 (1998); National
Union of Workers in Hotels, Restaurants and Allied Industries v. National Labor Relations
Commission, 287 SCRA 192 (1998).
[21]
Rollo, 72.
[22]
Civil Code, Article 2217.
[23]
Philippine National Bank v. Court of Appeals, 266 SCRA 136 (1997).
[24]
Ong v. Court of Appeals, 301 SCRA 387 (1999); Philtranco Service Enterprises, Inc. v. Court of
Appeals, 273 SCRA 562 (1997).
[25]
Del Rosario v. Court of Appeals, 267 SCRA 158 (1997).
[26]
Civil Code, Article 2231.
[27]
Petitioners have never questioned the jurisdiction of the labor arbiter or the NLRC over private
respondents claim for damages. See Zamboanga v. Buat, 243 SCRA 47 (1995); Ocheda v. Court of
Appeals, 214 SCRA 629 (1992).
[28]
Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291 SCRA 385 (1998).
[29]
Philtranco Service Enterprises, Inc. v. Court of Appeals, supra.

SECOND DIVISION

INTERCONTINENTAL G.R. No. 152843

BROADCASTING CORPORATION,
Petitioner,
Present:

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.
REYNALDO BENEDICTO, deceased,
substituted by his surviving spouse
LOURDES V. BENEDICTO, and children,
namely: REYNALDO V. BENEDICTO,
SHIRLEY V. BENEDICTO-TAN, EDGAR
V. BENEDICTO and LILIBETH V.
BENEDICTO-DE LA VICTORIA,*
Respondents. Promulgated:
 July 20, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CORONA, J.:

This is a petition for review on certiorari[1] of the October 18, 2001

decision[2] and March 18, 2002 resolution[3] of the Court of Appeals (CA)
in CA-G.R. SP No. 53413 which in turn affirmed the March 5, 1999
decision[4] and June 10, 1999 resolution[5] of the National Labor Relations
Commission (NLRC) in NLRC NCR CA Case No. 017886-99.

Petitioner alleged that Intercontinental Broadcasting Corporation is

a government-owned and controlled corporation.[6] It is engaged in the
business of mass media communications including, among others, the
operation of television Channel 13 (IBC 13).[7]

In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio,

the general manager[8] then of petitioner, as marketing manager with a
monthly compensation of P20,000 plus 1% commission from collections
of all advertising contracts consummated.[9]

In a letter dated October 11, 1994 signed by Tomas Gomez III, at

that time the president of petitioner, Benedicto was terminated from his
position.[10]

On December 3, 1996, Benedicto filed a complaint with the NLRC

for illegal dismissal and damages. He alleged that after his appointment,
he was able to increase the televiewing, listening and audience ratings of
petitioner which resulted in its improved competitive financial
strength.[11] Specifically, in 1994, he claimed that he successfully initiated,
pursued and consummated an advertising contract with VTV Corporation
for a period of five years involving the amount of P600
million.[12] However, on October 11, 1994, he was terminated from his
position without just or authorized cause.

Labor arbiter Jovencio LL. Mayor, Jr.,[13] in a decision dated

August 17, 1998, ruled in favor of Benedicto finding that he was indeed
illegally dismissed. Consequently, Mayor: (1) ordered his reinstatement
with full backwages from the time of his dismissal up to his actual
reinstatement (amounting
to P920,000 at the time of the promulgation of the decision); (2) directed
petitioner to pay his 1% commission on the contract with VTV
Corporation (P645,000), attorneys fees
in the amount of 10% of the total award(P156,500) and (3) dismissed the
claim for moral and exemplary damages.[14]

Finding the award excessive, petitioner, on October 15, 1998, filed

with the NLRC its memorandum on appeal with motion to re-compute
the award on which the appeal bond was to be based.[15] This motion was
not acted upon,[16] hence, on December 10, 1998, petitioner proceeded to
file the appeal bond based on the amounts[17] awarded in the judgment
appealed from.[18]

In a decision promulgated on March 5, 1999, the NLRC dismissed

the appeal and ruled that petitioner failed to perfect its appeal since it did
not file the appeal bond within the reglementary period. The CA affirmed
the NLRCs decision.
 Thus this petition with application for preliminary injunction
and/or temporary restraining order alleging the following assignment of
errors:

I. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING

THE ASSAILED DECISION/RESOLUTION OF THE [NLRC]
ON MERE TECHNICALITY, FAILING TO RECOGNIZE
THAT PETITIONER HAS IN FACT PERFECTED ITS
APPEAL UNDER EXISTING LAW AND
JURISPRUDENCE[;]

II. WITH DUE RESPECT, THE [CA] ERRED IN

AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION DEPRIVING PETITIONER OF
ITS RIGHT TO APPEAL, BY IGNORING THE MERITS OF
THE MOTION TO RECOMPUTE AWARD TO REDUCE
BOND AND ITS SIGNIFICANCE IN RELATION TO THE
PERFECTION OF THE APPEAL[;]

III. WITH DUE RESPECT, THE [CA] ERRED IN NOT

PASSING UPON THE SUBSTANTIVE MERITS OF THE
CASE, SPECIALLY ON THE VALIDITY OF THE
REINSTATEMENT OF [BENEDICTO] AT AGE SEVENTY
TWO (72), CONTRARY TO LAW AND JURISPRUDENCE,
AND THE GRANT OF BACKWAGES BEYOND [THE]
AGE FOR COMPULSORY RETIREMENT AT 65[;]

IV. WITH DUE RESPECT, THE [CA] ERRED IN

AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION THAT GRANTS 5-YEAR
AUTOMATIC INCREASE OF AWARD [SUCH] AS
FROM P1.565M TO 2.711M WITHOUT SETTING
[BENEDICTO]S MOTION TO RECOMPUTE AWARD FOR
HEARING AND WITHOUT DUE NOTICE THEREOF
DEPRIVING THE PETITIONER OF ITS PROPERTY
WITHOUT DUE PROCESS[;]

V. THE [CA] ERRED IN IGNORING THE ISSUE OF

JURISDICTION RAISED BY PETITIONER.[19]
 On June 26, 2002, this Court issued a temporary restraining order
enjoining Benedicto and the NLRC from implementing the decision of
labor arbiter Mayor.[20]

During the pendency of the case, on November 6, 2002, Benedicto

passed away.[21] He was substituted by his surviving spouse Lourdes V.
Benedicto and their four children.[22]

After this petition was given due course, Atty. Rodolfo B. Barriga,

who claimed to have been hired by Benedicto as collaborating counsel,

filed a motion dated December 17, 2002 praying to be reinstated as
counsel of record of respondents.[23] The Court, in a resolution dated

March 26, 2003, denied the motion since any attorney-client relationship
between him and Benedicto, if it indeed existed, was terminated by the
latters death. Thereafter, Atty. Barriga filed a motion to determine
attorneys fees and notice and statement of charging lien for attorneys fees
dated May 5, 2003 praying, among others, that we determine and approve
his attorneys fees and approve the notice of his charging lien.[24]

Now the resolution of the issues.

Petitioner raises the issue of jurisdiction without, however,

explaining properly the basis of its objections.[25] Such half-hearted and

belated attempt to argue the NLRCs alleged lack of jurisdiction cannot

possibly be taken seriously at this late stage of the proceedings.
 The NLRC and the CA dismissed petitioners appeal. Both held that
petitioner failed to perfect its appeal. Petitioner had ten calendar days
from its receipt of the labor arbiters decision on October 5, 1998 to
appeal. While it filed its memorandum on appeal with motion to
re-compute award on October 15, 1998, the appeal bond was posted after
the appeal period.

Under the second paragraph of Article 223 of the Labor Code,

when a judgment involving monetary award is appealed by the employer,
the appeal is perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the
NLRC in an amount equivalent to the monetary award in the judgment.
This assures the workers that if they finally prevail in the case, the
monetary award will be given to them on dismissal of the employers
appeal.[26] It is also meant to discourage employers from using the appeal
to delay or evade payment of their obligations to the employees.[27]

Nevertheless, such amount of the bond may be reduced by the

NLRC in meritorious cases, on motion of the appellant.[28] Indeed, an

unreasonable and excessive amount of bond is oppressive and unjust, and
has the effect of depriving a party of his right to appeal.[29]

The provision of Article 223 of the Labor Code requiring the

posting of a bond for the perfection of an appeal of a monetary award
must be given liberal interpretation in line with the desired objective of
resolving controversies on the merits.[30] If only to achieve substantial
justice, strict observance of the reglementary periods may be relaxed if
warranted.[31] However, this liberal interpretation must be justified by
substantial compliance with the rule. As we declared in Buenaobra v. Lim
King Guan:[32]

It is true that the perfection of an appeal in the manner and

within the period prescribed by law is not only mandatory but
jurisdictional, and failure to perfect an appeal has the effect of making
the judgment final and executory. However, technicality should not be
allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties. We have allowed appeals from the
decisions of the labor arbiter to the NLRC, even if filed beyond the
reglementary period, in the interest of justice.[33]

In this case, petitioner posted the bond when the NLRC did not act
on its motion for re-computation of the award. There was thus substantial
compliance that justified a liberal application of the requirement on the

timely filing of the appeal bond. Moreover, petitioner presented a

meritorious ground in questioning the computation of the backwages, as
we shall discuss below.

We now proceed to the merits of the case.

The labor arbiter found that Benedicto was an employee (the

marketing manager) of petitioner.[34] He also determined that there was no

just or authorized cause for Benedictos termination. Neither did petitioner
comply with the two-notice requirement for valid termination under the
law. He therefore concluded that Benedicto was illegally dismissed.[35]
 These factual findings of the NLRC, confirmed by the CA, are
binding on us since they are supported by substantial evidence. Petitioner,
aside from merely stating that Benedictos appointment was
unauthorized,[36] did not extensively deal with the issue of whether
Benedicto was in fact its employee. Besides, it is estopped from denying
such fact considering its admission that its former President, Tomas
Gomez III, wrote him a letter of termination on October 11,
1994.[37] Petitioner, furthermore, never contested the finding of illegal
dismissal. Accordingly, there are no strong reasons for us to again delve
into the facts.

Instead, the bulk of petitioners arguments focused on the labor

arbiters order of reinstatement and award of backwages. The issue of
reinstatement was mooted by Benedictos death in 2002.

As for the award of backwages, petitioner insists that the award

should be limited to what Benedicto was entitled to as of the compulsory
retirement age of 65 years. When the labor arbiter promulgated his

decision (wherein he awarded the amount of P920,000 as backwages),

Benedicto was already 68 years old. In an order dated August 10, 1999,
he further increased the backwages by P180,000.[38]

We agree with petitioner that Benedicto was entitled to backwages

only up to the time he reached 65 years old, the compulsory retirement
age under the law.[39] When Benedicto was illegally dismissed on October
11, 1994, he was already 64 years old. He turned 65 years old on
December 1, 1994[40] at which age he was deemed to have retired. Since
backwages are granted on grounds of equity for earnings lost by an
employee due to his illegal dismissal,[41] Benedicto was entitled to
backwages only for the period he could have worked had he not been
illegally dismissed, i.e. from October 11, 1994 to December 1, 1994.[42]

Petitioner also questions the award by the labor arbiter of

Benedictos 1% commission on the blocktime sale agreement with VTV
Corporation in the amount of P645,000.[43] The arbiter found that the
agreement was initiated by and consummated through Benedictos efforts
and that he was entitled to the commission.[44] This is another factual
matter that is binding on us. However, it is unclear how the labor arbiter
arrived at the amount adjudged. We therefore rule that in computing the
amount of the commission Benedicto was entitled to, the following
should be considered:

First, because Benedicto was entitled to backwages only from

October 11 to December 1, 1994 when he turned 65 years old,

petitioner should pay his commission only for this period.

Second, by nature, commissions are given to employees only if the

employer receives income.[45] Employees, as a reward, receive a

percentage of the earnings of the employer, which they, through

their efforts, helped produce.[46] Commissions are also given in the
form of incentives or encouragement so that employees will be
inspired to put a little more industry into their tasks. Commissions
 can also be considered as direct remunerations for services
rendered.[47] All these different concepts of commissions are
incongruent with the claim that an employee can continue to
receive them indefinitely after reaching his mandatory retirement
age.

Benedictos right to the commissions was coterminous with his

employment with petitioner[48] and this ended when he reached the
compulsory retirement age.

Lastly, the stipulation[49] providing for commissions (which did not

specify the period of entitlement) would be too burdensome if

interpreted to mean that Benedicto had a right to it even after his

employment with petitioner. Doubts in contracts should be settled
in favor of the greatest reciprocity of interests.[50] A lopsided and
open-minded construction could not have been the parties
contemplation. Had that been their intent, then they should have
spelled it out in no uncertain terms.

The labor arbiter should therefore re-compute the commission

Benedicto was entitled to in accordance with these guidelines.

Petitioner is also liable for 10% of the total amount for attorneys
fees since Benedicto and the present respondents were compelled to
litigate and incur expenses to enforce and protect his rights.[51]
 With respect to Atty. Barrigas motion, we note that this entails a
factual determination and examination of the evidence. Since Atty.
Barriga still has to prove his entitlement to the attorneys fees he is
claiming and the amount thereof (if he is so entitled), this may be taken
up in the NLRC which will execute the judgment.[52]

In summary, this case shall be remanded to the labor arbiter for

re-computation of backwages and commissions to be paid by petitioner to
respondent(s) for the period October 11, 1994 to December 1, 1994 and
10% of the total amount as attorneys fees. The labor arbiter shall also set
for further hearing Atty. Barrigas motion to determine his attorneys fees
and thereafter to fix the amount thereof if he is so entitled.

WHEREFORE, the assailed decision dated October 18, 2001 and

resolution dated March 18, 2002 of the Court of Appeals in CA-G.R. SP
No. 53413 are hereby REVERSED and SET ASIDE.

Petitioner is ORDERED to pay the deceased respondents

backwages and commissions to his heirs from the time he was illegally
dismissed on October 11, 1994 up to the time he reached compulsory
retirement age on December 1, 1994. Likewise, petitioner
is ORDERED to pay attorneys fees equivalent to 10% of the total
monetary award (backwages plus commissions). For this purpose, the
case is hereby ordered REMANDED to the labor arbiter for the
re-computation of the amounts due.
 The labor arbiter is also DIRECTED to set for further hearing Atty.
Rodolfo B. Barrigas motion to determine his attorneys fees and thereafter
to fix the amount thereof if due to him.

Our temporary restraining order issued on June 26, 2002 is

hereby LIFTED.

Costs against petitioner.

SO ORDERED.

RENATO C. CORONA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA

Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
the Courts Division.

REYNATO S. PUNO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

*
The present petition impleaded the National Labor Relations Commission as respondent. However,
under Rule 45, Section 4 of the 1997 Rules of Civil Procedure, the petition may be filed
without impleading the lower courts and judges thereof as petitioners or respondents. Hence,
the Court deleted it from the title.
[1]
Under Rule 45 of the Rules of Court.
[2]
Penned by Associate Justice Perlita J. Tria Tirona and concurred in by Associate Justices Eloy R.
Bello, Jr. and Amelita G. Tolentino of the Special Eighth Division of the Court of
Appeals; rollo, pp. 50-61.
[3]
Id., pp. 64-66.
[4]
Id., pp. 151-155.
[5]
Id., pp. 156-162.
[6]
Id., p. 13.
[7]
Id.
[8]
Id., p. 594.
[9]
Labor arbiters Decision, id., pp. 118 and 490.
[10]
Id., p. 513. According to petitioner, respondent was terminated on grounds of incompetence and
conflict of interest that resulted to opportunity losses in the amount of P9 million more or less;
id., p. 42.
[11]
Respondents Position Paper filed before the labor arbiter; id., pp. 225-226.
[12]
Id.
[13]
Id., p. 122.
[14]
Id., pp. 121-122.
[15]
Id., p. 18.
[16]
See rollo, pp. 58 and 290.
[17]
Totaling P1,565,000; id., p. 145.
[18]
Id.
[19]
Id., pp. 19-20.
[20]
Id., p. 241.
[21]
Id., p. 359.
[22]
Id., p. 366. Their children executed a Special Power of Attorney naming their mother as their
attorney-in-fact.
[23]
Id., p. 376. In this motion, Atty. Barriga represented Benedictos alleged heir, Michael Ira V.
Benedicto, who prayed that he be allowed to substitute for his deceased father. In a resolution
dated February 3, 2003, we denied this motion for substitution on the ground that there is no
conclusive proof that movant is indeed an heir of Benedicto; id., p. 409.
[24]
Id., p. 633.
[25]
He merely stated that as a consultant, the NLRC has no jurisdiction and instead the civil court has
jurisdiction over the case; id., pp. 40-42. Moreover, petitioner contradicted itself when it also
stated that [respondent] was not [its] consultant[a]ny relationship he claims is not with
[petitioner] but with Basilio personally; id., p. 17.
[26]
Casimiro v. Stern Real Estate Inc. Rembrandt Hotel, G.R. No. 162233, 10 March 2006, citing Coral
Point Development Corporation v. NLRC, 383 Phil. 456, 463-464 (2000).
[27]
Id.
[28]
Section 6, Rule VI of the New Rules of Procedure of the NLRC.
[29]
Supra at note 26, citing Nueva Ecija I Electric Cooperative, Inc. v. NLRC, 380 Phil. 44, 56 (2000).
[30]
Buenaobra v. Lim King Guan, G.R. No. 150147, 20 January 2004, 420 SCRA 359, 364,
citing Star Angel Handicraft v. National Labor Relations Commission, G.R. No. 108914, 20
September 1994, 236 SCRA 580, 585. See also Postigo v. Philippine Tuberculosis Society,
Inc., G.R. No. 155146, 24 January 2006.
[31]
Id.
[32]
Id.
[33]
Id., citing Philippine-Singapore Ports Corporation v. National Labor Relations Commission, G.R.
No. 67035, 29 January 1993, 218 SCRA 77.
[34]
Rollo, p. 118.
[35]
Id., pp. 118-119.
[36]
Id., pp. 16-17.
[37]
Id., pp. 42 and 513. The letter read:
October 11, 1994
Mr. Reynaldo Benedicto
-Present-
Dear Rey :
This does not come easy for me. My task as President of a corporation in crisis has been
rendered most difficult.
I would have wanted for you to resign, instead, but you leave me no other room.
Management no longer has confidence in your capacity and competence to perform as
Marketing, Sales & Programming Manager.
 Effective immediately, you are hereby relieved and separated from the employ of this
Company. Please see the General Manager for the arrangements of your departure.
God be with you and good luck.

Sincerely yours,
(signed)
Tomas Gomez III
President.
[38]
Id., p. 195.
[39]
Art. 287 of the Labor Code, as amended by Republic Act No. 7641 (which took effect on January 7,
1993) provides:

Art. 287. Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract.
xxx xxx xxx
In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in
the said establishment, may retire and shall be entitled to retirement pay equivalent to
at least one half () month salary for every year of service, a fraction of at least six (6)
months being considered as one whole year.
xxx xxx xxx. (Emphasis ours)
[40]
Rollo, p. 100.
[41]
Espejo v. National Labor Relations Commission, 325 Phil. 753 (1996), citing Torillo v. Leogardo,
Jr., G.R. No. 77205, 27 May 1991, 197 SCRA 471, 477.
[42]
Respondent did not claim retirement benefits.
[43]
As of November 1996; rollo, p. 120. In the Order of the Labor Arbiter dated August 10, 1999, an
additional commission in the amount of P720,000 was awarded; id., p. 195.
[44]
Id., p. 120.
[45]
Manila Central Line Corp. v. Manila Central Line Free Workers, 353 Phil. 133, 144 (1998),
quoting the Solicitor General with approval.
[46]
Id.
[47]
Iran v. National Labor Relations Commission, 352 Phil. 261, 270 (1998).
[48]
See analogous case Sobrepea., Jr. v. Court of Appeals, G.R. No. 111148, 10 October 1997, 280
SCRA 476.
[49]
In a memorandum dated September 12, 1993, the compensation package of respondent included
sales commission of 0.1% on NET of the monthly gross sales not below P8M; rollo, p. 451. In
another memorandum dated November 3, 1993, it was stated this way: one percent (01%)
sales commission on net payable upon collection of accounts; id., p. 450.
[50]
Article 1378, New Civil Code. This provision states:
When it is absolutely impossible to settle doubts by the rules established in the preceding
articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least
transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall
be settled in favor of the greatest reciprocity of interest. xxx (emphasis ours)
[51]
Urbanes, Jr. v. Court of Appeals, G.R. No. 138379, 25 November 2004, 444 SCRA 84, 97,
citing Paguio v. Philippine Long Distance Telephone Co., Inc., 441 Phil. 679 (2002).
[52]
Cadalin v. POEAs Administrator, G.R. No. 104776, 5 December 1994, 238 SCRA 721, 770-771.

SECOND DIVISION
 [G.R. No. 126625. September 23, 1997]

KANLAON CONSTRUCTION ENTERPRISES CO.,

INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, 5TH DIVISION, and BENJAMIN RELUYA,
JR., EDGARDO GENAYAS, ERNESTO CANETE,
PROTACIO ROSALES, NESTOR BENOYA, RODOLFO
GONGOB, DARIO BINOYA, BENJAMIN BASMAYOR,
ABELARDO SACURA, FLORENCIO SACURA, ISABELO
MIRA, NEMESIO LACAR, JOSEPH CABIGKIS, RODRIGO
CILLON, VIRGILIO QUIZON, GUARINO EVANGELISTA,
ALEJANDRO GATA, BENEDICTO CALAGO, NILO GATA,
DIONISIO PERMACIO, JUANITOSALUD, ADOR RIMPO,
FELIPE ORAEZ, JULIETO TEJADA, TEOTIMO LACIO,
ONOFRE QUIZON, RUDY ALVAREZ, CRESENCIO
FLORES, ALFREDO PERMACIO, CRESENCIO ALVIAR,
HERNANI SURILA, DIOSDADO SOLON, CENON ALBURO,
ZACARIAS ORTIZ, EUSEBIO BUSTILLO, GREGORIO
BAGO, JERRY VARGAS, EDUARDO BUENO, PASCUAL
HUDAYA, ROGELIO NIETES, and REYNALDO
NIETES, respondents.

DECISION
PUNO, J.:

In this petition for certiorari, petitioner Kanlaon Construction Enterprises

Co., Inc. seeks to annul the decision of respondent National Labor Relations
Commission, Fifth Division and remand the cases to the Arbitration Branch for
a retrial on the merits.
Petitioner is a domestic corporation engaged in the construction business
nationwide with principal office at No. 11 Yakan St., La Vista Subdivision,
Quezon City. In 1988, petitioner was contracted by the National Steel
Corporation to construct residential houses for its plant employees in
Steeltown, Sta. Elena, Iligan City. Private respondents were hired by petitioner
as laborers in the project and worked under the supervision of Engineers
Paulino Estacio and Mario Dulatre. In 1989, the project neared its completion
and petitioner started terminating the services of private respondents and its
other employees.
In 1990, private respondents filed separate complaints against petitioner
before Sub-Regional Arbitration Branch XII, Iligan City. Numbering forty-one
(41) in all, they claimed that petitioner paid them wages below the minimum
and sought payment of their salary differentials and thirteenth-month
pay. Engineers Estacio and Dulatre were named co-respondents.
Some of the cases were assigned to Labor Arbiter Guardson A. Siao while
the others were assigned to Labor Arbiter Nicodemus G.
Palangan. Summonses and notices of preliminary conference were issued and
served on the two engineers and petitioner through Engineer Estacio. The
preliminary conferences before the labor arbiters were attended by Engineers
Estacio and Dulatre and private respondents. At the conference of June 11,
1990 before Arbiter Siao, Engineer Estacio admitted petitioner's liability to
private respondents and agreed to pay their wage differentials and
thirteenth-month pay on June 19, 1990. As a result of this agreement,
Engineer Estacio allegedly waived petitioner's right to file its position
paper. [1] Private respondents declared that they, too, were dispensing with
their position papers and were adopting their complaints as their position
paper. [2]
On June 19, 1990, Engineer Estacio appeared but requested for another
week to settle the claims. Labor Arbiter Siao denied this request. On June 21,
1990, Arbiter Siao issued an order granting the complaint and directing
petitioner to pay private respondents' claims. Arbiter Siao held:
"x x x.

"Considering the length of time that has elapsed since these cases were filed,
and what the complainants might think as to how this branch operates and/or
conducts its proceedings as they are now restless, this Arbiter has no other
alternative or recourse but to order the respondent to pay the claims of the
complainants, subject of course to the computation of the Fiscal Examiner II
of this Branch pursuant to the oral manifestation of respondent. The
Supreme Court ruled: 'Contracts though orally made are binding on the
parties.' (Lao Sok v. Sabaysabay, 138 SCRA 134).

"Similarly, this Branch would present in passing that 'a court cannot decide
a case without facts either admitted or agreed upon by the parties or proved
by evidence.' (Yu Chin Piao v. Lim Tuaco, 33 Phil. 92;Benedicto v. Yulo,
26 Phil. 160),

"WHEREFORE, premises considered, the respondent is hereby ordered to

pay the individual claims of the above-named complainants representing
their wage differentials within ten (10) days from receipt of this Order.

"The Fiscal Examiner II of this Branch is likewise hereby ordered to

compute the individual claims of the herein complainants.
"SO ORDERED." [3]

On June 29, 1990, Arbiter Palangan issued a similar order, thus:

"When the above-entitled cases were called for hearing on June 19, 1990 at
10:00 a.m. respondent thru their representative manifested that they were
willing to pay the claims of the complainants and promised to pay the same
on June 28, 1990 at 10:30 a.m.

"However, when these cases were called purposely to materialize the

promise of the respondent, the latter failed to appear without any valid
reason.

"Considering therefore that the respondent has already admitted the claims
of the complainants, we believe that the issues raised herein have become
moot and academic.

"WHEREFORE, premises considered, the above-entitled cases are hereby

ordered Closed and Terminated, however, the respondent is hereby ordered
to pay the complainants their differential pay and 13th-month pay within a
period of ten (10) days from receipt hereof based on the employment record
on file with the respondent.

"SO ORDERED." [4]

Petitioner appealed to respondent National Labor Relations

Commission. It alleged that it was denied due process and that Engineers
Estacio and Dulatre had no authority to represent and bind
petitioner. Petitioner's appeal was filed by one Atty. Arthur Abundiente.
In a decision dated April 27, 1992, respondent Commission affirmed the
orders of the Arbiters.
Petitioner interposed this petition alleging that the decision of respondent
Commission was rendered without jurisdiction and in grave abuse of
discretion. Petitioner claims that:
"I

"THE QUESTIONED DECISION RENDERED BY THE HONORABLE

COMMISSION IS A NULLITY, IT HAVING BEEN ISSUED WITHOUT
JURISDICTION;

II
"PUBLIC RESPONDENT NATIONAL LABOR RELATIONS
COMMISSION GRAVELY ABUSED ITS DISCRETION IN
ARBITRARILY, CAPRICIOUSLY AND WHIMSICALLY MAKING
THE FOLLOWING CONCLUSIONS BASED NOT ON FACTS AND
EVIDENCE BUT ON SPECULATION, SURMISE AND CONJECTURE:

A. Petitioner was deprived of the constitutional right to due process of law

when it was adjudged by the NLRC liable without trial on the merits and
without its knowledge;

B. The NLRC erroneously, patently and unreasonably interpreted the

principle that the NLRC and its Arbitration Branch are not strictly bound by
the rules of evidence;

C. There is no legal nor actual basis in the NLRC's ruling that petitioner is
already in estoppel to disclaim the authority of its alleged representatives.

D. The NLRC committed manifest error in relying merely on private

respondents unsubstantiated complaints to hold petitioner liable for
damages." [5]

In brief, petitioner alleges that the decisions of the labor arbiters and
respondent Commission are void for the following reasons: (1) there was no
valid service of summons; (2) Engineers Estacio and Dulatre and Atty.
Abundiente had no authority to appear and represent petitioner at the hearings
before the arbiters and on appeal to respondent Commission; (3) the decisions
of the arbiters and respondent Commission are based on unsubstantiated and
self-serving evidence and were rendered in violation of petitioner's right to due
process.
Service of summons in cases filed before the labor arbiters is governed by
Sections 4 and 5 of Rule IV of the New Rules of Procedure of the NLRC. They
provide:

"Section 4. Service of Notices and Resolutions.-- (a) Notices or summons

and copies of orders, resolutions or decisions shall be served on the parties
to the case personally by the bailiff or duly authorized public officer within
three (3) days from receipt thereof or by registered mail; Provided that
where a party is represented by counsel or authorized representative, service
shall be made on such counsel or authorized representative; provided further
that in cases of decision and final awards, copies thereof shall be served on
both the parties and their counsel; provided finally, that in case where the
parties are so numerous, service shall be made on counsel and upon such
number of complainants as may be practicable, which shall be considered
substantial compliance with Article 224 (a) of the Labor Code, as amended.

"x x x.

"Section 5. Proof and completeness of service.-- The return is prima

facie proof of the facts indicated therein. Service by registered mail is
complete upon receipt by the addressee or his agent. x x x."

Under the NLRC Rules of Procedure, summons on the respondent shall be

served personally or by registered mail on the party himself. If the party is
represented by counsel or any other authorized representative or agent,
summons shall be served on such person.
It has been established that petitioner is a private domestic corporation
with principal address in Quezon City. The complaints against petitioner were
filed in Iligan City and summonsestherefore served on Engineer Estacio in
Iligan City. The question now is whether Engineer Estacio was an agent and
authorized representative of petitioner.
To determine the scope or meaning of the term "authorized
representative" or "agent" of parties on whom summons may be served, the
provisions of the Revised Rules of Court may be resorted to. [6]
Under the Revised Rules of Court, [7] service upon a private domestic
corporation or partnership must be made upon its officers, such as the
president, manager, secretary, cashier, agent, or any of its directors. These
persons are deemed so integrated with the corporation that they know their
responsibilities and immediately discern what to do with any legal papers
served on them. [8]
In the case at bar, Engineer Estacio, assisted by Engineer Dulatre,
managed and supervised the construction project. [9] According to the Solicitor
General and private respondents, Engineer Estacio attended to the project in
Iligan City and supervised the work of the employees thereat. As manager, he
had sufficient responsibility and discretion to realize the importance of the legal
papers served on him and to relay the same to the president or other
responsible officer of petitioner. Summons for petitioner was therefore validly
served on him.
Engineer Estacio's appearance before the labor arbiters and his promise
to settle the claims of private respondents is another matter.
The general rule is that only lawyers are allowed to appear before the
labor arbiter and respondent Commission in cases before them. The Labor
Code and the New Rules of Procedure of the NLRC, nonetheless, lists three (3)
exceptions to the rule, viz:

"Section 6. Appearances.-- x x x.
"A non-lawyer may appear before the Commission or any Labor Arbiter
only if:

"(a) he represents himself as party to the case;

"(b) he represents the organization or its members, provided that he shall be

made to present written proof that he is properly authorized; or

"(c) he is a duly-accredited member of any legal aid office duly recognized

by the Department of Justice or the Integrated Bar of the Philippines in cases
referred thereto by the latter. x x x."
[10]

A non-lawyer may appear before the labor arbiters and the NLRC only
if: (a) he represents himself as a party to the case; (b) he represents an
organization or its members, with written authorization from them; or (c) he is a
duly accredited member of any legal aid office duly recognized by the
Department of Justice or the Integrated Bar of the Philippines in cases referred
to by the latter. [11]
Engineers Estacio and Dulatre were not lawyers. Neither were they
duly-accredited members of a legal aid office. Their appearance before the
labor arbiters in their capacity as parties to the cases was authorized under the
first exception to the rule. However, their appearance on behalf of petitioner
required written proof of authorization. It was incumbent upon the arbiters to
ascertain this authority especially since both engineers were named
co-respondents in the cases before the arbiters. Absent this authority,
whatever statements and declarations Engineer Estacio made before the
arbiters could not bind petitioner.
The appearance of Atty. Arthur Abundiente in the cases appealed to
respondent Commission did not cure Engineer Estacio's representation. Atty.
Abundiente, in the first place, had no authority to appear before the respondent
Commission. The appellants' brief he filed was verified by him, not by
petitioner. [12] Moreover, respondent Commission did not delve into the merits of
Atty. Abundiente's appeal and determine whether Engineer Estacio was duly
authorized to make such promise. It dismissed the appeal on the ground that
notices were served on petitioner and that the latter was estopped from
denying its promise to pay.
Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente
were authorized to appear as representatives of petitioner, they could bind the
latter only in procedural matters before the arbiters and respondent
Commission. Petitioner's liability arose from Engineer
Estacio's alleged promise to pay. A promise to pay amounts to an offer to
compromise and requires a special power of attorney or the express consent
of petitioner. The authority to compromise cannot be lightly presumed and
should be duly established by evidence. [13] This is explicit from Section 7 of
Rule III of the NLRC Rules of Procedure, viz:

"Section 7. Authority to bind party.-- Attorneys and other representatives of

parties shall have authority to bind their clients in all matters of
procedure; but they cannot, without a special power of attorney or express
consent, enter into a compromise agreement with the opposing party in full
or partial discharge of a client's claim."

The promise to pay allegedly made by Engineer Estacio was made at the
preliminary conference and constituted an offer to settle the case
amicably. The promise to pay could not be presumed to be a single unilateral
act, contrary to the claim of the Solicitor General. [14] A defendant's promise to
pay and settle the plaintiff's claims ordinarily requires a reciprocal obligation
from the plaintiff to withdraw the complaint and discharge the defendant from
liability. [15] In effect, the offer to pay was an offer to compromise the cases.
In civil cases, an offer to compromise is not an admission of any liability,
and is not admissible in evidence against the offeror. [16] If this rule were
otherwise, no attempt to settle litigation could safely be made. [17] Settlement of
disputes by way of compromise is an accepted and desirable practice in courts
of law and administrative tribunals. [18] In fact, the Labor Code mandates the
labor arbiter to exert all efforts to enable the parties to arrive at an amicable
settlement of the dispute within his jurisdiction on or before the first hearing. [19]
Clearly, respondent Commission gravely abused its discretion in affirming
the decisions of the labor arbiters which were not only based on unauthorized
representations, but were also made in violation of petitioner's right to due
process.
Section 3 of Rule V of the NLRC Rules of Procedure provides:

"Section 3. Submission of Position Papers/Memorandum.-- Should the

parties fail to agree upon an amicable settlement, in whole or in part, during
the conferences, the Labor Arbiter shall issue an order stating therein the
matters taken up and agreed upon during the conferences and directing the
parties to simultaneously file their respective verified position papers.

"x x x."
After petitioner's alleged representative failed to pay the workers' claims as
promised, Labor Arbiters Siao and Palangan did not order the parties to file
their respective position papers.The arbiters forthwith rendered a decision on
the merits without at least requiring private respondents to substantiate their
complaints. The parties may have earlier waived their right to fileposition
papers but petitioner's waiver was made by Engineer Estacio on the premise
that petitioner shall have paid and settled the claims of private respondents at
the scheduled conference. Since petitioner reneged on its "promise," there
was a failure to settle the case amicably. This should have prompted the
arbiters to order the parties to file their position papers.
Article 221 of the Labor Code mandates that in cases before labor arbiters
and respondent Commission, they "shall use every and all reasonable means
to ascertain the facts in each case speedily and objectively and without regard
to technicalities of law or procedure, all in the interest of due process." The rule
that respondent Commission and the Labor Arbiters are not bound by technical
rules of evidence and procedure should not be interpreted so as to dispense
with the fundamental and essential right of due process. [20] And this right is
satisfied, at the very least, ' when the parties are given the opportunity to
submit position papers. [21] Labor Arbiters Siao and Palangan erred in
dispensing with this requirement.
Indeed, the labor arbiters and the NLRC must not, at the expense of due
process, be the first to arbitrarily disregard specific provisions of the Rules
which are precisely intended to assist the parties in obtaining the just,
expeditious and inexpensive settlement of labor disputes. [22]
IN VIEW WHEREOF, the petition for certiorari is granted. The decision of
the National Labor Relations Commission, Fifth Division, is annulled and set
aside and the case is remanded to the Regional Arbitration Branch, Iligan City
for further proceedings.
SO ORDERED.
Regalado, (Chairman), and Torres, Jr., JJ., concur.
Mendoza, J., on official leave.

[1]
See Order dated June 21, 1990 of Arbiter Siao, Rollo, p. 53.
[2]
Id.
[3]
Id., pp. 53-54.
[4]
Order dated June 29, 1990 of Arbiter Palangan, Rollo, pp. 50-51.
[5]
Petition, pp. 14, 17, 19, 21, 27, 32, Rollo, pp. 19, 22, 24, 26, 27, 32.
[6]
Philippine National Construction Corporation v. Ferrer-Calleja, 167 SCRA 294, 302 [1988].
[7]
Section 13, Rule 14 of the Revised Rules of Court provides:
"Section 13. Service upon private domestic corporation or partnership.-- If the defendant is a
corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier, agent,
or any of its directors."
Section 11, Rule 14 of the 1997 Rules of Civil Procedure reads:
"Section 11. Service upon domestic private juridical entity.-- When the defendant is a
corporation, partnership or association organized under the laws of the Philippines
 with a juridical personality, service may be made on the president, managing partner,
general manager, corporate secretary, treasurer, or in-house counsel."
[8]
G & G Trading Corp. v. Court of Appeals, 158 SCRA 466, 468 [1988]; Villa Rey Transit,
Inc. v. Far East Motor Corp., 81 SCRA 298, 303 [1978].
[9]
Comment of the Solicitor General, pp. 9-10; Rollo, pp. 182-183.
[10]
Section 6, Rule III, The New Rules of Procedure of the NLRC; see also Article 222, Labor
Code.
[11]
Section 6, Rule III, NLRC Rules of Procedure.
[12]
Private respondents do not deny petitioner's allegation that Atty. Abundiente of the
Macalalag and Associates Law Office in Iligan City was retained counsel of the
National Steel Corporation, and that as a matter of duty, he may have taken it upon
himself to appeal the cases against petitioners and the two engineers.
[13]
Jag & Haggar Jeans & Sportswear Corp. v. National Labor Relations Commission, 241
SCRA 635, 641 [1995]; General Rubber & Footwear Corp. v. Drilon, 169 SCRA 808,
814 [1989].
[14]
A compromise is a contract whereby the parties, in making reciprocal concessions, avoid a
litigation or put an end to one already commenced. (Article 2028, Civil Code).
[15]
Where a conveyance by the heirs is made in exchange for the settlement of any claim which
the grantee may have against the heirs, the agreement may be considered as a
contract of compromise (Aquino v. Esguerra, 87 Phil. 397, 399 [1950]).
[16]
Section 27, Rule 130 of the Revised Rules on Evidence.
[17]
Martin, Revised Rules on Evidence, p. 219 [1989]; Francisco, Handbook on Evidence, p.
130 [1984].
[18]
Jag & Haggar Jeans & Sportswear Corp. v. National Labor Relations Commission, supra, at
640; Santiago v. de Guzman, 177 SCRA 344, 349 [1989].
[19]
Article 221, paragraph 2, Labor Code.
[20]
Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 [1940]; Gelmart Industries (Phils.),
Inc. v. Leogardo, Jr., 155 SCRA 403, 410 [1987].
[21]
Pepsi Cola Distributors of the Philippines, Inc. v. National Labor Relations Commission, 247
SCRA 386, 394 [1995]; PNOC-Energy Development Corporation v. National Labor
Relations Commission, 201 SCRA 487, 494 [1991]; Odin Security Agency v. De La
Serna, 182 SCRA 472, 479 [1990]; Manila Doctors' Hospital v. National Labor
Relations Commission, 135 SCRA 262, 266-267 [1985].
[22]
Manebo v. National Labor Relations Commission, 229 SCRA 240, 248 [1994].

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 82211-12 March 21, 1989

TERESITA MONTOYA, petitioner,
vs.
TERESITA ESCAYO, JOY ESCAYO, AIDA GANANCIAL, MARY ANN CAPE, CECILIA
CORREJADO, ERLINDA PAYPON and ROSALIE VERDE, AND NATIONAL LABOR
RELATIONS COMMISSION, respondents.

Rolando N. Medalla and Segundo Y Chua for petitioner.

The Solicitor General for public respondent.

Archie S. Baribar for private respondents.

SARMIENTO, J.:

This petition for certiorari seeks the annullment and setting aside of the resolution 1 9dated
August 20, 1987 of the National Labor Relations Commission (NLRC), Third Division, which reversed and set aside the order
dated September 27, 1985 of Labor Arbiter Ethelwoldo R. Ovejera of the NLRC's Regional Arbitration Branch No. VI, Bacolod
City, dismissing the complaint filed by the private respondents against the petitioner. This petition raises a singular issue, i.e.,
the applicability of Presidential Decree (P.D.) No. 1508, more commonly known as the Katarungang Pambarangay Law, to
labor disputes.

The chronology of events leading to the present controversy is as follows:

The private respondents were all formerly employed as salesgirls in the petitioner's store,
the "Terry's Dry Goods Store," in Bacolod City. On different dates, they separately filed
complaints for the collection of sums of money against the petitioner for alleged unpaid
overtime pay, holiday pay, 13th month pay, ECOLA, and service leave pay: for violation of
the minimum wage law, illegal dismissal, and attorney's fees. The complaints, which were
originally treated as separate cases, were subsequently consolidated on account of the
similarity in their nature. On August 1, 1984, the petitioner-employer moved (Annex "C" of
Petition) for the dismissal of the complaints, claiming that among others, the private
respondents failed to refer the dispute to the Lupong Tagapayapa for possible settlement
and to secure the certification required from the Lupon Chairman prior to the filing of the
cases with the Labor Arbiter. These actions were allegedly violative of the provisions of
P.D. No. 1508, which apply to the parties who are all residents of Bacolod City.

Acting favorably on the petitioner's motion, Labor Arbiter Ethelwoldo R. Ovejera, on

September 27, 1985, ordered the dismissal of the complaints. The private respondents
sought the reversal of the Labor Arbiter's order before the respondent NLRC. On August
20, 1987, the public respondent rendered the assailed resolution reversing the order of
Ovejera, and remanded the case to the Labor Arbiter for further proceedings. A motion for
reconsideration was filed by the petitioner but this was denied for lack of merit on October
28, 1987. Hence, this petition.

It is the petitioner's contention that the provisions of the Katarungang Pambarangay Law
(P.D. No. 1508) relative to the prior amicable settlement proceedings before the Lupong
Tagapayapa as a jurisdictional requirement at the trial level apply to labor cases. More
particularly, the petitioner insists that the failure of the private respondents to first submit
their complaints for possible conciliation and amicable settlement in the proper barangay
court in Bacolod City and to secure a certification from the Lupon Chairman prior to their
filing with the Labor Arbiter, divests the Labor Arbiter, as well as the respondent
Commission itself, of jurisdiction over these labor controversies and renders their
judgments thereon null and void.

On the other hand, the Solicitor General, as counsel for the public respondent NLRC, in
his comment, strongly argues and convincingly against the applicability of P.D. No. 1508
to labor cases.

We dismiss the petition for lack of merit, there being no satisfactory showing of any grave
abuse of discretion committed by the public respondent.

The provisions of P.D. No. 1508 requiring the submission of disputes before the barangay
Lupong Tagapayapa prior to their filing with the court or other government offices are not
applicable to labor cases.

For a better understanding of the issue in this case, the provisions of P.D. No. 1508
invoked by the petitioner are quoted:

SEC. 6. Conciliation pre-condition to filing of complaint. No complaint, petition, action or

proceeding involving any matter within the authority of the Lupon as provided in Section 2
hereof shall be filed or instituted in court or any other government office for adjudication
unless there has been a confrontation of the parties before the Lupon Chairman or the
Pangkat and no conciliation or settlement has been reached as certified by the Lupon
Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat Chairman, or
unless the settlement has been repudiated. However, the parties may go directly to court
in the following cases:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of per sonal liberty calling for habeas
corpus proceedings;

(3) Actions coupled with provisional remedies such as preliminary injunction, attachment,
delivery of personal property and support pendente lite; and

(4) Where the action may otherwise be barred by the Statute of Limitations.

As correctly pointed out by the Solicitor General in his comment to the petition, even from
the three "WHEREAS" clauses of P.D. No. 1508 can be gleaned clearly the decree's
intended applicability only to courts of justice, and not to labor relations commissions or
labor arbitrators' offices. The express reference to "judicial resources", to "courts of
justice", "court dockets", or simply to "courts" are significant. On the other band, there is
no mention at all of labor relations or controversies and labor arbiters or commissions in
the clauses involved.

These "WHEREAS" clauses state:

WHEREAS, the perpetuation and official recognition of the time-honored tradition of

amicably settling disputes among family and barangay members at the barangay level
without judicial resources would promote the speedy administration of justice and
implement the constitutional mandate to preserve and develop Filipino culture and to
strengthen the family as a basic social institution;
WHEREAS, the indiscriminate filing of cases in the courts of justice contributes heavily
and unjustifiably to the congestion of court dockets, thus causing a deterioration in the
quality of justice;

WHEREAS, in order to help relieve the courts of such docket congestion and thereby
enhance the quality of Justice dispensed by the courts, it is deemed desirable to formally
organize and institutionalize a system of amicably settling disputes at the barangay level;
(Emphasis supplied.)

In addition, Letter of Instructions No. 956 and Letter of Implementation No. 105, both
issued on November 12, 1979 by the former President in connection with the
implementation of the Katarungang Pambarangay Law, affirm this conclusion. These
Letters were addressed only to the following officials: all judges of the Courts of first
Instance, Circuit Criminal Courts, Juvenile and Domestic Relations Courts, Courts of
Agrarian Relations, City Courts and Municipal Courts, and all Fiscals and other
Prosecuting Officers. These presidential issuances make clear that the only official
directed to oversee the implementation of the provisions of the Katarungang
Pambarangay Law (P.D. No. 1508) are the then Minister of Justice, the then Minister of
Local Governments and Community Development, and the Chief Justice of the Supreme
Court. If the contention of the petitioner were correct, the then Minister (now Secretary) of
Labor and Employment would have been included in the list, and the two presidential
issuances alsowould have been addressed to the labor relations officers, labor arbiters,
and the members of the National Labor Relations Commission. Expressio unius est
exclusio alterius.

Nor can we accept the petitioner's contention that the "other government office" referred
to in Section 6 of P.D. No. 1508 includes the Office of the Labor Arbiter and the
Med-Arbiter. The declared concern of the Katarungan Pambarangay Law is "to help
relieve the courts of such docket congestion and thereby enhance the quality of justice
dispensed by the courts." Thus, the" other government office" mentioned in Section 6 of
P.D. No. 1508 refers only to such offices as the Fiscal's Office or, in localities where there
is no fiscal, the Municipal Trial Courts, where complaints for crimes (such as those
punishable by imprisonment of not more than 30 days or a, fine of not more than P 200.00)
falling under the jurisdiction of the barangay court but which are not amicably settled, are
subsequently filed for proper disposition.

But, the opinion of the Honorable Minister of Justice (Opinion No. 59, s. 1983) to the
contrary notwithstanding, all doubts on this score are dispelled by The Labor Code Of The
Philippines (Presidential Decree No. 442, as amended) itself. Article 226 thereof grants
original and exclusive jurisdiction over the conciliation and mediation of disputes,
grievances, or problems in the regional offices of the Department of Labor and Employ-
ment. It is the said Bureau and its divisions, and not the barangay Lupong Tagapayapa,
which are vested by law with original and exclusive authority to conduct conciliation and
mediation proceedings on labor controversies before their endorsement to the appropriate
Labor Arbiter for adjudication. Article 226, previously adverted to is clear on this regard. It
provides:

ART. 226. Bureau of Labor Relations.- The Bureau of Labor Relations and the Labor
relations divisions in the regional officer of the Department of Labor shall have original and
exclusive authority to act, at their own initiative or upon request of either or both parties,
on all inter-union and intra-union conflicts, and all disputes, grievances or problems
arising from or affecting labor-management relations in all workplaces whether agricultural
or non-agricultural, except those arising from the implementation or interpretation of
collective bargaining agreements which shall be the subject of grievance procedure
and/or voluntary arbitration.

The Bureau shall have fifteen (15) working days to act on all labor cases, subject to
extension by agreement of the parties, after which the Bureau shall certify the cases to the
appropriate Labor Arbiters. The 15-working day deadline, however, shall not apply to
cases involving deadlocks in collective bargaining which the Bureau shall certify to the
appropriate Labor Arbiters only after all possibilities of voluntary settlement shall have
been tried.

Requiring conciliation of labor disputes before the barangay courts would defeat the very
salutary purposes of the law. Instead of simplifying labor proceedings designed at
expeditious settlement or referral to the proper court or office to decide it finally, the
position taken by the petitioner would only duplicate the conciliation proceedings and
unduly delay the disposition of the labor case. The fallacy of the petitioner's submission
can readily be seen by following it to its logical conclusion. For then, if the procedure
suggested is complied with, the private respondent would have to lodge first their
complaint with the barangay court, and then if not settled there, they would have to go to
the labor relations division at the Regional Office of Region VI of the Department of Labor
and Employment, in Bacolod City, for another round of conciliation proceedings. Failing
there, their long travail would continue to the Office of the Labor Arbiter, then to the NLRC,
and finally to us. This suggested procedure would destroy the salutary purposes of P.D.
1508 and of The Labor Code Of The Philippines. And labor would then be given another
unnecessary obstacle to hurdle. We reject the petitioner's submission. It does violence to
the constitutionally mandated policy of the State to afford full protection to labor. 2

Finally, it is already well-settled that the ordinary rules on procedure are merely suppletory
in character vis-a-vis labor disputes which are primarily governed by labor laws. 3 And "(A)ll
doubts in the implementation and interpretation of this Code (Labor), including its implementing rules and regulations, shall be
resolved in favor of labor. 4

WHEREFORE, the petition is DISMISSED. Costs against the petitioner.

SO ORDERED.

[Syllabus]

THIRD DIVISION

[G.R. No. 120506. October 28, 1996]

PHILIPPINE AIRLINES, INC. petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, HON. LABOR ARBITER
CORNELIO LINSANGAN, UNICORN SECURITY
SERVICES, INC., and FRED BAUTISTA, et al.,
respondents.

DECISION
DAVIDE, JR., J.:

This is a petition for certiorari under Rule 65 of the Rules of Court to annul
the decision of the Labor Arbiter dated 12 August 1991 in NLRC Case No.
00-11-06008-90 and the resolutions of public respondent National Labor
Relations Commission (NLRC) promulgated on 27 October 1994 and 31 May
1995 dismissing the appeal filed by the petitioner and denying the motion for
reconsideration, respectively.
The dispute arose from these antecedents:
On 23 December 1987, private respondent Unicorn Security Services, Inc.
(USSI) and petitioner Philippine Airlines, Inc. (PAL) executed a security service
agreement.[1] USSI was designated therein as the CONTRACTOR. Among the
pertinent terms and conditions of the agreement are as follows:
(4) The CONTRACTOR shall assign to PAL an initial force of EIGHTY ONE
(81) bodies which may be decreased or increased by agreement in
writing . It is, of course, understood that the CONTRACTOR undertakes
to pay the wages or salaries and cost of living allowance of the guards in
accordance with the provisions of the Labor Code, as amended, the
different Presidential Decrees, Orders and with the rules and
regulations promulgated by competent authorities implementing said
acts, assuming all responsibilities therefor .
xxx
(6) Without any expense on the part of PAL, CONTRACTOR shall see to it
that the guards assigned to PAL are provided, at the expense of
CONTRACTOR, with the necessary firearms, ammunitions and facilities
needed for the rendition of the security services as aforesaid;
(7) CONTRACTOR shall select, engage and discharge the guards,
employees, or agents, and shall otherwise direct and control their
services herein provided or heretofore to be set forth or prescribed. The
determination of wages, salaries and compensation of the guards or
employees of the CONTRACTOR shall be within its full control but shall
in no way contravene existing laws on the matter. It is further
understood that CONTRACTOR as the employer of the security guards
agrees to comply with all relevant laws and regulations, including
compulsory coverage under the Social Security Act, Labor Code, as
amended and the Medical Care Act, in its operations. Although it is
understood and agreed between parties hereto that CONTRACTOR in
the performance of its obligations under this Agreement, is subject to
the control and direction of PAL merely as to the result as to be
accomplished by the work or services herein specified, and not as to the
means and methods for accomplishing such result, CONTRACTOR
hereby warrants that it will perform such work or services in such
manner as will achieve the result herein desired by PAL.
(8) Discipline and administration of the security guards shall be the sole
responsibility of the CONTRACTOR to the end that CONTRACTOR
shall be able to render the desired security service requirements of
 PAL. CONTRACTOR, therefore, shall conform to such rules and
regulations that may be issued by PAL. For this purpose, Annex A,
which forms part of this Agreement, contains such rules and regulations
and CONTRACTOR is expected to comply with them. At its
discretion, PAL may, however, work out with CONTRACTOR such rules
and regulations before their implementation.
(9) Should PAL at any time have any justifiable objection to the presence in
its premises of any of CONTRACTORs officer, guard or agent under this
Agreement, it shall send such objection in writing to CONTRACTOR and
the latter shall immediately take proper action.
(10) The security guards employed by CONTRACTOR in performing this
Agreement shall be paid by the CONTRACTOR and it is distinctly
understood that there is no employee-employer relationship between
CONTRACTOR and/or his guards on the one hand, and PAL on the
other. CONTRACTOR shall have entire charge, control and
supervision of the work and services herein agreed upon, and PAL
shall in no manner be answerable or accountable for any accident or
injury of any kind which may occur to any guard or guards of the
CONTRACTOR in the course of, or as a consequence of, their
performance of work and services under this Agreement, or for any
injury, loss or damage arising from the negligence of or carelessness of
the guards of the CONTRACTOR or of anyone of its employ to any
person or persons or to its or their property whether in the premises of
PAL or elsewhere; and the CONTRACTOR hereby covenants and
agrees to assume, as it does hereby assume, any and all liability or on
account of any such injury, loss or damage, and shall indemnify PAL
for any liability or expense it may incur by reason thereof and to hold
PAL free and harmless from any such liability.
xxx
(13) For and in consideration of the services to be rendered by
CONTRACTOR under these presents, PAL shall pay CONTRACTOR
the amount of PESOS NINE & 40/100 CTVS (P9.40) PER HOUR
multiplied by 905 hours equivalent to PESOS TWO HUNDRED
SEVENTY FIVE THOUSAND NINE HUNDRED NINE & 58/100
CTVS, Philippine currency, - (P275,909.58) the basis of eight (8)
working hours per office/guard a day, Sundays and Holidays included,
the same to be payable on or before the 15th of each month for services
on the first half of the month and on or before the end of the month for
services for the 2nd half of the month.
Nothing herein contained shall prevent the parties from meeting
for a review of the rates should circumstances warrant.
xxx
(20) This Agreement shall take effect on 06 December 1987 an shall be in
force for a period of SIX (6) MONTHS 05 JUNE 1988 thereafter it shall
continue indefinitely unless sooner terminated upon thirty (30) days
notice served upon by one party to the other, except as provided for in
Articles 16, 17 & 18 hereof.
 Sometime in August of 1988, PAL requested 16 additional security
guards. USSI provided what was requested; however, PAL insisted that what
USSI did was merely to pick out 16 guards from the 86 already assigned by it
and directed them to render overtime duty.
On 16 February 1990, PAL terminated the security service agreement with
USSI without giving the latter the 30-day prior notice required in paragraph 20
thereof. Instead, PAL paid each of the security guards actually assigned at the
time of the termination of the agreement an amount equivalent to their
one-month salary to compensate for the lack of notice.
In November 1990, USSI, allegedly in its capacity as Trustee for Sixteen or
so Security Guards, filed with the NLRC Arbitration Branch, National Capital
Region, a complaint[2] against PAL for the recovery of P75,600.00 representing
termination pay benefit due the alleged 16 additional security guards, which
PAL failed and refused to pay despite demands. It further asked for an award
of not less than P15,000.00 for each of the 16 guards as damages for the
delay in the performance of PALs obligation, and also for attorneys fees in an
amount equivalent to 10% of whatever might be recovered. Pertinent portions
of the complaint read as follows:
3. By virtue of said contract and upon its effectivity, respondent required
eighty-six (86) security guards whom complainant USSI supplied; on or
sometime in August 1989, respondent asked for sixteen (16) security
guards to render twelve (12) hours each.
4. In February 1990 and for reasons of its own, respondent caused to
terminate not only the contract but also the services of the security guards;
in effecting such termination, said respondent caused to pay the
equivalent of one (1) months notice unto all the security guards, except
the 16 who, as aforementioned were rendering 12 hours each from date
of assignment up to and until their termination.
5. As computed, the termination pay benefits due the 16 security guards
amount to P75,600.00, more or less, which, despite demands,
respondent fails, neglects or refuses to pay, as it continue refusing, failing
or neglecting to so do up to the present time.
6. Respondent has not only incurred in delay in the performance of its
obligation but also contravened the tenor thereof; hence, complainants
are, by law, entitled to be indemnified with damages for no less
than P15,000.00 each for all complainants though the correct amount is
left solely to the sound discretion of the Honorable Labor Arbiter.
7. Complainants are now compelled to litigate their plainly valid, just or
demandable claim on account of which services of counsel have been
required and thereby obligated themselves to pay, for and as attorneys
fees, the sum equivalent to ten percent (10%) of whatever sums or sum
may be recovered in the case.
The complaint was docketed as NLRC-NCR Case No. 00-11-06008-90
and assigned to Labor Arbiter Cornelio L. Linsangan.
 PAL filed a motion to dismiss the complaint[3] on the grounds that the
Labor Arbiter had no jurisdiction over the subject matter or nature of the
complaint and that USSI had no cause of action against PAL. In amplification
thereof, PAL argued that the case involved the interpretation of the security
service agreement, which is purely civil in character and falls outside of the
Labor Arbiters jurisdiction. It is clear from Article 217 of the Labor Code that for
claims to be within the jurisdiction of Labor Arbiters, they must arise from an
employer-employee relationship. PAL claimed that USSI did not allege the
existence of an employer-employee relationship between PAL and USSI or its
guards, and that in fact, paragraph 10 of the agreement provides that there is
no employer-employee relationship between the CONTRACTOR and/or his
guards on the one hand and PAL on the other.
In its Opposition,[4] USSI pointed out that PAL forgot or overlooked the fact
that insofar as labor standards, benefits, etc. have to be resolved or
adjudicated, liability therefor is shifted to, or assumed by respondent [herein
petitioners] which, in law, has been constituted as an indirect employer.
PAL filed a supplemental motion to dismiss[5] wherein it cites the following
reasons for the dismissal of the complaint: (1) the clear stipulations in the
agreement (paragraphs 4 and 10) that there exists no employer-employee
relationship between PAL on the one hand and USSI and the guards on the
other; (2) there were no 16 additional guards, as the 16 guards who were
required to render 12-hour shifts were picked out from the original 86 guards
already assigned and were already given a one-month salary in lieu of the
30-day notice of termination of the agreement; (3) USSI had no legal
personality to file the case as alleged trustee of the 16 security guards; and (4)
the real parties in interest -- the 16 security guards -- never showed any
interest in the case either by attending any hearing or conference, or by
following up the status of the case.
Attached to the supplemental motion dismiss were, among other things,
xerox copies of confirmation letter of USSI to PAL to show that no additional
guards were in fact provided.[6]
Labor Arbiter Linsangan did not resolve the motion to dismiss and the
supplemental motion to dismiss. On 12 August 1991, he handed down a
decision[7] ordering PAL to pay: (1) the sum of P75,600.00 representing the
equivalent of one-months separation pay due the 16 individual security guards,
plus, 10% interest from the date of filing of the case until the whole obligations
shall have been fully settled; (2) the sum of P5,000.00 by way of exemplary
damages due each of the 16 security guards; and (3) another sum equivalent
to 10% of the total award for and as attorneys fees.
It was in that decision that Labor Arbiter Linsangan mentioned for the first
time that the resolution of the motion to dismiss and supplemental motion to
dismiss was deferred until [the] case is decided on the merits considering the
ground not to be indubitable. In holding that he had jurisdiction over the case,
he stated:
As heretofore and invariably held in similar cases, the issue of whether or
not Labor Arbiters have jurisdiction over money claims affecting security
guards assigned by security agencies (like complainant herein) to their
client-companies such as PAL is, more or less, settled, especially since, as
the law views such as peculiar relationship, such money claims insofar as
they have to be paid, are the ultimate responsibility of the client-firms. In
effect, the security guards have been constituted as indirect employees of the
client just as the client becomes the indirect employer of the guards. Art.
107 and 109 of the Labor Code expressly provide that.

To justify the awards, Labor Arbiter Linsangan opined:

Evidence adduced clearly show that sometime in December 1987,

aforementioned security service contract was executed, based on which the
required number of security guards were assigned to, or posted at, the
various premises of respondent -- PAL. Said number of security guards may,
as the contract provides, be increased or reduced at respondents request,
such that the original number of eighty-six (86) guards, an additional sixteen
(16) were needed and, accordingly supplied who, pursuant to PALs
instructions, were required to render twelve (12) hours each, per day.

In February 1990, and for reasons of its own, PAL caused to terminate, as it
did, the contract of security service. Unequivocably, it caused to pay the
separation pay benefits of the 86-security guards for the equivalent amount
of one (1) months pay. As to the additional 16, it failed and refused to grant
similar equivalent, without any valid reasons therefor.

As earlier stated, respondent opted to rely solely on the ground set forth in
its Motion to Dismiss as well as Supplement thereto. It failed to file, despite
directive made thereon, its position paper. Neither did it submit, nor adduce,
evidence (documentary or otherwise) to rebut or controvert complainants
claims especially since the money equivalent of the one month separation
pay due the 16 guards has been duly quantified as amounting to Seventy
Five Thousand Six Hundred (P75,600.00) Pesos. Thus established, it is clear
that there was absolutely no legal/justifiable reason why said 16 guards
applied and who rendered 12 hours each per day had to be discriminated
against.

Following PALs failure or refusal to pay, demands were made by

complainant, asking at the same time why that was so. Conceivably,
respondent has smarted itself on its mistaken belief that there was, as
between the guards and itself, no employer-employee relationship and,
hence, there is no legal basis for it to pay. If that was so, why did it pay
separation pay unto the 86 regular employed guards.

PAL being widely known as a progressively-minded employer, it should be

the first to show good example for emulation. In this instant case, it did not;
in fact, its actuations were not consistent with good faith. It should, therefore,
be held liable for exemplary damages and having required complainant to
litigate a plainly valid, just or demandable claim, an award for attorneys fees
must perforce be assessed.

On 3 September 1991, PAL filed its Appeal[8] wherein it indicated that it

received a copy of the decision on 26 August 1991. Attached thereto was a
machine copy of the Notice of Judgment/Final Order, with the date of its
receipt, i.e., 26 August 1991,[9] having been stamped on the upper right hand
corner by PALs Legal Department.
USSI countered this Appeal with a motion for execution of judgment [10] on
the ground that since PAL, received a copy of the decision on the 23 rd, not on
the 26th, of August 1991 it had until 2 September 1991 to appeal; hence, the
appeal interposed on 3 September was late by one day. The decision had then
become final and executory.
In its opposition[11] to this motion, PAL insisted that it received a copy of
the decision on 26 August 1991; thus, it had until 5 September 1991 to file its
appeal.
On 30 September 1991, Labor Arbiter Linsangan issued a writ of
execution.[12]
On 1 October 1991, PAL filed a motion to quash [13] the writ of execution. It
tried to explain therein why it thought all along that it received a copy of the
decision on 26 August 1991, thus:
4. Upon investigation the undersigned counsel learned that on 23 August
1991 (Friday) a server-messenger went to PAL Legal Department to serve said
decision. The receiving clerks at that time were all out of the office so that the
server persuaded a secretary, Ms. April Rose del Rosario to receive the same,
notwithstanding the fact that Ms. Del Rosario told him (server) that she was not
authorized to receive documents for an in behalf of PAL. Ms. Del Rosario then
stamped the date of receipt on the services copy without stamping (the date of
receipt) PALs copy of the decision which was left by the server. Thereafter, Ms.
Del Rosario placed PALs copy of the Decision on the incoming documents rack
of the receiving clerk.
Attached herewith is the affidavit of Ms. Del Rosario and as Annex A hereof.
5. On 26 August 1991 (Monday), the receiving clerk/messenger Mr. Greg
Soriano upon finding the Decision among the documents in the incoming
documents rack, immediately stamped Received 26 August 1991 thereon, on the
honest and sincere belief that the same just arrived that day (26 August
1991). He then forwarded the same to the secretary of the undersigned counsel.
 Attached herewith is the affidavit of Mr. Greg Soriano marked as Annex B
hereof.
6. The undersigned counsel believing that the said decision was received on
26 August 1991 reckoned/counted the ten (10) day period for appeal from said
date.
7. Considering the foregoing circumstances, the undersigned counsels
innocent reliance on the date of receipt stamped on the copy of the Decision
furnished him was clearly due to an innocent mistake and/or excusable
neglect. Hence, justice and equity dictates that respondent PAL should be
considered to have filed its Appeal within the reglementary period for Appeal.[14]
On 8 October 1991, Labor Arbiter Linsangan issued an order [15] denying
the motion to quash.
On 10 October 1991, PAL appealed[16] to the NLRC the aforesaid order of
8 October 1991 on the ground that it was issued with grave abuse of
discretion.
In its resolution of 27 October 1994,[17] the Second Division of the NLRC
dismissed PALs appeal for having been filed out if time. It sustained the labor
Arbiters finding that PAL had received a copy of the decision on 23 August
1991, and hence the last day to appeal was 2 September 1991. It ruled that
whether or not the decision was received by an employee other than the
receiving clerk or messenger was of no moment, as the proper performance of
employees duties was PALs concern.
On 31 May 1995, the NLRC denied the motion for reconsideration [18] for
the reason that it cannot accept PALs excuse as it may open the floodgates to
abuse; and that the lapse of the period to appeal had already deprived the
Commission of jurisdiction over the case.[19]
PAL then filed this special civil action for certiorari under Rule 65 of the
Rules of Court alleging that (1) public respondents committed serious and
patent error in failing to declare that the Labor Arbiter had no jurisdiction over
the instant case; (2) The Labor Arbiter gravely abused its discretion in ordering
PAL to pay the separation pay of the 16 security guards assigned at PALs
premises by USSI; and (3) respondent NLRC committed grave abuse of
discretion in declaring PALs appeal to have been filed out of time.
PAL argues that since USSIs cause of action was founded on the security
service agreement, and that thereunder no employer-employee relationship
existed between PAL and the security guards who were USSIs employees, the
Labor Arbiter had no jurisdiction over the complaint. Moreover,
assuming arguendo that the claims of the security guards were valid, USSI
had no personality to file the complaint, for there is nothing whatsoever to
show that it was expressly authorized by the security guards to act as their
trustee.
As to the second assigned error, PAL asserts that it is not liable to pay
separation pay because (1) it was not the employer of the security guards; (2)
even as an indirect employer, as held by the Labor Arbiter, its liability was
limited to violations of labor standards law, and non-payment of the separation
pay is not a violation of the said law; (3) the security service agreement with
USSI did not provide for payment of separation pay; (4) the payment made to
the 86 security guards upon the termination of the agreement without the prior
30-day notice was not for separation pay but a benefit in lieu of the 30-day
notice required under paragraph 20 of the agreement; and (5) since PAL was
not the employer of the security guards, in no way could it terminate their
services.
In its third assigned error, PAL submits that rules of procedure ought not to
be applied in a very rigid technical sense, since they are used only to help
secure and not override substantial justice, especially in this case where the
appeal was meritorious. Moreover, the delay in the perfection of the appeal,
reckoned from the finding of the Labor Arbiter, was only one day; but if
reckoned from what its counsel innocently believed to be PALs date of receipt
of the decision, which was 26 August 1991, the appeal could be said to have
been seasonably filed.
In its Comment, USSI points out that the grounds relied upon by PAL are
based on factual a issue, namely, the discrimination made by PAL in paying
the 86 and not the 16 security guards. It argues that the case touched upon the
rights of the 16 security guards as employees; thus, the same was within the
jurisdiction of the Labor Arbiter. As regards PALs plea for the relaxation of the
rule on perfection of appeals, USSI contends that the negligence of PALs
counsel should not be deemed compelling reason to warrant relaxation of the
rule.
In its Manifestation and Motion in Lieu of Comment,[20] the Office of the
Solicitor General agrees with PAL that the Labor Arbiter did not have
jurisdiction over the complaint because there was no employer-employee
relationship between PAL and the 16 security guards; that Articles 107 and
109 of the Labor Code which provide for joint and several liability for payment
of wages by the direct and indirect employer find no application in the present
case because the 16 security guards employed by USSI were not after unpaid
wages; and that in the interest of justice and considering that the appeal was
filed only one day late, the rule on perfection of appeals should have been
relaxed to prevent a miscarriage of justice.
In view of the stand of the Office of the Solicitor General, we advised public
respondents to file their own comment if they so desired.
In their Comment, the NLRC and Labor Arbiter Linsangan maintain that
they had jurisdiction over the case because of Articles 107 and 109 of the
Labor Code which constitute PAL as indirect employer of the 16 security
guards, there being a question involving separation pay due the latter; that the
16 security guards were entitled to separation pay, because PAL paid the
other 86 security guards when the service agreement was terminated; and that
for the NLRC to excuse the delay of one day in filing the appeal would open
the floodgates of abuse.
The instant petition is impressed with merit.
We agree with petitioner PAL that the Labor Arbiter was without
jurisdiction over the subject matter of NLRC-NCR Case No. 00-11-06008-90,
because no employer-employee relationship existed between PAL and the
security guards provided by USSI under the security service agreement,
including the alleged 16 additional security guards.
We have pronounced in numerous cases[21] that in determining the
existence of an employer-employee relationship, the following elements are
generally considered: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power to dismiss; and (4) the power to control
the employees conduct.
In the instant case, the security service agreement between PAL and USSI
provides the key to such consideration. A careful perusal thereof, especially
the terms and conditions embodied in paragraphs 4, 6, 7, 8, 9, 10, 13 and 20
quoted earlier in this ponencia, demonstrates beyond doubt that USSI-and not
PAL was the employer of the security guards. It was USSI which (a) selected,
engaged or hired and discharged the security guards; (b) assigned them to
PAL according to the number agreed upon; (c) provided, at its own expense,
the security guards with firearms and ammunitions; (d) discipline and
supervised them or controlled their conduct; and (e) determined their wages,
salaries, and compensation; and (f) paid them salaries or wages. Even if we
disregard the explicit covenant in said agreement that there exist no
employer-employee relationship between CONTRACTOR and/or his guards
on the one hand, and PAL on the other all other considerations confirm the fact
that PAL was not the security guards employer. Analogous to the instant case
is Canlubang Security Agency Corp. vs. NLRC.[22]
Considering then that no employer-employee relationship existed between
PAL and the security guards, the Labor Arbiter had no jurisdiction over the
claim in NLRC-NCR Case No. 00-11-06008-90. Article 217 of the Labor Code
(P.D. No. 442), as amended, vests upon Labor Arbiter exclusive original
jurisdiction only over the following:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving legality of strikes and lockouts; and
 6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or house hold service,
involving an amount exceeding five thousand pesos(P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requisite.
The Labor Arbiter cannot avoid the jurisdictional issue or justify his
assumption of jurisdiction on the pretext that PAL was the indirect employer of
the security guards under Article 107 in relation to Articles 106 and 109 of the
Labor Code and, therefore, it is solidarily liable with USSI. We agree with the
Solicitor General that these Articles are inapplicable to PAL under the facts of
this case. Article 107 provides:

ART. 107. Indirect employer. -- The provisions of the immediately

preceding Article shall likewise apply to any person, partnership, association
or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.

The preceding Article referred to, which is Article 106, partly reads as
follows:

ART. 106. Contractor or subcontractor. -- Whenever an employer enters

into a contract with another person for the performance of the formers work,
the employees of the contractor and of the latters subcontractor, if any, shall
be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.

While USSI is an independent contractor under the security service agreement

and PAL may be considered an indirect employer, that status did not make
PAL the employer of the security guards in every respect. As correctly posited
by the Office of the Solicitor General, PAL may be considered
an indirect employer only for purposes of unpaid wages since Article 106,
which is applicable to the situation contemplated in Section 107, speaks
of wages. The concept of indirect employer only relates or refers to the liability
for unpaid wages. Read together, Articles 106 and 109 simply mean that the
party with whom an independent contractor deals is solidarily liable with the
latter for unpaid wages, and only to that extent and for that purpose that the
latter is considered a direct employer. The term wage is defined in Article 97(f)
of the Labor Code as the remuneration of earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained
on a time, task, piece, or commission basis, or other method of calculating the
unwritten contract of employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.
No valid claim for wages or separation pay can arise from the security
service agreement in question by reason of its termination at the instance of
PAL. The agreement contains no provision for separation pay. A breach
thereof could only give rise to damages under the Civil Code, which is
cognizable by the appropriate regular court of justice. Besides, there is no
substantial proof that USSI in fact provided 16 additional guards. On the
contrary, PAL was able to prove in the annexes attached to its supplemental
motion to dismiss that the 16 guards were actually picked out from the original
group and were just required to render overtime service.
The Labor Arbiters lack of jurisdiction was too obvious from the allegations
in the complaint and its annex (the security service agreement) in NLRC-NCR
Case No. 00-11-06008-90.The Labor Arbiter then should have forthwith
resolved the motion to dismiss and the supplemental motion to dismiss. As
correctly pointed out by PAL, under Section 15 of Rule V of the New Rules of
Procedure of the NLRC, any motion to dismiss on the ground of lack of
jurisdiction, improper venue, res judicata, or prescription shall be immediately
resolved by the Labor Arbiter by a written order. Yet, the Labor Arbiter did not,
and it was only in his decision that he mentioned that the resolution of the
motion to dismiss was deferred until this case is decided on the merits
because the ground thereof was not indubitable. On this score the Labor
Arbiter acted with grave abuse of discretion for disregarding the rules he was
bound to observe.
We shall now turn to the issue of tardiness of the appeal. The record does
indeed show that on the original copy of the Notice of Judgment/Final
Order,[23] there is stamped by the PAL Legal Department the date of its receipt
of the decision, viz., AUG. 23 1991,
It is not also denied by respondents that on the right upper hand corner of
PALs copy of the Notice of Judgment/Final Orders,[24] there is stamped the
date of receipt thereof by PAL Legal Department, viz., AUG. 26 1991. PAL
explained how this discrepancy occurred and how its counsel was misled into
believing that PAL received a copy of the decision only on 26 August
1991. This belief in good faith rendered excusable any negligence it might
have committed. Besides, the delay in the perfection of the appeal was only
one day. Considering that the Labor Arbiter had no jurisdiction over the subject
matter of NLRC-NCR Case No. 00-11-06008-90 and that the 16 security
guards are not in fact entitled to separation pay under the security service
agreement, the higher interest of justice favors a relaxation of the rule on
perfection of appeals in labor cases.
 While it is an established rule that the perfection of an appeal in the
manner and within the period prescribed by law is not only mandatory but
jurisdictional, and failure to perfect an appeal has the effect of rendering the
judgment final and executory, it is equally settled that the NLRC may disregard
the procedural lapse where there is an acceptable reason to excuse tardiness
in the taking of the appeal.[25] Among the acceptable reasons recognized by
this Court are (a) counsels reliance on the footnote of the notice of the decision
of the Labor Arbiter that the aggrieved party may appeal within ten
(10) working days;[26] (b) fundamental consideration of substantial justice;[27] (c)
prevention of miscarriage of justice or of unjust enrichment, as where the tardy
appeal is from a decision granting separation pay which was already granted
in an earlier final decision;[28] and (d) special circumstances of the case
combined with its legal merits[29] or the amount and the issue involved.[30] A
one-day delay in the perfection of the appeal was excused in Pacific Asia
Overseas Shipping Corp. vs. NLRC,[31] Insular life Assurance Co. vs.
NLRC,[32] and City Fair Corp vs. NLRC.[33]
In the instant case, the Labor Arbiters lack of jurisdiction -- so palpably
clear on the face of the complaint -- and the perpetuation of unjust enrichment
if the appeal is disallowed are enough combination of reasons that warrant a
relaxation of the rules on perfection of appeals in labor cases.
WHEREFORE, the instant petition is hereby GRANTED. The questioned
decision of the Labor Arbiter dated 12 August 1991 and the resolution of the
Second Division of the National Labor Relations Commission promulgated on
27 October 1994 and 31 May 1995 are hereby SET ASIDE, and NLRC-NCR
Case No. 00-11-06008-90 is DISMISSED.
SO ORDERED.
Narvasa, C.J. (Chairman), Melo, Francisco and Panganiban, JJ., concur.

[1] Original Records (OR), 6-13; Rollo, 50-57.

[2] OR, 2-4; Rollo, 46-48.
[3] OR, 19-22; Rollo, 58-60.
[4] OR., 27-29.
[5] Id., 48-58; Rollo, 64-74.
[6] Id., 59-65; Id., 75-76.
[7] Id., 66-71; id., 40-45.
[8] OR, 73-89; Rollo, 82-105.
[9] Id., p. 93.
[10] Id., 105-106; Id., 102-103.
[11] Id., 108-109; Id., 104-105.
[12] Id., 113-114; Id., 106-107.
[13] Id., 116-117; Id., 109-110.
[14] OR, 115-116.
[15] Id., 125.
[16] Id., 128-143.
[17] Per Commissioner Calaycay, V., with Commissioners Aquino, R. and Rayala, R.,
concurring; Rollo, 29-34.
[18] Rollo, 177-185.
[19] Id., 36-38.
[20] Rollo, 202-216.
[21] Among others, see: Viana vs. Al-Lagadan, 99 Phil. 408, 411-412 [1956]; Social Security

System vs. Court of Appeals, 39 SCRA 629, 636 [1971]; American President Lines vs. Clave,
114 SCRA 826, 832 [1982]; Besa vs.Trajano, 146 SCRA 501, 507 [1986]; Brotherhood Labor
Unity Movement of the Philippines vs. Zamora 147 SCRA 49, 54 [1987]; Bautista vs. Inciong,
158 SCRA 665, 668 [1988]; Agro Commercial Security Service Agency, Inc. vs. NLRC, 175
SCRA 790, 795 [1989]; Ruga vs. NLRC, 181 SCRA 266, 273 [1990]; Singer Sewing Machine
Co. vs. Drilon, 193 SCRA 270, 275 [1991]; Canlubang Security Agency Corp. Vs. NLRC, 216
SCRA 280, 284 [1992]; Vallum Security Services vs. NLRC, 224 SCRA 781, 785 [1993]; Air
Material Wing Savings and Loan Association vs. NLRC, 233 SCRA 592, 594-595 [1994].
[22] Supra, note 21.
[23] OR, 72.
[24] OR, 93.
[25] Chong Guan Trading vs. NLRC, 172 SCRA 831, 839 [1989].
[26] Id., Firestone Tire and Rubber Co. vs. Lariosa, 148 SCRA 187, 190-191 [1987].
[27] Insular Life Assurance Co. vs. NLRC, 156 SCRA 740, 746 [1987]; see also the Resolution

therein of 26 July 1988, Ruga vs. NLRC, supra, note 21, at 272; Benguet Electric
Coop. vs. NLRC, 209 SCRA 55, 61 [1992]; Blancaflor vs. NLRC, 218 SCRA 366, 370-371
[1993].
[28] Olacao vs. NLRC, 177 SCRA 38, 41 [1989].
[29] Pacific Asia Overseas Shipping Corp. vs. NLRC, 161 SCRA 122, 130 [1988].
[30] City Fair Corp. vs. NLRC, 243 SCRA 572, 576 [1995].
[31] Supra, note 29.
[32] Supra, note 27.
[33] Supra, note 30.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 85985 August 13, 1993

PHILIPPINE AIRLINES, INC. (PAL), petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P.
ORTIGUERRA and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION
(PALEA), respondents.

Solon Garcia for petitioner.

Adolpho M. Guerzon for respondent PALEA.

MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of whether or not the
formulation of a Code of Discipline among employees is a shared responsibility of the
employer and the employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of
Discipline. The Code was circulated among the employees and was immediately
implemented, and some employees were forthwith subjected to the disciplinary measures
embodied therein.

Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a
complaint before the National Labor Relations Commission (NLRC) for unfair labor
practice (Case No. NCR-7-2051-85) with the following remarks: "ULP with arbitrary
implementation of PAL's Code of Discipline without notice and prior discussion with Union
by Management" (Rollo, p. 41). In its position paper, PALEA contended that PAL, by its
unilateral implementation of the Code, was guilty of unfair labor practice, specifically
Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA alleged that
copies of the Code had been circulated in limited numbers; that being penal in nature the
Code must conform with the requirements of sufficient publication, and that the Code was
arbitrary, oppressive, and prejudicial to the rights of the employees. It prayed that
implementation of the Code be held in abeyance; that PAL should discuss the substance
of the Code with PALEA; that employees dismissed under the Code be reinstated and
their cases subjected to further hearing; and that PAL be declared guilty of unfair labor
practice and be ordered to pay damages (pp. 7-14, Record.)

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to
prescibe rules and regulations regarding employess' conduct in carrying out their duties
and functions, and alleging that by implementing the Code, it had not violated the
collective bargaining agreement (CBA) or any provision of the Labor Code. Assailing the
complaint as unsupported by evidence, PAL maintained that Article 253 of the Labor Code
cited by PALEA reffered to the requirements for negotiating a CBA which was inapplicable
as indeed the current CBA had been negotiated.

In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor
Code was violated when PAL unilaterally implemented the Code, and cited provisions of
Articles IV and I of Chapter II of the Code as defective for, respectively, running counter to
the construction of penal laws and making punishable any offense within PAL's
contemplation. These provisions are the following:

Sec. 2. Non-exclusivity. — This Code does not contain the entirety of the rules and
regulations of the company. Every employee is bound to comply with all applicable rules,
regulations, policies, procedures and standards, including standards of quality,
productivity and behaviour, as issued and promulgated by the company through its duly
authorized officials. Any violations thereof shall be punishable with a penalty to be
determined by the gravity and/or frequency of the offense.

Sec. 7. Cumulative Record. — An employee's record of offenses shall be cumulative. The

penalty for an offense shall be determined on the basis of his past record of offenses of
any nature or the absence thereof. The more habitual an offender has been, the greater
shall be the penalty for the latest offense. Thus, an employee may be dismissed if the
number of his past offenses warrants such penalty in the judgment of management even if
each offense considered separately may not warrant dismissal. Habitual offenders or
recidivists have no place in PAL. On the other hand, due regard shall be given to the
length of time between commission of individual offenses to determine whether the
employee's conduct may indicate occasional lapses (which may nevertheless require
sterner disciplinary action) or a pattern of incorrigibility.

Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but
they failed to appear at the scheduled date. Interpreting such failure as a waiver of the
parties' right to present evidence, the labor arbiter considered the case submitted for
decision. On November 7, 1986, a decision was rendered finding no bad faith on the part
of PAL in adopting the Code and ruling that no unfair labor practice had been committed.
However, the arbiter held that PAL was "not totally fault free" considering that while the
issuance of rules and regulations governing the conduct of employees is a "legitimate
management prerogative" such rules and regulations must meet the test of
"reasonableness, propriety and fairness." She found Section 1 of the Code aforequoted
as "an all embracing and all encompassing provision that makes punishable any offense
one can think of in the company"; while Section 7, likewise quoted above, is
"objectionable for it violates the rule against double jeopardy thereby ushering in two or
more punishment for the same misdemeanor." (pp. 38-39, Rollo.)

The labor arbiter also found that PAL "failed to prove that the new Code was amply
circulated." Noting that PAL's assertion that it had furnished all its employees copies of the
Code is unsupported by documentary evidence, she stated that such "failure" on the part
of PAL resulted in the imposition of penalties on employees who thought all the while that
the 1966 Code was still being followed. Thus, the arbiter concluded that "(t)he phrase
ignorance of the law excuses no one from compliance . . . finds application only after it has
been conclusively shown that the law was circulated to all the parties concerned and
efforts to disseminate information regarding the new law have been exerted. (p. 39, Rollo.)
She thereupon disposed:

WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:

1. Furnish all employees with the new Code of Discipline;

2. Reconsider the cases of employees meted with penalties under the New Code of
Discipline and remand the same for further hearing; and

3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the
decision.

All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.

SO ORDERED. (p. 40, Rollo.)

PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner
Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya
concurring, found no evidence of unfair labor practice committed by PAL and affirmed the
dismissal of PALEA's charge. Nonetheless, the NLRC made the following observations:

Indeed, failure of management to discuss the provisions of a contemplated code of

discipline which shall govern the conduct of its employees would result in the erosion and
deterioration of an otherwise harmonious and smooth relationship between them as did
happen in the instant case. There is no dispute that adoption of rules of conduct or
discipline is a prerogative of management and is imperative and essential if an industry,
has to survive in a competitive world. But labor climate has progressed, too. In the
Philippine scene, at no time in our contemporary history is the need for a cooperative,
supportive and smooth relationship between labor and management more keenly felt if we
are to survive economically. Management can no longer exclude labor in the deliberation
and adoption of rules and regulations that will affect them.

The complainant union in this case has the right to feel isolated in the adoption of the New
Code of Discipline. The Code of Discipline involves security of tenure and loss of
employment — a property right! It is time that management realizes that to attain
effectiveness in its conduct rules, there should be candidness and openness by
Management and participation by the union, representing its members. In fact, our
Constitution has recognized the principle of "shared responsibility" between employers
and workers and has likewise recognized the right of workers to participate in "policy and
decision-making process affecting their rights . . ." The latter provision was interpreted by
the Constitutional Commissioners to mean participation in "management"' (Record of the
Constitutional Commission, Vol. II).

In a sense, participation by the union in the adoption of the code if conduct could have
accelerated and enhanced their feelings of belonging and would have resulted in
cooperation rather than resistance to the Code. In fact, labor-management cooperation is
now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.)

Respondent Commission thereupon disposed:

WHEREFORE, premises considered, we modify the appealed decision in the sense that
the New Code of Discipline should be reviewed and discussed with complainant union,
particularly the disputed provisions [.] (T)hereafter, respondent is directed to furnish each
employee with a copy of the appealed Code of Discipline. The pending cases adverted to
in the appealed decision if still in the arbitral level, should be reconsidered by the
respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained.

SO ORDERED. (p. 5, NLRC Decision.)

PAL then filed the instant petition for certiorari charging public respondents with grave
abuse of discretion in: (a) directing PAL "to share its management prerogative of
formulating a Code of Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL
to share said prerogative with the union; (c) deciding beyond the issue of unfair labor
practice, and (d) requiring PAL to reconsider pending cases still in the arbitral level (p. 7,
Petition; p. 8, Rollo.)

As stated above, the Principal issue submitted for resolution in the instant petition is
whether management may be compelled to share with the union or its employees its
prerogative of formulating a code of discipline.

PAL asserts that when it revised its Code on March 15, 1985, there was no law which
mandated the sharing of responsibility therefor between employer and employee.

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715,
amending Article 211 of the Labor Code, that the law explicitly considered it a State policy
"(t)o ensure the participation of workers in decision and policy-making processes affecting
the rights, duties and welfare." However, even in the absence of said clear provision of
law, the exercise of management prerogatives was never considered boundless. Thus,
in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that management's prerogatives
must be without abuse of discretion.

In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we
upheld the company's right to implement a new system of distributing its products, but
gave the following caveat:

So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements,
this Court will uphold them.
(at p. 28.)

All this points to the conclusion that the exercise of managerial prerogatives
is not unlimited. It is circumscribed by limitations found in law, a collective bargaining
agreement, or the general principles of fair play and justice (University of Sto. Tomas vs.
NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs.
NLRC (154 713 [1987]), it must be duly established that the prerogative being invoked is
clearly a managerial one.

A close scrutiny of the objectionable provisions of the Code reveals that they are not
purely business-oriented nor do they concern the management aspect of the business of
the company as in the San Miguel case. The provisions of the Code clearly have
repercusions on the employee's right to security of tenure. The implementation of the
provisions may result in the deprivation of an employee's means of livelihood which, as
correctly pointed out by the NLRC, is a property right (Callanta, vs Carnation Philippines,
Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border on
infringement of constitutional rights, we must uphold the constitutional requirements for
the protection of labor and the promotion of social justice, for these factors, according to
Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker"
(Employees Association of the Philippine American Life Insurance Company vs. NLRC,
199 SCRA 628 [1991] 635).

Verily, a line must be drawn between management prerogatives regarding business

operations per se and those which affect the rights of the employees. In treating the latter,
management should see to it that its employees are at least properly informed of its
decisions or modes action. PAL asserts that all its employees have been furnished copies
of the Code. Public respondents found to the contrary, which finding, to say the least is
entitled to great respect.

PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on
June 27, 1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce
company rules and regulations to carry out the functions of management without having to
discuss the same with PALEA and much less, obtain the latter's conformity thereto" (pp.
11-12, Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view is based on the
following provision of the agreement:

The Association recognizes the right of the Company to determine matters of

management it policy and Company operations and to direct its manpower. Management
of the Company includes the right to organize, plan, direct and control operations, to hire,
assign employees to work, transfer employees from one department, to another, to
promote, demote, discipline, suspend or discharge employees for just cause; to lay-off
employees for valid and legal causes, to introduce new or improved methods or facilities
or to change existing methods or facilities and the right to make and enforce Company
rules and regulations to carry out the functions of management.

The exercise by management of its prerogative shall be done in a just reasonable,

humane and/or lawful manner.

Such provision in the collective bargaining agreement may not be interpreted as cession
of employees' rights to participate in the deliberation of matters which may affect their
rights and the formulation of policies relative thereto. And one such mater is the
formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just
participation in the discussion of matters affecting their rights. Thus, even before Article
211 of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it was already
declared a policy of the State, "(d) To promote the enlightenment of workers concerning
their rights and obligations . . . as employees." This was, of course, amplified by Republic
Act No 6715 when it decreed the "participation of workers in decision and policy making
processes affecting their rights, duties and welfare." PAL's position that it cannot be
saddled with the "obligation" of sharing management prerogatives as during the
formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner's
Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such "obligation"
was not yet founded in law when the Code was formulated, the attainment of a
harmonious labor-management relationship and the then already existing state policy of
enlightening workers concerning their rights as employees demand no less than the
observance of transparency in managerial moves affecting employees' rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline

considering the nature of its business cannot be overemphasized. In fact, its being a local
monopoly in the business demands the most stringent of measures to attain safe travel for
its patrons. Nonetheless, whatever disciplinary measures are adopted cannot be properly
implemented in the absence of full cooperation of the employees. Such cooperation
cannot be attained if the employees are restive on account, of their being left out in the
determination of cardinal and fundamental matters affecting their employment.

WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No

special pronouncement is made as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 91298 June 22, 1990

CORAZON PERIQUET, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and THE PHIL. NATIONAL
CONSTRUCTION CORPORATION (Formerly Construction Development Corp. of the
Phils.), respondents.
Tabaquero, Albano & Associates for petitioner.

The Government Corporate Counsel for private respondent.

CRUZ, J.:

It is said that a woman has the privilege of changing her mind but this is usually allowed only in affairs of the heart where the
rules are permissibly inconstant. In the case before us, Corazon Periquet, the herein petitioner, exercised this privilege in
connection with her work, where the rules are not as fickle.

The petitioner was dismissed as toll collector by the Construction Development

Corporation of the Philippines, private respondent herein, for willful breach of trust and
unauthorized possession of accountable toll tickets allegedly found in her purse during a
surprise inspection. Claiming she had been "framed," she filed a complaint for illegal
dismissal and was sustained by the labor arbiter, who ordered her reinstatement within
ten days "without loss of seniority rights and other privileges and with fun back wages to
be computed from the date of her actual dismissal up to date of her actual
reinstatement." On appeal, this order was affirmed in toto by public respondent NLRC on
1

August 29, 1980. 2

On March 11, 1989, almost nine years later, the petitioner filed a motion for the issuance
of a writ of execution of the decision. The motion was granted by the executive labor
arbiter in an order dated June 26, 1989, which required payment to the petitioner of the
sum of P205,207.42 "by way of implementing the balance of the judgment amount" due
from the private respondent. Pursuant thereto, the said amount was garnished by the
3

NLRC sheriff on July 12, 1989. On September 11, 1989, however, the NLRC sustained
4

the appeal of the CDCP and set aside the order dated June 20, 1989, the corresponding
writ of execution of June 26, 1989, and the notice of garnishment. 5

In its decision, the public respondent held that the motion for execution was time-barred,
having been filed beyond the five-year period prescribed by both the Rules of Court and
the Labor Code. It also rejected the petitioner's claim that she had not been reinstated on
time and ruled as valid the two quitclaims she had signed waiving her right to
reinstatement and acknowledging settlement in full of her back wages and other benefits.
The petitioner contends that this decision is tainted with grave abuse of discretion and
asks for its reversal. We shall affirm instead.

Sec. 6, Rule 39 of the Revised Rules of Court, provides:

SEC. 6. Execution by motion or by independent action. — A judgment may be executed

on motion within five (5) years from the date of its entry or from the date it becomes final
and executory. After the lapse of such time, and before it is barred by the statute of
limitations, a judgment may be enforced by action.

A similar provision is found in Art. 224 of the Labor Code, as amended by RA 6715, viz.

ART. 224. Execution of decision, orders, awards. — (a) The Secretary of Labor and
Employment or any Regional Director, the Commission or any Labor Arbiter or
Med-Arbiter, or the Voluntary Arbitrator may, motu propio, or on motion of any interested
party, issue a writ of execution on a judgment within five (5) years from the date it
becomes final and executory, requiring a sheriff or a duly deputized officer to execute or
enforce a final decision, order or award. ...

The petitioner argues that the above rules are not absolute and cites the exception
snowed in Lancita v. Magbanua, where the Court held:
6

Where judgments are for money only and wholly unpaid, and execution has been
previously withheld in the interest of the judgment debtor, which is in financial difficulties,
the court has no discretion to deny motions for leave to issue execution more than five
years after the judgments are entered. (Application of Molnar, Belinsky, et al. v. Long Is.
Amusement Corp., I N.Y.S, 2d 866)

In computing the time limited for suing out of an execution, although there is authority to
the contrary, the general rule is that there should not be included the time when execution
is stayed, either by agreement of the parties for a definite time, by injunction, by the taking
of an appeal or writ of error so as to operate as a supersedeas, by the death of a party, or
otherwise. Any interruption or delay occasioned by the debtor will extend the time within
which the writ may be issued without scire facias.

xxx xxx xxx

There has been no indication that respondents herein had ever slept on their rights to
have the judgment executed by mere motions, within the reglementary period. The statute
of limitation has not been devised against those who wish to act but cannot do so, for
causes beyond their central.

Periquet insists it was the private respondent that delayed and prevented the execution of
the judgment in her favor, but that is not the way we see it. The record shows it was she
who dilly-dallied.

The original decision called for her reinstatement within ten days from receipt thereof
following its affirmance by the NLRC on August 29, 1980, but there is no evidence that
she demanded her reinstatement or that she complained when her demand was rejected.
What appears is that she entered into a compromise agreement with CDCP where she
waived her right to reinstatement and received from the CDCP the sum of P14,000.00
representing her back wages from the date of her dismissal to the date of the agreement. 7

Dismissing the compromise agreement, the petitioner now claims she was actually
reinstated only on March 16, 1987, and so should be granted back pay for the period
beginning November 28, 1978, date of her dismissal, until the date of her reinstatement.
She conveniently omits to mention several significant developments that transpired during
and after this period that seriously cast doubt on her candor and bona fides.

After accepting the sum of P14,000.00 from the private respondent and waiving her right
to reinstatement in the compromise agreement, the petitioner secured employment as
kitchen dispatcher at the Tito Rey Restaurant, where she worked from October 1982 to
March 1987. According to the certification issued by that business, she received a
8

monthly compensation of P1,904.00, which was higher than her salary in the CDCP.

For reasons not disclosed by the record, she applied for re-employment with the CDCP
and was on March 16,1987, given the position of xerox machine operator with a basic
salary of P1,030.00 plus P461.33 in allowances, for a total of P1,491.33 monthly. 9
On June 27, 1988; she wrote the new management of the CDCP and asked that the rights
granted her by the decision dated August 29, 1980, be recognized because the waiver
she had signed was invalid. 10

On September 19, 1988, the Corporate Legal Counsel of the private respondent (now
Philippine National Construction Corporation) recommended the payment to the petitioner
of the sum of P9,544.00, representing the balance of her back pay for three years at P654.
00 per month (minus the P14,000.00 earlier paid). 11

On November 10, 1988, the petitioner accepted this additional amount and signed
another Quitclaim and Release reading as follows:

KNOW ALL MEN BY THESE PRESENTS:

THAT, I CORAZON PERIQUET, of legal age, married and resident of No. 87 Annapolis
St., Quezon City, hereby acknowledged receipt of the sum of PESOS: NINE THOUSAND
FIVE HUNDRED FORTY FOUR PESOS ONLY (P9,544.00) Philippine currency,
representing the unpaid balance of the back wages due me under the judgment award in
NLRC Case No. AB-2-864-79 entitled "Corazon Periquet vs. PNCC- TOLLWAYS" and I
further manifest that this payment is in full satisfaction of all my claims/demands in the
aforesaid case. Likewise, I hereby manifest that I had voluntarily waived reinstatement to
my former position as TOLL TELLER and in lieu thereof, I sought and am satisfied with my
present position as XEROX MACHINE OPERATOR in the Central Office.

Finally, I hereby certify that delay in my reinstatement, after finality of the Decision dated
10 May 1979 was due to my own fault and that PNCC is not liable thereto.

I hereby RELEASE AND DISCHARGE the said corporation and its officers from money
and all claims by way of unpaid wages, separation pay, differential pay, company,
statutory and other benefits or otherwise as may be due me in connection with the
above-entitled case. I hereby state further that I have no more claims or right of action of
whatever nature, whether past, present, future or contingent against said corporation and
its officers, relative to NLRC Case No. AB-2-864-79.

IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of November 1988
at Mandaluyong, Metro Manila. (Emphasis supplied.) 12

The petitioner was apparently satisfied with the settlement, for in the memorandum she
sent the PNCC Corporate Legal Counsel on November 24, 1988, she said in part:
13

Sir, this is indeed my chance to express my gratitude to you and all others who have
helped me and my family enjoy the fruits of my years of stay with PNCC by way of
granting an additional amount of P9,544.00 among others ...

As per your recommendation contained therein in said memo, I am now occupying the
position of xerox machine operator and is (sic) presently receiving a monthly salary of
P2,014.00.

Reacting to her inquiry about her entitlement to longevity pay, yearly company increases
and other statutory benefits, the private respondent adjusted her monthly salary from
P2,014.00 to P3,588.00 monthly.
Then the lull. Then the bombshell.

On March 11, 1989, she filed the motion for execution that is now the subject of this
petition.

It is difficult to understand the attitude of the petitioner, who has blown hot and cold, as if
she does not know her own mind. First she signed a waiver and then she rejected it; then
she signed another waiver which she also rejected, again on the ground that she had
been deceived. In her first waiver, she acknowledged full settlement of the judgment in her
favor, and then in the second waiver, after accepting additional payment, she again
acknowledged fun settlement of the same judgment. But now she is singing a different
tune.

In her petition she is now disowning both acknowledgments and claiming that the earlier
payments both of which she had accepted as sufficient, are insufficient. They were valid
before but they are not valid now. She also claimed she was harassed and cheated by the
past management of the CDCP and sought the help of the new management of the PNCC
under its "dynamic leadership." But now she is denouncing the new management-for also
tricking her into signing the second quitclaim.

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there
is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as a valid and
binding undertaking. As in this case.

The question may be asked: Why did the petitioner sign the compromise agreement of
September 16, 1980, and waive all her rights under the judgment in consideration of the
cash settlement she received? It must be remembered that on that date the decision could
still have been elevated on certiorari before this Court and there was still the possibility of
its reversal. The petitioner obviously decided that a bird in hand was worth two on the
wing and so opted for the compromise agreement. The amount she was then waiving, it is
worth noting, had not yet come up to the exorbitant sum of P205,207.42 that she was later
to demand after the lapse of eight years.

The back pay due the petitioner need not detain us. We have held in countless cases that
this should be limited to three years from the date of the illegal dismissal, during which
period (but not beyond) the dismissed employee is deemed unemployed without the
necessity of proof. Hence, the petitioner's contention that she should be paid from 1978
14

to 1987 must be rejected, and even without regard to the fact (that would otherwise have
been counted against her) that she was actually employed during most of that period.

Finally, the petitioner's invocation of Article 223 of the Labor Code to question the failure
of the private respondent to file a supersedeas bond is not well-taken. As the Solicitor
General correctly points out, the bond is required only when there is an appeal from the
decision with a monetary award, not an order enforcing the decision, as in the case at bar.

As officers of the court, counsel are under obligation to advise their clients against making
untenable and inconsistent claims like the ones raised in this petition that have only
needlessly taken up the valuable time of this Court, the Solicitor General, the Government
Corporate Counsel, and the respondents. Lawyers are not merely hired employees who
must unquestioningly do the bidding of the client, however unreasonable this may be
when tested by their own expert appreciation of the pertinent facts and the applicable law
and jurisprudence. Counsel must counsel.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

EN BANC

[G.R. No. 118651. October 16, 1997]

PIONEER TEXTURIZING CORP. and/or JULIANO

LIM, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, PIONEER TEXTURIZING WORKERS
UNION and LOURDES A. DE JESUS, respondents.

DECISION
FRANCISCO, J.:

The facts are as follows:

Private respondent Lourdes A. de Jesus is petitioners
reviser/trimmer since 1980. As reviser/trimmer, de Jesus based her
assigned work on a paper note posted by petitioners. The posted
paper which contains the corresponding price for the work to be
accomplished by a worker is identified by its P.O. Number. On August
15, 1992, de Jesus worked on P.O. No. 3853 by trimming the cloths
ribs. She thereafter submitted tickets corresponding to the work done
to her supervisor. Three days later, de Jesus received from
petitioners personnel manager a memorandum requiring her to
explain why no disciplinary action should be taken against her for
dishonesty and tampering of official records and documents with the
intention of cheating as P.O. No. 3853 allegedly required no
trimming. The memorandum also placed her under preventive
suspension for thirty days starting from August 19, 1992. In her
handwritten explanation, de Jesus maintained that she merely
committed a mistake in trimming P.O. No. 3853 as it has the same
style and design as P.O. No. 3824 which has an attached price list for
trimming the ribs and admitted that she may have been negligent in
presuming that the same work was to be done with P.O. No. 3853, but
not for dishonesty or tampering Petitioners personnel department,
nonetheless, terminated her from employment and sent her a notice
of termination dated September 18, 1992.
On September 22, 1992, de Jesus filed a complaint for illegal
dismissal against petitioners. The Labor Arbiter who heard the case
noted that de Jesus was amply accorded procedural due process in
her termination from service. Nevertheless, after observing that de
Jesus made some further trimming on P.O. No. 3853 and that her
dismissal was not justified, the Labor Arbiter held petitioners guilty of
illegal dismissal. Petitioners were accordingly ordered to reinstate de
Jesus to her previous position without loss of seniority rights and with
full backwages from the time of her suspension on August 19,
1992. Dissatisfied with the Labor Arbiters decision, petitioners
appealed to the public respondent National Labor Relations
Commission (NLRC). In its July 21, 1994 decision, the NLRC ruled [1]

that de Jesus was negligent in presuming that the ribs of P.O. No.
3853 should likewise be trimmed for having the same style and
design as P.O. No. 3824, thus petitioners cannot be entirely faulted
for dismissing de Jesus. The NLRC declared that the
status quo between them should be maintained and affirmed the
Labor Arbiters order of reinstatement, but without backwages. The
NLRC further directed petitioner to pay de Jesus her back salaries
from the date she filed her motion for execution on September 21,
1993 up to the date of the promulgation of [the] decision. Petitioners
[2]

filed their partial motion for reconsideration which the NLRC denied,
hence this petition anchored substantially on the alleged NLRCs error
in holding that de Jesus is entitled to reinstatement and back
salaries. On March 6, 1996, petitioners filed its supplement to the
petition amplifying further their arguments. In a resolution dated
February 20, 1995, the Court required respondents to comment
thereon. Private respondent de Jesus and the Office of the Solicitor
General, in behalf of public respondent NLRC, subsequently filed their
comments. Thereafter, petitioners filed two rejoinders [should be
replies] to respondents respective comments. Respondents in due
time filed their rejoinders.

These are two interrelated and crucial issues, namely: (1) whether or not de
Jesus was illegally dismissed, and (2) whether or not an order for
reinstatement needs a writ of execution.
Petitioners insist that the NLRC gravely abused its discretion in holding that
de Jesus is entitled to reinstatement to her previous position for she was not
illegally dismissed in the first place. In support thereof, petitioners quote
portions of the NLRC decision which stated that respondent [petitioners
herein] cannot be entirely faulted for dismissing the complaint and that
[3]

there was no illegal dismissal to speak of in the case at bar. Petitioners

[4]

further add that de Jesus breached the trust reposed in her, hence her
dismissal from service is proper on the basis of loss of confidence, citing as
authority the cases of Ocean Terminal Services, Inc. v. NLRC, 197 SCRA
491; Coca-Cola Bottlers Phil., Inc. v. NLRC, 172 SCRA 751, and Piedad v.
Lanao del Norte Electric Cooperative, 154 SCRA 500.
[5]

The arguments lack merit.

The entire paragraph which comprises the gist of the NLRCs
decision from where petitioners derived and isolated the aforequoted
portions of the NLRCs observation reads in full as follows:
We cannot fully subscribe to the complainants claim that she
trimmed the ribs of PO3853 in the light of the sworn statement of her
supervisor Rebecca Madarcos (Rollo, p. 64) that no trimming was
necessary because the ribs were already of the proper length. The
complainant herself admitted in her sinumpaang salaysay (Rollo, p.
45) that Aking napansin na hindi pantay-pantay ang lapad ng mga
ribs PO3853 - mas maigsi ang nagupit ko sa mga ribs ng PO3853
kaysa sa mga ribs ng mga nakaraang POs. The complaint being an
experienced reviser/trimmer for almost twelve (12) years should
have called the attention of her supervisor regarding her observation
of PO3853. It should be noted that complainant was trying to claim
as production output 447 pieces of trimmed ribs of PO3853 which
respondents insists that complainant did not do any. She was
therefore negligent in presuming that the ribs of PO3853 should
likewise be trimmed for having the same style and design as
PO3824. Complainant cannot pass on the blame to her supervisor
whom she claimed checked the said tickets prior to the submission to
the Accounting Department. As explained by respondent, what the
supervisor does is merely not the submission of tickets and do some
checking before forwarding the same to the Accounting
Department. It was never disputed that it is the Accounting
Department who does the detailed checking and computation of the
tickets as has been the company policy and practice. Based on the
foregoing and considering that respondent cannot be entirely faulted
for dismissing complainant as the complainant herself was also
 negligent in the performance of her job, We hereby rule that
status quo between them should be maintained as a matter of
course. We thus affirm the decision of Labor Arbiter reinstating the
complainant but without backwages. The award of backwages in
general are granted on grounds of equity for earnings which a worker
or employee has lost due to his illegal dismissal. (Indophil Acrylic
Mfg. Corporation vs. NLRC, G.R. No. 96488 September 27,
1993) There being no illegal dismissal to speak in the case at bar, the
award for backwages should necessarily be deleted. [6]

We note that the NLRCs decision is quite categorical in finding

that de Jesus was merely negligent in the performance of her
duty. Such negligence, the Labor Arbiter delineated, was brought
about by the petitioners plain improvidence. Thus:
After careful assessment of the allegations and documents available
on record, we are convinced that the penalty of dismissal was not
justified.
At the outset, it is remarkable that respondents did not deny nor
dispute that P.O. 3853 has the same style and design as P.O. 3824;
that P.O. 3824 was made as guide for the work done on P.O. 3853;
and, most importantly, that the notation correction on P.O. 3824 was
made only after the error was discovered by respondents Accounting
Department.
Be sure that as it may, the factual issue in this case is whether or not
complaint trimmed the ribs of P.O. 3853?
Respondents maintained that she did not because the record in
Accounting Department allegedly indicates that no trimming is to be
done on P.O. 3853. Basically, this allegation is unsubstantiated.
It must be emphasized that in termination cases the burdent of proof
rests upon the employer.
In the instant case, respondents mere allegation that P.O. 3853 need
not be trimmed does not satisfy the proof required to warrant
complainants dismissal.
Now, granting that the Accounting record is correct, we still believe
that complainant did some further trimming on P.O. 3853 based on
the following grounds:
 First, Supervisor Rebecca Madarcos who ought to know the work to
be performed because she was in-charged of assigning jobs, reported
no anomally when the tickets were submitted to her.
Incidentally, supervisor Madarcos testimony is suspect because if
she could recall what she ordered the complainant to do seven (7)
months ago (to revise the collars and plackets of shirts) there was no
reason for her not to detect the alleged tampering at the time
complainant submitted her tickets, after all, that was part of her job,
if not her main job.
Secondly, she did not exceed her quota, otherwise she could have
simply asked for more.
That her output was remarkably big granting misinterpreted it is true,
is well explained in that the parts she had trimmed were lesser
compared to those which she had cut before.
In this connection, respondents misinterpreted the handwritten
explanation of the complainant dated 20 August 1992, because the
letter never admits that she never trimmed P.O. 3853, on the contrary
the following sentence,
Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang
inalis na pala ang presyo ng Sec. 9 P.O. 3853 na ito.
is crystal clear that she did trim the ribs on P.O. 3853. [7]

Gleaned either from the Labor Arbiters observations or from the

NLRCs assessment, it distinctly appears that petitioners accusation of
dishonesty and tampering of official records and documents with
intention of cheating against de Jesus was not substantiated by clear
and convincing evidence. Petitioners simply failed, both before the
Labor Arbiter and the NLRC, to discharge the burdent of proof and to
validly justify de Jesus dismissal from service. The law, in this light,
directs the employers, such as herein petitioners, not to terminate the
services of an employee except for a just or authorized cause under
the Labor Code. Lack of a just cause in the dismissal from service of
[8]

an employee, as in this case, renders the dismissal illegal, despite the

employers observance of procedural due process. And while the
[9]

NLRC stated that there was no illegal dismissal to speak of in the

case at bar and that petitioners cannot be entirely faulted therefor,
said statements are inordinate pronouncements which did not remove
the assailed dismissal from the realm of illegality. Neither can these
pronouncements preclude us from holding otherwise.
 We also find the imposition of the extreme penalty of dismissal
against de Jesus as certainly harsh and grossly disproportionate to
the negligence committed, especially where said employee holds a
faithful and an untarnished twelve-year service record. While an
employer has the inherent right to discipline its employees, we have
always held that this right must always be exercised humanely, and
the penalty it must impose should be commensurate to the offense
involved and to the degree of its infraction. The employer should
[10]

bear in mind that, in the exercise of such right, what is at stake is not
only the employees position but her livelihood as well.
Equally unmeritorious is petitioners assertion that the dismissal is
justified on the basis of loss of confidence. While loss of confidence,
as correctly argued by petitioners, is one of the valid grounds for
termination of employment, the same, however, cannot be used as a
pretext to vindicate each and every instance of unwarranted
dismissal. To be a valid ground, it must shown that the employee
concerned is responsible for the misconduct or infraction and that the
nature of his participation therein rendered him absolutely unworthy of
the trust and confidence demanded by his position. In this cae,
[11]

petitioners were unsuccessful in establishing their accusations of

dishonesty and tampering of records with intention of cheating.Indeed,
even if petitioners allegations against de Jesus were true, they just
the same failed to prove that her position needs the continued and
unceasing trust of her employees functions. Surely, de Jesus who
[12]

occupies the position of a reviser/trimmer does not require the

petitioners perpetual and full confidence. In this regard, petitioners
reliance on the cases of Ocean Terminal Services, Inc. v.
NLRC; Coca-Cola Bottlers Phil., Inc. v. NLRC; and Piedad v. Lanao
del Norte Electric Cooperative, which when perused involve positions
that require the employers full trust and confidence, is wholly
misplaced. In Ocean Terminal Services, for instance, the dismissed
employee was designated as expediter and canvasser whose
responsibility is mainly to make emergency procurements of tools and
equipments and was entrusted with the necessary cash for buying
them. The case of Coca-Cola Bottlers, on the other hand, involves a
sales agent whose job exposes him to the everyday financial
transactions involving the employers goods and funds, while that
of Piedad concerns a bill collector who essentially handles the
employers cash collections. Undoubtedly, the position of a
reviser/trimmer could not be equated with that of a canvasser, sales
agent, or a bill collector. Besides, the involved employees in the three
aforementioned cases were clearly proven guilty of infractions unlike
private respondent in the case at bar. Thus, petitioners dependence
on these cited cases is inaccurate, to say the least. More, whether or
not de Jesus meets the days quota of work she, just the same, is paid
the daily minimum wage. [13]

Corollary to our determination that de Jesus was illegally

dismissed is her imperative entitlement to reinstatement and
backwages as mandated by law. Whence, we move to the second
[14]

issue, i.e., whether or not an order for reinstatement needs a writ of

execution.
Petitioners theory is that an order for reinstatement is not
self-executory. They stress that there must be a writ of execution
which may be issued by the NLRC or by the Labor Arbiter motu
proprio or on motion of an interested party. They further maintain that
even if a writ of execution was issued, a timely appeal coupled by the
posting of appropriate supersedeas bond, which they did in this case,
effectively forestalled and stayed execution of the reinstatement order
of the Labor Arbiter. As supporting authority, petitioners emphatically
cite and bank on the case of Maranaw Hotel Resort Corporation
(Century Park Sheraton Manila) v. NLRC, 238 SCRA 190.
Private respondent de Jesus, for her part, maintains that
petitioners should have reinstated her immediately after the decision
of the Labor Arbiter ordering her reinstatement was promulgated
since the law mandates that an order for reinstatement is immediately
executory. An appeal, she says, could not stay the execution of a
reinstatement order for she could either be admitted back to work or
merely reinstated in the payroll without need of a writ of execution. De
Jesus argues that a writ of execution is necessary only for the
enforcement of decisions, orders, or awards which have acquired
finality. In effect, de Jesus is urging the Court to re-examine the ruling
laid down in Maranaw.
Article 223 of the Labor Code, as amended by R.A. No. 6715
which took effect on March 21, 1989, pertinently provides:
ART. 223. Appeal. --Decisions, awards, or orders of the Labor
Arbiter are final and executory unless appealed to the Commission by
any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders. Such appeal maybe entertained only on
any of the following grounds:
xxx xxx xxx
 In an event, the decision of the Labor Arbiter reinstating a dismissed
or separated employee, insofar as the reinstatement aspect is
concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the
option of the employer, merely reistated in the payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement
provided herein.
xxx xxx xxx
We initially interpreted the aforequoted provision in Inciong v.
NLRC. The Court made this brief comment:
[15] [16]

The decision of the Labor Arbiter in this case was rendered on

December 18, 1988, or three (3) months before Article 223 of the
Labor Code was amended by Republic Act 6715 (which became law
on March 21, 1989), providing that a decision of the Labor Arbiter
ordering the reinstatement of a dismissed or separated employee shall
be immediately executory insofar as the reinstatement aspect is
concerned, and the posting of an appeal bond by the employer shall
not stay such execution. Since this new law contains no provision
giving it retroactive effect (Art. 4, Civil Code), the amendment may
not be applied to this case.
which the Court adopted and applied in Callanta v.
NLRC. In Zamboanga City Water District v. Buat, the Court
[17] [18]

construed Article 223 to mean exactly what it says. We said:

Under the said provision of law, the decision of the Labor Arbiter
reinstating a dismissed or separated employee insofar as the
reinstatement aspect is concerned, shall be immediately executory,
even pending appeal. The employer shall reinstate the employee
concerned either by: (a) actually admitting him back to work under
the same terms and conditions prevailing prior to his dismissal or
separation; or (b) at the option of the employer, merely reinstating
him in the payroll. Immediate reinstatement is mandated and is not
stayed by the fact that the employer has appealed, or has posted a
cash or surety bond pending appeal. [19]

We expressed a similar view a year earlier in Medina v. Consolidated

Broadcasting System (CBS) DZWX and laid down the rule that an
[20]

employer who fails to comply with an order of reinstatement makes

him liable for the employees salaries. Thus:
Petitioners construe the above paragraph to mean that the refusal of the
employer to reinstate an employee as directed in an executory order of
reinstatement would make it liable to pay the latters salaries.This
interpretation is correct. Under Article 223 of the Labor Code, as amended,
an employer has two options in order for him to comply with an order of
reinstatement, which is immediately executory, even pending appeal. Firstly,
he can admit the dismissed employee back to work under the same terms
and conditions prevailing prior to his dismissal or separation or to a
substantially equivalent position if the former position is already filled up as
we have ruled in Union of Supervisors (RB) NATU vs. Sec. of Labor, 128
SCRA 442 [1984]; and Pedroso vs. Castro, 141 SCRA 252
[1986]. Secondly, he can reinstate the employee merely in the
payroll. Failing to exercise any of the above options, the employer can be
compelled under pain of contempt, to pay instead the salary of the
employee. This interpretation is more in consonance with the constitutional
protection to labor (Section 3, Art. XIII, 1987 Constitution). The right of a
person to his labor is deemed to be property within the meaning of the
constitutional guaranty that no one shall be deprived of life, liberty, and
property without due process of law. Therefore, he should be protected
against any arbitrary and unjust deprivation of his job (Bondoc vs. Peoples
Bank and Trust Co., Inc., 103 SCRA 599 [1981]). The employee should not
be left without any remedy in case the employer unreasonably delays
reinstatement. Therefore, we hold that the unjustified refusal of the
employer to reinstate an illegally dismissed employee entitles the employee
to payment of his salaries x x x.
[21]

The Court, however, deviated from this construction in the case

of Maranaw. Reinterpreting the import of Article 223 in Maranaw, the
Court declared that the reinstatement aspect of the Labor Arbiters
[22]

decision needs a writ of execution as it is not self-executory, a

declaration the Court recently reiterated and adopted in Archilles
Manufacturing Corp. v. NLRC. [23]

We note that prior to the enactment of R.A. No. 6715, Article

223 of the Labor Code contains no provision dealing with the
[24]

reinstatement of an illegally dismissed employee. The amendment

introduced by R.A. No. 6715 is an innovation and a far departure from
the old law indicating therby the legislatures unequivocal intent to
insert a new rule that will govern the reinstatement aspect of a
decision or resolution in any given labor dispute. In fact, the law as
now worded employs the phrase shall immediately be executory
without qualification emphasizing the need for prompt compliance. As
a rule, shall in a statute commonly denotes an imperative obligation
and is inconsistent with the idea of discretion and that the [25]

presumption is that the word shall, when used in a statute, is

mandatory. An appeal or posting of bond, by plain mandate of the
[26]

law, could not even forestall nor stay the executory nature of an order
of reinstatement. The law, moreover, is unambiguous and clear. Thus,
it must be applied according to its plain and obvious meaning,
according to its express terms. In Globe-Mackay Cable and Radio
Corporation v. NLRC, we held that:
[27]

Under the principles of statutory construction, if a statute is clear, plain and

free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation. This plain-meaning rule or verba legis derived
from the maxim index animi sermo est (speech is the index of intention)
rests on the valid presumption that the words employed by the legislature in
a statute correctly express its intent by the use of such words as are found in
the statute. Verba legis non est recedendum, or from the words of a statute
there should be no departure. [28]

And in conformity with the executory nature of the reinstatement order,

Rule V, Section 16 (3) of the New Rules of Procedure of the NLRC
strictly requires the Labor Arbiter to direct the employer to
immediately reinstate the dismissed employee. Thus:

In case the decision includes an order of reinstatement, the Labor Arbiter

shall direct the employer to immediately reinstate the dismissed or separated
employee even pending appeal. The order of reinstatement shall indicate
that the employee shall either be admitted back to work under the same
terms and conditions prevailing prior to his dismissal or separation or, at the
option of the employer, merely reinstated in the payroll.

In declaring that reinstatement order is not self-executory and

needs a writ of execution, the Court, in Maranaw, adverted to the rule
provided under Article 224. We said:
It must be stressed, however, that although the reinstatement aspect
of the decision is immediately executory, it does not follow that it
is self-executory. There must be a writ of execution which may be
issued motu proprio or on motion of an interested party. Article 224
of the Labor Code provides:
ART. 224. Execution of decisions, orders or awards. (a) The
Secretary of Labor and Employment or any Regional Director, the
 Commission or any Labor Arbiter, or med-arbiter or voluntary
arbitrator may, motu propio or on motion of any interested party,
issue a writ of execution on a judgment within five (5) years from
the date it becomes final and executory (emphasis supplied)
The second paragraph of Section 1, Rule VIII of the New Rules of
Procedure of the NLRC also provides:

The Labor Arbiter, POEA Administrator, or the Regional Director, or his

duly authorized hearing officer of origin shall, motu propio or on motion of
any interested party, issue a writ of execution on a judgment within five (5)
years from the date it becomes final and executory . No motion for
execution shall be entertained nor a writ be issued unless the Labor Arbiter
is in possession of the records of the case which shall include an entry of
judgment. (emphasis supplied)

xxx xxx xxx

In the absence them of an order for the issuance of a writ of
execution on the reinstatement aspect of the decision of the Labor
Arbiter, the petitioner was under no legal obligation to admit back
to work the private respondent under the terms and conditions
prevailing prior to her dismissal or, at the petitioners option, to
merely reinstate her in the payroll. An option is a right of election to
exercise a privilege, and the option in Article 223 of the Labor Code
is exclusively granted to the employer. The event that gives rise for
its exercise is not the reinstatement decree of a Labor Arbiter, but
the writ for its execution commanding the employer to reinstate the
employee, while the final act which compels the employer to
exercise the option is the service upon it of the writ of execution
when, instead of admitting the employee back to his work, the
employer chooses to reinstate the employee in the payroll only. If
the employer does not exercise this option, it must forthwith admit
the employee back to work, otherwise it may be punished for
contempt. [29]

A closer examination, however, shows that the necessity for a writ of

execution under Article 224 applies only to final and executory
decisions which are not within the coverage of Article 223. For
comparison, we quote the material portions of the subject articles:

ART. 223. Appeal. x x x

 In any event, the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even pending
appeal. The employee shall either be admitted back to work under
the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the
payroll. The posting of a bond by the employer shall not stay the
execution for reinstatement provided herein.
xxx xxx xxx
ART. 224. Execution of decisions, orders, or awards. --(a) The
Secretary of Labor and Employment or any Regional Director, the
Commission or any Labor Arbiter, or med-arbiter or voluntary
arbitrator may, motu propio or on motion of any interested
party, issue a writ of execution on a judgment within five (5) years
from the date it becomes final and executory, requiring a sheriff or
a duly deputized officer to execute or enforce final decicions, orders
or awards of the Secretary of Labor and Employment or regional
director, the Commission, the arbiter or med-arbiter, or voluntary
arbitrators. In any case, it shall be the duty of the responsible officer
to separately furnish immediately the counsels of record and the
parties with copies of said decisions, orders or awards. Failure to
comply with the duty prescribed herein shall subject such
responsible officer to appropriate administrative sanctions."
Article 224 states that the need for a writ of execution applies
only within five (5) years from the date a decision, an order or
awards becomes final and executory. It cannot relate to an award
or order of reinstatement still to be appealed or pending appeal which
Article 223 contemplates. The provision of Article 223 is clear that an
award for reinstatement shall be immediately executory even
pending appeal and the posting of a bond by the employer shall
not stay the execution for reinstatement. The legislative content is
quite obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a
reinstatement award would certainly betray and run counter to the
very object and intent of Article 223, i. e., the immediate execution of
a reinstatement order. The reason is simple. An application for a writ
of execution and its issuance could be delayed for numerous
reasons. A mere continuance or postponement of a scheduled
hearing, for instance, or an inaction on the part of the Labor Arbiter or
the NLRC could easily delay the issuance of the writ thereby setting at
naught the strict mandate and noble purpose envisioned by Article
223. In other words, if the requirements of Article 224 were to govern,
as we so declared in Maranaw, then the executory nature of a
reinstatement order or award contemplated by Article 223 will be
unduly circumscribed and rendered ineffectual. In enacting the law,
the legislature is presumed to have ordaineda valid and sensible law,
one which operates no further than may be necessary to achieve its
specific purpose. Statutes, as a rule, are to be construed in the light of
the purpose to be achieved and the evil sought to be remedied. And [30]

where statues are fairly susceptible of two or more construction, that

construction should be adopted which will most tend to give effect to
the manifest intent of the law maker and promote the object for which
the statute was enacted, and a construction should be rejected which
would tend to render abortive other provisions of the statute and to
defeat the object which the legislator sought to attain by its
enactment. In introducing a new rule on the reinstatement aspect of
[31]

a labor decision under R.A. No. 6715, Congress should not be

considered to be indulging in mere semantic exercise. On appeal,
however, the appellate tribunal concerned may enjoin or suspend the
reinstatement order in the exercise of its sound discretion.
Furthermore, the rule is that all doubts in the interpretation and
implementation of labor laws should be resolved in favor of labor. In
ruling that an order or award for reinstatement does not require a writ
of execution the Court is simply adhering and giving meaning to this
rule. Henceforth, we rule that an award or order for reinstatement is
self-executory. After receipt of the decision or resolution ordering the
employee's reinstatement, the employer has the right to choose
whether to re-admit the employee to work under the same terms and
conditions prevailing prior to his dismissal or to reinstate the
employee in the payroll. In either instance, the employer has to inform
the employee of his choice. The notification is based on practical
considerations for without notice, the employee has no way of
knowing if he has to report for work or not.
WHEREFORE, the petition is DENIED and the decision of the
Labor Arbiter is hereby REINSTATED.
Costs against petitioner.
SO ORDERED.
[Decision]
 SYLLABUS

1. LABOR LAW; NATIONAL LABOR RELATIONS COMMISSION;

WRIT OF INJUNCTION; THE NLRC OR ANY OF ITS DIVISIONS,
UNDER ARTICLE 218(E) OF THE LABOR CODE, DOES NOT
HAVE BLANKET AUTHORITY TO ISSUE WRITS OF
INJUNCTION. - In the first place, the NLRC should not have
entertained the private respondent's separate or independent
petition for "Injunction and Damages" (NLRC IC No. M-000065). It
was obvious that the petition was a scheme to defeat or obstruct
the enforcement of the judgment in NLRC Case No.
SRAB-09-05-10102-92 where, in fact, a writ of execution had
been issued. Article 218(e) of the Labor Code does not provide
blanket authority to the NLRC or any of its divisions to issue writs
of injunction, while Rule XI of the New Rules of Procedure of the
NLRC makes injunction only an ancillary remedy in ordinary labor
disputes such as the one brought by the petitioner in NLRC Case
No. SRAB-09-05-10102-92. This is clear from Section I of the said
Rule which pertinently provides as follows: Section 1. Injunction in
Ordinary Labor Disputed.- A preliminary injunction or a restraining
order may be granted by the Commission through its divisions
pursuant to the provisions of paragraph (e) of Article 218 of the
Labor Code, as amended, when it is established on the bases of
the sworn allegations in the petition that the acts complained of,
involving or arising from any labor dispute before the Commission,
which, if not restrained or performed forthwith, may cause grave or
irreparable damage to any party or render ineffectual any decision
in favor of such party. x x x The foregoing ancillary power may be
exercised by the Labor Arbiters only as an incident to the cases
pending before them in order to preserve the rights of the parties
during the pendency of the case, but excluding labor disputes
involving strike or lockpout. Hence, a petition or motion for
preliminary injunction should have been filed in the appeal
interposed by the private respondent, i.e., in NLRC Case No.
SRAB-09-05-10102-92. This matter, however, became academic
when the NLRC consolidated the two cases as shown by the
captions in its challenged decision of 28 February 1994 and
resolution of 6 May 1994.
2. ID; JURISDICTION OF THE NLRC; THE NLRC HAS EXCLUSIVE
APPELLATE JURISDICTION ONLY OVER CASES FALLING
WITHIN THE EXCLUSIVE ORIGINAL JURISDICTION OF THE
 LABOR ARBITER; THUS, THE NLRC WAS WITHOUT
JURISDICTION TO RECEIVE EVIDENCE ON THE ALLEGED
INDEBTEDNESS, RENDER JUDGMENT THEREON, AND
DIRECT THAT ITS AWARD BE SET-OFF AGAINST THE FINAL
JUDGMENT OF THE LABOR ARBITER.- As correctly contended
by the Office of the Solicitor General, there is a complete want of
evidence that the indebtedness asserted by the private
respondent against Andres Pondoc arose out of or was incurred in
connection with the employer-employee relationship between
them. The Labor Arbiter did not then have jurisdiction over the
claim as under paragraph (a) of Article 217 of the Labor Code,
Labor Arbiters have exclusive and original jurisdiction only in the
following cases: 1. Unfair labor practice cases; 2. Termination
disputes; 3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment; 4. Claim for
actual, moral, exemplary and other forms of damages arising from
employer-employee relations; 5. Cases arising from any violation
of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and 6. Except claims for
Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement. On the other hand,
under paragraph (b) thereof, the NLRC has exclusive appellate
jurisdiction over all cases decided by the Labor Arbiters. This
simply means that the NLRC does not have original jurisdiction
over the cases enumerated in paragraph (a) and that if a claim
does not fall within the exclusive original jurisdiction of the Labor
Arbiter, the NLRC cannot have appellate jurisdiction thereon. The
conclusion then is inevitable that the NLRC was without
jurisdiction, either original or appellate, to receive evidence on the
alleged indebtedness, render judgment thereon, and direct that its
award be set-off against the final judgment of the Labor Arbiter.
3. ID.; NEW RULES OF PROCEDURE OF THE NLRC;
SUPPLETORY APPLICATION OF THE RULES OF COURT IN
LABOR CASES; THE CLAIM FOR THE ALLEGED
INDEBTEDNESS, ASSUMING IT FELL WITHIN THE
EXCLUSIVE ORIGINAL JURISDICTION OF THE LABOR
 ARBITER, WAS DEEMED WAIVED FOR NOT HAVING BEEN
PLEADED AS AN AFFIRMATIVE DEFENSE OR BARRED FOR
NOT HAVING BEEN SET UP AS A COUNTERCLAIM BEFORE
THE LABOR ARBITER.- Even assuming arguendo that the claim
for the alleged indebtedness fell within the exclusive original
jurisdiction of the Labor Arbiter, it was deemed waived for not
having been pleaded as an affirmative defense or barred for not
having set up as a counterclaim before the Labor Arbiter at any
appropriate time prior to the rendition of the decision in NLRC
Case No. SRAB-09-05-10102-92. Under the Rules of Court, which
is applicable in a suppletory character in labor cases before the
Labor Arbiters or the NLRC pursuant to Section 3, Rule I of the
New Rules of Procedure of the NLRC, defenses which are not
raised either in a motion to dismiss or in the answer are deemed
waived and counteclaims not set up in the answer are
barred. Set-off or compensation is one of the modes of
extinguishing obligations and extinguishment is an affirmative
defense and a ground for a motion to dismiss.

APPEARANCES OF COUNSEL

Arturo M. Paculanang for petitioner.

The Solicitor General for public respondents.
Soriano, Ku & Fortea for private respondent.

[Syllabus]

THIRD DIVISION

[G.R. No. 116347. October 3, 1996]

NATIVIDAD PONDOC, petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION (Fifth Division, Cagayan de
Oro City) and EMILIO PONDOC, respondents.

DECISION
DAVIDE, JR., J.:
 The novel issue that confronts us in this case is whether the Fifth Division
of the National Labor Relations Commission (NLRC) can validly defeat a final
judgment of the labor arbiter in favor of the complainant in a labor case by: (a)
entertaining a petition for injunction and damages, and an appeal from the
Labor Arbiters denial of a claim for set-off based on an alleged indebtedness of
the laborer and order of execution of the final judgment; and, (b) thereafter, by
receiving evidence and adjudging recovery on such indebtedness and
authorizing it to offset the Labor Arbiters final award.
The petitioner takes the negative view. In its Manifestation and Motion in
Lieu of Comment,[1] the Office of the Solicitor General joins her in her plea,
hence we required the NLRC to file its own comment.
We resolved to give due course to the petition after the filing by the NLRC
and the private respondent of their separate comments.
Petitioner Natividad Pondoc was the legitimate wife of Andres
Pondoc. After her death on 5 December 1994, she was substituted by Hipolito
Pondoc, her only legitimate son.[2]
The Office of the Solicitor General summarized the factual antecedents of
this case in its Manifestation and Motion in Lieu of Comment:

Private respondent Eulalio Pondoc is the owner-proprietor of Melleonor

General Merchandise and hardware Supply located at Poblacion, Sindangan,
Zamboanga del Norte. Respondent is engaged, among others, in the business
of buying and selling copra, rice, corn, binangkol, junk iron and empty
bottles. He has in his employ more than twenty (20) regular workers
(Records, pp. 9-11).

Records disclose that Andres Pondoc was employed by Eulalio Pondoc as a

laborer from October 1990 up to December 1991, receiving a wage rate
of P20.00 per day. He was required to work twelve (12) hours a day
from 7:00 AM to 8:00 PM, Monday to Sunday. Despite working on his rest
days and holidays, he was not paid his premium pay as required by law
(Ibid).

Consequently, on May 14, 1992, Natividad Pondoc, on behalf of her

husband, filed a complaint for salary differential, overtime pay, 13th month
pay, holiday pay and other money claims before the Sub-Regional
Arbitration Branch No. 9 of the NLRC, docketed as Sub-RAB Case No.
09-05-10102-92 (Records, p. 1).

In his position paper, private respondent questioned, among others, the

existence of [an] employer-employee relationship between them. He further
averred that Melleonor General Merchandise and Hardware Supply is a
fictitious establishment (Records, pp. 64-68).

On June 17, 1993, labor Arbiter Esteban Abecia rendered a Decision finding
the existence of [an] employer-employee relationship between the
parties. The dispositive portion of the Decision reads:

WHEREFORE, judgment is hereby rendered: (a) ordering respondent

Eulalio Pondoc to pay complainant the following claims:

(1) Salary differential for

reason of underpayment P35,776.00;
(2) Regular holiday and
premium pay for holiday
services 902.00;
(3) Premium pay for rest day
services 3,840.00;
(4) 13th month pay 3,600.00

or the total amount of FOURTY-FOUR [sic] THOUSAND AND ONE

HUNDRED EIGHTEEN PESOS (P44,118.00).

Other claims are denied for lack of merit.

SO ORDERED (Records, pp. 323-324).

On his last day to perfect an appeal, private respondent filed a manifestation

before the Labor Arbiter praying that his liabilities be set-off against
petitioners alleged indebtedness to him (Records, pp. 325-327). The Labor
Arbiter denied, however, the compensation, and instead, issued a writ of
execution as prayed for by petitioner (Records, p. 328).

Before the execution order could be implemented, however, private

respondent was able to obtain a restraining order from the NLRC, where he
filed a Petition for "Injunction and Damages, docketed as NLRC Case No.
ICM-000065.

On February 28, 1994, public respondent NLRC allowed compensation

between petitioners monetary award and her alleged indebtedness to private
respondent. It disposed:

WHEREFORE, the appealed order is hereby vacated and set aside. A new
one is entered declaring the setting-off of complainants indebtedness which
allegedly amounted to P41,051.35 against the complainants monetary award
in the amount of P44,118.00. The additional amount of P5,000.00 which
complainant allegedly got from respondent on 10 July 1993 could not be
credited in view of appellants failure to submit evidence to prove that
complainant was really paid P5,000.00.

Accordingly, respondent Eulalio Pondoc is hereby directed to pay

complainant Natividad Pondoc the amount of P3,066.65.

The Temporary restraining order issued herein is hereby made permanent.

SO ORDERED (Annex D of Petition). [3]

Her motion for reconsideration of the judgment having been denied by the
NLRC, the petitioner instituted this special civil action for certiorari under Rule
65 of the Rules of Court wherein she prays this Court annul the challenged
decision of the NLRC, Fifth Division (Cagayan de Oro City), in NLRC Case No.
IC No. M-000065, and direct the enforcement of the writ of execution in NLRC
Case No. SRAB-09-05-10102-92, on the ground that the NLRC, Fifth Division,
acted without or in excess of jurisdiction or with grave abuse of discretion when
it proceeded to determine the alleged indebtedness of the petitioner and set-off
the same against the liabilities of the private respondent. The petitioner asserts
that the decision of the labor Arbiter in NLRC Case No. SRAB-09-05-10102-92
was already final and executory when the private respondent tried to defeat
the judgment by asserting an alleged indebtedness of Andres Pondoc as a
set-off, a claim not pleaded before the Labor Arbiter at any time before
judgment, hence deemed waived. Moreover, the indebtedness did not evolve
out [sic] employer-employee relationship, hence, purely civil in aspect.
The Office of the solicitor General agreed with the petitioner and stressed
further that the asserted indebtedness was never proven to have arisen out of
or in connection with the employer-employee relationship between the private
respondent and the late Andres Pondoc, or to have any causal connection
thereto. Accordingly, both the Labor Arbiter and the NLRC did not have
jurisdiction over the private respondents claim.
As expected, the private respondent and the NLRC prayed for the
dismissal of this case.
We rule for the petitioner.
The proceedings before the NLRC were fatally flawed.
In the first place, the NLRC should not have entertained the private
respondents separate or independent petition for Injunction and Damages
(NLRC IC No. M-000065). It was obvious that the petition was a scheme to
defeat or obstruct the enforcement of the judgment in NLRC Case No.
SRAB-09-05-10102-92 where, in fact, a writ of execution had been
issued. Article 218(e) of the Labor Code does not provide blanket authority to
the NLRC or any of its divisions to issue writs of injunction, while Rule XI of the
New Rules of Procedure of the NLRC makes injunction only an Ancillary
remedy in ordinary labor disputes such as the one brought by the petitioner in
NLRC Case No. SRAB-09-05-10102-92. This is clear from Section 1 of the
said Rule which pertinently provides as follows:

Section 1. Injunction in Ordinary Labor Disputed. -- A preliminary

injunction or a restraining order may be granted by the Commission through
its divisions pursuant to the provisions of paragraph (e) of Article 218 of the
Labor Code, as amended, when it is established on the bases of the sworn
allegations in the petition that the acts complained of, involving or arising
from any labor dispute before the Commission, which, if not restrained or
performed forthwith, may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party.

xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only
as an incident to the cases pending before them in order to preserve the
rights of the parties during the pendency of the case, but excluding labor
disputes involving strike or lockout. (emphasis supplied)

Hence, a petition or motion for preliminary injunction should have been filed in
the appeal interposed by the private respondent, i.e., in NLRC Case No.
SRAB-09-05-10102-92. This matter, however, became academic when the
NLRC consolidated the two cases as shown by the captions in its challenged
decision of 28 February 1994 and resolution of 6 May 1994.
Secondly, the appeal of the private respondent in NLRC Case No.
SRAB-09-05-10102-92 was not from the decision therein, but from the order of
the Labor Arbiter denying the set-off insisted upon by the private respondent
and directing the execution of the judgment. Therefore, the private respondent
admitted the final and executory character of the judgment.
The Labor Arbiter, in denying the set-off, reasoned [I]t could have been
considered if it was presented before the decision of this case. [4] While this is
correct, there are stronger reasons why the set-off should, indeed, be
denied. As correctly contended by the Office of the Solicitor General, there is a
complete want of evidence that the indebtedness asserted by the private
respondent against Andres Pondoc arose out of or was incurred in connection
with the employer-employee relationship between them. The Labor Arbiter did
not then have jurisdiction over the claim as under paragraph (a) of Article 217
of the Labor Code, Labor Arbiters have exclusive and original jurisdiction only
in the following cases:
1. Unfair labor practice cases;
2. Termination disputes;
 3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claim for actual, moral, exemplary and other forms of damages arising
from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanies with a claim for reinstatement.
On the other hand, under paragraph (b) thereof, the NLRC has exclusive
appellate jurisdiction over all cases decided by the Labor Arbiters. This simply
means that the NLRC does not have original jurisdiction over the cases
enumerated in paragraph (a) and that if a claim does not fall within the
exclusive original jurisdiction of the labor Arbiter, the NLRC cannot have
appellate jurisdiction thereon.
The conclusion then is inevitable that the NLRC was without jurisdiction,
either original or appellate, to receive evidence on the alleged indebtedness,
render judgment thereon, and direct that its award be set-off against the final
judgment of the Labor Arbiter.
Finally, even assuming arguendo that the claim for the alleged
indebtedness fell within the exclusive original jurisdiction of the Labor Arbiter, it
was deemed waived for not having been pleaded as an affirmative defense or
barred for not having been set up as a counterclaim before the Labor Arbiter at
any appropriate time prior to the rendition of the decision in NLRC Case No.
SRAB-09-05-10102-92. Under the rules of Court, which is applicable in a
suppletory character in labor cases before the Labor Arbiters or the NLRC
pursuant to Section 3, Rule 1 of the New Rules of Procedure of the NLRC,
defenses which are not raised either in a motion to dismiss or in the answer
are deemed waived[5] and counterclaims not set up in the answer are
barred.[6] Set-off or compensation is one of the modes of extinguishing
obligations[7] and extinguishment is an affirmative defense and a ground for a
motion to dismiss.[8]
We do not then hesitate to rule that the NLRC acted without jurisdiction or
with grave abuse of discretion in entertaining an independent action for
injunction and damages (NLRC IC No. M-000065), in receiving evidence and
rendering judgment on the alleged indebtedness of Andres Pondoc, and in
ordering such judgment to offset the final award of the Labor Arbiter in NLRC
Case No. SRAB-09-05-10102-92.
WHEREFORE, the instant petition is GRANTED and the challenged
decision of 28 February 1994 and resolution of 6 May 1994 of the National
labor Relations Commission in NLRC Case No. IC No. M-000065 and NLRC
Case No. SRAB-09-05-10102-92 are ANNULLED and SET ASIDE. The
judgment of the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92
should forthwith be enforced without any further delay, the award therein
bearing interest at the rate of twelve percentum (12%) per annum from the
finality of such judgment until it shall have been fully paid.
Costs against the private respondent.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur.

[1] Rollo, 95-104.

[2] Rollo, 75-77; 89.
[3] Rollo, 97-98.
[4] Order of 26 July 1993; Rollo, 23.
[5] Section 2, Rule 9, Rules of Court.
[6] Section 4, Id., Id.
[7] Article 1231 (5), Civil Code.
[8] Section 1 (h), Rule 16, Rules of Court.

FIRST DIVISION

[G.R. No. 128003. July 26, 2000]

RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG, petitioner,

vs. NATIONAL LABOR RELATIONS COMMISSION, AQUINO
MAGSALIN, PEDRO MAIBO, RICARDO BORJA, ALICIA M. SAN
PEDRO AND FELOMENA B. TOLIN, respondents.

DECISION

PARDO, J.:

What is before the Court for resolution is a petition to annul the

resolution of the National Labor Relations Commission
(NLRC),[1] affirming the labor-arbiter's award but deleting the moral and
exemplary damages.

The facts are as follows:

Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a
corporation established in 1965, was engaged in manufacturing
footwear, bags and garments.

Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan,

Alicia M. San Pedro, and Felomena Tolin were employed as dispatcher,
warehouseman, issue monitor, foreman, jacks cementer and outer sole
attacher, respectively.

On August 26, 1994, Rubberworld filed with the Department of Labor

and Employment a notice of temporary shutdown of operations to take
effect on September 26, 1994. Before the effectivity date, however,
Rubberworld was forced to prematurely shutdown its operations.

On November 11, 1994, private respondents filed with the National

Labor Relations Commission a complaint[2] against petitioner for illegal
dismissal and non-payment of separation pay.

On November 22, 1994, Rubberworld filed with the Securities and

Exchange Commission (SEC) a petition for declaration of suspension of
payments with a proposed rehabilitation plan.[3]

On December 28, 1994, SEC issued the following order:

"Accordingly, with the creation of the Management Committee,

all actions for claims against Rubberworld Philippines, Inc.
pending before any court, tribunal, office, board, body,
Commission or sheriff are hereby deemed SUSPENDED.

"Consequently, all pending incidents for preliminary injunctions,

writ or attachments, foreclosures and the like are hereby
rendered moot and academic.

"SO ORDERED."[4]

On January 24, 1995, petitioners submitted to the labor arbiter a motion

to suspend the proceedings invoking the SEC order dated December
28, 1994. The labor arbiter did not act on the motion and ordered the
parties to submit their respective position papers.

On December 10, 1995, the labor arbiter rendered a decision, which

provides:

"In the light of the foregoing, respondents are hereby declared

guilty of ILLEGAL SHUTDOWN and that respondents are
ordered to pay complainants their separation pay equivalent to
one (1) month pay for every year of service.
 Considering the malicious act of closing the business
precipitately without due regard to the rights of complainants,
moral damages and exemplary damage in the sum of P
50,000.00 and P 30,000.00 respectively is hereby awarded for
each of the complainants.

Finally 10 % of all sums owing to complainants is hereby

adjudged as attorney's fees.

SO ORDERED."[5]

On February 5, 1996, petitioners appealed to the National Labor

Relations Commission (NLRC) alleging abuse of discretion and serious
errors in the findings of facts of the labor arbiter.

On August 30, 1996, NLRC issued a resolution, the dispositive portion

of which reads:

"PREMISES CONSIDERED, the decision appealed from is

hereby, AFFIRMED with MODIFICATION in that the award of
moral and exemplary damages is hereby, DELETED.

SO ORDERED."[6]

On November 20, 1996, NLRC denied petitioners' motion for

reconsideration.

Hence, this petition.[7]

The issue is whether or not the Department of Labor and Employment,

the Labor Arbiter and the National Labor Relations Commission may
legally act on the claims of respondents despite the order of the
Securities and Exchange Commission suspending all actions against a
company under rehabilitation by a management committee created by
the Securities and Exchange Commission.

Presidential Decree No. 902-A is clear that "all actions for claims
against corporations, partnerships or associations under management
or receivership pending before any court, tribunal, board or body shall
be suspended accordingly." The law did not make any exception in
favor of labor claims.[8]

"The justification for the automatic stay of all pending actions for claims
is to enable the management committee or the rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extra judicial
interference that might unduly hinder or prevent the 'rescue' of the
debtor company. To allow such other actions to continue would only
 add to the burden of the management committee or rehabilitation
receiver, whose time, effort and resources would be wasted in
defending claims against the corporation instead of being directed
toward its restructuring and rehabilitation."[9]

Thus, the labor case would defeat the purpose of an automatic stay. To
rule otherwise would open the floodgates to numerous claims and
would defeat the rescue efforts of the management committee.

Besides, even if an award is given to private respondents, the ruling

could not be enforced as long as petitioner is under management
committee.[10]

This finds ratiocination in that the power to hear and decide labor
disputes is deemed suspended when the Securities and Exchange
Commission puts the corporation under rehabilitation.

Thus, when NLRC proceeded to decide the case despite the SEC
suspension order, the NLRC acted without or in excess of its jurisdiction
to hear and decide cases. As a consequence, any resolution, decision
or order that it rendered or issued without jurisdiction is a nullity.

WHEREFORE, the petition is hereby GRANTED. The decision of the

labor arbiter dated December 10, 1995 and the NLRC resolution dated
August 30, 1996, are SET ASIDE.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago,

JJ., concur.

[1]
In NLRC NCR 00-11-08125-94 (NLRC CA No. 010142-96)
[2]
Docketed as NLRC NCR Case 00-11-08125-94.
[3]
Docketed as SEC Case No. 11-94-4920.
[4]
Order, SEC Case No. 11-94-4920, December 28, 1994, Rollo, pp. 55-59.
[5]
Decision, Labor Arbiter Ariel Cadiente Santos, Rollo, pp. 48-54.
[6]
Rollo, pp. 35-45, Raul T. Aquino, Presiding Commissioner, ponente, Commissioners Victoriano R.
Calaycay and Rogelio I. Rayala, concurring.
[7]
Filed on February 18, 1997, Rollo, pp. 3-31. On September 22, 1999, we gave due course to the
petition, Rollo, pp. 174-175. We considered this case as an exception to the rule laid down in St. Martin
Funeral Home v. NLRC, 295 SCRA 494 (1998). The issue raised is purely legal. Rather than refer the
case to the Court of Appeals, whose decision would be appealable to the Supreme Court, our ruling
would finally put an end to the litigation.
[8]
PD 902-A, Section 6; Rubberworld v. NLRC, 305 SCRA 721 (1999), citing Barotac Sugar Mills v.
Court of Appeals, 275 SCRA 497 (1997)
[9]
Rubberworld v. NLRC, supra, citing BF Homes, Inc. v. Court of Appeals, 190 SCRA 262 (1990)
[10]
Ibid.

[Decision]

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE;

ARTICLE 212(H) THEREOF; LEGITIMATE
LABOR ORGANIZATION; DEFINITION OF.- Article 212(h) of the
Labor Code defines a legitimate labor organization as "any labor
organization duly registered with the Department of Labor and
Employment, and includes any branch or local thereof."
2. ID.; ID.; ARTICLE 242 THEREOF; ID; RIGHTS THEREOF.- It is
important to determine whether or not a particular labor
organization is legitimate since legitimate labor organizations have
exclusive rights under the law which cannot be exercised by
non-legitimate unions, one of which is the right to be certified as
the exclusive representative of all the employees in an appropriate
collective bargaining unit for purposes of collective
bargaining. These rights are found under Article 242 of the Labor
Code.
3. ID.; ID.; LABOR RELATIONS; LEGITIMACY OF LABOR
ORGANIZATION, WHEN ACQUIRED.- Ordinarily, a labor
organization attains the status of legitimacy only upon the
issuance in its name of a Certificate of Registration by the Bureau
of Labor Relations pursuant to Articles 234 and 235 of the Labor
Code. x x x The foregoing procedure is not the only way by which
a labor union may become legitimate, however. When an
unregistered union becomes a branch, local or chapter of a
federation, some of the aforementioned requirements for
registration are no longer required. Section 3, Rule II, book V of
the Implementing Rules of the Labor Code governs the procedure
for union affiliation. x x x Paragraph (a) refers to a local or chapter
of a federation which did not undergo the rudiments of registration
while paragraph (b) refers to an independently registered union
which affiliated with a federation. Implicit in the foregoing
 differentiation is the fact that a local or chapter need not be
independently registered. By force of law (in this case, Article 212
[h]), such local or chapter becomes a legitimate labor organization
upon compliance with the aforementioned provisions of Section 3
(a) and (e), without having to be issued a Certificate
of Registration in its favor by the BLR. x x x Absent compliance
with these mandatory requirements, the local or chapter does not
become a legitimate labor organization. Corollarily, the
satisfaction of all these requirements by the local or chapter shall
vest upon it the status of legitimacy with all its concomitant
statutory privileges, one of which is the right to be certified as the
exclusive representative of all the employees in an appropriate
bargaining unit.
4. ID.; ID.; ID.; ID.; CASE AT BENCH.- Petitioner SMFI does not
dispute the fact that IBM at SMFI has complied with the second
set of requirements, i.e., constitution, by-laws, et al. What is
controverted is the non-compliance with the requirement as to the
charter certificate which must be submitted to the BLR within thirty
(30) days from its issuance by the labor federation. While the
presence of a charter certificate is conceded, petitioner maintains
that the validity and authenticity of the same cannot yet be
ascertained as it is still not known who is the legitimate and
authorized representative of the IBM Federation who may
validly issue said charter certificate in favor of its local, IBM at
SMFI. According to petitioner, there are two (2) contending sets of
officers of the IBM Federation at the time the charter certificate
was issued in favor of IBM at SMFI, the faction of Mr. Severino O.
Meron and that of Mr. Edilberto B. Galvez. x x x We agree with the
position of the public respondent and the Solicitor General in
upholding the legitimate status of IBM at SMFI. In addition, private
respondent's Comment to this petition indicates that in the election
of officers held to determine the representatives of IBM, the
faction of Mr. Meron lost to the group of Mr. Edilberto Galvez, and
the latter was acknowledged as the duly elected IBM National
President. Thus, the authority of Mr. Galvez to sign trhe charter
certificate of IBM at SMFI, as President of the IBM Federation, can
no longer be successfully questioned.
5. ID.; ID.; ID.; ID.; CHARTER
CERTIFICATE; CERTIFICATION UNDER
OATH BY THE ORGANIZATION'S SECRETARY AND
 PRESIDENT NOT ESSENTIAL FOR VALIDITY THEREOF;CASE
AT BENCH.- Petitioner next asseverates that the Charter
Certificate submitted by the private respondent was defective in
that it was not certified under oath and attested to by the
organization's secretary and President. Petitioner is grasping at
straws. Under our ruling in the Progressive Development
Corporation case, what is required to be certified under oath by
the secretary or treasurer and attested to by the local's president
are the "constitution and by-laws, a statement on the set of
officers, and the books of accounts" of the organization. The
charter certificate issued by the mother union need not be certified
under oath by the secretary or treasurer and attested to by the
local's president.
6. ID.; ID.; ID.; ID.; CERTIFICATION ELECTION; ROLE OF
EMPLOYER IS THAT OF A MERE BY-STANDER
THEREIN; EXCEPTION; CASE AT BENCH.- In any case, this
Court notes that it is petitioner, the employer, which has offered
the most tenacious resistance to the holding of a certification
election among its monthly-paid rank-and-file employees. This
must not be so, for the choice of a collective bargaining agent is
the sole concern of the employees. The only exception to this rule
is where the employer has to file the petition for certification
election pursuant to Article 258 of the Labor Code because it was
requested to bargain collectively, which exception finds no
application in the case before us. Its role in a certification election
has aptly been described in Trade Unions of the Philippines and
Allied Services (TUPAS) v. Trajano, as that of a mere
by-stander. It has no legal standing in a certification election as it
cannot oppose the petition or appeal the Med-Arbiter's orders
related thereto. An employer that involves itself in a certification
election lends suspicion to the fact that it wants to create a
company union. This Court should be the last agency to lend
support to such an attempt at interference with a purely internal
affair of labor. While employers may rightfully be notified or
informed of petitions of such nature, they should not, however, be
considered parties thereto with the concomitant right to oppose
it. Sound policy dictates that they should maintain a strictly
hands-off policy.
7. ID.; ID.; ID.; ID.; ID.; HOLDING THEREOF IS A
DEMOCRATIC DECISION WHICH DESERVES UTMOST
 RESPECT; CASE AT BENCH.- It bears stressing that no obstacle
must be placed to the holding of certification elections, for it is a
statutory policy that should not be circumvented. The certification
election is the most democratic and expeditious method by which
the laborers can freely determine the union that shall act as their
representative in their dealings with the establishment where they
are working. It is the appropriate means whereby controversies
and disputes on representation may be laid to rest, by the
unequivocal vote of the employees themselves. Indeed, it is the
keystone of industrial democracy.Finally, the certification election
sought to be stopped by petitioner is, as of now, fait accompli. The
monthly paid rank-and-file employees of SMFI have already
articulated their choice as to who their collective bargaining agent
should be. In the certification election held on August 20, 1994,
the SMFI workers chose IBM at SMFI to be their sole and
exclusive bargaining agent. This democratic decision deserves
utmost respect. Again, it bears stressing that labor legislation
seeks in the main to protect the interest of the members of the
working class. It should never be used to subvert their will.
8.
REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; LEG
AL PERSONALITY OF FEDERATION CANNOT BE
CHALLENGED FOR
THE FIRST TIME ON APPEAL; CASE ATBENCH.- Petitioner, in
its Reply to public respondent's Comment, nevertheless calls the
attention of this court to the fact that, contrary to the assertion of
private respondent IBM that it is a legitimate labor federation and
therefore has the capacity and authority to create a local or
chapter at SMFI, the Chief of the Labor Organizations Division of
the Bureau of Labor Relations - Manila had allegedly issued a
certification last January 17, 1995, to the effect that private
respondent is not a legitimate labor federation. This is a factual
issue which petitioner should have raised before the Med-Arbiter
so as to allow the private respondent ample opportunity to present
evidence to the contrary. This Court is definitely not the proper
venue to consider this matter for it is not a trier of facts. It is
noteworthy that petitioner did not challenge the legal personality of
the federation in the proceedings before the Med-Arbiter.Nor was
this issue raised in petitioner's appeal to the Office of the
Secretary of Labor and Employment. This matter is being raised
for the first time in this petition. An issue which was neither alleged
 in the pleadings nor raised during the proceedings below cannot
be ventilated for the first time before this Court. It would be
offensive to the basic rule of fair play, justice and due
process. Certiorari is a remedy narrow in its scope and inflexible in
character. It is not a general utility tool in the legal
workshop. Factual issues are not a proper subject for certiorari as
the power of the Supreme Court to review labor cases is limited to
the issue of jurisdiction and grave abuse of discretion. It is simply
unthinkable for the public respondent Undersecretary of Labor to
have committed grave abuse of discretion in this regard when the
issue as to the legal personality of the private respondent IBM
Federation was never interposed in the appeal before said forum.

APPEARANCES OF COUNSEL

Estenzo, Torrente, Paloma & Solon for petitioner.

The Solicitor General for public respondent.
Danilo L. Pilapil for private respondent.
[Syllabus]

FIRST DIVISION

[G.R. No. 116172. October 10, 1996]

SAN MIGUEL FOODS, INC.-CEBU B-MEG FEED

PLANT, petitioner, vs. HON. BIENVENIDO E. LAGUESMA,
Undersecretary of DOLE and ILAW AT BUKLOD NG
MANGGAGAWA (IBM), respondents.

DECISION
HERMOSISIMA, JR., J.:

This is a petition for certiorari under Rule 65 to review and set aside two
Resolutions of Mediator-Arbiter Achilles V. Manit, dated January 5, 1994 and
April 6, 1994, and the affirmation Order on appeal of the public respondent,
Undersecretary Bienvenido E. Laguesma of the Department of Labor and
Employment. The petition below was entitled: In Re: Petition for Direct
Certification as the Sole and Exclusive Bargaining Agent of All Monthly Paid
Employees of SMFI-Cebu B-Meg Feeds Plant, docketed as OS-MA-A-3-51-94
(RO700-9309-RU-036).
 The essential facts are not disputed.
On September 24, 1993, a petition for certification election among the
monthly-paid employees of the San Miguel Foods, Inc.-Cebu B-Meg Feeds
Plant was filed by private respondent labor federation Ilaw at Buklod ng
Manggagawa (IBM, for brevity) before Med-Arbiter Achilles V. Manit,
alleging, inter alia, that it is a legitimate labor organization duly registered with
the Department of labor and Employment (DOLE) under the Registration
Certificate No. 5369-IP. SMFI-Cebu B-Meg Feeds Plant (SMFI, for brevity),
herein petitioner, is a business entity duly organized and existing under the
laws of the Philippines which employs roughly seventy-five (75) monthly paid
employees, almost all of whom support the present petition. It was submitted in
said petition that there has been no certification election conducted in SMFI to
determine the sole and exclusive bargaining agent thereat for the past two
years and that the proposed bargaining unit, which is SMFIs monthly paid
employees, is an unorganized one. It was also stated therein that petitioner
IBM (herein private respondent) has already complied with the mandatory
requirements for the creation of its local or affiliate in SMFIs establishment.
On October 25, 1993, herein petitioner SMFI filed a Motion to Dismiss the
aforementioned petition dated September 24, 1993 on the ground that a
similar petition remains pending between the same parties for the same cause
of action before Med-Arbiter Achilles V. Manit.
SMFI was referring to an evidently earlier petition, docketed as CE CASE
NO R0700-9304-RU-016, filed on April 28, 1993 before the office of
Med-Arbiter Manit. Indeed, both petitions involved the same parties, cause of
action and relief being prayed for, which is the issuance of an order by the
Med-Arbiter allowing the conduct of a certification election in SMFIs
establishment. The contention is that the judgment that may be rendered in the
first petition would be determinative of the outcome of the second petition,
dated September 24, 1993.
On December 2, 1993, private respondent IBM filed its Opposition to
SMFIs Motion to Dismiss contending, among others, that the case referred to
by SMFI had already been resolved by Med-Arbiter Manit in his Resolution and
Order date July 26, 1993[1] and September 2, 1993,[2] respectively, wherein
IBMs first petition for certification election was denied mainly due to IBMs
failure to comply with certain mandatory requirements of the law. This denial
was affirmed by the Med-Arbiter in another Order dated November 12,
1993[3] wherein the Resolutions dated July 26, 1993 and September 2,
1993 were made to stand. Thus, IBM argues that there having been no similar
petition pending before Med-Arbiter Manit, another petition for certification
election may be refiled as soon as the said requirements are met. These
requirements were finally satisfied before the second petition for certification
election was brought on September 24, 1993.
On January 5, 1994, Med-Arbiter Manit, this time, granted the second
petition for certification election of private respondent IBM in this wise:
 Let, therefore, a certification election be conducted among the
monthly paid rank and file employees of SMFI-CEBU B-MEG
FEEDS PLANT at Lo-oc, Mandaue City. The choices shall
be: YES-for IBM AT SMFI-CEBU B-MEG; and NO-for No Union.
The parties are hereby notified of the pre-election conference which
will take place on January 17, 1994 at 3:00 oclock in the afternoon
to set the date and time of the election and to thresh out the
mechanics thereof. On said date and time the respondent is directed
to submit the payroll of its monthly paid rank and file employees for
the month of June 1993 which shall be the basis for the list of the
eligible voters. The petitioner is directed to be ready to submit a list
of the monthly paid rank and file employees of SMFI-CEBU
B-MEG FEEDS PLANT when the respondent fails to submit the
required payroll.
SO ORDERED. [4]

Petitioner SMFI appealed the foregoing Order to the Secretary of Labor

and Employment alleging that the Med-Arbiter erred in directing the conduct of
certification election considering that the local or chapter of IBM at SMFI is still
not a legitimate labor organization with a right to be certified as the exclusive
bargaining agent in petitioners establishment based on two grounds: (1) the
authenticity and due execution of the Charter Certificate submitted by IBM in
favor of its local at SMFI cannot yet be ascertained as it is still now known who
is the legitimate and authorized representative of the IBM Federation who may
validly issue said Charter Certificate; and (2) a group of workers or a local
union shall acquire legal personality only upon the issuance of a Certificate of
Registration by the Bureau of Labor Relations under Article 234 of the Labor
Code, which IBM at SMFI did not possess.
In a resolution dated April 6, 1994, public respondent Undersecretary
Bienvenido Laguesma, by authority of the Secretary of Labor and Employment,
denied petitioners appeal, viz.:
WHEREFORE, the appeal is hereby denied for lack of merit and the
Order of the Med-Arbiter is hereby affirmed.
Let the records of this case be forwarded to the Regional Office of
origin for the immediate conduct of certification election subject to
the usual pre-election conference.
SO RESOLVED. [5]

Thereafter, a Motion for Reconsideration was filed which was also denied
by the public respondent in his Order dated May 24, 1994.[6]
Hence, the instant petition interposing the following justifications:
 1) THE HONORABLE UNDERSECRETARY BIENVENIDO
E. LAGUESMA GRAVELY ABUSED HIS
DISCRETION WHEN HE ARBITRARILY RULED
THAT A LOCAL OR CHAPTER OF A LABOR
FEDERATION, LIKE RESPONDENT IBM, NEED NOT
OBTAIN A CERTIFICATE OF REGISTRATION FROM
THE BUREAU OF LABOR RELATIONS TO ACQUIRE
LEGAL PERSONALITY, WHEN ARTICLE 234 OF THE
LABOR CODE OF THE PHILIPPINES AND SECTION 3
OF RULE II OF BOOK V OF THE RULES
IMPLEMENTING THE LABOR CODE, AS AMENDED,
CLEARLY PROVIDES THAT A GROUP OF
WORKERS OR A LOCAL UNION SHALL ACQUIRE
LEGAL PERSONALITY ONLY UPON THE ISSUANCE
OF THE CERTIFICATE OF REGISTRATION BY THE
BUREAU OF LABOR RELATIONS. AND,
2) THE HONORABLE UNDERSECRETARY BIENVENIDO
E. LAGUESMA GRAVELY ABUSED HIS
DISCRETION WHEN HE PREMATURELY AND
ARBITRARILY RULED THAT RESPONDENT IBM IS
A LEGITIMATE LABOR ORGANIZATION WHEN
THE AUTHENTICITY AND DUE EXECUTION OF
THE CHARTER CERTIFICATE SUBMITTED BY
RESPONDENT IBM CANNOT YET BE
ASCERTAINED BECAUSE IT IS STILL NOT KNOWN
WHO ARE THE LEGITIMATE OFFICERS OF THE
IBM FEDERATION WHO MAY VALIDLY ISSUE
SAID CHARTER CERTIFICATE AS THE CASE FILED
TO RESOLVE THE ISSUE ON WHO ARE THE
LEGITIMATE OFFICERS OF THE IBM
FEDERATION IS STILL PENDING RESOLUTION
BEFORE THIS HONORABLE SUPREME COURT. [7]

The petition has no merit.

Petitioner asserts that IBM at SMFI is not a legitimate labor organization
notwithstanding the fact that it is a local or chapter of the IBM Federation. This
is so because under Article 234 of the Labor Code, any labor organization shall
acquire legal personality upon the issuance of the Certificate of Registration by
the Bureau of Labor Relations.
We do not agree.
I
 Article 212(h) of the Labor Code defines a legitimate labor organization as
any labor organization duly registered with the Department of Labor and
Employment, and includes any branch or local thereof.
It is important to determine whether or not a particular labor organization is
legitimate since legitimate labor organizations have exclusive rights under the
law which cannot be exercised by non-legitimate unions, one of which is the
right to be certified as the exclusive representative of all the employees in an
appropriate collective bargaining unit for purposes of collective
bargaining. These rights are found under Article 242 of the Labor Code, to wit:

ART. 242. Rights of legitimate organizations.--A legitimate labor

organization shall have the right:

(a) To act as the representative of its members for the purpose of collective
bargaining;

(b) To be certiified as the exclusive representative of all the employees in an

appropriate collective bargaining unit for purposes of collective
bargaining;

(c) To be furnished by the employer, upon written request, with his annual
audited financial statements, including the balance sheet and the profit and
loss statement, within thirty (30) calendar days from the date of receipt of
the request, after the union has been duly recognized by the employer or
certified as the sole and exclusive bargaining representative of the
employees in the bargaining unit, or within sixty (60) calendar days before
the expiration of the existing collective bargaining agreement, or during the
collective bargaining negotiation;

(d) To own property, real or personal, for the use and benefit of the labor
organization and its members;

(e) To sue and be sued in its registered name; and

(f) To undertake all other activities designed to benefit the organization and
its members, including cooperative, housing welfare and other projects not
contrary to law.

x x x x x x x x x."
The pertinent question, therefore, must be asked: When does a labor
organization acquire legitimacy?
 Ordinarily, a labor organization attains the status of legitamacy only upon
the issuance in its name of a Certificate of Registration by the Bureau of Labor
Relations pursuant to Articles 234 and 235 of the Labor Code, viz.:
ART. 234. Requirements of registration.--Any applicant labor
organization, association or group of unions or workers shall
acquire legal personality and shall be entitled to the rights and
privileges granted by law to legitimate labor organizations upon
issuance of the certificate of registration based on the following
requirements:

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the
labor organization, the minutes of the organizational meetings and the list of
the workers who participated in such meetings;

(c) The names of all its members comprising at least twenty percent (20%)
of all the employees in the bargaining unit where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies
of its annual financial reports; and

(e) Four (4) copies of the constitution and by-laws of the applicant union,
minutes of its adoption or ratification, and the list of the members who
participated in it.

ART. 235. Action on application. -- The Bureau shall act on all

applications for registration within thirty (30) days from filing.
All requisite documents and papers shall be certified under oath by
the secretary or the treasurer of the organization, as the case may be,
and attested to by its president.
The foregoing procedure is not the only way by which a labor union may
become legitimate, however. When an unregistered union becomes a branch,
local or chapter of a federation, some of the aforementioned requirements for
registration are no longer required.[8] Section 3, Rule II, Book V of the
Implementing Rules of the Labor Code governs the procedure for union
affiliation, the relevant portions of which provide:
Sec. 3. Union Affiliation: Direct Membership with National Union.
An affiliate of a labor federation or national union may be a local or
chapter thereof or an independently registered union.
 (a) The labor federation or national union concerned shall issue a
chapter certificate indicating the creation or establishment of a
local or chapter, copy of which shall be submitted to the Bureau of
Labor Relations within thirty (30) days from issuance of such
charter certificate.
(b) An independently registered union shall be considered an
affiliate of a labor federation or national union after submission to
the Bureau of the contract or agreement of affiliation within thirty
(30) days after its execution.
xxxxxxxxx
(e) The local or chapter of a labor federation or national union shall
have and maintain a constitution and by-laws, set of officers and
book of accounts. For reporting purposes, the procedure governing
the reporting of independently registered unions, federations or
national unions shall be observed.
Paragraph (a) refers to a local or chapter of a federation which did not
undergo the rudiments of registration while paragraph (b) refers to an
independently registered union which affiliated with a federation. Implicit in the
foregoing differentiation is the fact that a local or chapter need not be
independently registered. By force of law (in this case, Article 212 [h]), such
local or chapter becomes a legitimate labor organization upon compliance with
the aforementioned provisions of Section 3[9] (a) and (e), without having to be
issued a Certificate of Registration in its favor by the BLR.
The cases of Lopez Sugar Corporation v. Secretary of Labor and
Employment,[10] Phoenix Iron and Steel Corporation v. Secretary of Labor and
Employment,[11] and Protection Technology, Inc. v. Secretary, Department of
Labor and Employment,[12] all going back to our landmark holding
in Progressive Development Corporation v. Secretary, Department of Labor
and Employment,[13] unequivocably laid down the rule, thus:
A local or chapter therefore becomes a legitimate labor organization
only upon submission of the following to the BLR:
1) A charter certificate, within 30 days from its issuance by
the labor federation or national union, and
2) The constitution and by-laws, a statement on the set of
officers, and the books of accounts all of which are
certified under oath by the secretary or treasurer, as the
case may be, of such local or chapter, and attested to by
its president.
 Absent compliance with these mandatory requirements, the local or
chapter does not become a legitimate labor organization.
Corollarily, the satisfaction of all these requirements by the local or chapter
shall vest upon it the status of legitimacy with all its concomitant statutory
privileges, one of which is the right to be certified as the exclusive
representative of all the employees in an appropriate bargaining unit.
In the case at bench, public respondent Bienvenido E. Laguesma, in
affirming the finding of the Med-Arbiter that IBM at SMFI is a legitimate labor
organization,[14] made the following material pronouncements amply supported
by the records:
[t]he resolution of the issue raised by the respondent on whether or
not petitioner is a legitimate labor organization will depend on the
documents submitted by the petitioner in the second petition.
A close scrutiny of the records shows that at the time of the filing of
the subject petition on 24 September 1993 by the petitioner Ilaw at
Buklod ng Manggagawa, for and in behalf of its local affiliate IBM
at SMFI-CEBU B-MEG, the latter has been clothed with the status
and/or character of a legitimate labor organization. This is so,
because on 19 July 1993, petitioner submitted to the Bureau of
Labor Relations (BLR), this Department, the following
documents: charter certificate, constitution and by-laws, names and
addresses of the union officers and a certification of the unions
secretary on the non-availability of the unions Books of
Accounts. Said documents (except the charter certificate) are
certified under oath and attested to by the local unions secretary and
President, respectively. [15]

Petitioner SMFI does not dispute the fact that IBM at SMFI has complied
with the second set of requirements, i.e., constitution, by-laws, et. al. What is
controverted is the non-compliance with the requirement as to the charter
certificate which must be submitted to the BLR within thirty (30) days from its
issuance by the labor federation. While the presence of a charter certificate is
conceded, petitioner maintains that the validity and authenticity of the same
cannot yet be ascertained as it is still not known who is the legitimate and
authorized representative of the IBM Federation who may validly issue said
charter certificate in favor of its local, IBM at SMFI. According to petitioner,
there are two (2) contending sets of officers of the IBM Federation at the time
the charter certificate was issued in favor of IBM at SMFI, the faction of Mr.
Severino O. Meron and that of Mr. Edilberto B. Galvez.
On this point, public respondent, in upholding the legitimate status of IBM
at SMFI, backed up by the Solicitor General, had this to say:
 The contention of the respondent that unless and until the issue on
who is the legitimate national president, of the Ilaw at Buklod ng
Manggagawa is resolved, the petitioner cannot claim that it has a
valid charter certificate necessary for it to acquire legal personality
is untenable. We wish to stress that the resolution of the said issue
will not in any way affect the validity of the charter certificate
issued by the IBM in favor of the local union. It must be borne in
mind that the said charter certificate was issued by the IBM in its
capacity as a labor organization, a juridical entity which has a
separate and distinct legal personality from its members. When as in
this case, there is no showing that the Federation acting as a separate
entity is questioning the legality of the issuance of the said charter
certificate, the legality of the issuance of the same in favor of the
local union is presumed. This, notwithstanding the alleged
controversy on the leadership of the federation. [16]

We agree with this position of the public respondent and the Solicitor
General. In addition, private respondents Comment to this petition indicates
that in the election of officers held to determine the representatives of IBM, the
faction of Mr. Meron lost to the group of Mr. Edilberto Galvez, and the latter
was acknowledged as the duly elected IBM National President.[17]Thus, the
authority of Mr. Galvez to sign the charter certificate of IBM at SMFI, as
President of the IBM Federation,[18] can no longer be successfully
questioned. A punctilious examination of the records presents no evidence to
the contrary and petitioner, instead of squarely refuting this point, skirted the
issue by insisting that the mere presence of two contending factions in the IBM
prevents the issuance of a valid and authentic charter certificate in favor of IBM
at SMFI. This averment of petitioner simply does not deserve any merit.
II

In any case, this Court notes that it is petitioner, the employer, which has
offered the most tenacious resistance to the holding of a certification election
among its monthly-paid rank-and-file employees. This must not be so, for the
choice of a collective bargaining agent is the sole concern of the
employees.[19] The only exception to this rule is where the employer has to file
the petition for certification election pursuant to Article 258[20] of the Labor Code
because it was requested to bargain collectively,[21] which exception finds no
application in the case before us. Its role in a certification election has aptly
been described in Trade Unions of the Philippines and Allied Services (TUPAS)
v. Trajano,[22] as that of a mere by-stander. It has no legal standing in a
certification election as it cannot oppose the petition or appeal the
Med-Arbiters orders related thereto. An employer that involves itself in a
certification election lends suspicion to the fact that it wants to create a
company union.[23] This Court should be the last agency to lend support to such
an attempt at interference with a purely internal affair of labor.[24]
 While employers may rightfully be notified or informed of petitions of such
nature, they should not, however, be considered parties thereto with the
concomitant right to oppose it. Sound policy dictates that they should maintain
a strictly hands-off policy.[25]
It bears stressing that no obstacle must be placed to the holding of
certification elections,[26] for it is a statutory policy that should not be
circumvented.[27] The certification election is the most democratic and
expeditious method by which the laborers can freely determine the union that
shall act as their representative in their dealings with the establishment where
they are working.[28] It is the appropriate means whereby controversies and
disputes on representation may be laid to rest, by the unequivocal vote of the
employees themselves.[29] Indeed, it is the keystone of industrial democracy.[30]
III

Petitioner next asseverates that the Charter Certificate submitted by the

private respondent was defective in that it was not certified under oath and
attested to by the organizations secretary and President.
Petitioner is grasping at straws. Under our ruling in the Progressive
Development Corporation[31] case, what is required to be certified under oath by
the secretary or treasurer and attested to by the locals president are the
constitution and by-laws, a statement on the set of officers, and the books of
accounts of the organization. The charter certificate issued by the mother
union need not be certified under oath by the secretary or treasurer and
attested to by the locals president.
IV

Petitioner, in its Reply to public respondents Comment, nevertheless calls

the attention of this court to the fact that, contrary to the assertion of private
respondent IBM that it is a legitimate labor federation and therefore has the
capacity and authority to create a local or chapter at SMFI, the Chief of the
Labor Organizations Division of the Bureau of Labor Relations Manila had
allegedly issued a certification last January 17, 1995 to the effect that private
respondent is not a legitimate labor federation.[32]
This is a factual issue which petitioner should have raised before the
Med-Arbiter so as to allow the private respondent ample opportunity to present
evidence to the contrary. This Court is definitely not the proper venue to
consider this matter for it is not a trier of facts. It is noteworthy that petitioner
did not challenge the legal personality of the federation in the proceedings
before the Med-Arbiter. Nor was this issue raised in petitioners appeal to the
Office of the Secretary of Labor and Employment. This matter is being raised
for the first time in this petition. An issue which was neither alleged in the
pleadings nor raised during the proceedings below cannot be ventilated for the
first time before this Court. It would be offensive to the basic rule of fair play,
justice and due process.[33] Certiorari is a remedy narrow in its scope and
inflexible in character. It is not a general utility tool in the legal
workshop.[34] Factual issues are not a proper subject for certiorari, as the power
of the Supreme Court to review labor cases is limited to the issue of jurisdiction
and grave abuse of discretion.[35] It is simply unthinkable for the public
respondent Undersecretary of Labor to have committed grave abuse of
discretion in this regard when the issue as to the legal personality of the private
respondent IBM Federation was never interposed in the appeal before said
forum.
V

Finally, the certification election sought to be stopped by petitioner is, as of

now, fait accompli. The monthly paid rank-and-file employees of SMFI have
already articulated their choice as to who their collective bargaining agent
should be. In the certification election held on August 20, 1994, [36] the SMFI
workers chose IBM at SMFI to be their sole and exclusive bargaining
agent. This democratic decision deserves utmost respect. Again, it bears
stressing that labor legislation seeks in the main to protect the interest of the
members of the working class. It should never be used to subvert their will.[37]
WHEREFORE, the petition is DENIED. Costs against petitioner.
SO ORDERED.
Bellosillo, Vitug, and Kapunan, JJ., concur.
Padilla (Chairman), J., no part, on account of interests in San Miguel
Group of companies.

[1] Rollo, pp. 52-53.

[2] Rollo, pp. 67-69.
[3] Rollo, p. 83.
[4] Rollo, pp. 31-32.
[5] Rollo, p. 40.
[6] Rollo, p. 42.
[7] Rollo, p. 20.
[8]
Progressive Development Corporation v. Secretary, Department of Labor and Employment,
205 SCRA 802, 810 [1992].
[9] Ibid.
[10] 247 SCRA 1, 8 [1995].
[11] 244 SCRA 173, 177 [1995].
[12] 242 SCRA 99, 106 [1995].
[13] Supra.
[14] Rollo, p. 31.
[15] Rollo, pp. 37-38.
[16] Rollo, pp. 38-39.
[17] Rollo, p. 118.
[18] Rollo, p. 78.
[19] R. Transport Corporation v. Laguesma, 227 SCRA 826, 833 [1993].
[20]
ART. 258. When an employer may file petition. When requested to bargain collectively, an
employer may petition the Bureau for an election. If there is no existing certified collective
bargaining agreement in the unit, the Bureau shall, after hearing, order a certification election.
All certification cases shall be decided within twenty (20) working days.
The Bureau shall conduct a certification election within twenty (20) days in accordance with the
rules and regulations prescribed by the Secretary of Labor and Employment.
[21] Phil. Telegraph and Telephone Corp. v. Laguesma, 223 SCRA 452, 456-457 [1993].
[22] 120 SCRA 64, 66 [1983].
[23]
Philippine Scout Veterans Security and Investigation Agency v. Torres, 224 SCRA 682,
690 [1993].
[24] Consolidated Farms, Inc. v. Noriel, 84 SCRA 469,473 [1978].
[25] Philippine Scout Veterans Security and Investigation Agency, supra.
[26]
Trade Unions of the Philippines v. Laguesma, 233 SCRA 565, 571 [1994], citing Warren
Manufacturing Workers Union v. Bureau of Labor Relations, 159 SCRA 387 [1988]; General
Textiles Allied Workers Association, v.Director of Bureau of Labor Relations, 84 SCRA 430
[1978]; Philippine Association of Free Labor Unions v. Bureau of Labor Relations, 69 SCRA
132 [1976].
[27]
Ibid., citing Belyca Corporation v. Ferrer-Calleja, 168 SCRA 184 [1988]; Philippine Airlines
Employees Association (PALEA) v. Ferrer-Calleja, 162 SCRA 426 [1988]; George and Peter
Lines, Inc. v. Associated Labor Unions (ALU) , 134 SCRA 82 [1986].
[28]
Port workers Union of the Phils. (PWUP) v. Laguesma, 207 SCRA 329, 333 [1992], citing
National Association of Free Trade Unions v. Bureau of Labor Relations, 164 SCRA 12 [1988].
[29]
Trade Unions of the Philippines, supra. at 572, citing PALEA v. Ferrer-Calleja, 162 SCRA
426, 431 [1988].
[30] Ibid.
[31] Supra, at 813.
[32] Rollo, p. 162.
[33]
C. Alcantara & Sons, Inc. v. NLRC, 229 SCRA 109, 115 [1994], citing Medida v. C.A., 208
SCRA 887 [1992]).
[34] Herrera, Oscar M., Remedial Law, Volume III, 1996 ed., p. 164.
[35]
Oscar Ledesma and Company v. National Labor Relations Commission, 246 SCRA 47, 51
[1995].
[36] Rollo, p. 127.
[37] Trade Unions of the Philippines, supra.

FIRST DIVISION
 [G. R. No. 143215. July 11, 2002]

SOLIMAN SECURITY SERVICES, INC. and/or TERESITA L.

SOLIMAN, petitioners, vs. THE COURT OF APPEALS and
EDUARDO VALENZUELA, respondents.

DECISION
VITUG, J.:

Respondent Eduardo Valenzuela, a security guard, was a regular

employee of petitioner Soliman Security Services assigned at the BPI-Family
Bank, Pasay City. On 09 March 1995, he received a memorandum from
petitioners relieving him from his post at the bank, said to be upon the latters
request, and requiring him to report to the security agency for reassignment.
The following month, or on 07 April 1995, respondent filed a complaint for
illegal dismissal on the ground that his services were terminated without a valid
cause and that, during his tenure at the bank, he was not paid his overtime pay,
13th month pay, and premium pay for services rendered during holidays and
rest days. He averred that, after receiving the memorandum of 09 March 1995,
he kept on reporting to the office of petitioners for reassignment but, except for
a brief stint in another post lasting for no more than a week, he was put on a
floating status.
Petitioners contended that the relief of respondent from his post, made
upon request of the client, was merely temporary and that respondent had
been offered a new post but the latter refused to accept it. Petitioners argued
that respondents floating status for barely 29 days did not constitute
constructive dismissal.
On 31 July 1995, the Labor Arbiter, Ariel Cadiente Santos, arrived at a
decision holding petitioners guilty of constructive dismissal and ordering the
reinstatement of the complainant to his former position with full backwages
from the date of his dismissal until his actual reinstatement; directing the
Research and Information Unit to compute the various monetary benefits
awarded to the complainant; and adjudging the payment, by way of attorneys
fees, of ten percent (10%) of all sums owing to the complainant.
On 16 October 1998, petitioners filed an appeal to the National Labor
Relations Commission (NLRC).
On 11 November 1998, the NLRC issued an order directing petitioners to
submit an affidavit to the effect that their appeal bond was genuine and that it
would be in force and effect until the final disposition of the case. In his reply
memorandum, dated 28 November 1998, respondent, asseverating that
petitioners failed to deposit the required bond for the appeal, sought the appeal
to be declared as not having been validly perfected. On 19 January 1999,
petitioners submitted a manifestation and affidavit in compliance with the 11th
November 1998 order of the NLRC.[1] Apparently satisfied, the NLRC, on 30
April 1999, gave due course to the appeal and rendered the presently assailed
decision, reversing that of the Labor Arbiter, to wit:

WHEREFORE, the decision appealed from is hereby SET ASIDE.

However, respondent [before the NLRC] is hereby ordered to pay
complainant separation pay computed at one-half (1/2) month for
every year of service, reckoned from date of employment on October
9, 1990 up to September 9, 1995, the date the complainant should
have been redeployed. [2]

A motion for reconsideration, filed by herein private respondent Valenzuela,

was denied by the NLRC.
Valenzuela forthwith brought the matter up to the Court of Appeals. On the
thesis that the only issue interposed was whether or not the NLRC committed
grave abuse of discretion when it took cognizance of the appeal and reversed
the decision of the Labor Arbiter despite the failure of herein petitioners to
validly post the appeal bond, the appellate court responded in the affirmative,
set aside the assailed decision of the NLRC and reinstated that of the Labor
Arbiter. A motion to reconsider the decision was denied.
In the instant recourse before this Court, petitioners claim that the Court of
Appeals (Eleventh Division) has committed grave abuse of discretion
amounting to lack or excess of jurisdiction in declaring petitioners to have
failed in perfecting their appeal with the NLRC.
This Court finds merit in the petition.
Private respondent would posit that the appeal of petitioners to the NLRC
should be considered to have been made on 19 January 1999 (when petitioner
submitted, pursuant to the NLRC order, a statement under oath to the effect
that the surety bond it had posted was genuine and confirmed it to be in effect
until the final termination of the case) which was beyond the ten-day period for
perfecting an appeal. The records before the Court would show, however, that
an appeal bond was posted with the NLRC at the same time that the appeal
memorandum of petitioners was filed on 16 October 1998. A certified true copy
of the appeal bond[3] would indicate that it was received by the Commission on
16 October 1998, the date reflected by the stamp-mark thereon. The surety
bond issued by the Philippine Charter Insurance Corporation bore the date of
14 October 1998 or two days before the appeal memorandum was seasonably
filed on 16 October 1998. The Order,[4] dated 11 November 1998, of the NLRC
categorically stated that records [would] disclose that the instant appeal [was]
accompanied by a surety bond, as the Decision sought to be appealed
involved a monetary award. The NLRC, in fact, ordered petitioner to submit an
affidavit to confirm that its appeal bond was genuine and would be in force and
effect until the final disposition of the case. The Commissions declaration that
the appeal was accompanied by a surety bond indicated that there had been
compliance with Article 223[5] of the Labor Code.
An appeal to the NLRC is perfected once an appellant files the
memorandum of appeal, pays the required appeal fee and, where an employer
appeals and a monetary award is involved, the latter posts an appeal bond or
submits a surety bond issued by a reputable bonding company. [6] In line with
the desired objective of labor laws to have controversies promptly resolved on
their merits, the requirements for perfecting appeals are given liberal
interpretation and construction.[7]
The only issue on the merits of the case is whether or not private
respondent should be deemed constructively dismissed by petitioner for
having been placed on floating status, i.e., with no reassignment, for a period
of 29 days. The question posed is not new. In the case of Superstar Security
Agency, Inc., vs. NLRC,[8] this Court, addressing a similar issue, has said:

x x x The charge of illegal dismissal was prematurely filed. The

records show that a month after Hermosa was placed on a temporary
off-detail, she readily filed a complaint against the petitioners on the
presumption that her services were already terminated. Temporary
off-detail is not equivalent to dismissal. In security parlance, it means
waiting to be posted. It is a recognized fact that security guards
employed in a security agency may be temporarily sidelined as their
assignments primarily depend on the contracts entered into by the
agency with third parties (Agro Commercial Security Agencies, Inc. vs.
NLRC, et al., G.R. Nos. 82823-24, 31 July 1989). However, it must be
emphasized that such temporary inactivity should continue only for six
months. Otherwise, the security agency concerned could be liable for
constructive dismissal. [9]

Constructive dismissal exists when an act of clear discrimination,

insensibility or disdain, on the part of an employer has become so unbearable
as to leave an employee with no choice but to forego continued
employment.[10] The temporary off-detail of respondent Valenzuela is not such a
case.
WHEREFORE, the instant petition is GRANTED. The assailed decision
and resolution of the Court of Appeals are SET ASIDE and the decision of the
National Labor Relations Commission in NCR CN. 04-02620-95 is
REINSTATED. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan,
Ynares-Santiago, and Austria-Martinez, JJ., concur.
[1]
Annexes E and E-1 of the Petition, Rollo, pp. 52-53.
[2]
Rollo, p. 58.
[3]
Annex C, ibid., Rollo, p.46.
[4]
Annex D, ibid., Rollo, pp. 50-51.
Art. 223. Appeal. - Decisions, awards, or orders of the Labor Arbiter are final and executory
[5]

unless appealed to the Commission by any or both parties within ten (10) calendar days from
receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of
the following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter;
(b) If the decision, order or award was secured through fraud or coercion, including graft and
corruption;
(c) If made purely on questions of law, and
(d) If serious errors in the findings of facts are raised which would cause grave or irreparable
damage or injury to the appellant.
In case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary award
in the judgment appeal from.
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even
pending appeal. The employee shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the option of the employer,
merely reinstated in the payroll. The posting of a bond by the employer shall not stay the
execution for reinstatement provided herein.
To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall impose
reasonable penalty, including fines or censures, upon the erring parties.
In all cases, the appellant shall furnish a copy of the memorandum of appeal to the other party
who shall file an answer not later than ten (10) calendar days from receipt thereof.
The Commission shall decide all cases within twenty (20) calendar days from receipt of the
answer of the appellee. The decision of the Commission shall be final and executory after ten
(10) calendar days from receipt thereof by the parties.
Any law enforcement agency may be deputized by the Secretary of Labor and Employment or
the Commission in the enforcement of decisions, awards or orders.
[6]
Workers of Antique Electric Coop., Inc. vs. NLRC, 333 SCRA 181.
[7]
Fernandez vs. NLRC, 285 SCRA 149; Alcosero vs. NLRC, 288 SCRA 129.
[8]
184 SCRA 74; see also Valdez vs. NLRC, 286 SCRA 87.
[9]
At p. 77.
[10]
Blue Dairy Corp. vs. NLRC, 314 SCRA 401.

Republic of the Philippines

SUPREME COURT
Manila
 EN BANC

EN BANC

[G.R. No. 130866. September 16, 1998]

ST. MARTIN FUNERAL HOME, petitioner, vs. NATIONAL

LABOR RELATIONS MARTINEZ, COMMISSION and
BIENVENIDO ARICAYOS, respondents.

DECISION
REGALADO, J.:

The present petition for certiorari stemmed from a complaint for illegal dismissal
filed by herein private respondent before the National Labor Relations Commission
(NLRC), Regional Arbitration Branch No. III, in San Fernando, Pampanga. Private
respondent alleges that he started working as Operations Manager of petitioner St.
Martin Funeral Home on February 6, 1995. However, there was no contract of
employment executed between him and petitioner nor was his name included in the
semi-monthly payroll. On January 22, 1996, he was dismissed from his employment
for allegedly misappropriating P38,000.00 which was intended for payment by
petitioner of its value added tax (VAT) to the Bureau of Internal Revenue (BIR).[1]
Petitioner on the other hand claims that private respondent was not its employee
but only the uncle of Amelita Malabed, the owner of petitioner St. Martins Funeral
Home. Sometime in 1995, private respondent, who was formerly working as an
overseas contract worker, asked for financial assistance from the mother of
Amelita. Since then, as an indication of gratitude, private respondent voluntarily
helped the mother of Amelita in overseeing the business.
In January 1996, the mother of Amelita passed away, so the latter she took over
the management of the business. She then discovered that there were arrears in the
payment of taxes and other government fees, although the records purported to show
that the same were already paid. Amelita then made some changes in the business
operation and private respondent and his wife were no longer allowed to participate in
the management thereof. As a consequence, the latter filed a complaint charging that
petitioner had illegally terminated his employment.[2]
Based on the position papers of the parties, the labor arbiter rendered a decision
in favor of petitioner on October 25, 1996 declaring that no employer-employee
relationship existed between the parties and, therefore, his office had no jurisdiction
over the case.[3]
 Not satisfied with the said decision, private respondent appealed to the NLRC
contending that the labor arbiter erred (1) in not giving credence to the evidence
submitted by him; (2) in holding that he worked as a volunteer and not as an
employee of St. Martin Funeral Home from February 6, 1995 to January 23, 1996, or
a period of about one year; and (3) in ruling that there was no employer-employee
relationship between him and petitioner.[4]
On June 13, 1997, the NLRC rendered a resolution setting aside the questioned
decision and remanding the case to the labor arbiter for immediate appropriate
proceedings.[5] Petitioner then filed a motion for reconsideration which was denied by
the NLRC in its resolution dated August 18, 1997 for lack of merit,[6] hence the
present petition alleging that the NLRC committed grave abuse of discretion.[7]
Before proceeding further into the merits of the case at bar, the Court feels that it
is now exigent and opportune to reexamine the functional validity and systemic
practicability of the mode of judicial review it has long adopted and still follows with
respect to decisions of the NLRC. The increasing number of labor disputes that find
their way to this Court and the legislative changes introduced over the years into the
provisions of Presidential Decree (P.D.) No. 442 (The Labor Code of the Philippines
and Batas Pambansa Blg. (B.P. No.) 129 (The Judiciary Reorganization Act of 1980)
now stridently call for and warrant a reassessment of that procedural aspect.
We prefatorily delve into the legal history of the NLRC. It was first established in
the Department of Labor by P.D. No. 21 on October 14, 1972, and its decisions were
expressly declared to be appealable to the Secretary of Labor and, ultimately, to the
President of the Philippines.
On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the
same to take effect six months after its promulgation.[8] Created and regulated therein
is the present NLRC which was attached to the Department of Labor and Employment
for program and policy coordination only.[9] Initially, Article 302 (now, Article 223)
thereof also granted an aggrieved party the remedy of appeal from the decision of the
NLRC to the Secretary of Labor, but P.D. No. 1391 subsequently amended said
provision and abolished such appeals. No appellate review has since then been
provided for.
Thus, to repeat, under the present state of the law, there is no provision for
appeals from the decision of the NLRC.[10] The present Section 223, as last amended
by Section 12 of R.A. No. 6715, instead merely provides that the Commission shall
decide all cases within twenty days from receipt of the answer of the appellee, and
that such decision shall be final and executory after ten calendar days from receipt
thereof by the parties.
When the issue was raised in an early case on the argument that this Court has no
jurisdiction to review the decisions of the NLRC, and formerly of the Secretary of
Labor, since there is no legal provision for appellate review thereof, the Court
nevertheless rejected that thesis. It held that there is an underlying power of the courts
to scrutinize the acts of such agencies on questions of law and jurisdiction even
though no right of review is given by statute; that the purpose of judicial review is to
keep the administrative agency within its jurisdiction and protect the substantial rights
of the parties; and that it is that part of the checks and balances which restricts the
separation of powers and forestalls arbitrary and unjust adjudications.[11]
Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court,
the remedy of the aggrieved party is to timely file a motion for reconsideration as a
precondition for any further or subsequent remedy,[12] and then seasonably avail of the
special civil action of certiorari under Rule 65,[13] for which said Rule has now fixed
the reglementary period of sixty days from notice of the decision.Curiously, although
the 10-day period for finality of the decision of the NLRC may already have lapsed as
contemplated in Section 223 of the Labor Code, it has been held that this Court may
still take cognizance of the petition for certiorari on jurisdictional and due process
considerations if filed within the reglementary period under Rule 65.[14]
Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129
originally provided as follows:
SEC. 9. Jurisdiction. - The Intermediate Appellate Court shall
exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari,

habeas corpus, and quo warranto, and auxiliary writs or processes, whether
or not in aid of its appellate jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of judgments

of Regional Trial Courts; and

(3) Exclusive appellate jurisdiction over all final judgments, decisions,

resolutions, orders, or awards of Regional Trial Courts and quasi-judicial
agencies, instrumentalities, boards, or commissions, except those falling
within the appellate jurisdiction of the Supreme Court in accordance with
the Constitution, the provisions of this Act, and of subparagraph (1) of the
third paragraph and subparagraph (4) of the fourth paragraph of Section 17
of the Judiciary Act of 1948.

The Intermediate Appellate Court shall have the power to try cases and
conduct hearings, receive evidence and perform any and all acts necessary
to resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new trials or
further proceedings.

These provisions shall not apply to decisions and interlocutory orders issued
under the Labor Code of the Philippines and by the Central Board of
Assessment Appeals.[15]

Subsequently, and as it presently reads, this provision was amended by R.A. No.
7902 effective March 18, 1995, to wit:
 SEC. 9. Jurisdiction. - The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari,

habeas corpus, and quo warranto, and auxiliary writs or processes, whether
or not in aid of its appellate jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of judgments

of Regional Trial Courts; and

(3) Exclusive appellate jurisdiction over all final judgments, decisions,

resolutions, orders or awards of Regional Trial Courts and quasi-judicial
agencies, instrumentalities, boards or commissions, including the Securities
and Exchange Commission, the Social Security Commission, the Employees
Compensation Commission and the Civil Service Commission, except those
falling within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.

The Court of Appeals shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual
issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further
proceedings. Trials or hearings in the Court of Appeals must be continuous
and must be completed within, three (3) months, unless extended by the
Chief Justice.

It will readily be observed that, aside from the change in the name of the lower
appellate court,[16] the following amendments of the original provisions of Section 9 of
B.P. No. 129 were effected by R.A. No. 7902, viz.:

1. The last paragraph which excluded its application to the Labor Code of
the Philippines and the Central Board of Assessment Appeals was deleted
and replaced by a new paragraph granting the Court of Appeals limited
powers to conduct trials and hearings in cases within its jurisdiction.

2. The reference to the Labor Code in that last paragraph was transposed to
paragraph (3) of the section, such that the original exclusionary clause
therein now provides except those falling within the appellate jurisdiction of
the Supreme Court in accordance with the Constitution, the Labor Code of
the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act
of 1948. (Italics supplied)

3. Contrarily, however, specifically added to and included among the

quasi-judicial agencies over which the Court of Appeals shall have
exclusive appellate jurisdiction are the Securities and Exchange
Commission, the Social Security Commission, the Employees
Compensation Commission and the Civil Service Commission.

This, then, brings us to a somewhat perplexing impass, both in point of purpose

and terminology. As earlier explained, our mode of judicial review over decisions of
the NLRC has for some time now been understood to be by a petition for certiorari
under Rule 65 of the Rules of Court. This is, of course, a special original action
limited to the resolution of jurisdictional issues, that is, lack or excess of jurisdiction
and, in almost all cases that have been brought to us, grave abuse of discretion
amounting to lack of jurisdiction.
It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now
grants exclusive appellate jurisdiction to the Court of Appeals over all final
adjudications of the Regional Trial Courts and the quasi-judicial agencies generally or
specifically referred to therein except, among others, those falling within
the appellate jurisdiction of the Supreme Court in accordance with x x x the Labor
Code of the Philippines under Presidential Decree No. 442, as amended, x x x. This
would necessarily contradict what has been ruled and said all along that appeal does
not lie from decisions of the NLRC.[17] Yet, under such excepting clause literally
construed, the appeal from the NLRC cannot be brought to the Court of Appeals, but
to this Court by necessary implication.
The same exceptive clause further confuses the situation by declaring that the
Court of Appeals has no appellate jurisdiction over decisions falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
provisions of B.P. No. 129, and those specified cases in Section 17 of the Judiciary
Act of 1948. These cases can, of course, be properly excluded from the exclusive
appellate jurisdiction of the Court of Appeals. However, because of the
aforementioned amendment by transposition, also supposedly excluded are cases
falling within the appellate jurisdiction of the Supreme Court in accordance with the
Labor Code. This is illogical and impracticable, and Congress could not have
intended that procedural gaffe, since there are no cases in the Labor Code the
decisions, resolutions, orders or awards wherein are within the appellate jurisdiction
of the Supreme Court or of any other court for that matter.
A review of the legislative records on the antecedents of R.A. No. 7902
persuades us that there may have been an oversight in the course of the deliberations
on the said Act or an imprecision in the terminology used therein. In fine, Congress
did intend to provide for judicial review of the adjudications of the NLRC in labor
cases by the Supreme Court, but there was an inaccuracy in the term used for the
intended mode of review. This conclusion which we have reluctantly but prudently
arrived at has been drawn from the considerations extant in the records of Congress,
more particularly on Senate Bill No. 1495 and the Reference Committee Report on S.
No. 1495/H. No. 10452.[18]
In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his
sponsorship speech[19] from which we reproduce the following excerpts:
The Judiciary Reorganization Act, Mr. President, Batas Pambansa
Blg. 129, reorganized the Court of Appeals and at the same time
expanded its jurisdiction and powers. Among others, its appellate
jurisdiction was expanded to cover not only final judgment of
Regional Trial Courts, but also all final judgment(s), decisions,
resolutions, orders or awards of quasi-judicial agencies,
instrumentalities, boards and commissions, except those falling
within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the provisions of BP Blg. 129 and of
subparagraph 1 of the third paragraph and subparagraph 4 of Section
17 of the Judiciary Act of 1948.
Mr. President, the purpose of the law is to ease the workload of the
Supreme Court by the transfer of some of its burden of review of
factual issues to the Court of Appeals. However, whatever benefits
that can be derived from the expansion of the appellate jurisdiction
of the Court of Appeals was cut short by the last paragraph of
Section 9 of Batas Pambansa Blg. 129 which excludes from its
coverage the decisions and interlocutory orders issued under the
Labor Code of the Philippines and by the Central Board of
Assessment Appeals.
Among the highest number of cases that are brought up to the
Supreme Court are labor cases. Hence, Senate Bill No. 1495
seeks to eliminate the exceptions enumerated in Section 9 and,
additionally, extends the coverage of appellate review of the Court
of Appeals in the decision(s) of the Securities and Exchange
Commission, the Social Security Commission, and the Employees
Compensation Commission to reduce the number of cases elevated
to the Supreme Court. (Emphases and corrections ours)
xxx
Senate Bill No. 1495 authored by our distinguished Colleague from
Laguna provides the ideal situation of drastically reducing the
workload of the Supreme Court without depriving the litigants of the
privilege of review by an appellate tribunal.
 In closing, allow me to quote the observations of former Chief
Justice Teehankee in 1986 in the Annual Report of the Supreme
Court:
x x x Amendatory legislation is suggested so as to relieve
the Supreme Court of the burden of reviewing these cases
which present no important issues involved beyond the
particular fact and the parties involved, so that the Supreme
Court may wholly devote its time to cases of public interest
in the discharge of its mandated task as the guardian of the
Constitution and the guarantor of the peoples basic rights
and additional task expressly vested on it now to determine
whether or not there has been a grave abuse of discretion
amounting to lack of jurisdiction on the part of any branch
or instrumentality of the Government.
We used to have 500,000 cases pending all over the land, Mr.
President. It has been cut down to 300,000 cases some five years
ago. I understand we are now back to 400,000 cases. Unless we
distribute the work of the appellate courts, we shall continue to
mount and add to the number of cases pending.
In view of the foregoing, Mr. President, and by virtue of all the
reasons we have submitted, the Committee on Justice and Human
Rights requests the support and collegial approval of our Chamber.
xxx
Surprisingly, however, in a subsequent session, the following Committee
Amendment was introduced by the said sponsor and the following proceedings
transpired:[20]
Senator Roco. On page 2, line 5, after the line Supreme Court in
accordance with the Constitution, add the phrase THE LABOR
CODE OF THE PHILIPPINES UNDER P.D. 442, AS
AMENDED. So that it becomes clear, Mr. President, that issues
arising from the Labor Code will still be appealable to the Supreme
Court.
The President. Is there any objection? (Silence) Hearing none, the amendment is approved.
Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This was also
discussed with our Colleagues in the House of Representatives and as we understand
it, as approved in the House, this was also deleted, Mr. President.
The President. Is there any objection? (Silence) Hearing none, the amendment is approved.
Senator Roco. There are no further Committee amendments, Mr. President.
 Senator Romulo. Mr. President, I move that we close the period of Committee
amendments.
The President. Is there any objection? (Silence) Hearing none, the amendment is
approved. (Italics supplied)
xxx
Thereafter, since there were no individual amendments, Senate Bill No. 1495 was
passed on second reading and being a certified bill, its unanimous approval on third
reading followed.[21]; Record of the Senate, Vol. V, No. 63, pp. 180-181.21 The
Conference Committee Report on Senate Bill No. 1495 and House Bill No. 10452,
having theretofore been approved by the House of Representatives, the same was
likewise approved by the Senate on February 20, 1995,[22] inclusive of the dubious
formulation on appeals to the Supreme Court earlier discussed.
The Court is, therefore, of the considered opinion that ever since appeals from the
NLRC to the Supreme Court were eliminated, the legislative intendment was that the
special civil action of certiorari was and still is the proper vehicle for judicial review
of decisions of the NLRC. The use of the word appeal in relation thereto and in the
instances we have noted could have been a lapsus plumae because appeals by
certiorari and the original action for certiorari are both modes of judicial review
addressed to the appellate courts. The important distinction between them, however,
and with which the Court is particularly concerned here is that the special civil action
of certiorari is within the concurrent original jurisdiction of this Court and the Court
of Appeals;[23] whereas to indulge in the assumption that appeals by certiorari to the
Supreme Court are allowed would not subserve, but would subvert, the intention of
Congress as expressed in the sponsorship speech on Senate Bill No. 1495.
Incidentally, it was noted by the sponsor therein that some quarters were of the
opinion that recourse from the NLRC to the Court of Appeals as an initial step in the
process of judicial review would be circuitous and would prolong the proceedings. On
the contrary, as he commendably and realistically emphasized, that procedure would
be advantageous to the aggrieved party on this reasoning:
On the other hand, Mr. President, to allow these cases to be appealed
to the Court of Appeals would give litigants the advantage to have
all the evidence on record be reexamined and reweighed after which
the findings of facts and conclusions of said bodies are
correspondingly affirmed, modified or reversed.
Under such guarantee, the Supreme Court can then apply strictly the
axiom that factual findings of the Court of Appeals are final and may
not be reversed on appeal to the Supreme Court. A perusal of the
records will reveal appeals which are factual in nature and may,
therefore, be dismissed outright by minute resolutions.[24]
While we do not wish to intrude into the Congressional sphere on the matter of
the wisdom of a law, on this score we add the further observations that there is a
growing number of labor cases being elevated to this Court which, not being a trier of
fact, has at times been constrained to remand the case to the NLRC for resolution of
unclear or ambiguous factual findings; that the Court of Appeals is procedurally
equipped for that purpose, aside from the increased number of its component
divisions; and that there is undeniably an imperative need for expeditious action on
labor cases as a major aspect of constitutional protection to labor.
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed
appeals from the NLRC to the Supreme Court are interpreted and hereby declared to
mean and refer to petitions for certiorari under Rule 65. Consequently, all such
petitions should henceforth be initially filed in the Court of Appeals in strict
observance of the doctrine on the hierarchy of courts as the appropriate forum for the
relief desired.
Apropos to this directive that resort to the higher courts should be made in
accordance with their hierarchical order, this pronouncement in Santiago vs. Vasquez,
et al.[25] should be taken into account:
One final observation. We discern in the proceedings in this case a
propensity on the part of petitioner, and, for that matter, the same
may be said of a number of litigants who initiate recourses before us,
to disregard the hierarchy of courts in our judicial system by seeking
relief directly from this Court despite the fact that the same is
available in the lower courts in the exercise of their original or
concurrent jurisdiction, or is even mandated by law to be sought
therein. This practice must be stopped, not only because of the
imposition upon the precious time of this Court but also because of
the inevitable and resultant delay, intended or otherwise, in the
adjudication of the case which often has to be remanded or referred
to the lower court as the proper forum under the rules of procedure,
or as better equipped to resolve the issues since this Court is not a
trier of facts. We, therefore, reiterate the judicial policy that this
Court will not entertain direct resort to it unless the redress desired
cannot be obtained in the appropriate courts or where exceptional
and compelling circumstances justify availment of a remedy within
and calling for the exercise of our primary jurisdiction.
WHEREFORE, under the foregoing premises, the instant petition for certiorari
is hereby REMANDED, and all pertinent records thereof ordered to be
FORWARDED, to the Court of Appeals for appropriate action and disposition
consistent with the views and ruling herein set forth, without pronouncement as to
costs.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan,
Mendoza, Panganiban, Martinez, Quisumbing, and Purisima, JJ., concur.
[1]
Rollo, 17.
[2]
Ibid., 18-19.
[3]
Ibid., 19.
[4]
Ibid., 16.
[5]
Ibid., 21.
[6]
Ibid., 23-24.
[7]
Ibid., 6.
[8]
Article 2.
[9]
Article 213.
[10]
While Art. 223 bears the epigraph of Appeal, it actually refers only to decisions, awards, or orders
of the labor arbiter which shall be final and executory unless appealed to the NLRC by any or both
parties within ten calendar days from receipt thereof.
[11]
San Miguel Corporation vs. Secretary of Labor, et al., G.R. No. L-39195, May 15, 1975, 64 SCRA
56; Scott vs. Inciong, et al. G.R. No. L-38868, December 29, 1975, 68 SCRA 473; Bordeos, et al., vs.
NLRC, et al., G.R. Nos. 115314-23, September 26, 1996, 262 SCRA 424.
[12]
Zapata vs. NLRC, et al., G.R. No. 77827, July 5, 1989, 175 SCRA 56.
[13]
See, for instance, Pure Foods Corporation vs. NLRC, et al., G.R. No. 78591, March 21, 1989, 171
SCRA 415.
[14]
Mantrade, etc. vs. Bacungan, et al., G.R. No. L-48437, September 30, 1986, 144 SCRA 511.
[15]
75 O.G. 4781, August 29, 1983.
[16]
Executive Order No. 33 restored the name of the Court of Appeals, in lieu of the Intermediate
Appellate Court, effective July 28, 1986.
[17]
The different modes of appeal, that is, by writ of error (Rule 41), petition for review (Rules 42 and
43), and petition for review on certiorari (Rule 45) obviously cannot be availed of because there is no
provision for appellate review of NLRC decisions in P.D. No. 442, as amended.
[18]
An Act Expanding the Jurisdiction of the Court of Appeals, Amending for the Purpose Section 9 of
Batas Pambansa Blg. 129, known as the Judiciary Reorganization Act of 1980.
[19]
Transcript of Session Proceedings (TSP), S. No. 1495, February 8, 1995, 31-36.
[20]
TSP, id., February 15, 1995, 18-19.
[21]
TSP, id., id., 19-
[22]
TSP, id., February 20, 1995, pp. 42-43.
[23]
The Regional Trial Court also shares that concurrent jurisdiction but that cannot be considered with
regard to the NLRC since they are of the same rank.
[24]
TSP, S. No. 1495, February 8, 1995, pp. 32-33.
[25]
G.R. Nos. 99289-90, January 27, 1993, 217 SCRA 633. See also Tano, et al. vs. Socrates, et al.,
G.R. No. 110249, August 21, 1997, 278 SCRA 155.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 118746 September 7, 1995

ATTY. WILFREDO TAGANAS, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, MELCHOR ESCULTURA, ET
AL., respondents.
 RESOLUTION

FRANCISCO, J.:

Petitioner Atty. Wilfredo E. Taganas represented herein private respondents in a labor suit
for illegal dismissal, underpayment and non-payment of wages, thirteenth-month pay,
attorney's fees and damages conditioned upon a contingent fee arrangement granting the
equivalent of fifty percent of the judgment award plus three hundred pesos appearance
fee per hearing. The Labor Arbiter ruled in favor of private respondents and ordered Ultra
1

Clean Services (Ultra) and the Philippine Tuberculosis Society, Inc., (PTSI) respondents
therein, jointly and severally to reinstate herein private respondents with full backwages,
to pay wage differentials, emergency cost of living allowance, thirteenth-month pay and
attorney's fee, but disallowed the claim for damages for lack of basis. This decision was
2

appealed by Ultra and PTSI to the National Labor Relations Commission (NLRC), and
subsequently by PTSI to the Court but to no avail. During the execution stage of the
decision, petitioner moved to enforce his attorney's charging lien. Private respondents,
3

aggrieved for receiving a reduced award due to the attorney's charging lien, contested the
validity of the contingent fee arrangement they have with petitioner, albeit four of the
fourteen private respondents have expressed their conformity thereto. 4

Finding the arrangement excessive, the Labor Arbiter ordered the reduction of petitioner's
contingent fee from fifty percent of the judgment award to ten percent, except for the four
private respondents who earlier expressed their conformity. Petitioner appealed to NLRC
5

which affirmed with modification the Labor Arbiter's order by ruling that the ten percent
contingent fee should apply also to the four respondents even if they earlier agreed to pay
a higher percentage. Petitioner's motion for reconsideration was denied, hence this
6

petition for certiorari.

The sole issue in this petition is whether or not the reduction of petitioner's contingent fee
is warranted. Petitioner argues that respondent NLRC failed to apply the pertinent laws
and jurisprudence on the factors to be considered in determining whether or not the
stipulated amount of petitioner's contingent fee is fair and reasonable. Moreover, he
contends that the invalidation of the contingent fee agreement between petitioner and his
clients was without any legal justification especially with respect to the four clients who
manifested their conformity thereto. We are not persuaded.

A contingent fee arrangement is an agreement laid down in an express contract between

a lawyer and a client in which the lawyer's professional fee, usually a fixed percentage of
what may be recovered in the action is made to depend upon the success of the
litigation. This arrangement is valid in this jurisdiction. It is, however, under the
7 8

supervision and scrutiny of the court to protect clients from unjust charges. Section 13 of
9

the Canons of Professional Ethics states that "[a] contract for a contingent fee, where
sanctioned by law, should be reasonable under all the circumstances of the case including
the risk and uncertainty of the compensation, but should always be subject to the
supervision of a court, as to its reasonableness". Likewise, Rule 138, Section 24 of the
Rules of Court provides:

Sec. 24. Compensation of attorneys; agreement as to fees. — An attorney shall be

entitled to have and recover from his client no more than a reasonable compensation for
his services, with a view to the importance of the subject-matter of the controversy, the
extent of the services rendered, and the professional standing of the attorney. No court
shall be bound by the opinion of attorneys as expert witnesses as to the proper
compensation but may disregard such testimony and base its conclusion on its own
professional knowledge. A written contract for services shall control the amount to be paid
therefor unless found by the court to be unconscionable or unreasonable.

When it comes, therefore, to the validity of contingent fees, in large measure it depends
on the reasonableness of the stipulated fees under the circumstances of each case. The
reduction of unreasonable attorney's fees is within the regulatory powers of the courts. 10

We agree with the NLRC's assessment that fifty percent of the judgment award as
attorney's fees is excessive and unreasonable. The financial capacity and economic
status of the client have to be taken into account in fixing the reasonableness of the
fee. Noting that petitioner's clients were lowly janitors who receive miniscule salaries and
11

that they were precisely represented by petitioner in the labor dispute for reinstatement
and claim for backwages, wage differentials, emergency cost of living allowance,
thirteenth-month pay and attorney's fees to acquire what they have not been receiving
under the law and to alleviate their living condition, the reduction of petitioner's contingent
fee is proper. Labor cases, it should be stressed, call for compassionate justice.

Furthermore, petitioner's contingent fee falls within the purview of Article 111 of the Labor
Code. This article fixes the limit on the amount of attorney's fees which a lawyer, like
petitioner, may recover in any judicial or administrative proceedings since the labor suit
where he represented private respondents asked for the claim and recovery of wages. In
fact, We are not even precluded from fixing a lower amount than the ten percent ceiling
prescribed by the article when circumstances warrant it. Nonetheless, considering the
12

circumstances and the able handling of the case, petitioner's fee need not be further
reduced.

The manifestation of petitioner's four clients indicating their conformity with the contingent
fee contract did not make the agreement valid. The contingent fee contract being
unreasonable and unconscionable the same was correctly disallowed by public
respondent NLRC even with respect to the four private respondents who agreed to pay
higher percentage. Petitioner is reminded that as a lawyer he is primarily an officer of the
court charged with the duty of assisting the court in administering impartial justice
between the parties. When he takes his oath, he submits himself to the authority of the
court and subjects his professional fees to judicial control.13

WHEREFORE, finding no grave abuse of discretion the assailed NLRC decision is hereby
affirmed in toto.