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 theformulation of a Code of Discipline among employees is a shared responsibility of the employerand the employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code ofDiscipline. 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 complaintbefore 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 ofDiscipline without notice and prior discussion with Union by Management" (Rollo, p. 41). In itsposition paper, PALEA contended that PAL, by its unilateral implementation of the Code, wasguilty of unfair labor practice, specifically Paragraphs E and G of Article 249 and Article 253 ofthe 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. Itprayed that implementation of the Code be held in abeyance; that PAL should discuss thesubstance of the Code with PALEA; that employees dismissed under the Code be reinstated andtheir cases subjected to further hearing; and that PAL be declared guilty of unfair labor practiceand be ordered to pay damages (pp. 7-14, Record.)

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to presciberules 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 bargainingagreement (CBA) or any provision of the Labor Code. Assailing the complaint as unsupported byevidence, PAL maintained that Article 253 of the Labor Code cited by PALEA reffered to therequirements for negotiating a CBA which was inapplicable as indeed the current CBA had beennegotiated.

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

Sec. 2. Non-exclusivity. — This Code does not contain the entirety of the rules andregulations of the company. Every employee is bound to comply with all applicablerules, regulations, policies, procedures and standards, including standards ofquality, productivity and behaviour, as issued and promulgated by the companythrough its duly authorized officials. Any violations thereof shall be punishable witha 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 ofoffenses of any nature or the absence thereof. The more habitual an offender hasbeen, the greater shall be the penalty for the latest offense. Thus, an employee maybe dismissed if the number of his past offenses warrants such penalty in thejudgment of management even if each offense considered separately may notwarrant dismissal. Habitual offenders or recidivists have no place in PAL. On theother hand, due regard shall be given to the length of time between commission ofindividual offenses to determine whether the employee's conduct may indicate

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occasional lapses (which may nevertheless require sterner disciplinary action) or apattern of incorrigibility.

Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but theyfailed to appear at the scheduled date. Interpreting such failure as a waiver of the parties' rightto present evidence, the labor arbiter considered the case submitted for decision. On November7, 1986, a decision was rendered finding no bad faith on the part of PAL in adopting the Code andruling 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 theconduct of employees is a "legitimate management prerogative" such rules and regulations mustmeet the test of "reasonableness, propriety and fairness." She found Section 1 of the Codeaforequoted as "an all embracing and all encompassing provision that makes punishable anyoffense 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 morepunishment 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 isunsupported by documentary evidence, she stated that such "failure" on the part of PAL resultedin the imposition of penalties on employees who thought all the while that the 1966 Code wasstill being followed. Thus, the arbiter concluded that "(t)he phrase ignorance of the law excusesno one from compliance . . . finds application only after it has been conclusively shown that thelaw was circulated to all the parties concerned and efforts to disseminate information regardingthe 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 ofDiscipline and remand the same for further hearing; and

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

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

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

The complainant union in this case has the right to feel isolated in the adoption ofthe New Code of Discipline. The Code of Discipline involves security of tenure andloss of employment — a property right! It is time that management realizes that toattain effectiveness in its conduct rules, there should be candidness and opennessby Management and participation by the union, representing its members. In fact,our Constitution has recognized the principle of "shared responsibility" betweenemployers and workers and has likewise recognized the right of workers toparticipate in "policy and decision-making process affecting their rights . . ." The

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latter provision was interpreted by the Constitutional Commissioners to meanparticipation in "management"' (Record of the Constitutional Commission, Vol. II).

In a sense, participation by the union in the adoption of the code if conduct couldhave accelerated and enhanced their feelings of belonging and would have resultedin cooperation rather than resistance to the Code. In fact, labor-managementcooperation 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 sensethat the New Code of Discipline should be reviewed and discussed with complainantunion, particularly the disputed provisions [.] (T)hereafter, respondent is directed tofurnish each employee with a copy of the appealed Code of Discipline. The pendingcases adverted to in the appealed decision if still in the arbitral level, should bereconsidered by the respondent Philippine Air Lines. Other dispositions of the LaborArbiter are sustained.

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

PAL then filed the instant petition for certiorari charging public respondents with grave abuse ofdiscretion in: (a) directing PAL "to share its management prerogative of formulating a Code ofDiscipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogativewith the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL toreconsider 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 whethermanagement may be compelled to share with the union or its employees its prerogative offormulating a code of discipline.

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

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amendingArticle 211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure theparticipation of workers in decision and policy-making processes affecting the rights, duties andwelfare." However, even in the absence of said clear provision of law, the exercise ofmanagement prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA565 [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 thecompany's right to implement a new system of distributing its products, but gave the followingcaveat:

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

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It iscircumscribed by limitations found in law, a collective bargaining agreement, or the generalprinciples 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 beduly 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 purelybusiness-oriented nor do they concern the management aspect of the business of the companyas in the San Miguel case. The provisions of the Code clearly have repercusions on theemployee's right to security of tenure. The implementation of the provisions may result in thedeprivation of an employee's means of livelihood which, as correctly pointed out by the NLRC, isa property right (Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of theseaspects of the case which border on infringement of constitutional rights, we must uphold theconstitutional requirements for the protection of labor and the promotion of social justice, forthese factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in

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favor of the worker" (Employees Association of the Philippine American Life Insurance Companyvs. NLRC, 199 SCRA 628 [1991] 635).

Verily, a line must be drawn between management prerogatives regarding businessoperations 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 ormodes action. PAL asserts that all its employees have been furnished copies of the Code. Publicrespondents 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 andregulations to carry out the functions of management without having to discuss the same withPALEA and much less, obtain the latter'sconformity thereto" (pp. 11-12, Petitioner'sMemorandum; pp 180-181, Rollo.) Petitioner's view is based on the following provision of theagreement:

The Association recognizes the right of the Company to determine matters ofmanagement it policy and Company operations and to direct its manpower.Management of the Company includes the right to organize, plan, direct and controloperations, to hire, assign employees to work, transfer employees from onedepartment, to another, to promote, demote, discipline, suspend or dischargeemployees for just cause; to lay-off employees for valid and legal causes, tointroduce new or improved methods or facilities or to change existing methods orfacilities and the right to make and enforce Company rules and regulations to carryout 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 ofemployees' rights to participate in the deliberation of matters which may affect their rights andthe formulation of policies relative thereto. And one such mater is the formulation of a code ofdiscipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just participationin 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 . . . asemployees." 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, dutiesand welfare." PAL's position that it cannot be saddled with the "obligation" of sharingmanagement prerogatives as during the formulation of the Code, Republic Act No. 6715 had notyet 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, theattainment of a harmonious labor-management relationship and the then already existing statepolicy of enlightening workers concerning their rights as employees demand no less than theobservance of transparency in managerial moves affecting employees' rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline consideringthe nature of its business cannot be overemphasized. In fact, its being a local monopoly in thebusiness demands the most stringent of measures to attain safe travel for its patrons.Nonetheless, whatever disciplinary measures are adopted cannot be properly implemented in theabsence of full cooperation of the employees. Such cooperation cannot be attained if theemployees are restive on account, of their being left out in the determination of cardinal andfundamental matters affecting their employment.

WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No specialpronouncement is made as to costs.

SO ORDERED.

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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.

HERMOSISIMA, JR., J.:p

This is a petition for certiorari under Rule 65 to review and set aside two Resolutions ofMediator-Arbiter Achilles V. Manit, dated January 5, 1994 and April 6, 1994, and theaffirmation 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 AllMonthly Paid Employees of SMFI-Cebu B-Meg Feeds Plant," docketed as OS-MA-A-3-51-94(R0700-9309-RU-036).

The essential facts are not disputed.

On September 24, 1993, a petition for certification election among the monthly-paidemployees of the San Miguel Food, Inc.-Cebu B-Meg Feeds Plant was filed by privaterespondent labor federation Ilaw at Buklod ng Mangagawa (IBM, for brevity) before Med-Arbiter Achilles V. Manit, alleging, inter alia, that it is a legitimate labor organization dulyregistered with the Department of Labor and Employment (DOLE) under RegistrationCertificate 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 whichemploys roughly seventy-five (75) monthly paid employees, almost all of whom supportthe present petition. It was submitted in said petition that there has been no certificationelection conducted in SMFI to determine the sole and exclusive bargaining agent thereatfor the past two years and that the proposed bargaining unit, which is SMFI's monthly paidemployees, is an unorganized one. It was also stated therein that petitioner IBM (hereinprivate respondent) has already complied with the mandatory requirements for thecreation of its local or affiliate in SMFI's establishment.

On October 25, 1993, herein petitioner SMFI filed a Motion to Dismiss the aforementionedpetition dated September 24, 1993 on the ground that a similar petition remains pendingbetween 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, bothpetitions involved the same parties, cause of action and relief being prayed for, which isthe issuance of an order by the Med-Arbiter allowing the conduct for a certification electionin SMFI's establishment. The contention is that the judgment that may be rendered in thefirst petition would be determinative of the outcome of the second petition, dateSeptember 24, 1993.

On December 2, 1993, private respondent IBM filed its Opposition to SMFI's Motion toDismiss contending, among others, that the case referred to by SMFI had already beenresolved by Med-Arbiter Manit in his Resolution and Order dated July 26, 1993 1 andSeptember 2, 1993, 2 respectively, wherein IBM's first petition for certification election wasdenied mainly due to IBM's failure to comply with certain mandatory requirements of thelaw. This denial was affirmed by the Med-Arbiter in another Order dated November 12,

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1993 3 wherein the Resolutions dated July 26, 1993 and September 2, 1993 were made tostand. 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 saidrequirements are met. These requirements were finally satisfied before the second petitionfor certification election was brought on September 24, 1993.

On January 5, 1994, Med-Arbiter Manit, this time, granted the second petition forcertification election of private respondent IBM in this wise:

Let, therefore, a certification election be conducted among the monthly paid rankand file employees of SMFI-CEBU B-MEG FEEDS PLANT at Lo-oc, Mandaue City. Thechoices 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 placeon January 17, 1994 at 3:00 o'clock in the afternoon to set the date and time of theelection and to thresh out the mechanics thereof. On said date and time therespondent is directed to submit the payroll of its monthly paid rank and fileemployees for the month of June 1993 which shall be the basis for the list of theeligible voters. The petitioner is directed to be ready to submit a list of the monthlypaid rank and file employees of SMFI-CEBU B-MEG FEEDS PLANT when therespondent fails to submit the required payroll.

SO ORDERED. 4

Petitioner SMFI appealed the foregoing Order to the Secretary of Labor and Employmentalleging that the Med-Arbiter erred in directing the conduct of certification electionconsidering that the local or chapter of IBM at SMFI is still not a legitimate labororganization with a right to be certified as the exclusive bargaining agent in petitioner'sestablishment based on two grounds: (1) the authenticity and due execution of the CharterCertificate submitted by IBM in favor of its local at SMFI cannot yet be ascertained as it isstill not known who is the legitimate and authorized representative of the IBM Federationwho may validly issue said Charter Certificate; and (2) a group of workers or a local unionshall acquire legal personality only upon the issuance of a Certificate of Registration by theBureau of Labor Relations under Article 234 of the Labor Code, which IBM at SMFI did notpossess.

In a resolution dated April 6, 1994, public respondent Undersecretary BienvenidoLaguesma, by authority of the Secretary of Labor and Employment, denied petitioner'sappeal, viz.:

WHEREFORE, the appeal is hereby denied for lack of merit and the Order of theMed-Arbiter is hereby affirmed.

Let the records of this case be forwarded to the Regional Office of origin for theimmediate conduct of certification election subject to the usual pre-electionconference.

SO RESOLVED. 5

Thereafter, a Motion for Reconsideration was filed which was also denied by the publicrespondent in his Order dated May 24, 1994. 6

Hence, the instant petition interposing the following justifications:

1) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA GRAVELY ABUSEDHIS DISCRETION WHEN HE ARBITRARILY RULED THAT "A LOCAL OR CHAPTER OF ALABOR FEDERATION, LIKE RESPONDENT IBM, NEED NOT OBTAIN A CERTIFICATE OFREGISTRATION FROM THE BUREAU OF LABOR RELATIONS TO ACQUIRE LEGALPERSONALITY," WHEN ARTICLE 234 OF THE LABOR CODE OF THE PHILIPPINES ANDSECTION 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 UNIONSHALL ACQUIRE LEGAL PERSONALITY ONLY UPON THE ISSUANCE OF THECERTIFICATE OF REGISTRATION BY THE BUREAU OF LABOR RELATIONS. AND,

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2) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA GRAVELY ABUSEDHIS DISCRETION WHEN HE PREMATURELY AND ARBITRARILY RULED THATRESPONDENT IBM IS A LEGITIMATE LABOR ORGANIZATION WHEN THEAUTHENTICITY AND DUE EXECUTION OF THE CHARTER CERTIFICATE SUBMITTED BYRESPONDENT IBM CANNOT YET BE ASCERTAINED BECAUSE IT IS STILL NOT KNOWNWHO ARE THE LEGITIMATE OFFICERS OF THE IBM FEDERATION WHO MAY VALIDLYISSUE SAID CHARTER CERTIFICATE AS THE CASE FILED TO RESOLVE THE ISSUE ONWHO ARE THE LEGITIMATE OFFICERS OF THE IBM FEDERATION IS STILL PENDINGRESOLUTION BEFORE THIS HONORABLE SUPREME COURT. 7

The petition has no merit.

Petitioner asserts that IBM at SMFI is not a legitimate labor organization notwithstandingthe fact that it is a local or chapter of the IBM Federation. This is so because under Article234 of the Labor Code, any labor organization shall acquire legal personality only upon theissuance of the Certificate of Registration by the Bureau of Labor Relations.

We do not agree.

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Article 212(h) of the Labor Code defines a legitimate labor organization as "any labororganization duly registered with the Department of Labor and Employment, and includesany branch or local thereof ."

It is important to determine whether or not a particular labor organization is legitimatesince legitimate labor organizations have exclusive rights under the law which cannot beexercised by non-legitimate unions, one of which is the right to be certified as theexclusive representative of all the employees in an appropriate collective bargaining unitfor purposes of collective bargaining. These rights are found under Article 242 of the LaborCode, to wit:

Art. 242. Rights of legitimate labor organizations. — A legitimate labor organizationshall have the right:

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

(b) To be certified as the exclusive representative of all the employees in anappropriate collective bargaining unit for purpose of collective bargaining;

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

(d) To own property, real or personal, for the use and benefit of the labororganization 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 itsmembers, including cooperative, housing welfare and other projects not contrary tolaw.

xxx xxx xxx

The pertinent question, therefore, must be asked: When does a labor organization acquirelegitimacy?

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Ordinarily, a labor organizations attains the status of legitimacy only upon the issuance inits name of a Certificate of Registration by the Bureau of Labor Relations pursuant toArticles 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 beentitled to the rights and privileges granted by law to legitimate labor organizationsupon 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 labororganization, the minutes of the organizational meetings and the list of the workerswho participated in such meetings;

(c) The names of all its members comprising at least twenty percent (20%) of all theemployees 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 itsannual financial reports; and

(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes ofits 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 forregistration within thirty (30) days from filing.

All requisite documents and papers shall be certified under oath by the secretary orthe treasurer of the organization, as the case may be, and attested to by itspresident.

The foregoing procedure is not the only way by which a labor union may becomelegitimate, however. When an unregistered union becomes a branch, local or chapter of afederation, some of the aforementioned requirements for registration are no longerrequired. 8 Section 3, Rule II, Book V of the Implementing Rules of the Labor Code governsthe procedure for union affiliation, the relevant portions of which provide:

Sec. 3. Union Affiliation: Direct Membership with National Union. — An affiliate of alabor federation or national union may be a local or chapter thereof or anindependently registered union.

(a) The labor federation or national union concerned shall issue a charter certificateindicating the creation or establishment of a local or chapter, copy of which shall besubmitted to the Bureau of Labor Relations within thirty (30) days from issuance ofsuch charter certificate.

(b) An independently registered union shall be considered an affiliate of a laborfederation or national union after submission to the Bureau of the contract oragreement of affiliation within thirty (30) days after its execution.

xxx xxx xxx

(e) The local or chapter of a labor federation or national union shall have andmaintain a constitution and by-laws, set of officers and books of accounts. Forreporting purposes, the procedure governing the reporting of independentlyregistered unions, federations or national unions shall be observed.

Paragraph (a) refers to a local or chapter of a federation which did not undergo therudiments of registration while paragraph (b) refers to an independently registered unionwhich affiliated with a federation. Implicit in the foregoing differentiation is the fact that alocal or chapter need not be independently registered. By force of law (in this case, Article212 [h]), such local or chapter becomes a legitimate labor organization upon compliancewith the aforementioned provisions of Section 3 9 (a) and (e), without having to be issued aCertificate of Registration in its favor by the BLR.

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The cases of Lopez Sugar Corporation v. Secretary of Labor and Employment, 10 PhoenixIron and Steel Corporation v. Secretary of Labor and Employment 11 and ProtectionTechnology, Inc. v. Secretary, Department of Labor and Employment, 12 all going back toour landmark holding in Progressive Development Corporation v. Secretary, Department ofLabor andEmployment, 13 unequivocably laid down the rule, thus:

A local or chapter therefore becomes a legitimate labor organization only uponsubmission of the following to the BLR:

1) A charter certificate, within 30 days from its issuance by the labor federation ornational union, and

2) The constitution and by-laws, a statement on the set of officers, and the books ofaccounts all of which are certified under oath by the secretary or treasurer, as thecase may be, of such local or chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter doesnot become a legitimate labor organization.

Corollarily, the satisfaction of all these requirements by the local or chapter shall vestupon it the status of legitimacy with all its concomitant statutory privileges, one of whichis the right to be certified as the exclusive representative of all the employees in anappropriate bargaining unit.

In the case at bench, public respondent Bienvenido E. Laguesma, in affirming the findingof the Med-Arbiter that IBM at SMFI is a legitimate labor organization, 14 made the followingmaterial pronouncement amply supported by the records;

[t]he resolution of the issue raised by the respondent on whether or not petitioner isa legitimate labor organization will depend on the documents submitted by thepetitioner in the second petition.

A close scrutiny of the records shows that at the time of the filing of the subjectpetition on 24 September 1993 by the petitioner Ilaw at Buklod ng Manggagawa, forand in behalf of its local affiliate IBM at SMFI-CEBU B-MEG, the latter has beenclothed with the status and/or character of a legitimate labor organization. This isso, because on 19 July 1993, petitioner submitted to the Bureau of Labor Relations(BLR), this Department, the following documents: charter certificate, constitutionand by-laws, names and addresses of the union officers and certification of theunion's secretary on the non-availability of the union's Books of Accounts. Saiddocuments (expect the charter certificate) are certified under oath and attested toby the local union's secretary and President, respectively. 15

Petitioner SMFI does not dispute the fact that IBM at SMFI has complied with the secondset or 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 tothe BLR within thirty (30) days from its issuance by the labor federation. While thepresence of a charter certificate is conceded, petitioner maintains that the validity andauthenticity of the same cannot yet be ascertained as its is still not known who is thelegitimate and authorized representative of the IBM Federation who may validly issue saidcharter 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 wasissued 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, backedup by the Solicitor General, had this to say:

The contention of the respondent that unless and until the issue on who is thelegitimate national president, of the Ilaw at Buklod ng Mangagawa is resolved, thepetitioner cannot claim that is has a valid charter certificate necessary for it toacquire legal personality is untenable. We wish to stress that the resolution of thesaid issue will not in any way affect the validity of the charter certificate issued bythe IBM in favor of the local union. It must be borne in mind that the said charter

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certificate was issued by the IBM in its capacity as a labor organization, a juridicalentity which has a separate and distinct legal personality from its members. Whenas in this case, there is no showing that the Federation acting as a separate entity isquestioning the legality of the issuance of the said charter certificate, the legality ofthe 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 respondent's Comment to this petition indicates that in the election of officers heldto 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 NationalPresident. 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. Apunctilious examination of the records presents no evidence to the contrary andpetitioner, instead of squarely refuting this point, skirted the issue by insisting that themere presence of two contending factions in the IBM prevents the issuance of a valid andauthentic charter certificate in favor of IBM at SMFI. This averment of petitioner simplydoes not deserve any merit.

II

In any case, this Court notes that it is petitioner, the employer, which has offered the mosttenacious 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 isthe sole concern of the employees. 19 The only exception to this rule is where the employerhas to file the petition for certification election pursuant to Article 258 20 of the Labor Codebecause it was requested to bargain collectively, 21 which exception finds no application inthe case before us. Its role in a certification election has aptly been described in TradeUnions 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 petitionor appeal the Med-Arbiter's orders related thereto. An employer that involves itself in acertification election lends suspicion to the fact it wants to create a company union. 23 ThisCourt should be the last agency to lend support to such an attempt at interference with apurely internal affair of labor. 24

While employers may rightfully be notified or informed of petitions of such nature, theyshould not, however, be considered parties thereto with the concomitant right to opposeit. 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 certificationelections, 26 for it is a statutory policy that should not be circumvented. 27 The certificationelection is the most democratic and expeditious method by which the laborers can freelydetermine the union that shall act as their representative in their dealings with theestablishment where they are working. 28 It is the appropriate means wherebycontroversies and disputes on representation may be laid to rest, by the unequivocal voteof the employees themselves. 29 Indeed, it is the keystone of industrial democracy. 30

Petitioner next asseverates that the Charter Certificate submitted by the privaterespondent was defective in that it was not certified under oath and attested to by theorganization's secretary and President.

Petitioner is grasping at straws. Under our ruling in the Progressive DevelopmentCorporation 31 case, what is required to be certified under oath by the secretary ortreasurer and attested to by the local's president are the "constitution and by-laws, astatement on the set of officers, and the books of accounts" of the organization. Thecharter certificate issued by the mother union need not be certified under oath by thesecretary or treasurer and attested to by the local's president.

IV

Petitioner, in its Reply to public respondent's Comment, nevertheless calls the attention ofthis court to the fact that, contrary to the assertion of private respondent IBM that it is alegitimate labor federation and therefore has the capacity and authority to create a localor chapter at SMFI, the Chief of the Labor Organizations Division of the Bureau of Labor

10

Relations — Manila had allegedly issued a certification last January 17, 1995 to the effectthat 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 toallow the private respondent ample opportunity to present evidence to the contrary. ThisCourt 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 inthe proceedings before the Med-Arbiter. Nor was this issue raised in petitioner's appeal tothe Office of the Secretary of Labor and Employment. This matter is being raised for thefirst time in this petition. An issue which was neither alleged in the pleadings nor raisedduring the proceedings below cannot be ventilated for the first time before this Court. Itwould be offensive to the basic rule of fair play, justice and due process. 33 Certiorari is aremedy narrow in its scope and inflexible in character. It is not a general utility tool in thelegal workshop. 34 Factual issues are not a proper subject for certiorari, as the power of theSupreme Court to review labor cases is limited to the issue of jurisdiction and grave abuseof discretion.35 It is simply unthinkable for the public respondent Undersecretary of Laborto have committed grave abuse of discretion in this regard when the issue as to the legalpersonality of the private respondent IBM Federation was never interposed in the appealbefore said forum.

V

Finally, the certification election sought to be stopped by petitioner is, as of now, faitaccompli. The monthly paid rank-and-file employees of SMFI have already articulated theirchoice as to who their collective bargaining agent should be. In the certification electionheld on August 20, 1994, 36 the SMFI workers chose IBM at SMFI to be their sole andexclusive bargaining agent. This democratic decision deserve utmost respect. Again, itbears stressing that labor legislation seeks in the main to protect the interest of themembers of the working class. It should never be used to subvert their will. 37

WHEREFORE, the petition is DENIED. Costs again petitioner

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.

DAVIDE, JR., J.:p

This is a petition for certiorari under Rule 65 of the Rules of Court to annul the decision ofthe Labor Arbiter dated 12 August 1991 in NLRC Case No. 00-11-06008-90 and theresolutions of public respondent National Labor Relations Commission (NLRC)promulgated on 27 October 1994 and 31 May 1995 dismissing the appeal filed by thepetitioner and denying the motion for reconsideration, respectively.

The dispute arose from these antecedents:

On 23 December 1987, private respondent Unicorn Security Services, Inc. (USSI) andpetitioner Philippine Airlines, Inc. (PAL) executed a security service agreement. 1 USSIwas designated therein as the CONTRACTOR. Among the pertinent terms and conditionsof 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 inwriting . . . . It is, of course, understood that the CONTRACTOR undertakes topay the wages or salaries and cost of living allowance of the guards in

11

accordance with the provisions of the Labor Code, as amended, the differentPresident Decrees, Orders and with the rules and regulations promulgated bycompetent authorities implementing said acts, assuming all responsibilitiestherefor. . . .

xxx xxx xxx

(6) Without any expense on the part of PAL, CONTRACTOR shall see to it thatthe guards assigned to PAL . . . are provided, at the expense ofCONTRACTOR, with the necessary firearms, ammunitions and facilitiesneeded 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 hereinprovided or heretofore to be set forth or prescribed. The determination ofwages, salaries and compensation of the guards or employees of theCONTRACTOR shall be within its full control but shall in no way contraveneexisting laws on the matter. It is further understood that CONTRACTOR as theemployer of the security guards agrees to comply with all relevant laws andregulations, including compulsory coverage under the Social Security Act,Labor Code, as amended and the Medical Care Act, in its operations.Although it is understood agreed between parties hereto that CONTRACTORin the performance of its obligations under this Agreement, is subject to thecontrol and direction of PAL merely as to the result as to be accomplished bythe work or services herein specified, and not as to the means and methodsfor accomplishing such result, CONTRACTOR hereby warrants that it willperform such work or services in such manner as will achieve the resultherein desired by PAL.

(8) Discipline and administration of the security guards shall be the soleresponsibility of the CONTRACTOR to the end that CONTRACTOR shall be ableto render the desired security service requirements of PAL CONTRACTOR,therefore, shall conform to such rules and regulations that may be issued byPAL. For this purpose, Annex "A", which forms part of this Agreement,contains such rules and regulations and CONTRACTOR is expected to complywith them. At its discretion, PALmay, however, work out with CONTRACTORsuch rules and regulations before their implementation.

(9) Should PAL at any time have any justifiable objection to the presence inits premises of any of CONTRACTOR's officer, guard or agent under thisAgreement, it shall send such objection in writing to CONTRACTOR and thelatter shall immediately take proper action.

(10) The security guards employed by CONTRACTOR in performing thisAgreement shall be paid by the CONTRACTOR and it is distinctly understoodthat there is no employee-employer relations between CONTRACTOR and/orhis guards on the one hand, and PAL on the other. CONTRACTOR shall haveentire charge, control and supervision of the work and services herein agreedupon, and PAL shall in no manner be answerable or accountable for anyaccident or injury of any kind which may occur to any guard or guards of theCONTRACTOR in the course of, or as a consequence of, their performance ofwork and services under this Agreement, or for any injury, loss or damagearising from the negligence of or carelessness of the guards of theCONTRACTOR or of anyone of its employ to any person to persons or to its ortheir property whether in the premises of PAL or elsewhere; and theCONTRACTOR hereby covenants and agrees to assume, as it does herebyassume, any and all liability or on account of any such injury, loss ordamage, and shall indemnify PAL for any liability or expense it may incur byreason thereof and to hold PAL free and harmless from any such liability.

12

xxx xxx xxx

(13) For and in consideration of the services to be rendered by CONTRACTORunder these presents, PAL shall pay CONTRACTOR the amount ofPESOS NINE & 40/100 CTVS (P9.40) PER HOUR multiplied by 905 hoursequivalent to PESOS TWO HUNDRED SEVENTY FIVE THOUSAND NINEHUNDRED NINE & 58/100 CTVS, Philippine currency, — (P275,909.58) thebasis of eight (8) working hours per office/guard a day, Sundays and holidaysincluded, the same to be payable on or before the 15th of each month forservices on the first half of the month and on or before the end of the monthfor services for the 2nd half of the month.

Nothing herein contained shall prevent the parties from meeting for a reviewof the rates should circumstances warrant.

xxx xxx xxx

(20) This Agreement shall take effect on 06 December 1987 and shall be inforce for a period of SIX (6) MONTHS — 05 JUNE 1988 thereafter it shallcontinue indefinitely unless sooner terminated upon thirty (30) days noticeserved 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 providedwhat was requested; however, PAL insisted that what USSI did was merely to pick out 16guards 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 withoutgiving the latter the 30-day prior notice required in paragraph 20 thereof. Instead, PALpaid each of the security guards actually assigned at the time of the termination of theagreement an amount equivalent to their one-month salary to compensate for the lackof notice.

In November 1990, USSI, allegedly "in its capacity as Trustee for Sixteen or on SecurityGuards," filed with the NLRC Arbitration Branch, National Capital Region, acomplaint 2 against PAL for the recovery of P75,600.00 representing termination paybenefit due the alleged 16 additional security guards, which PAL failed and refused topay despite demands. It further asked for an award of not less than P15,000.00 for eachof the 16 guards as damages for the delay in the performance of PAL's obligation, andalso for attorney's 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 requiredeighty-six (86) security guards whom complaint USSI supplied; on orsometime in August 1989, respondent asked sixteen (16) security guards torender twelve (12) hours each.

4. In February 1990 and for reasons of its own, respondent caused toterminate not only the contract but also the services of the security guards;in effecting such termination, said respondent caused to pay the equivalentof one (1) month's notice unto all the security guards, except the 16 who, asaforementioned were rendering 12 hours each from date of assignment up toand until their termination.

5. As computed, the termination pay benefits due the 16 security guardsamount to P75,600.00, more or less, which, despite demands, respondentfails, neglects or refuses to pay, as it continue refusing, failing or neglectingto so do up to the present time.

13

6. Respondent has not only incurred in delay in the performance of itsobligation but also contravened the tenor thereof; hence, complainants are,by law, entitled to be indemnified with damages for no less than P15,000.00each for all complainants though the correct amount is left solely to thesound discretion of the Honorable Labor Arbiter.

7. Complainants are now compelled to litigate their plainly valid, just ordemandable claim on account of which services of counsel have beenrequired and thereby obligated themselves to pay, for and as attorney's fees,the sum equivalent to ten percent (10%) of whatever sums or sum may berecovered in the case.

The complaint was docketed as NLRC-NCR Case No. 00-11-06008-90 and assigned toLabor Arbiter Cornelio L. Linsangan.

PAL filed a motion to dismiss the complaint 3 on the grounds that the Labor Arbiter hadno jurisdiction over the subject matter or nature of the complaint and that USSI had nocause of action against PAL. In amplification thereof, PAL argued that the case involvedthe interpretation of the security service agreement, which is purely civil in characterand falls outside of the Labor Arbiter's jurisdiction. It is clear from Article 217 of the LaborCode that for claims to be within the jurisdiction of Labor Arbiters, they must arise froman employer-employee relationship. PAL claimed that USSI did not allege the existence ofan 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 relationshipbetween 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 aslabor standards, benefits, etc. have to be resolved or adjudicated, liability therefor isshifted to, or assumed by, respondent [herein petitioners] which, in law, has beenconstituted as an indirect employer."

PAL filed a supplemental motion to dismiss 5 wherein it cites the following reasons for thedismissal of the complaint: (1) the clear stipulations in the agreement (paragraphs 4 and10) that there exists no employer-employee relationship between PAL on the one handand USSI and the guards on the other; (2) there were no 16 additional guards, as the 16guards who were required to render 12-hour shifts were picked out from the original 86guards already assigned and were already given a one-month salary in lieu of the 30-daynotice of termination of the agreement; (3) USSI had no legal personality to file the caseas alleged trustee of the 16 security guards; and (4) the real parties in interest — the 16security guards — never showed any interest in the case either by attending any hearingor conference, or by following up the status of the case.

Attached to the supplemental motion to dismiss were, among other things, xerox copiesof confirmation letters of USSI to PAL to show that no additional guards were in factprovided. 6

Labor Arbiter Linsangan did not resolved the motion to dismiss and the supplementalmotion 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-month's separation paydue the 16 individual security guards, plus 10% interest from the date of filing of thecase until the whole obligation shall have been fully settled; (2) the sum of P5,000.00 byway of exemplary damages due each of the 16 security guards; and (3) another sumequivalent to 10% of the total award for and as attorney's fees.

It was in that decision that Labor Arbiter Linsangan mentioned for the first time that theresolution of the motion to dismiss and supplemental motion to dismiss "was deferreduntil [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:

14

As heretofore and invariably held in similar cases, the issue of whether or notLabor Arbiters have jurisdiction over money claims affecting security guardsassigned by security agencies (like complainant herein) to their client-companies such as PAL is, more or less, settled, especially since, as the lawviews such as peculiar relationship, such money claims insofar as they haveto be paid, are the ultimate responsibility of the client-firms. In effect, thesecurity guards have been constituted as indirect employees of the clientjust as the client becomes the indirect employer of the guards. Art. 107 and109 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 therequired number of security guards were assigned to, or posted at, thevarious premises of respondent — PAL. Said number of security guards may,as the contract provides, be increased or reduced at respondent's request,such that the original number of eighty-six (86) guards, an additional sixteen(16) were needed and, accordingly supplied who, pursuant to PAL'sinstructions, were required to render twelve (12) hours each, per day.

In February 1990, and for reasons of its own, PAL caused to terminate, as itdid, the contract of security service. Unequivocably, it caused to pay theseparation pay benefits of the 86-security guards for the equivalent amountof one (1) month's pay. As to the additional 16, it failed and refused to grantsimilar equivalent, without any valid reasons therefor.

As earlier stated, respondent opted to rely solely on the ground set forth inits Motion to Dismiss as well as Supplement thereto. It failed to file, despitedirective made thereon, its position paper. Neither did it submit, nor adduce,evidence (documentary or otherwise) to rebut or contravert complainant'sclaims especially since the money equivalent of the one month separationpay due the 16 guards has been duly quantified as amounting to SeventyFive Thousand Six Hundred (P75,600.00) Pesos. Thus established, it is clearthat there was absolutely no legal/justifiable reason why said 16 guardsapplied and who rendered 12 hours each per day had to be discriminatedagainst.

Following PAL's failure or refusal to pay, demands were made bycomplainant, asking at the same time why that was so. Conceivably,respondent has smarted itself on its mistaken belief that there was, asbetween 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 payseparation pay unto the 86 regular employed guards.

PAL being widely known as a progressively-minded employer, it should bethe 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 requiredcomplainant to litigate a plainly valid, just or demandable claim, an award forattorney's fees must perforce be assessed.

On 3 September 1991, PAL filed its Appeal 8 wherein it indicated that it received a copyof the decision on 26 August 1991. Attached thereto was a machine copy of the Notice ofJudgment/Final Order, with the date of its receipt, i.e., 26 August 1991, 9 having beenstamped on the upper right hand corner by PAL's Legal Department.

USSI countered this Appeal with a motion foe execution of judgment 10 on the groundthat since PAL, received a copy of the decision on the 23rd, not on the 26th, of August

15

1991 it had until 2 September 1991 to appeal; hence, the appeal interposed on 3September 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 on26 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 explaintherein why it thought all along that it received a copy of the decision on 26 August1991, thus:

4. Upon investigation the undersigned counsel learned that on 23 August1991 (Friday) a server-messenger went to PAL Legal Department to servesaid decision. The receiving clerks at that time were all out of the office sothat the server persuaded a secretary, Ms. April Rose del Rosario to receivethe same, notwithstanding the fact that Ms. Del Rosario told him (server)that she was not authorized to receive documents for and in behalf of PAL.Ms. Del Rosario then stamped the date of receipt on the service's copywithout stamping (the date of receipt) PAL's copy of the decision which wasleft by the server. Thereafter, Ms. del Rosario placed PAL's copy of theDecision 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. GregSoriano upon finding the Decision among the documents in the incomingdocuments rack, immediately stamped "Received 26 August 1991" thereon,on the honest and sincere belief that the same just arrived that day (26August 1991). He then forwarded the same to the secretary of theundersigned 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 on26 August 1991 reckoned/counted the ten (10) day period for appeal fromsaid date.

7. Considering the foregoing circumstances, the undersigned counsel'sinnocent reliance on the date of receipt stamped on the copy of the Decisionfurnished him was clearly due to an innocent mistake and/or excusableneglect. Hence, justice and equity dictates that respondent PAL should beconsidered to have filed its Appeal within the reglementary period forAppeal. 14

On 8 October 1991, Labor Arbiter Linsangan issued an order 15 denying the motion toquash.

On 10 October 1991, PAL appealed 16 to the NLRC the aforesaid order of 8 October 1991on 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 PAL'sappeal for having been filed out of time. It sustained the Labor Arbiter's finding that PALhad received a copy of the decision on 23 August 1991, and hence the last day to appealwas 2 September 1991. It ruled that whether or not the decision was received by anemployee other than the receiving clerk or messenger was of no moment, as the properperformance of employee's duties was PAL's concern.

16

On 31 May 1995, the NLRC denied the motion for reconsideration 18 for the reason that itcannot accept PAL's excuse as it may "open the floodgates to abuse"; and that the lapseof the period to appeal had already deprived the Commission of jurisdiction over thecase. 19

PAL then filed this special civil action for certiorari under Rule 65 of the Rules of Courtalleging that (1) public respondent committed serious and patent error in failing todeclare that the Labor Arbiter had no jurisdiction over the instant case; (2) The LaborArbiter gravely abused its discretion in ordering PAL to pay the separation pay of the 16security guards assigned at PAL's premises by USSI; and (3) respondent NLRC committedgrave abuse of discretion in declaring PAL's appeal to have been filed out of time.

PAL argues that since USSI's cause of action was founded on the security serviceagreement, and that thereunder no employer-employee relationship existed between PALand the security guards who were USSI's employees, the Labor Arbiter had no jurisdictionover the complaint. Moreover, assuming arguendo that the claims of the security guardswere valid, USSI had no personality to file the complaint, for there is nothing whatsoeverto 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 paybecause (1) it was not the employer of the security guards; (2) even as an indirectemployer, as held by the Labor Arbiter, its liability was limited to violations of laborstandards 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 separationpay; (4) the payment made to the 86 security guards upon the termination of theagreement without the prior 30-day notice was not for separation pay but a benefit inlieu of the 30-day notice required under paragraph 20 of the agreement; and (5) sincePAL was not 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 ina very rigid technical sense, sense they are used only to help secure and not overridesubstantial 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 PAL'sdate of receipt of the decision, which was 26 August 1991, the appeal could be said tohave been seasonably filed.

In its Comment, USSI points out that the grounds relied upon by PAL are based on factuala issue, namely, the discrimination made by PAL in paying the 86 and not the 16 securityguards. It argues that the case touched upon the rights of the 16 security guards asemployees; thus, the same was within the jurisdiction of the Labor Arbiter. As regardsPAL's plea for the relaxation of the rule on perfection of appeals, USSI contends that thenegligence of PAL's counsel should not be deemed "compelling reason to warrantrelaxation of the rule."

In its Manifestation and Motion in Lieu of Comment, 20 the Office of the Solicitor Generalagrees with PAL that the Labor Arbiter did not have jurisdiction over the complaintbecause there was no employer-employee relationship between PAL and the 16 securityguards; that Article 107 and 109 of the Labor Code which provide for joint and severalliability for payment of wages by the direct and indirect employer find no application inthe present case because the 16 security guards employed by USSI were not afterunpaid wags; and that in the interest of justice and considering that the appeal was filedonly one day late, the rule on perfection of appeals should have been relaxed to preventa miscarriage of justice.

In view of the stand of the Office of the Solicitor General, we advised public respondentsto file their own comment if they so desired.

In their Comment, the NLRC and Labor Arbiter Linsangan maintain that they hadjurisdiction over the case because of Articles 107 and 109 of the Labor Code which

17

constitute PAL as indirect employer of the 16 security guards, there being a questioninvolving separation pay due the latter; that the 16 security guards were entitled toseparation pay, because PAL paid the other 86 security guards when the serviceagreement was terminated; and that for the NLRC to excuse the delay of one day in filingthe 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 thesubject matter of NLRC-NCR Case No. 00-11-06008-90, because no employer-employeerelationship existed between PAL and the security guards provided by USSI under thesecurity service agreement, including the alleged 16 additional security guards.

We have pronounced in numerous cases 21 that in determining the existence of anemployer-employee relationship, the following elements are generally considered: (1) theselection and engagement of the employee; (2) the payment of wages; (3) the power todismiss; and (4) the power to control the employee's conduct.

In the instant case, the security service agreement between PAL and USSI provides thekey to such consideration. A careful perusal thereof, especially the terms and conditionsembodied 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 securityguards. It was USSI which (a) selected, engaged or hired and discharged the securityguards; (b) assigned them to PAL according to the number agreed upon; (c) provided, atits own expense, the security guards with firearms and ammunitions; (d) disciplined andsupervised 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 explicitcovenant in said agreement that "there exists no employer-employee relationshipbetween CONTRACTOR and/or his guards on the one hand, and PAL on the other" allother 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 thesecurity guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR CaseNo. 00-11-06008-90. Article 217 of the Labor Code (P.D. No. 442), as amended, vestsupon Labor Arbiters exclusive original jurisdiction only over the following:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those casesthat workers may file involving wages, rates of pay, hours ofwork and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms ofdamages arising from employer-employee relations;

5. Cases arising from any violation of Article 265 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 fromemployer-employee relations, including those of persons indomestic or household service, involving an amount exceedingfive thousand pesos (P5,000.00) regardless of whetheraccompanied with a claim for reinstatement.

In all these cases, an employer-employee relationship is an indispensablejurisdictional requisite.

18

The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption ofjurisdiction on the pretext that PAL was the indirect employer of the security guardsunder Article 107 in relation to Articles 106 and 109 of the Labor Code and, therefore, itis solidarily liable with USSI. We agree with the Solicitor General that these Articles areinapplicable to PAL under the facts of this case. Article 107 provides:

Art. 107. Indirect employer. — The provisions of the immediately precedingArticle shall likewise apply to any person, partnership, association orcorporation which, not being an employer, contracts with an independentcontractor 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 acontract with another person for the performance of the former's work, theemployees of the contractor and of the latter's subcontractor, if any, shall bepaid in accordance with the provisions of this Code.

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

While USSI is an independent contractor under the security service agreement andPAL may be considered an indirect employer, that status did not make PAL theemployer to the security guards in every respect. As correctly posited by the Officeof the Solicitor General, PAL may be considered an indirect employer only forpurposes of unpaid wages since Article 106, which is applicable to the situationcontemplated in Section 107, speaks of wages. The concept of indirectemployer only relates or refers to the liability for unpaid wages. Read together,Articles 106 and 109 simply mean that the party with whom an independentcontractor deals is solidarily liable with the latter for unpaid wages, and only tothat extent and for that purpose that the latter is considered a direct employer.The term "wages" is defined in Article 97(f) of the Labor Code as "the remunerationor earnings, however designated, capable of being expressed in terms of money,whether fixed or ascertained on a time, task, piece, or commission basis, or othermethod of calculating the unwritten contract of employment for work done or to bedone, or for services rendered or to be rendered and includes the fair andreasonable value, as determined by the Secretary of Labor, of board, lodging, orother facilities customarily furnished by the employer to the employee."

No valid claim for wages or separation pay can arise from the security serviceagreement in question by reason of its termination at the instance of PAL. Theagreement contains no provision for separation pay. A breach thereof could onlygive rise to damages under the Civil Code, which is cognizable by the appropriateregular court of justice. Besides, there is no substantial proof that USSI in factprovided 16 additional guards. On the contrary, PAL was able to prove in theannexes attached to its supplemental motion to dismiss that the 16 guards wereactually picked out from the original group and were just required to renderovertime service.

The Labor Arbiter's lack of jurisdiction was too obvious from the allegations in thecomplaint 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 motionto dismiss and the supplemental motion to dismiss. As correctly pointed out byPAL, under Section 15 of Rule V of the New Rules of Procedure of the NLRC, anymotion to dismiss on the ground of lack of jurisdiction, improper venue, resjudicata, or prescription shall be immediately resolved by the Labor Arbiter by awritten order. Yet, the Labor Arbiter did not, and it was only in his decision that he

19

mentioned that the resolution of the motion to dismiss "was deferred until thiscase is decided on the merits" because the ground therefore was not "indubitable."On this score the Labor Arbiter acted with grave abuse of discretion fordisregarding the rules he was bound to observe.

We shall now turn to the issue of tardiness of the appeal. The record does indeedshow that on the original copy of the Notice of Judgment/Final Order, 23 there isstamped 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 PAL'scopy of the Notice of Judgment/Final Orders, 24 there is stamped the date of receiptthereof by PAL Legal Department, viz., "AUG. 26, 1991." PAL explained how thisdiscrepancy occurred and how its counsel was misled into believing that PALreceived a copy of the decision only on 26 August 1991. This belief in good faithrendered excusable any negligence it might have committed. Besides, the delay inthe perfection of the appeal was only one day. Considering that the Labor Arbiterhad no jurisdiction over the subject matter of NLRC-NCR Case No. 00-11-06008-90and that the 16 security guards are not in fact entitled to separation pay under thesecurity service agreement, the higher interest of justice favors a relaxation of therule on perfection of appeals in labor cases.

While it is an established rule that the perfection of an appeal in the manner andwithin the period prescribed by law is not only mandatory but jurisdictional, andfailure to perfect an appeal has the effect of rendering the judgment final andexecutory, it is equally settled that the NLRC may disregard the procedural lapsewhere there is an acceptable reason to excuse tardiness in the taking of theappeal. 25Among the acceptable reasons recognized by this Court are (a) counsel'sreliance on the footnote of the notice of the decision of the Labor Arbiter that "theaggrieved party may appeal . . . within ten (10) working days"; 26 (b) fundamentalconsideration of substantial justice; 27 (c) prevention of miscarriage of justice or ofunjust enrichment, as where the tardy appeal is from a decision grantingseparation 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 amountand the issue involved. 30 A one-day delay in the perfection of the appeal wasexcused in Pacific Asia Overseas Shipping Corp.vs. NLRC, 31 Insular life AssuranceCo. vs. NLRC, 32 and City Fair Corp. vs. NLRC. 33

In the instant case, the Labor Arbiter's lack of jurisdiction — so palpably clear onthe face of the complaint — and the perpetuation of unjust enrichment if theappeal is disallowed are enough combination of reasons that warrant a relaxationof the rules on perfection of appeals in labor cases.

WHEREFORE, the instant petitioner is hereby GRANTED. The questioned decision ofthe Labor Arbiter dated 12 August 1991 and the resolutions of the Second Divisionof the National Labor Relations Commission promulgated on 27 October 1994 and31 May 1995 are hereby SET ASIDE, and NLRC-NCR Case No. 00-11-06008-90 isDISMISSED.

20

G.R. No. 128003 July 26, 2000

RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, AQUINO MAGSALIN, PEDRO MAÑIBO, RICARDO BORJA, ALICIA M. SAN PEDRO AND FELOMENA B. TOLIN, respondents.

D E C I S I O N

PARDO, J.:

What is before the Court for resolution is a petition to annul the resolution of the NationalLabor Relations Commission (NLRC),1 affirming the labor-arbiter's award but deleting themoral and exemplary damages.

The facts are as follows:

Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a corporation establishedin 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 anotice of temporary shutdown of operations to take effect on September 26, 1994.Before the effectivity date, however, Rubberworld was forced to prematurely shutdownits operations.

On November 11, 1994, private respondents filed with the National Labor RelationsCommission a complaint2against petitioner for illegal dismissal and non-payment ofseparation 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 rehabilitationplan.3

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

"Accordingly, with the creation of the Management Committee, all actions for claimsagainst 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

21

On January 24, 1995, petitioners submitted to the labor arbiter a motion to suspend theproceedings invoking the SEC order dated December 28, 1994. The labor arbiter did notact 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 ILLEGALSHUTDOWN and that respondents are ordered to pay complainants their separation payequivalent to one (1) month pay for every year of service.

Considering the malicious act of closing the business precipitately without due regard tothe rights of complainants, moral damages and exemplary damage in the sum of P50,000.00 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 laborarbiter.

On August 30, 1996, NLRC issued a resolution, the dispositive portion of which reads:

"PREMISES CONSIDERED, the decision appealed from is hereby, AFFIRMED withMODIFICATION 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 Arbiterand the National Labor Relations Commission may legally act on the claims ofrespondents despite the order of the Securities and Exchange Commission suspendingall actions against a company under rehabilitation by a management committee createdby 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 anycourt, tribunal, board or body shall be suspended accordingly." The law did not make anyexception in favor of labor claims.8

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

Thus, the labor case would defeat the purpose of an automatic stay.1âwphi1 To ruleotherwise would open the floodgates to numerous claims and would defeat the rescueefforts of the management committee.

Besides, even if an award is given to private respondents, the ruling could not beenforced as long as petitioner is under management committee.10

22

This finds ratiocination in that the power to hear and decide labor disputes is deemedsuspended when the Securities and Exchange Commission puts the corporation underrehabilitation.

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

WHEREFORE, the petition is hereby GRANTED. The decision of the labor arbiter datedDecember 10, 1995 and the NLRC resolution dated August 30, 1996, are SET ASIDE.

No costs.

G.R. No. 114761 January 19, 2000

ALEMAR'S SIBAL & SONS, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, NLM-KATIPUNAN (representing the group of CHARITO ALIMORONG), respondents.

PARDO, J.:

The petition before the Court is for certiorari1 to set aside the resolutions of the National LaborRelations Commission2 dismissing the appeal of petitioner and upholding the order of the LaborArbiter 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 CharitoAlimurong, filed with the Department of Labor and Employment a notice of strike,3 raisingcharges of unfair labor practice (ULP) and illegal dismissal against petitioner. Thereafter, thecharges were elevated to respondent National Labor Relations Commission (NLRC) forcompulsory arbitration.4

On April 29, 1985, Labor Arbiter Emilio V. Peñalosa rendered a decision5 ordering petitioner topay private respondent separation pay equivalent to one-half (1/2) month pay for every year ofservice.

On December 23, 1985, the Research and Information Unit of the NLRC submitted itscomputation of the separation pay due to private respondent, which amounted to a total ofP207,365.33.

On January 4, 1988, private respondent filed with the Labor Arbiter a motion for execution of thedecision 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 thecomputation 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 1988which is equivalent to 10% of the total money judgment. In June 1988, P41,473.06 will bepaid 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) Counselfor Complainant for Respondent6

23

Thus, Labor Arbiter Jose de Vera directed petitioner to pay the agreed amount of P20,736.53representing 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 withMotion,7 alleging that petitioner was not yet in a position to comply with the directive of LaborArbiter de Vera for the reason that it was still under Rehabilitation Receivership by virtue of theorder of the Securities and Exchange Commission (SEC) dated August 1, 1984. Thus, it soughtdeferment of such payment until the SEC will issue an order formally approving the rehabilitationof 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 complainantstheir separation pay, the Labor Arbiter granted the motion for execution of private respondent inan order dated July 18, 1988.

On August 5, 1988, petitioner filed a motion for reconsideration of the order granting the motionfor execution, contesting the amount computed by the Research Information Unit of the NationalLabor 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 thecomputation 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 wouldbe satisfied. Further, when the complainants agreed to accept payment of their separationpay on scheduled basis, the first payment of P20,736.53 scheduled in May 1988, whichwas agreed upon by the parties, said respondent failed to comply and instead, it filed aManifestation with Motion praying for the deferment of execution until the Securities andExchange Commission issues an Order formally approving the rehabilitation of therespondent.

Besides, the respondent Motion for Reconsideration is filed out of time considering that asper bailiffs return, respondent received the questioned Order on July 26, 1988 while itsMotion was filed only on August 5, 1988, or more than ten (10) days from receipt of theOrder.8

On September 26, 1988, petitioner filed with the Labor Arbiter a Motion to SuspendExecution,9 citing as reason therefor the order issued by the Securities and ExchangeCommission which states:

All actions for claims against the corporation before any court, tribunal or body aresuspended accordingly.10

On October 27, 1988, petitioner appealed the Labor Arbiter's order11 for the issuance of a writ ofexecution to the NLRC. In a decision dated October 13, 1993, the NLRC dismissed the appeal. OnFebruary 2, 1994, the NLRC likewise denied the petitioner's motion for reconsideration.

Hence, this petition.12

Petitioner contends that public respondent should have denied the order of the Labor Arbiter forthe immediate payment of separation pay in favor of private respondent. Petitioner insists that astay of execution of monetary award is justified in this case because of the order of the Securitiesand 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 coursewithout prejudice to the subsequent receipt of separation pay by private respondent inaccordance with the preference and concurrence of credits under the Civil Code, the InsolvencyLaw and Article110 of the Labor Code.

Respondent National Labor Relations Commission, on the other hand, contends that petitioner isbound by its agreement with private respondent as to the computation of separation pay to bepaid. The NLRC emphasizes that the order of execution made by the Labor Arbiter had reachedfinality and stresses that petitioner's succeeding motions had been filed out of time.14

24

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

Thus, petitioner pointed out that the SEC's order suspending all claims against it pending beforeany 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 powersfree from any judicial or extra-judicial interference that might unduly hinder the rescue of thedistressed company.18 Since receivership proceedings have ceased and petitioner's rehabilitationreceiver and liquidator, Ledesma Saludo & Associates, has been given the imprimatur to proceedwith corporate liquidation, the cited order of the Securities and Exchange Commission has beenrendered functus officio. Thus, there is no legal impediment for the execution of the decision ofthe Labor Arbiter for the payment of separation pay.

Considering that petitioner's monetary obligation to private respondent is long overdue and thatpetitioner has signified its willingness to comply with such obligation by entering into anagreement with private respondent as to the amount and manner of payment, petitioner can notdelay satisfaction of private respondent's claim. However, due to events subsequent to the filingof this petition, private respondent must present its claim with the rehabilitation receiver andliquidator of petitioner, subject to the rules on preference of credits.

WHEREFORE, the Court hereby DISMISSES the petition and direct private respondent to file itsclaim with the rehabilitation receiver/liquidator of petitioner in SEC EB No. 81 entitled "In theMatter of the Liquidation of Alemar's Sibal & Sons" pending before the Securities and ExchangeCommission.1âwphi1.nêt

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.

DAVIDE, JR., J.:p

The novel issue that confronts us in this case is whether the Fifth Division of the NationalLabor Relations Commission (NLRC) can validly defeat a final judgment of the LaborArbiter in favor of the complainant in a labor case by: (a) entertaining a petition forinjunction and damages, and an appeal from the Labor Arbiter's denial of a claim for set-off based on an alleged indebtedness of the laborer and order of execution of the finaljudgment; and, (b) thereafter, by receiving evidence and adjudging recovery on suchindebtedness and authorizing it to offset the Labor Arbiter's final award.

The petitioner takes the negative view. In its Manifestation and Motion in Lieu ofComment, 1 the Office of the Solicitor General joins her in her plea, hence we requiredthe NLRC to file its own comment.

We resolved to give due course to the petition after the filing by the NLRC and theprivate respondent of their separate comments.

Petitioner Natividad Pondoc was the legitimate wife of Andres Pondoc. Atter her death on5 December 1994, she was substituted by Hipolito Pondoc, her only legitimate son. 2

25

The Office of the Solicitor General summarized the factual antecedents of this case in itsManifestation and Motion in Lieu of Comment:

Private respondent Eulalio Pondoc is the owner-proprietor of MelleonorGeneral Merchandise and Hardware Supply located at Poblacion, Sindangan,Zamboanga del Norte. Respondent is engaged, among others, in thebusiness of buying and selling copra, rice, corn, "binangkol," junk iron andempty 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 alaborer from October 1990 up to December 1991, receiving a wage rate ofP20.00 per day. He was required to work twelve (12) hours a day from 7:00AM to 8:00 PM, Monday to Sunday. Despite working on his rest days andholidays, 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 ArbitrationBranch 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, theexistence of [an] employer-employee relationship between them. He furtheraverred that Melleonor General Merchandise and Hardware Supply is afictitious establishment (Records, pp. 64-68).

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

WHEREFORE, judgment is hereby rendered: (a) ordering respondent EulalioPondoc to pay complainant the following claims:

(1) Salary differential forreason of underpayment P35,776.00;—————

(2) Regular holiday andpremium pay for holiday services 902.00;————

(3) Premium pay for rest dayservices 3,840.00;————

(4) 13th month pay 3,600.00————

or the total amount of FORTY-FOUR [sic] THOUSAND AND ONE HUNDREDEIGHTEEN 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 Manifestationbefore the Labor Arbiter praying that his liabilities be set-off againstpetitioner's alleged indebtedness to him (Records, pp. 325-327). The Labor

26

Arbiter denied, however, the compensation, and, instead, issued a writ ofexecution as prayed for by petitioner (Records, p. 328).

Before the execution order could be implemented, however, privaterespondent was able to obtain a restraining order from the NLRC, where hefiled a Petition for "Injunction and Damages," docketed as NLRC Case No.ICM-000065.

On February 28, 1994, public respondent NLRC allowed compensationbetween petitioner's monetary award and her alleged indebtedness toprivate respondent. It disposed:

WHEREFORE, the appealed order is hereby vacated and setaside. A new one is entered declaring the setting-off ofcomplainant's indebtedness which allegedly amounted toP41,051.35 against the complainant's monetary award in theamount of P44,118.00. The additional amount of P5,000.00 whichcomplainant allegedly got from respondent on 10 July 1993 couldnot be credited in view of appellant's failure to submit evidenceto prove that complainant was really paid P5,000.00.

Accordingly, respondent Eulalio Pondoc is hereby directed to paycomplainant Natividad Pondoc the amount of P3,066.65.

The Temporary restraining order issued herein is hereby madepermanent.

SO ORDERED (Annex "D" of Petition). 3

Her motion for reconsideration of the judgment having been denied by the NLRC, thepetitioner instituted this special civil action for certiorari under Rule 65 of the Rules ofCourt wherein she prays this Court annul the challenged decision of the NLRC, FifthDivision (Cagayan de Oro City), in NLRC Case No. IC No. M-000065, and direct theenforcement of the writ of execution in NLRC Case No. SRAB-09-05-10102-92, on theground that the NLRC, Fifth Division, acted without or in excess of jurisdiction or withgrave abuse of discretion when it proceeded to determine the alleged indebtedness ofthe petitioner and set-off the same against the liabilities of the private respondent. Thepetitioner 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 defeatthe judgment by asserting an alleged indebtedness of Andres Pondoc as a set-off, aclaim not pleaded before the Labor Arbiter at any time before judgment, hence deemedwaived. Moreover the indebtedness "did not evolve out [sic] employer-employeerelationship, hence, purely civil in aspect."

The Office of the Solicitor General agreed with the petitioner and stressed further thatthe asserted indebtedness was never proven to have arisen out of or in connection withthe employer-employee relationship between the private respondent and the late AndresPondoc, or to have any causal connection thereto. Accordingly, both the Labor Arbiterand the NLRC did not have jurisdiction over the private respondent's 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 respondent'sseparate 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 ofthe judgment in NLRC Case No. SRAB-09-05-10102-92 where, in fact, a writ of execution

27

had been issued. Article 218(e) of the Labor Code does not provide blanket authority tothe NLRC or any of its divisions to issue writs of injunction, while Rule XI of the New Rulesof Procedure of the NLRC makes injunction only an ancillary remedy in ordinary labordisputes 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:

Sec. 1. Injunction in Ordinary Labor Disputed. — A preliminary injunction or arestraining order may be granted by the Commission through its divisionspursuant 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 inthe petition that the acts complained of, involving or arising from any labordispute before the Commission, which, if not restrained or performedforthwith, may cause grave or irreparable damage to any party or renderineffectual any decision in favor of such party.

xxx xxx xxx

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

Hence, a petition or motion for preliminary injunction should have been filed in theappeal interposed by the private respondent, i.e., in NLRC Case No. SRAB-09-05-10102-92. This matter, however, became academic when the NLRC consolidatedthe two cases as shown by the captions in its challenged decision of 28 February1994 and resolution of 6 May 1994.

Secondly, the appeal of the private respondent in NLRC Case No. SRAB-09-05-10102-92was not from the decision therein, but from the order of the Labor Arbiter denying theset-off insisted upon by the private respondent and directing the execution of thejudgment. Therefore, the private respondent admitted the final and executory characterof the judgment.

The Labor Arbiter, in denying the set-off, reasoned "[i]t could have been considered if itwas presented before the decision of this case." 4 While this is correct, there are strongerreasons why the set-off should, indeed, be denied. As correctly contended by the Officeof the Solicitor General, there is a complete want of evidence that the indebtednessasserted by the private respondent against Andres Pondoc arose out of or was incurred inconnection with the employer-employee relationship between them. The Labor Arbiterdid not then have jurisdiction over the claim as under paragraph (a) of Article 217 of theLabor Code, Labor Arbiters have exclusive and original jurisdiction only in the followingcases:

1. Unfair labor practice cases;2. Termination disputes;3. If accompanied with a claim for reinstatement, those casesthat workers may file involving wages, rates of pay, hours ofwork and other terms and conditions of employment;4. Claim for actual, moral, exemplary and other forms ofdamages arising from employer-employee relations;5. Cases arising from any violation of Article 264 of this Code,including questions involving the legality of strikes andlockouts; and6. Except claims for Employees Compensation, SocialSecurity, Medicare and maternity benefits, all other claims,arising from employer-employee relations, including thoseof persons in domestic or household service, involving anamount exceeding five thousand pesos (P5,000.00)

28

regardless of whether accompanies with a claim forreinstatement.

On the other hand, under paragraph (b) thereof, the NLRC has exclusive appellatejurisdiction over all cases decided by the Labor Arbiters. This simply means thatthe NLRC does not have original jurisdiction over the cases enumerated inparagraph (a) and that if a claim does not fall within the exclusive originaljurisdiction of the Labor Arbiter, the NLRC cannot have appellate jurisdictionthereon.

The conclusion then is inevitable that the NLRC was without jurisdiction, either original orappellate, 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 withinthe exclusive original jurisdiction of the Labor Arbiter, it was deemed waived for nothaving been pleaded as an affirmative defense or barred for not having been set up as acounterclaim before the Labor Arbiter at any appropriate time prior to the rendition ofthe decision in NLRC Case No. SRAB-09-05-10102-92. Under the Rules of Court, which isapplicable in a suppletory character in labor cases before the Labor Arbiters or the NLRCpursuant to Section 3, Rule I of the New Rules of Procedure of the NLRC, defenses whichare not raised either in a motion to dismiss or in the answer are deemed waived 5 andcounterclaims not set up in the answer are barred. 6 Set-off or compensation is one ofthe modes of extinguishing obligations 7 and extinguishment is an affirmative defenseand a ground for a motion to dismiss.8

We do not then hesitate to rule that the NLRC acted without jurisdiction or with graveabuse of discretion in entertaining an independent action for injunction and damages(NLRC IC No. M-000065), in receiving evidence and rendering judgment on the allegedindebtedness of Andres Pondoc, and in ordering such judgment to offset the final awardof the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 28 February1994 and resolution of 6 May 1994 of the National Labor Relations Commission in NLRCCase No. IC No. M-000065 and NLRC Case No. SRAB-09-05-10102-92 are ANNULLED andSET ASIDE. The judgment of the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92should forthwith be enforced without any further delay, the award therein bearinginterest at the rate of twelve per centum (12%) per annum from the finality of suchjudgment until it shall have been fully paid.

Costs against the private respondent.

G.R. No. 126625 September 18, 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, JUANITO SALUD, ADOR RIMPO, FELIPE ORAEZ, JULIETO TEJADA, TEOTIMO LACIO, ONOFRE QUIZON, RUDY ALVAREZ, CRESENCIO FLORES, ALFREDO PERMACIO, CRESENCIO ALVIAR, HERNANI SURILLA, DIOSDADO SOLON, CENON ALBURO, ZACARIAS ORTIZ, EUSEBIO BUSTILLO, GREGORIO BAGO, JERRY VARGAS, EDUARDO BUENO, PASCUAL HUDAYA, ROGELIO NIETES, and REYNALDO NIETES, respondents.

PUNO, J.:

29

In this petition for certiorari, petitioner Kanlaon Construction Enterprises Co., Inc. seeks to annul thedecision of respondent National Labor Relations Commission, Fifth Division and remand the cases to theArbitration Branch for a retrial on the merits.

Petitioner is a domestic corporation engaged in the construction business nationwide with principal officeat No. 11 Yakan St., La Vista Subdivision, Quezon City. In 1988, petitioner was contracted by the NationalSteel Corporation to construct residential houses for its plant employees in Steeltown, Sta. Elena, IliganCity. Private respondents were hired by petitioner as laborers in the project and worked under thesupervision of Engineers Paulino Estacio and Mario Dulatre. In 1989, the project neared its completion andpetitioner started terminating the services of private respondents and its other employees.

In 1990, private respondents filed separate complaints against petitioner before Sub-Regional ArbitrationBranch XII, Iligan City. Numbering forty-one (41) in all, they claimed that petitioner paid them wages belowthe minimum and sought payment of their salary differentials and thirteenth-month pay. Engineers Estacioand Dulatre were named co-respondents.

Some of the cases were assigned to Labor Arbiter Guardson A. Siao while the others were assigned toLabor Arbiter Nicodemus G. Palangan. Summonses and notices of preliminary conference were issued andserved on the two engineers and petitioner through Engineer Estacio. The preliminary conferences beforethe labor arbiters were attended by Engineers Estacio and Dulatre and private respondents. At theconference of June 11, 1990 before Arbiter Siao, Engineer Estacio admitted petitioner's liability to privaterespondents and agreed to pay their wage differentials and thirteenth-month pay on June 19, 1990. As aresult of this agreement, Engineer Estacio allegedly waived petitioner's right to file its positionpaper. 1 Private respondents declared that they, too, were dispensing with their position papers and wereadopting their complaints as their position paper. 2

On June 19, 1990, Engineer Estacio appeared but requested for another week to settle the claims. LaborArbiter Siao denied this request. On June 21, 1990, Arbiter Siao issued an order granting the complaint anddirecting petitioner to pay private respondents' claims. Arbiter Siao held:

xxx xxx xxx

Considering the length of time that has elapsed since these cases were filed, and what thecomplainants might think as to how this branch operates and/or conducts its proceedings as theyare now restless, this Arbiter has no other alternative or recourse but to order the respondent topay the claims of the complainants, subject of course to the computation of the Fiscal Examiner II ofthis Branch pursuant to the oral manifestation of respondent. The Supreme Court ruled: "Contractsthough 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 factseither 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 ofthe above-named complainants representing their wage differentials within ten (10) days fromreceipt of this order.

The Fiscal Examiner II of this Branch is likewise hereby ordered to compute the individual claims ofthe 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. respondentthru their representative manifested that they were willing to pay the claims of the complainantsand 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, thelatter failed to appear without any valid reason.

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

WHEREFORE premises considered, the above-entitled cases are hereby ordered Closed andTerminated, however, the respondent is hereby ordered to pay the complainants their differentialpay and 13th-month pay within a period of ten (10) days from receipt hereof based on theemployment record on file with the respondent.

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SO ORDERED. 4

Petitioner appealed to respondent National Labor Relations Commission. It alleged that it was denied dueprocess 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 renderedwithout jurisdiction and in grave abuse of discretion. Petitioner claims that:

I

THE QUESTIONED DECISION RENDERED BY THE HONORABLE COMMISSION IS A NULLITY, IT HAVINGBEEN ISSUED WITHOUT JURISDICTION;

II

PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETIONIN ARBITRARILY, CAPRICIOUSLY AND WHIMSICALLY MAKING THE FOLLOWING CONCLUSIONS BASEDNOT ON FACTS AND BUT ON SPECULATION, SURMISE AND EVIDENCE CONJECTURE:

A. Petitioner was deprived of the constitutional right to due process of law when itwas adjudged by the NLRC liable without trial on the merits and without itsknowledge;

B. The NLRC erroneously, patently and unreasonably interpreted the principle thatthe 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 inestoppel 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 forthe following reasons: (1) there was no valid service of summons; (2) Engineers Estacio and Dulatre andAtty. Abundiente had no authority to appear and represent petitioner at the hearings before the arbitersand on appeal to respondent Commission; (3) the decisions of the arbiters and respondent Commission arebased on unsubstantiated and self-serving evidence and were rendered in violation of petitioner's right todue process.

Service of summons in cases filed before the labor arbiters is governed by Sections 4 and 5 of Rule IV ofthe New Rules of Procedure of the NLRC. They provide:

Sec. 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 dulyauthorized public officer within three (3) days from receipt thereof or by registered mail; Providedthat where a party is represented by counsel or authorized representative, service shall be made onsuch counsel or authorized representative; provided further that in cases of decision and finalawards, copies thereof shall be served on both the parties and their counsel; provided finally, thatin case where the parties are so numerous, service shall be made on counsel and upon suchnumber of complainants as may be practicable, which shall be considered substantial compliancewith Article 224 (a) of the Labor Code, as amended.

xxx xxx xxx

Sec. 5. Proof and completeness of service. — The return is prima facie proof of the facts indicatedtherein.Service by registered mail is complete upon receipt by the addressee or his agent. . . .

Under the NLRC Rules of Procedure, summons on the respondent shall be served personally or byregistered mail on the party himself. If the party is represented by counsel or any other authorizedrepresentative or agent, summons shall be served on such person.

It has been established that petitioner is a private domestic corporation with principal address in QuezonCity. The complaints against petitioner were filed in Iligan City and summonses therefor served on EngineerEstacio in Iligan City. The question now is whether Engineer Estacio was an agent and authorizedrepresentative of petitioner.

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To determine the scope or meaning of the term "authorized representative" or "agent" of parties on whomsummons 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 bemade 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 andimmediately 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 theconstruction project. 9 According to the Solicitor General and private respondents, Engineer Estacioattended to the project in Iligan City and supervised the work of the employees thereat. As manager, hehad sufficient responsibility and discretion to realize the importance of the legal papers served on him andto relay the same to the president or other responsible officer of petitioner. Summons for petitioner wastherefore validly served on him.

Engineer Estacio's appearance before the labor arbiters and his promise to settle the claims of privaterespondents is another matter.

The general rule is that only lawyers are allowed to appear before the labor arbiter and respondentCommission 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:

Sec. 6. Appearances. — . . . .

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 presentwritten proof that he is properly authorized; or

(c) he is a duly-accredited member of any legal aid office duly recognized by the Department ofJustice or the Integrated Bar of the Philippines in cases referred thereto by the latter. . . . 10

A non-lawyer may appear before the labor arbiters and the NLRC only if: (a) he represents himself as aparty 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 Justiceor 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 aidoffice. Their appearance before the labor arbiters in their capacity as parties to the cases was authorizedunder the first exception to the rule. However, their appearance on behalf of petitioner required writtenproof of authorization. It was incumbent upon the arbiters to ascertain this authority especially since bothengineers were named co-respondents in the cases before the arbiters. Absent this authority, whateverstatements 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 cureEngineer Estacio's representation. Atty. Abundiente, in the first place, had no authority to appear beforethe respondent Commission. The appellants' brief he filed was verified by him, not bypetitioner. 12 Moreover, respondent Commission did not delve into the merits of Atty. Abundiente's appealand determine whether Engineer Estacio was duly authorized to make such promise. It dismissed theappeal on the ground that notices were served on petitioner and that the latter was estopped from denyingits promise to pay.

Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente were authorized to appear asrepresentatives of petitioner, they could bind the latter only in procedural matters before the arbiters andrespondent Commission. Petitioner's liability arose from Engineer Estacio's alleged promise to pay. Apromise to pay amounts to an offer to compromise and requires a special power of attorney or the expressconsent of petitioner. The authority to compromise cannot be lightly presumed and should be dulyestablished by evidence.13 This is explicit from Section 7 of Rule III of the NLRC Rules of Procedure, viz:

Sec. 7. Authority to bind party. — Attorneys and other representatives of parties shall haveauthority to bind their clients in all matters of procedure; but they cannot, without a special powerof attorney or express consent, enter into a compromise agreement with the opposing party in fullor partial discharge of a client's claim.

The promise to pay allegedly made by Engineer Estacio was made at the preliminary conference andconstituted an offer to settle the case amicably. The promise to pay could not be presumed to be a singleunilateral act, contrary to the claim of the Solicitor General. 14 A defendant's promise to pay and settle the

32

plaintiff's claims ordinarily requires a reciprocal obligation from the plaintiff to withdraw the complaint anddischarge 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 evidenceagainst the offeror. 16 If this rule were otherwise, no attempt to settle litigation could safely bemade. 17 Settlement of disputes by way of compromise is an accepted and desirable practice in courts oflaw and administrative tribunals. 18 In fact, the Labor Code mandates the labor arbiter to exert all efforts toenable the parties to arrive at an amicable settlement of the dispute within his jurisdiction on or before thefirst hearing. 19

Clearly, respondent Commission gravely abused its discretion in affirming the decisions of the laborarbiters which were not only based on unauthorized representations, but were also made in violation ofpetitioner's right to due process.

Section 3 of Rule V of the NLRC Rules of Procedure provides:

Sec. 3. Submission of Position Papers/Memorandum. — Should the parties fail to agree upon anamicable settlement, in whole or in part, during the conferences, the Labor Arbiter shall issue anorder stating therein the matters taken up and agreed upon during the conferences and directingthe parties to simultaneously file their respective verified position papers

xxx xxx xxx

After petitioner's alleged representative failed to pay the workers' claims as promised, Labor Arbiters Siaoand Palangan did not order the parties to file their respective position papers. The arbiters forthwithrendered a decision on the merits without at least requiring private respondents to substantiate theircomplaints. The parties may have earlier waived their right to file position papers but petitioner's waiverwas made by Engineer Estacio on the premise that petitioner shall have paid and settled the claims ofprivate respondents at the scheduled conference. Since petitioner reneged on its "promise," there was afailure to settle the case amicably. This should have prompted the arbiters to order the parties to file theirposition 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 objectivelyand without regard to technicalities of law or procedure, all in the interest of due process." The rule thatrespondent Commission and the Labor Arbiters are not bound by technical rules of evidence and procedureshould not be interpreted so as to dispense with the fundamental and essential right of due process. 20 Andthis right is satisfied, at the very least, 'when the parties are given the opportunity to submit positionpapers. 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 arbitrarilydisregard specific provisions of the Rules which are precisely intended to assist the parties in obtaining thejust, expeditious and inexpensive settlement of labor disputes. 22

IN VIEW WHEREOF, the petition for certiorari is granted. The decision of the National Labor RelationsCommission, Fifth Division, is annulled and set aside and the case is remanded to the Regional ArbitrationBranch, Iligan City for further proceedings.

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.

33

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 inaffairs of the heart where the rules are permissibly inconstant. In the case before us, CorazonPeriquet, the herein petitioner, exercised this privilege in connection with her work, where the rulesare not as fickle.

The petitioner was dismissed as toll collector by the Construction Development Corporation of thePhilippines, private respondent herein, for willful breach of trust and unauthorized possession ofaccountable toll tickets allegedly found in her purse during a surprise inspection. Claiming she hadbeen "framed," she filed a complaint for illegal dismissal and was sustained by the labor arbiter, whoordered her reinstatement within ten days "without loss of seniority rights and other privileges andwith fun back wages to be computed from the date of her actual dismissal up to date of her actualreinstatement." 1 On appeal, this order was affirmed in toto by public respondent NLRC on August 29,1980. 2

On March 11, 1989, almost nine years later, the petitioner filed a motion for the issuance of a writ ofexecution of the decision. The motion was granted by the executive labor arbiter in an order datedJune 26, 1989, which required payment to the petitioner of the sum of P205,207.42 "by way ofimplementing the balance of the judgment amount" due from the private respondent. 3 Pursuantthereto, the said amount was garnished by the NLRC sheriff on July 12, 1989. 4 On September 11,1989, however, the NLRC sustained 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 beenfiled beyond the five-year period prescribed by both the Rules of Court and the Labor Code. It alsorejected the petitioner's claim that she had not been reinstated on time and ruled as valid the twoquitclaims she had signed waiving her right to reinstatement and acknowledging settlement in full ofher back wages and other benefits. The petitioner contends that this decision is tainted with graveabuse 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 executedon motion within five (5) years from the date of its entry or from the date it becomesfinal and executory. After the lapse of such time, and before it is barred by the statute oflimitations, 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 andEmployment 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 interestedparty, issue a writ of execution on a judgment within five (5) years from the date itbecomes final and executory, requiring a sheriff or a duly deputized officer to execute orenforce a final decision, order or award. ...

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

Where judgments are for money only and wholly unpaid, and execution has beenpreviously withheld in the interest of the judgment debtor, which is in financialdifficulties, the court has no discretion to deny motions for leave to issue executionmore 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 authorityto the contrary, the general rule is that there should not be included the time whenexecution 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 thedeath of a party, or otherwise. Any interruption or delay occasioned by the debtor willextend the time within which the writ may be issued without scire facias.

xxx xxx xxx

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

Periquet insists it was the private respondent that delayed and prevented the execution of thejudgment 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 itsaffirmance by the NLRC on August 29, 1980, but there is no evidence that she demanded herreinstatement or that she complained when her demand was rejected. What appears is that sheentered into a compromise agreement with CDCP where she waived her right to reinstatement andreceived from the CDCP the sum of P14,000.00 representing her back wages from the date of herdismissal to the date of the agreement. 7

Dismissing the compromise agreement, the petitioner now claims she was actually reinstated only onMarch 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 severalsignificant developments that transpired during and after this period that seriously cast doubt on hercandor and bona fides.

After accepting the sum of P14,000.00 from the private respondent and waiving her right toreinstatement in the compromise agreement, the petitioner secured employment as kitchendispatcher at the Tito Rey Restaurant, where she worked from October 1982 to March 1987.According to the certification issued by that business, 8 she received a monthly compensation ofP1,904.00, 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 onMarch 16,1987, given the position of xerox machine operator with a basic salary of P1,030.00 plusP461.33 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 herby the decision dated August 29, 1980, be recognized because the waiver she had signed wasinvalid. 10

On September 19, 1988, the Corporate Legal Counsel of the private respondent (now PhilippineNational Construction Corporation) recommended the payment to the petitioner of the sum ofP9,544.00, representing the balance of her back pay for three years at P654. 00 per month (minus theP14,000.00 earlier paid). 11

On November 10, 1988, the petitioner accepted this additional amount and signed another Quitclaimand 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 FOURPESOS ONLY (P9,544.00) Philippine currency, representing the unpaid balance of the back wages dueme 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 inthe aforesaid case. Likewise, I hereby manifest that I had voluntarily waived reinstatement to myformer position as TOLL TELLER and in lieu thereof, I sought and am satisfied with my presentposition as XEROX MACHINE OPERATOR in the Central Office.

Finally, I hereby certify that delay in my reinstatement, after finality of the Decision dated 10 May1979 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 byway of unpaid wages, separation pay, differential pay, company, statutory and other benefits orotherwise as may be due me in connection with the above-entitled case. I hereby state further that Ihave no more claims or right of action of whatever nature, whether past, present, future or contingentagainst 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 atMandaluyong, Metro Manila. (Emphasis supplied.) 12

35

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

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

As per your recommendation contained therein in said memo, I am now occupying theposition of xerox machine operator and is (sic) presently receiving a monthly salary ofP2,014.00.

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

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 doesnot know her own mind. First she signed a waiver and then she rejected it; then she signed anotherwaiver 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, afteraccepting additional payment, she again acknowledged fun settlement of the same judgment. Butnow she is singing a different tune.

In her petition she is now disowning both acknowledgments and claiming that the earlier paymentsboth of which she had accepted as sufficient, are insufficient. They were valid before but they are notvalid now. She also claimed she was harassed and cheated by the past management of the CDCP andsought the help of the new management of the PNCC under its "dynamic leadership." But now she isdenouncing 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 voluntarilyentered into and represents a reasonable settlement, it is binding on the parties and may not later bedisowned simply because of a change of mind. It is only where there is clear proof that the waiverwas wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionableon its face, that the law will step in to annul the questionable transaction. But where it is shown thatthe person making the waiver did so voluntarily, with full understanding of what he was doing, andthe consideration for the quitclaim is credible and reasonable, the transaction must be recognized asa 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 shereceived? It must be remembered that on that date the decision could still have been elevatedon certiorari before this Court and there was still the possibility of its reversal. The petitionerobviously decided that a bird in hand was worth two on the wing and so opted for the compromiseagreement. The amount she was then waiving, it is worth noting, had not yet come up to theexorbitant 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 shouldbe 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. 14 Hence, thepetitioner's contention that she should be paid from 1978 to 1987 must be rejected, and even withoutregard to the fact (that would otherwise have been counted against her) that she was actuallyemployed during most of that period.

Finally, the petitioner's invocation of Article 223 of the Labor Code to question the failure of theprivate respondent to file a supersedeas bond is not well-taken. As the Solicitor General correctlypoints out, the bond is required only when there is an appeal from the decision with a monetaryaward, 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 untenableand inconsistent claims like the ones raised in this petition that have only needlessly taken up thevaluable time of this Court, the Solicitor General, the Government Corporate Counsel, and therespondents. Lawyers are not merely hired employees who must unquestioningly do the bidding ofthe client, however unreasonable this may be when tested by their own expert appreciation of thepertinent facts and the applicable law and jurisprudence. Counsel must counsel.

36

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

G.R. No. 118746 September 7, 1995

ATTY. WILFREDO TAGANAS, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, MELCHOR ESCULTURA, ET AL., respondents.

R E S O L U T I O N

FRANCISCO, J.:

Petitioner Atty. Wilfredo E. Taganas represented herein private respondents in a labor suitfor illegal dismissal, underpayment and non-payment of wages, thirteenth-month pay,attorney's fees and damages conditioned upon a contingent fee arrangement grantingthe equivalent of fifty percent of the judgment award plus three hundred pesosappearance fee per hearing. 1 The Labor Arbiter ruled in favor of private respondents andordered Ultra Clean Services (Ultra) and the Philippine Tuberculosis Society, Inc., (PTSI)respondents therein, jointly and severally to reinstate herein private respondents withfull 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 ofbasis. 2 This decision was appealed by Ultra and PTSI to the National Labor RelationsCommission (NLRC), and subsequently by PTSI to the Court but to no avail. During theexecution stage of the decision, petitioner moved to enforce his attorney's charginglien. 3 Private respondents, aggrieved for receiving a reduced award due to the attorney'scharging lien, contested the validity of the contingent fee arrangement they have withpetitioner, albeit four of the fourteen private respondents have expressed theirconformity thereto. 4

Finding the arrangement excessive, the Labor Arbiter ordered the reduction ofpetitioner's contingent fee from fifty percent of the judgment award to ten percent,except for the four private respondents who earlier expressed theirconformity. 5 Petitioner appealed to NLRC which affirmed with modification the LaborArbiter's order by ruling that the ten percent contingent fee should apply also to the fourrespondents even if they earlier agreed to pay a higher percentage. 6Petitioner's motionfor reconsideration was denied, hence this petition for certiorari.

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

A contingent fee arrangement is an agreement laid down in an express contract betweena lawyer and a client in which the lawyer's professional fee, usually a fixed percentage ofwhat may be recovered in the action is made to depend upon the success of thelitigation. 7 This arrangement is valid in this jurisdiction. 8 It is, however, under thesupervision and scrutiny of the court to protect clients from unjust charges. 9 Section 13of the Canons of Professional Ethics states that "[a] contract for a contingent fee, wheresanctioned by law, should be reasonable under all the circumstances of the caseincluding the risk and uncertainty of the compensation, but should always be subject tothe supervision of a court, as to its reasonableness". Likewise, Rule 138, Section 24 ofthe Rules of Court provides:

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Sec. 24. Compensation of attorneys; agreement as to fees. — An attorneyshall be entitled to have and recover from his client no more than areasonable compensation for his services, with a view to the importance ofthe subject-matter of the controversy, the extent of the services rendered,and the professional standing of the attorney. No court shall be bound by theopinion of attorneys as expert witnesses as to the proper compensation butmay disregard such testimony and base its conclusion on its ownprofessional knowledge. A written contract for services shall control theamount to be paid therefor unless found by the court to be unconscionableor unreasonable.

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

We agree with the NLRC's assessment that fifty percent of the judgment award asattorney's fees is excessive and unreasonable. The financial capacity and economicstatus of the client have to be taken into account in fixing the reasonableness of thefee. 11 Noting that petitioner's clients were lowly janitors who receive miniscule salariesand that they were precisely represented by petitioner in the labor dispute forreinstatement and claim for backwages, wage differentials, emergency cost of livingallowance, thirteenth-month pay and attorney's fees to acquire what they have not beenreceiving under the law and to alleviate their living condition, the reduction ofpetitioner's contingent fee is proper. Labor cases, it should be stressed, call forcompassionate justice.

Furthermore, petitioner's contingent fee falls within the purview of Article 111 of theLabor 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 laborsuit where he represented private respondents asked for the claim and recovery ofwages. In fact, We are not even precluded from fixing a lower amount than the tenpercent ceiling prescribed by the article when circumstances warrant it. 12 Nonetheless,considering the circumstances and the able handling of the case, petitioner's fee neednot be further reduced.

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

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

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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.

GONZAGA-REYES, J.:

On 17 October 1994, private respondent was hired by petitioners to work as a radio officer on board itsvessel, the M/V T.A. VOYAGER. Sometime in June, 1995, while the vessel was docked at the port of NewZealand, private respondent was taken ill. His worsening health condition was brought by his crewmates tothe attention of the master of the vessel. However, instead of disembarking private respondent so that hemay receive immediate medical attention at a hospital in New Zealand, the master of he vessel proceededto 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 forseveral hours until a vacant slot in the Manila pier was available for the vessel to dock. Private respondentwas confined in the Manila Doctors Hospital, wherein he was treated by a team of medical specialists from24 June 1995 to 26 July 1995.1âwphi1.nêt

After private respondent was discharged from the hospital, he demanded from petitioners the payment ofhis disability benefits and the unpaid balance of his sickness wages, pursuant to the Standard EmploymentContract 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 respondentthat, aside from the sickness wages that he had already received, no other compensation or benefit wasforthcoming.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 arbiterrendered 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 complainant's discharge orrelease from employment as Radio Operator. What complainant is pursuing is limited tocompensation 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 xxx xxx

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

xxx xxx xxx

c. The employer shall pay the seaman his basic wages from the time he leaves thevessel for medical treatment. After discharge from the vessel, the seaman is entitledto one hundred percent (100%) of his basic wages until he is declared fit to work orthe degree of permanent disability has been assessed by the company-designatedphysician, 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-employmentmedical examination by the company-designated physician within three working daysupon his return, except when he is physically incapacitated to do so, in which casethe written notice to the agency within the same period is deemed as compliance x xx.

"5. In case of permanent total or partial disability of the seamen [sic] [during] the term ofemployment caused by either injury or illness, the seamen [sic] shall be compensated in

39

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 ratesand the rules of compensation applicable at the time of [sic] the illness or disease wascontracted."

The aforecited provisions of the POEA Standards [sic] Employment Contract is clear andunmistakable that its literal meaning should be preserved.

Thus, the only question at which the liability of respondents is anchored is whether complainantwas really fit to work in his position as radio operator. If this is so, it could mean that he is notentitled to disability compensation which respondents vigorously disputed, citing in support thecertification made by Dra. Victoria Forendo [sic] Cayabyab, allegedly "the officially accredited anddesignated physician of respondents, which is likewise, accredited with the Philippine OverseasEmployment Administration" where it is stated that "Nothing [sic] his job description as a radiooperator, Mr. De Lara may be allowed to go back to work." (Annex D & E). Complainant on the otherhand disputes respondent's above posture contending that the more persuasive and authenticevidence for purposes of deciding his fitness or lack of fitness to work is the certificate issued byMs. Naneth [sic] Domingo-Reyes, MD, FPMA where it appears that after submitting himself toanother medical examination by his attending physicians at the Manila Doctors Hospital onDecember 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 previouswork due to mental state." (Annex "C", complainant's reply to respondent's position paper).

We have gone into a judicious study and analysis of the arguments and exhibits particularly theones relied upon by the parties and find that of the complainant worthy of consideration. Lookingclosely at Annexes "D" and "E" of respondents' position paper, there is hardly any clear affirmationthat complainant was fully fit to resume his work as radio operator. Although the document alludedto, declares that complainant may be allowed to go back to work, the tenor of the same seemsuncertain 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 Hospitalwhich in the beginning handled the medical case of complainant and to which respondentsunconditionally referred him and by reason of which six or seven medical especialists [sic] of thehospital 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 complainantis clear and unmistakable and confirm complainant's partial permanent disability and his definiteunfitness to go back to his previous work due to his mental health. Some pronouncements in thisexhibit 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, likeemergency CT scan on the brain and his admission in June 24, 1995 was catastropic, whereas, morecould 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 DoctorsHospital should not be given weight because it is not issued by the hospital or doctor dulyaccredited 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 compensationbenefits to a such [sic] or ailing seamen. We are more persuaded based on the arguments of thecomplainant among others, that it is absurd to require an ailing seaman in high seas or in a foreignland to still wait until the ship where he is working land in the country to secure treatment in a dulyaccredited hospital or doctor.

On the basis of the above therefore, and convinced that complainant's "partial permanentdisability" which was contracted in the course or on account of his employment as radio operator inforeign principal's vessel, he is entitled to disability benefit in accordance with the schedule ofbenefits enumerated in Appendix 1 of the Contract, the maximum of which is US $50,000. But sincethe amount prayed for is US$25,000.00 which were presume has a more realistic basis, the same ishereby 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 complainantof P49,546.00. Since complainant's salary as US$870 and a seaman's sick wage entitlement is fixedto a maximum of 120 days, his "sickness wages would rest to a total sum of US$3,480 or its pesoequivalent. On this, complainant has been paid only [P]49,546.00 (US$1,943), thereby leaving forcomplainant a balance of US$1,537. Finally, it is also argued that as regards the balance, the samehas 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 andrelease is invalid. Considering that there is no proof on record that this balance of US$1,537 waspaid, unlike the P49,546.00, the same is granted.

WHEREFORE, premises above-considered, a decision is hereby issued ordering respondent GermanMarine Agencies Inc. to pay complainant the following sums:

40

(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 itspeso equivalent, the claim for damages being hereby dismissed for lack of merit, plus ten (10%)percent attorney's fees.

SO ORDERED.

On 29 July 1998, the NLRC3 affirmed the labor arbiter's decision in toto and declared that the latter'sfindings and conclusions were supported by substantial evidence.4 After its motion for reconsideration wasdenied by the NLRC on 20 May 1999, petitioners repaired to the Court of Appeals.5 The appellate court'sassailed decision was promulgated on 1 December 1999, upholding the decision of the NLRC, with themodification that petitioners were ordered to pay private respondent exemplary damages in the amount ofP50,000.00. The appellate court reasoned out its decision,6 thus –

The basic issue here is: Whether or not petitioner is liable to pay private respondent's claim asawarded by the NLRC, and whether or not there was abuse of discretion on the part of the NLRC inaffirming such decision on appeal? To resolve this issue, this Court took time in looking closely atthe pertinent provision of the Standard Employment Contract Governing the Employment of FilipinoSeafarers 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 BENEFIT

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

"xxx xxx xxx

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

"5. In case of permanent total or partial disability of the seamen during the term of hisemployment caused by either injury or illness the seamen shall be compensated inaccordance 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 ratesand the rules of compensation applicable at the time the illness or disease was contracted.

xxx xxx xxx. . ."

A cursory reading of these applicable contractual provisions and a thorough evaluation of thesupporting evidence presented by both parties, lends strong credence to the contentions andarguments presented by private respondent.

The award of disability compensation has a clear and valid basis in the Standard EmploymentContract 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 notcompany designated is far from the truth. The designation of the Manila Doctors Hospital bypetitioners as the company doctor for private respondent cannot be denied. Their very act ofcommitting private respondent for treatment at the Manila Doctors Hospital under the care of itsphysician is tantamount to company designation. The very act of paying the hospital bills by thepetitioners constitutes their confirmation of such designation. Hence, petitioners cannot resort tothe convenience of denying this fact just to evade their obligation to pay private respondent of hisclaims 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 engaged in the medical treatmentof a sick seaman. There is nothing in the Standard Employment Contract that provides thisaccreditation requirement, and even if there is, this would be absurd and contrary to public policyas its effect will deny and deprive the ailing seaman of his basic right to seek immediate medicalattention from any competent physician. The lack of POEA accreditation of a physician who actuallytreated the ailing seaman does not render the findings of such physician (declaring the seamanpermanently disabled) less authoritative or credible. To our mind, it is the competence of theattending physician, not the POEA accreditation, that determines the true health status of the

41

patient-seaman, which in this instant case, is [sic] the attending physicians from the Manila DoctorsHospital.

As to the award of the balance of wages, this Court is inclined not to disturb the factual findings ofthe NLRC. The failure of the petitioners to present a strong and credible evidence supporting thefact of alleged payment of the balance of sickness justified the award of such claim. The longstanding 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 ofdubious origin as private respondent challenged the petitioners to present the original copy of thequitclaim and the vouchers in a motion demanding from petitioners to produce the original copy ofthose documents purporting to show that he had received the alleged sum of P39,803.30, whichallegedly shows the payment of the balance of his sickness wages. This motion was vehementlyopposed by petitioners. To our mind, such opposition only created more doubts and eroded theveracity and credence of petitioners' documentary evidence.

As to the award of attorney's fees, the same is justified by the fact that private respondent actuallyhired the services of a lawyer to vindicate his right to claim for his disability benefit which is beingarbitrarily 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 hisclaims in court, for which he is presumed to have incurred costs.

With respect to private respondent's claim for damages, this Court finds that the NLRC overlookedthe attendance of negligence on the part of petitioners in their failure to provide immediate medicalattention to private respondent. It further appears that negligence not only exists but wasdeliberately perpetrated by petitioners by its arbitrary refusal to commit the ailing privaterespondent to a hospital in New Zealand or at any nearest port deprived of his right to immediatemedical attention by petitioners, which resulted to the serious deterioration of his health thatcaused his permanent partial disability. Such deprivation of immediate medical attention appearsdeliberate by the clear manifestation from petitioners' own words which states that, "theproposition of the complainant that respondents should have taken the complainant to the nearestport of New Zealand is easier said than done. It is worthy to note that deviation from the route ofthe vessel will definitely result to loss of a fortune in dollars not only to the respondents butlikewise 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. Thiskind of attitude cannot be taken to pass by this Court without appropriate sanction by way ofpayment of exemplary damages, if only to show that the life of a Filipino crew must be accordeddue 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 indollars."

In affirming the decision of the Labor Arbiter, this Court finds that the NLRC never abused itsdiscretion 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, arehereby AFFIRMED, and in addition thereto, petitioners are ordered to pay exemplary damages toprivate 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 February2000. Hence, the present appeal.

Disability Benefits

Petitioners contend that the existence and degree of a seaman's 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 toreturn to work by Dr. Victoria Florendo Cayabyab, the designated physician of petitioners, who is alsoaccredited with the POEA.7

Disagreeing with petitioners' stand, the labor arbiter ruled that, for purposes of determining compensationbenefits under the Standard Employment Contract, an ailing seaman need not have his condition assessedby a doctor or hospital accredited with the POEA. Consequently, the labor arbiter gave more weight to theopinion of the specialists from the Manila Doctors Hospital who treated private respondent and declaredhim as having sustained a partial permanent disability and unfit to go back to his previouswork.8 Meanwhile, the Court of Appeals held that petitioners' act of committing private respondent fortreatment at the Manila Doctors Hospital and of paying his hospital bills therein is tantamount to

42

"company-designation," and therefore, the certificate issued by Dr. Nanette Domingo-Reyes of the ManilaDoctors Hospital describing private respondent as suffering from a partial permanent disability should beconstrued as decisive in the matter of private respondent's entitlement to disability benefits. The appellatecourt also declared that nothing in the Standard Employment Contract requires the company-designatedphysician 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 StandardEmployment Contract Government 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 hiscontract are as follows:

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

b. If the injury or illness requires medical and/or dental treatment in a foreign port, theemployer shall be liable for the full cost of such medical, dental, surgical and hospitaltreatment as well as board and lodging until the seaman is declared fit to work or to berepatriated.

However, if after repatriation the seaman still requires medical attention arising from saidinjury or illness, he shall be so provided at cost to the employer until such time he isdeclared fit or the degree of his disability has been established by the company-designatedphysician.

c. The employer shall pay the seaman his basic wages from the time he leaves the vessel formedical treatment. After discharge from the vessel the seaman is entitled to one hundredpercent (100%) of his basic wages until he is declared fit to work or the degree of permanentdisability has been assessed by the company-designated physician, but in no case shall thisperiod exceed one hundred twenty (120) days. For this purpose, the seaman shall submithimself to a post-employment medical examination by the company-designated physicianwithin three working days upon his return except when he is physically incapacitated to doso, in which case a written notice to the agency within the same period is deemed ascompliance. Failure of the seaman to comply with the mandatory reporting requirement shallresult 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 employmentcaused by either injury or illness the seaman shall be compensated in accordance with the scheduleof benefits enumerated in Appendix 1 of his Contract. Computation of his benefits arising from anillness or disease shall be governed by the rates and the rules of compensation applicable at thetime the illness or disease was contracted.

xxx xxx xxx

Petitioners' contention that the existence and grade of a seaman's disability must be pronounced by aphysician accredited by the POEA does not find any support in the abovecited provision, nor in any otherportion of the Standard Employment Contract. In order to claim disability benefits under the StandardEmployment Contract, it is the "company-designated" physician who must proclaim that the seamansuffered a permanent disability, whether total or partial, due to either injury or illness, during the term ofthe latter's employment. There is no provision requiring accreditation by the POEA of such physician. Infact, aside from their own gratuitous allegations, petitioners are unable to cite a single provision in the saidcontract in support of their assertions or to offer any credible evidence to substantiate their claim. Ifaccreditation of the company-designated physician was contemplated by the POEA, it would haveexpressly provided for such a qualification, by specifically using the term "accreditation" in the StandardEmployment Contract, to denote its intention. For instance, under the Labor Code it is expressly providedthat physicians and hospitals providing medical care to an injured or sick employee covered by the SocialSecurity System or Government Service Insurance System must be accredited by the EmployeesCompensation Commission.10 It is a cardinal rule in the interpretation of contracts that if the terms of acontract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning ofits stipulation shall control.11 There I no ambiguity in the wording of the Standard Employment Contract –the only qualification prescribed for the physician entrusted with the task of assessing the seaman'sdisability is that he be "company-designated." When the language of the contract is explicit, as in the caseat bar, leaving no doubt as to the intention of the drafters thereof, the courts may not read into it anyother intention that would contradict its plain import.12

43

The word "designate" means to specify, to mark out and make known, to identify by name, to indicate, toshow, to distinguish by mark or description, or to set apart for a purpose or duty. 13 The Court agrees withthe appellate court's ruling that petitioners' act of committing private respondent for treatment at theManila Doctors Hospital and paying the hospital bills therein is tantamount to "company-designation." Bysuch unequivocal acts, petitioners clearly set apart and distinguished the Manila Doctors Hospital, togetherwith its team of specialists, as the ones qualified to assess the existence and degree of privaterespondent's disability and thereby resolve the question of the latter's entitlement to disability benefitsunder the Standard Employment Contract.

In addition to their having been effectively designated by petitioners, it was the physicians from the ManilaDoctors 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 surgicaldrainage 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 toprivate respondent enabled the Manila Doctors Hospital specialists to acquire a detailed knowledge andfamiliarity with private respondent's medical condition.14 No doubt such specialized knowledge enabledthese physicians to arrive at a much more accurate appraisal of private respondent's condition, includingthe degree of any disability which he might have sustained, as compared to another physician not privy toprivate respondent's case from the very beginning. Thus, the appellate court was not mistaken in givingmore weight to the certificate issued by Dr. Nanette Domingo-Reyes of the Manila Doctors Hospital datedDecember 4, 1996, than to the one issued by Dr. Victoria Florendo Cayabyab.

On the strength of Dr. Domingo-Reyes's medical certificate which stated that private respondent "can beclassified under partial permanent disability and is not fit to go back to his previous work due to his mentalstate," the labor arbiter awarded $25,000.00 as disability benefits, which award was upheld by the NLRCand the appellate court. Petitioners insist that there is no factual basis for the award of $25,000.00 sincethere is no finding as to the grade of permanent partial disability sustained by private respondent, inaccordance with Appendix 1 of the Standard Employment Contract (Schedule of Disability or ImpedimentFor Injuries Suffered and Diseases or Illness Contracted), and therefore, no means of determining the exactamount 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 ofdisability suffered by the seaman must be ascertained in accordance with Appendix 1 of such contract,which is partially reproduced herein –

Appendix 1SCHEDULE OF DISABILITY OR IMPEDIMENTFOR INJURIES SUFFERED AND OR ILLNESS CONTRACTED

HEAD

Traumatic head injuries that result to:

1. Apperture unfilled with bone not over three (3)inches without braininjury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . Gr. 9

2. Apperture unfilled with bone over three (3) incheswithout brain injury . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . Gr. 3

3. Severe paralysis of both upper or lower extremitiesor one upper and one lowerextremity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gr. 1

4. Moderate paralysis of two (2) extremities producingmoderate difficulty in movements with self careactivities . . . . . . . . . . . Gr. 6

5. Slight paralysis affecting one extremity producingslight difficulty with self-care activities . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . Gr. 10

6. Severe mental disorder or Severe Complex Cerebralfunction disturbance or post – traumaticpsychoneurosis which require regular aid andattendance as to render worker permanently unableto perform any work . . . . . . . . . . . . . . . . . . . . . . . . .. Gr. 1

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7. Moderate mental disorder or moderate brainfunctional disturbance which limits worker to theactivities of daily living with some directed care orattendance . . . . . . . . . . . . . . . . . . . Gr. 6

8. Slight mental disorder or disturbance that requireslittle attendance or aid and which interferes to aslight degree with the working capacity of theclaimant . . . . . . . . . . . . . . . . . . . . Gr. 10

9. Incurable imbecility . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . Gr. 1

Each grade under Appendix 1 has an equivalent disability allowance or benefit expressed in terms of apercentage of the maximum amount of $50,000.00. This is specified in Appendix 1-A of the StandardEmployment Contract –

APPENDIX 1-A

SCHEDULE OF DISABILITY ALLOWANCES

Impediment GraceImpediment

1 Maximum Ratex 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

45

sustains a grade 6 disability. One of the grade 6 head injuries listed in Appendix 1, specifically numberseven (7), is described as a "moderate mental disorder or moderate brain functional disturbance whichlimits worker to the activities of daily living with some directed care or attendance." This coincides with Dr.Domingo-Reyes' diagnosis of private respondent's condition, as follows –

xxx xxx xxx

Work-ups and Management:

Patient was admitted on an emergency bases for drowsiness, behavioral change and on and offfever. 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 largermass 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. Hebecame ambulant on mid-August 1996 but his cerebral functions (cognitive and behavioral) remainimpaired.

This is his 18th month of illness. His admission last June 24, 1995 is considered catastrophic. He nowcan be classified under partial permanent disability and is not fit to go back to his previous workdue 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 disabilitybenefits 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 toprivate respondent, is erroneous and in absolute disregard of their documentary evidence – particularly thethree check vouchers in the total amount of P89,354.80, all issued in 1995 in favor of either privaterespondent or his wife, and the "Sickwages Release & Quitclaim" – which, according to petitioners, takentogether 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 bypetitioners and that private respondent is still entitled to the balance of the sickness wages in the amountof $1,537.00. According to the labor arbiter, petitioners failed to prove that they had paid this amount toprivate respondent, notwithstanding the document entitled "Sickness Release & Quitclaim" introduced bypetitioners in evidence, which was not given credence.17 The NLRC and the Court of Appeals concurredwith the labor arbiter on this issue. The appellate court held that the documentary evidence of petitionerswas 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. Thereason for this is that a quasi-judicial agency like the NLRC has acquired a unique expertise because itsjurisdiction is confined to specific matters.19 Whether or not petitioners actually paid the balance of thesickness wages to private respondent is a factual question. In the absence of proof that the labor arbiter orthe NLRC had gravely abused their discretion, the Court shall deem conclusive and cannot be compelled tooverturn this particular factual finding.20

Damages

We affirm the appellate court's finding that petitioners are guilty of negligence in failing to provideimmediate medical attention to private respondent. It has been sufficiently established that, while the M/VT.A. VOYAGER was docked at the port of New Zealand, private respondent was taken ill, causing him to losehis memory and rendering him incapable of performing his work as radio officer of the vessel. The crewimmediately notified the master of the vessel of private respondent's worsening condition. However,instead of disembarking private respondent so that he may receive immediate medical attention at ahospital in New Zealand or at a nearby port, the master of the vessel proceeded with the voyage, in totaldisregard of the urgency of private respondent'' condition. Private respondent was kept on board withoutany medical attention whatsoever for the entire duration of the trip from New Zealand to the Philippines, a

46

voyage of ten days. To make matters worse, when the vessel finally arrived in Manila, petitioners failed todirectly disembark private respondent for immediate hospitalization. Private respondent was made tosuffer a wait of several more hours until a vacant slot was available at the pier for the vessel to dock. Itwas only upon the insistence of private respondent's relatives that petitioners were compelled todisembark private respondent and finally commit him to a hospital.21 There is no doubt that the failure ofpetitioners to provide private respondent with the necessary medical care caused the rapid deteriorationand inevitable worsening of the latter's condition, which eventually resulted in his sustaining a permanentdisability.1âwphi1.nêt

In light of the foregoing, petitioners are liable for moral damages for the physical suffering and mentalanguish caused to private respondent.22 There is no hard and fast rule in the determination of what wouldbe a fair amount of moral damages, since each case must be governed by its own peculiarcircumstances.23 In the present case, the Court considers the amount of P50,000.00 in moral damages asproper.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 anotherbut to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. Whileexemplary damages cannot be recovered as a matter of right, they need not be proved, although plaintiffmust show that he is entitled to moral, temperate, or compensatory damages before the court mayconsider 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 thecase at bar, the appellate court found that –

… negligence not only exists but was deliberately perpetrated by petitioners by its arbitrary refusalto 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 manifestationfrom petitioners' own words which states that, "the proposition of the complainant that respondentsshould have taken the complainant to the nearest port of New Zealand is easier said than done. Itis worthy to note that deviation from the route of the vessel will definitely result to loss of a fortunein dollars not only to the respondents [petitioners herein] but likewise to the owners of the cargoesbeing shipped by the said vessel."

Petitioners never denied making this statement. Given the prevailing circumstances, the appellate court'saward of P50,000.00 as exemplary damages is adequate, fair, and reasonable.27

Although the labor arbiter awarded attorney's fees, which award was subsequently affirmed by the NLRCand the Court of Appeals, the basis for the same was not discussed in his decision nor borne out by therecords of this case, and should therefore be deleted. There must always be a factual basis for the awardof attorney's fees.28This is consistent with the policy that no premium should be placed on the right tolitigate.29

WHEREFORE, the 1 December 1999 Decision and 11 February 2000 Resolution of the Court of Appeals areAFFIRMED, with the modification that petitioners must also pay private respondent P50,000.00 as moraldamages and the award of attorney's fees is deleted. SO ORDERED.

G.R. No. 152843 July 20, 2006

INTERCONTINENTAL BROADCASTING CORPORATION, petitioner, vs.REYNALDO BENEDICTO, deceased, substituted by his surviving spouse LOURDES V. BENEDICTO, andchildren, namely: REYNALDO V. BENEDICTO, SHIRLEY V. BENEDICTO-TAN, EDGAR V. BENEDICTO andLILIBETH V. BENEDICTO-DE LA VICTORIA,*, respondents.

D E C I S I O N

CORONA, J.:

47

This is a petition for review on certiorari1 of the October 18, 2001 decision2 and March 18, 2002 resolution3 of theCourt of Appeals (CA) in CA-G.R. SP No. 53413 which in turn affirmed the March 5, 1999 decision4 and June 10,1999 resolution5 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 controlledcorporation.6 It is engaged in the business of mass media communications including, among others, theoperation of television Channel 13 (IBC 13).7

In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio, the general manager8 then of petitioner, asmarketing manager with a monthly compensation of P20,000 plus 1% commission from collections of alladvertising contracts consummated.9

In a letter dated October 11, 1994 signed by Tomas Gomez III, at that time the president of petitioner, Benedictowas terminated from his position.10

On December 3, 1996, Benedicto filed a complaint with the NLRC for illegal dismissal and damages. He allegedthat after his appointment, he was able to increase the televiewing, listening and audience ratings of petitionerwhich resulted in its improved competitive financial strength.11 Specifically, in 1994, he claimed that hesuccessfully initiated, pursued and consummated an advertising contract with VTV Corporation for a period offive years involving the amount of P600 million.12 However, on October 11, 1994, he was terminated from hisposition without just or authorized cause.

Labor arbiter Jovencio LL. Mayor, Jr.,13 in a decision dated August 17, 1998, ruled in favor of Benedicto findingthat he was indeed illegally dismissed. Consequently, Mayor: (1) ordered his reinstatement with full backwagesfrom the time of his dismissal up to his actual reinstatement (amounting to P920,000 at the time of thepromulgation of the decision); (2) directed petitioner to pay his 1% commission on the contract with VTVCorporation (P645,000), attorney’s fees in the amount of 10% of the total award (P156,500) and (3) dismissedthe claim for moral and exemplary damages.14

Finding the award excessive, petitioner, on October 15, 1998, filed with the NLRC its memorandum on appealwith motion to re-compute the award on which the appeal bond was to be based.15 This motion was not actedupon,16 hence, on December 10, 1998, petitioner proceeded to file the appeal bond based on theamounts17awarded in the judgment appealed from.18

In a decision promulgated on March 5, 1999, the NLRC dismissed the appeal and ruled that petitioner failed toperfect its appeal since it did not file the appeal bond within the reglementary period. The CA affirmed theNLRC’s decision.

Thus this petition with application for preliminary injunction and/or temporary restraining order alleging thefollowing 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 ITSAPPEAL UNDER EXISTING LAW AND JURISPRUDENCE[;]

II. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED RESOLUTION/DECISIONDEPRIVING PETITIONER OF ITS RIGHT TO APPEAL, BY IGNORING THE MERITS OF THE MOTION TORECOMPUTE AWARD TO REDUCE BOND AND ITS SIGNIFICANCE IN RELATION TO THE PERFECTION OF THEAPPEAL[;]

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 FORCOMPULSORY RETIREMENT AT 65[;]

IV. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED RESOLUTION/DECISIONTHAT GRANTS 5-YEAR AUTOMATIC INCREASE OF AWARD [SUCH] AS FROMP1.565M TO 2.711M WITHOUTSETTING [BENEDICTO]’S MOTION TO RECOMPUTE AWARD FOR HEARING AND WITHOUT DUE NOTICETHEREOF 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 fromimplementing 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 hissurviving 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 Benedictoas collaborating counsel, filed a motion dated December 17, 2002 praying to be reinstated as counsel of recordof respondents.23 The Court, in a resolution dated March 26, 2003, denied the motion since any attorney-clientrelationship between him and Benedicto, if it indeed existed, was terminated by the latter’s death. Thereafter,

48

Atty. Barriga filed a motion to determine attorney’s fees and notice and statement of charging lien for attorney’sfees dated May 5, 2003 praying, among others, that we determine and approve his attorney’s fees and approvethe 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 Suchhalf-hearted and belated attempt to argue the NLRC’s alleged lack of jurisdiction cannot possibly be takenseriously at this late stage of the proceedings.

The NLRC and the CA dismissed petitioner’s appeal. Both held that petitioner failed to perfect its appeal.Petitioner had ten calendar days from its receipt of the labor arbiter’s 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 appealbond was posted after the appeal period.

Under the second paragraph of Article 223 of the Labor Code, when a judgment involving monetary award isappealed by the employer, the appeal is perfected only upon the posting of a cash or surety bond issued by areputable bonding company duly accredited by the NLRC in an amount equivalent to the monetary award in thejudgment. This assures the workers that if they finally prevail in the case, the monetary award will be given tothem on dismissal of the employer’s appeal.26 It is also meant to discourage employers from using the appeal todelay 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 theappellant.28 Indeed, an unreasonable and excessive amount of bond is oppressive and unjust, and has the effectof 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 amonetary award must be given liberal interpretation in line with the desired objective of resolving controversieson the merits.30 If only to achieve substantial justice, strict observance of the reglementary periods may berelaxed if warranted.31 However, this liberal interpretation must be justified by substantial compliance with therule. 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 notonly mandatory but jurisdictional, and failure to perfect an appeal has the effect of making the judgmentfinal and executory. However, technicality should not be allowed to stand in the way of equitably andcompletely resolving the rights and obligations of the parties. We have allowed appeals from thedecisions of the labor arbiter to the NLRC, even if filed beyond the reglementary period, in the interest ofjustice.33

In this case, petitioner posted the bond when the NLRC did not act on its motion for re-computation of theaward. There was thus substantial compliance that justified a liberal application of the requirement on the timelyfiling of the appeal bond. Moreover, petitioner presented a meritorious ground in questioning the computation ofthe 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 alsodetermined that there was no just or authorized cause for Benedicto’s termination. Neither did petitioner complywith the two-notice requirement for valid termination under the law. He therefore concluded that Benedicto wasillegally dismissed.35

These factual findings of the NLRC, confirmed by the CA, are binding on us since they are supported bysubstantial evidence. Petitioner, aside from merely stating that Benedicto’s appointment was unauthorized,36 didnot extensively deal with the issue of whether Benedicto was in fact its employee. Besides, it is estopped fromdenying such fact considering its admission that its former President, Tomas Gomez III, wrote him a letter oftermination 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 petitioner’s arguments focused on the labor arbiter’s order of reinstatement and award ofbackwages. The issue of reinstatement was mooted by Benedicto’s death in 2002.

As for the award of backwages, petitioner insists that the award should be limited to what Benedicto wasentitled 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 orderdated 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, hewas already 64 years old. He turned 65 years old on December 1, 199440 at which age he was deemed to haveretired. Since backwages are granted on grounds of equity for earnings lost by an employee due to his illegaldismissal,41 Benedicto was entitled to backwages only for the period he could have worked had he not beenillegally dismissed, i.e. from October 11, 1994 to December 1, 1994.42

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Petitioner also questions the award by the labor arbiter of Benedicto’s 1% commission on the blocktime saleagreement with VTV Corporation in the amount of P645,000.43 The arbiter found that the agreement wasinitiated by and consummated through Benedicto’s efforts and that he was entitled to the commission.44 This isanother factual matter that is binding on us. However, it is unclear how the labor arbiter arrived at the amountadjudged. We therefore rule that in computing the amount of the commission Benedicto was entitled to, thefollowing should be considered:

First, because Benedicto was entitled to backwages only from October 11 to December 1, 1994 when heturned 65 years old, petitioner should pay his commission only for this period.

Second, by nature, commissions are given to employees only if the employer receivesincome.45Employees, 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 orencouragement 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 differentconcepts of commissions are incongruent with the claim that an employee can continue to receive themindefinitely after reaching his mandatory retirement age.

Benedicto’s right to the commissions was coterminous with his employment with petitioner48 and thisended when he reached the compulsory retirement age.

Lastly, the stipulation49 providing for commissions (which did not specify the period of entitlement) wouldbe too burdensome if interpreted to mean that Benedicto had a right to it even after his employmentwith petitioner. Doubts in contracts should be settled in favor of the greatest reciprocity of interests.50 Alopsided and open-minded construction could not have been the parties’ contemplation. Had that beentheir 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 withthese guidelines.

Petitioner is also liable for 10% of the total amount for attorney’s fees since Benedicto and the presentrespondents were compelled to litigate and incur expenses to enforce and protect his rights.51

With respect to Atty. Barriga’s motion, we note that this entails a factual determination and examination of theevidence. Since Atty. Barriga still has to prove his entitlement to the attorney’s fees he is claiming and theamount 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 commissionsto be paid by petitioner to respondent(s) for the period October 11, 1994 to December 1, 1994 and 10% of thetotal amount as attorney’s fees. The labor arbiter shall also set for further hearing Atty. Barriga’s motion todetermine his attorney’s 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 Courtof Appeals in CA-G.R. SP No. 53413 are hereby REVERSED and SET ASIDE.

Petitioner is ORDERED to pay the deceased respondent’s backwages and commissions to his heirs from thetime he was illegally dismissed on October 11, 1994 up to the time he reached compulsory retirement age onDecember 1, 1994. Likewise, petitioner is ORDERED to pay attorney’s fees equivalent to 10% of the totalmonetary award (backwages plus commissions). For this purpose, the case is hereby ordered REMANDED to thelabor arbiter for the re-computation of the amounts due.

The labor arbiter is also DIRECTED to set for further hearing Atty. Rodolfo B. Barriga’s motion to determine hisattorney’s 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.

G.R. No. L-14325 June 30, 1960

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CEFERINO TAVORA, ET AL., plaintiff-appellee, vs.ANTONIA TAVORA, defendant-appellant.

REYES, J. B. L., J.:

In Civil Case No. 12792 of the Court of First Instance of Pangasinan, plaintiffs and appellees, Ceferino Tavora, Numeriana Tavora y Querol and Catalina Suguitan, sought to annul a deed of donation executed in favor of the defendant-appellant, Antonia Tavora, by the deceased Maxima Zarate. After two motions for dismissal and another for a bill of particulars were denied, defendant failed to answer the complaint within the reglementary period. Consequently, upon motion of the plaintiffs, she was declared in default. From the order of default, defendant filed with this Supreme Court a petition for certiorari to have the same set-aside, but which was denied for lack of merit. Evidence was presented, after which the trial court rendered judgment dismissing the complaint "without pronouncement as to costs". From the judgment, plaintiffs perfected an appeal to the Court of Appeals, which, after due consideration, promulgated judgment, dated July 18, 1956, the dispositive portion of which reads:

From the consideration of all the evidence, we are of the opinion that the case for appellants has not been sufficientlyestablished. The judgment appealed from is therefore hereby affirmed, with costs against appellants.

It appears that before the promulgation of the above decision, appellant (appellee therein) filed a motion before the said Court ofAppeals, the substance and resolution of which is contained in the Resolution of said Court of April 4, 1956, to wit:

Passing upon the motion filed by counsel for defendant-appellee in case C.A.-G.R. No. 15872, Ceferino Tavora, et al., vs.Antonio Tavora, praying on the grounds therein stated that the appeal be dismissed; that Exhibits A, B, C, and D, attachedthereto be admitted as parts of the record on appeal, and that appellants be ordered to print the same and be included inthe printed record on appeal, and that they finally be ordered to serve copy of their brief upon the appellee; and the answerthereto filed by counsel for appellants for the denial thereof; and finding that defendant-appellee was declared in default,against which order she did not properly proceed to appeal, and that a petition for certiorari to review and set aside saiddefault order was denied by the Supreme Court in case G.R. No. L-7854, for which reason she lost her standing andpersonality and therefore she is not entitled to be heard as appellee (Limtoco vs. Go Fay, 80 Phil., 166; 45 Off. Gaz., [8] p.3340, and Tecson et al., vs. Malendres, et al., 88 Phil., 703 the Court RESOLVED to deny the motion for lack of merits.

It is further disclosed that when the case was heard thereat on July 16, 1956, counsel for appellee (now appellant) appeared and wasallowed to argue her case when counsel for the appellants (now appellees) withdrew his objection on appellee's right to do so.

Upon the return of the records to the trial court, defendant submitted for the court's approval a bill of costs, wherein she claims costsin the Court of First Instance of Pangasinan, the Court of Appeals, and the Supreme Court (for the docket fee she paid for the filing ofher petition for certiorari to set aside the order of default, seesupra.) Acting thereon and on appellees' opposition, the trial courtdenied in toto the said bill of costs. From this denial and from the order denying her motion for reconsideration, defendant appealedto the Court of Appeals, which court later certified the case to us as the issues involved are all questions of law.

The issues are simple and only deal on the right of the appellant to recover costs from the appellees and the proper amountrecoverable, should the same be held proper.

In one case (Tanega vs. Nazareno, 73 Phil., 354) where the defendant was absolved from the complaint by the trial court "withoutspecial pronouncement as to costs", but, on appeal, the judgment was reversed by the Court of Appeals "with costs against theappellee", this Court, resolving the issue of whether the costs awarded by the Court of Appeals referred only to the costs of suit inthat court or also in the trial court, had occasion to state:

Where ... the prevailing party is entitled to costs as a matter of course, the words "with costs" of an order of reversal oraffirmance in the court of appeals will be construed to mean all costs made in both the appellate court and the court below(15 C.J. 260; 20 C.J.S. 590). In the absence, therefore, of any qualification, the costs awarded by the Court of Appeals in theinstant case should be construed to mean the costs of suit from its commencement to its termination.

Consonant with the above ruling, we hold that the pronouncement as to costs made by the Court of Appeals (affirming the trialcourt's judgment dismissing the case "with costs against the appellants"), should be deemed to include not only the costs of suit inthe said appellate court, but also in the trial court. On the other hand, it could not comprehend the docket fee paid to the SupremeCourt on the petition for certiorari filed by the herein appellant to set aside the order of default, for while the filing thereof was anoffshot of the civil a case, it partook the nature of an independent suit.

Conformably with the rules laid down under sections 10 and 11 of Rule 131 of the Rules of Court, the appellant may recover as costs,in the Court of Appeals, P20.00 for counsel's attendance in said tribunal, it appearing that, while there was the default order sill ineffect, counsel for the appellees consented to his (appellant's counsel) appearance before the said court; in fact, he was allowed toargue orally thereat. Other expenses allegedly incurred in taking the deposition of the defendant and in procuring certified copies ofcertain pleadings in the Court of First Instance for purposes of the appeal to the Court of Appeals are not recoverable, since, being indefault, defendant was not entitled to have the same documents presented in evidence or included as part of the records of theappealed case (see Resolution of April 4, 1956 of the Court of Appeals, supra.) In the trial court, the recoverable costs include theP10.00 allowed for the attendance of counsel in said court, since before the declaration of default by the court, defendant's counselhad previously filed two motions for dismissal and another for a bill of particulars. The item for P25.00 representing alleged expensescontracted in taking the deposition of two witnesses should be disallowed, for it does not appear that the same (depositions) wereproperly produced in evidence as required by the Rules.

Wherefore, the order of the lower court appealed from denying in toto the bill of costs is hereby reversed and set aside, and anotherone is entered requiring appellees to pay the total sum of P30.00 by way of costs in Civil Case No. 12792 and CA-G.R. No. 15872. Nopronouncement as to costs in this appeal.

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G.R. No. 130866 September 16, 1998

ST. MARTIN FUNERAL HOME, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and BIENVENIDO ARICAYOS, respondents.

REGALADO, J.:

The present petition for certiorari stemmed from a complaint for illegal dismissal filed by hereinprivate respondent before the National Labor Relations Commission (NLRC), Regional ArbitrationBranch No. III, in San Fernando, Pampanga. Private respondent alleges that he started working asOperations Manager of petitioner St. Martin Funeral Home on February 6, 1995. However, there wasno contract of employment executed between him and petitioner nor was his name included in thesemi-monthly payroll. On January 22, 1996, he was dismissed from his employment for allegedlymisappropriating 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 uncleof Amelita Malabed, the owner of petitioner St. Martin's Funeral Home. Sometime in 1995, privaterespondent, who was formerly working as an overseas contract worker, asked for financial assistancefrom the mother of Amelita. Since then, as an indication of gratitude, private respondent voluntarilyhelped the mother of Amelita in overseeing the business.

In January 1996, the mother of Amelita passed away, so the latter then took over the management ofthe business. She then discovered that there were arrears in the payment of taxes and othergovernment fees, although the records purported to show that the same were already paid. Amelitathen made some changes in the business operation and private respondent and his wife were nolonger allowed to participate in the management thereof. As a consequence, the latter filed acomplaint 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 petitioneron October 25, 1996 declaring that no employer-employee relationship existed between the partiesand, therefore, his office had no jurisdiction over the case. 3

Not satisfied with the said decision, private respondent appealed to the NLRC contending that thelabor arbiter erred (1) in not giving credence to the evidence submitted by him; (2) in holding that heworked as a "volunteer" and not as an employee of St. Martin Funeral Home from February 6, 1995 toJanuary 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 andremanding the case to the labor arbiter for immediate appropriate proceedings. 5 Petitioner then fileda motion for reconsideration which was denied by the NLRC in its resolution dated August 18, 1997for lack of merit, 6 hence the present petition alleging that the NLRC committed grave abuse ofdiscretion. 7

Before proceeding further into the merits of the case at bar, the Court feels that it is now exigent andopportune to reexamine the functional validity and systemic practicability of the mode of judicialreview it has long adopted and still follows with respect to decisions of the NLRC. The increasingnumber of labor disputes that find their way to this Court and the legislative changes introduced overthe years into the provisions of Presidential Decree (P.D.) No. 442 (The Labor Code of the Philippinesand Batas Pambansa Blg. (B.P. No.) 129 (The Judiciary Reorganization Act of 1980) now stridently callfor 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 ofLabor by P.D. No. 21 on October 14, 1972, and its decisions were expressly declared to be appealableto 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 sixmonths after its promulgation. 8 Created and regulated therein is the present NLRC which wasattached to the Department of Labor and Employment for program and policy coordinationonly. 9 Initially, Article 302 (now, Article 223) thereof also granted an aggrieved party the remedy ofappeal from the decision of the NLRC to the Secretary of Labor, but P.D. No. 1391 subsequentlyamended said provision and abolished such appeals. No appellate review has since then beenprovided for.

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Thus, to repeat, under the present state of the law, there is no provision for appeals from the decisionof the NLRC. 10 The present Section 223, as last amended by Section 12 of R.A. No. 6715, insteadmerely provides that the Commission shall decide all cases within twenty days from receipt of theanswer of the appellee, and that such decision shall be final and executory after ten calendar daysfrom receipt thereof by the parties.

When the issue was raised in an early case on the argument that this Court has no jurisdiction toreview the decisions of the NLRC, and formerly of the Secretary of Labor, since there is no legalprovision for appellate review thereof, the Court nevertheless rejected that thesis. It held that there isan underlying power of the courts to scrutinize the acts of such agencies on questions of law andjurisdiction even though no right of review is given by statute; that the purpose of judicial review is tokeep 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 andforestalls arbitrary and unjust adjudications. 11

Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the remedy of theaggrieved party is to timely file a motion for reconsideration as a precondition for any further orsubsequent remedy, 12 and then seasonably avail of the special civil action of certiorari under Rule65, 13 for which said Rule has now fixed the reglementary period of sixty days from notice of thedecision. Curiously, although the 10-day period for finality of the decision of the NLRC may alreadyhave lapsed as contemplated in Section 223 of the Labor Code, it has been held that this Court maystill take cognizance of the petition for certiorari on jurisdictional and due process considerations iffiled 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 asfollows:

Sec. 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeascorpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of itsappellate jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of judgments of RegionalTrial 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 theSupreme Court in accordance with the Constitution, the provisions of this Act, and ofsubparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraphof Section 17 of the Judiciary Act of 1948.

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

These provisions shall not apply to decisions and interlocutory orders issued under theLabor 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 March18, 1995, to wit:

Sec. 9. Jurisdiction. — The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeascorpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of itsappellate jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of judgments of RegionalTrial 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 SocialSecurity Commission, the Employees Compensation Commission and the Civil Service

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Commission, except those falling within the appellate jurisdiction of the Supreme Courtin accordance with the Constitution, the Labor Code of the Philippines under PresidentialDecree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of thethird paragraph and subparagraph (4) of the fourth paragraph of Section 17 of theJudiciary Act of 1948.

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

It will readily be observed that, aside from the change in the name of the lower appellate court, 16 thefollowing 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 theCentral Board of Assessment Appeals was deleted and replaced by a new paragraph granting theCourt 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 thesection, such that the original exclusionary clause therein now provides "except those falling withinthe appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code ofthe Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and ofsubparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17of the Judiciary Act of 1948." (Emphasis supplied).

3. Contrarily, however, specifically added to and included among the quasi-judicial agencies overwhich the Court of Appeals shall have exclusive appellate jurisdiction are the Securities and ExchangeCommission, the Social Security Commission, the Employees Compensation Commission and the CivilService Commission.

This, then, brings us to a somewhat perplexing impassè, both in point of purpose and terminology. Asearlier explained, our mode of judicial review over decisions of the NLRC has for some time now beenunderstood to be by a petition for certiorari under Rule 65 of the Rules of Court. This is, of course, aspecial original action limited to the resolution of jurisdictional issues, that is, lack or excess ofjurisdiction and, in almost all cases that have been brought to us, grave abuse of discretionamounting to lack of jurisdiction.

It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now grantsexclusive appellate jurisdiction to the Court of Appeals over all final adjudications of the Regional TrialCourts and the quasi-judicial agencies generally or specifically referred to therein except, amongothers, "those falling within the appellate jurisdiction of the Supreme Court in accordance with . . . theLabor Code of the Philippines under Presidential Decree No. 442, as amended, . . . ." This wouldnecessarily contradict what has been ruled and said all along that appeal does not lie from decisionsof the NLRC. 17 Yet, under such excepting clause literally construed, the appeal from the NLRC cannotbe 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 hasno appellate jurisdiction over decisions falling within the appellate jurisdiction of the Supreme Court inaccordance with the Constitution, the provisions of B.P. No. 129, and those specified cases in Section17 of the Judiciary Act of 1948. These cases can, of course, be properly excluded from the exclusiveappellate jurisdiction of the Court of Appeals. However, because of the aforementioned amendmentby transposition, also supposedly excluded are cases falling within the appellate jurisdiction of theSupreme Court in accordance with the Labor Code. This is illogical and impracticable, and Congresscould not have intended that procedural gaffe, since there are no cases in the Labor Code thedecisions, resolutions, orders or awards wherein are within the appellate jurisdiction of the SupremeCourt 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 mayhave been an oversight in the course of the deliberations on the said Act or an imprecision in theterminology used therein. In fine, Congress did intend to provide for judicial review of theadjudications of the NLRC in labor cases by the Supreme Court, but there was an inaccuracy in theterm used for the intended mode of review. This conclusion which we have reluctantly but prudentlyarrived at has been drawn from the considerations extant in the records of Congress, moreparticularly on Senate Bill No. 1495 and the Reference Committee Report on S. No. 1495/H. No.10452. 18

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In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his sponsorship speech 19 fromwhich we reproduce the following excerpts:

The Judiciary Reorganization Act, Mr. President, Batas Pambansa Blg. 129, reorganizedthe Court of Appeals and at the same time expanded its jurisdiction and powers. Amongothers, its appellate jurisdiction was expanded to cover not only final judgment ofRegional Trial Courts, but also all final judgment(s), decisions, resolutions, orders orawards of quasi-judicial agencies, instrumentalities, boards and commissions, exceptthose falling within the appellate jurisdiction of the Supreme Court in accordance withthe Constitution, the provisions of BP Blg. 129 and of subparagraph 1 of the thirdparagraph 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 bythe transfer of some of its burden of review of factual issues to the Court ofAppeals. However, whatever benefits that can be derived from the expansion of theappellate jurisdiction of the Court of Appeals was cut short by the last paragraph ofSection 9 of Batas Pambansa Blg. 129 which excludes from its coverage the "decisionsand interlocutory orders issued under the Labor Code of the Philippines and by theCentral Board of Assessment Appeals.

Among the highest number of cases that are brought up to the Supreme Court are laborcases. Hence, Senate Bill No. 1495 seeks to eliminate the exceptions enumerated inSection 9 and, additionally, extends the coverage of appellate review of the Court ofAppeals in the decision(s) of the Securities and Exchange Commission, the SocialSecurity Commission, and the Employees Compensation Commission to reduce thenumber of cases elevated to the Supreme Court. (Emphases and corrections ours)

xxx xxx xxx

Senate Bill No. 1495 authored by our distinguished Colleague from Laguna provides theideal situation of drastically reducing the workload of the Supreme Court withoutdepriving 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 1986in the Annual Report of the Supreme Court:

. . . Amendatory legislation is suggested so as to relieve the SupremeCourt of the burden of reviewing these cases which present no importantissues involved beyond the particular fact and the parties involved, so thatthe Supreme Court may wholly devote its time to cases of public interestin the discharge of its mandated task as the guardian of the Constitutionand the guarantor of the people's basic rights and additional taskexpressly vested on it now "to determine whether or not there has been agrave abuse of discretion amounting to lack of jurisdiction on the part ofany branch or instrumentality of the Government.

We used to have 500,000 cases pending all over the land, Mr. President. It has been cutdown to 300,000 cases some five years ago. I understand we are now back to 400,000cases. Unless we distribute the work of the appellate courts, we shall continue to mountand add to the number of cases pending.

In view of the foregoing, Mr. President, and by virtue of all the reasons we havesubmitted, the Committee on Justice and Human Rights requests the support andcollegial approval of our Chamber.

xxx xxx xxx

Surprisingly, however, in a subsequent session, the following Committee Amendment was introducedby the said sponsor and the following proceedings transpired: 20

Senator Roco. On page 2, line 5, after the line "Supreme Court in accordance with theConstitution," 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 theLabor Code will still be appealable to the Supreme Court.

The President. Is there any objection? (Silence) Hearing none, the amendment isapproved.

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Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This was alsodiscussed 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 isapproved.

Senator Roco. There are no further Committee amendments, Mr. President.

Senator Romulo. Mr. President, I move that we close the period of Committeeamendments.

The President. Is there any objection? (Silence) Hearing none, the amendment isapproved. (Emphasis supplied).

xxx xxx xxx

Thereafter, since there were no individual amendments, Senate Bill No. 1495 was passed on secondreading and being a certified bill, its unanimous approval on third reading followed. 21 The ConferenceCommittee Report on Senate Bill No. 1495 and House Bill No. 10452, having theretofore beenapproved by the House of Representatives, the same was likewise approved by the Senate onFebruary 20, 1995, 22 inclusive of the dubious formulation on appeals to the Supreme Court earlierdiscussed.

The Court is, therefore, of the considered opinion that ever since appeals from the NLRC to theSupreme Court were eliminated, the legislative intendment was that the special civil actionof certiorari was and still is the proper vehicle for judicial review of decisions of the NLRC. The use ofthe word "appeal" in relation thereto and in the instances we have noted could have been a lapsusplumae because appeals by certiorari and the original action for certiorari are both modes of judicialreview addressed to the appellate courts. The important distinction between them, however, and withwhich the Court is particularly concerned here is that the special civil action ofcertiorari is within theconcurrent original jurisdiction of this Court and the Court of Appeals; 23 whereas to indulge in theassumption that appeals by certiorari to the Supreme Court are allowed would not subserve, butwould 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 recoursefrom the NLRC to the Court of Appeals as an initial step in the process of judicial review would becircuitous and would prolong the proceedings. On the contrary, as he commendably and realisticallyemphasized, 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 ofAppeals would give litigants the advantage to have all the evidence on record bereexamined and reweighed after which the findings of facts and conclusions of saidbodies are correspondingly affirmed, modified or reversed.

Under such guarantee, the Supreme Court can then apply strictly the axiom that factualfindings of the Court of Appeals are final and may not be reversed on appeal to theSupreme Court. A perusal of the records will reveal appeals which are factual in natureand 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 beingelevated to this Court which, not being a trier of fact, has at times been constrained to remand thecase to the NLRC for resolution of unclear or ambiguous factual findings; that the Court of Appeals isprocedurally 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 majoraspect of constitutional protection to labor.

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRCto the Supreme Court are interpreted and hereby declared to mean and refer to petitionsfor certiorari under Rule 65. Consequently, all such petitions should hence forth be initially filed in theCourt of Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriateforum for the relief desired.

Apropos to this directive that resort to the higher courts should be made in accordance with theirhierarchical order, this pronouncement in Santiago vs. Vasquez, et al. 25 should be taken into account:

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One final observation. We discern in the proceedings in this case a propensity on thepart of petitioner, and, for that matter, the same may be said of a number of litigantswho initiate recourses before us, to disregard the hierarchy of courts in our judicialsystem by seeking relief directly from this Court despite the fact that the same isavailable in the lower courts in the exercise of their original or concurrent jurisdiction, oris even mandated by law to be sought therein. This practice must be stopped, not onlybecause of the imposition upon the precious time of this Court but also because of theinevitable and resultant delay, intended or otherwise, in the adjudication of the casewhich often has to be remanded or referred to the lower court as the proper forumunder the rules of procedure, or as better equipped to resolve the issues since thisCourt is not a trier of facts. We, therefore, reiterate the judicial policy that this Court willnot entertain direct resort to it unless the redress desired cannot be obtained in theappropriate courts or where exceptional and compelling circumstances justify availmentof 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 appropriateaction and disposition consistent with the views and ruling herein set forth, without pronouncementas to costs.

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

TERESITA MONTOYA, petitioner, vs.TERESITA ESCAYO, JOY ESCAYO, AIDA GANANCIAL, MARY ANN CAPE, CECILIACORREJADO, ERLINDA PAYPON and ROSALIE VERDE, AND NATIONAL LABOR RELATIONSCOMMISSION, 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 9datedAugust 20, 1987 of the National Labor Relations Commission (NLRC), Third Division, whichreversed 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 complaintfiled 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 theKatarungang 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 forthe collection of sums of money against the petitioner for alleged unpaid overtime pay, holidaypay, 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 separatecases, 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 LupongTagapayapa for possible settlement and to secure the certification required from the LuponChairman prior to the filing of the cases with the Labor Arbiter. These actions were allegedlyviolative of the provisions of P.D. No. 1508, which apply to the parties who are all residents ofBacolod City.

Acting favorably on the petitioner's motion, Labor Arbiter Ethelwoldo R. Ovejera, on September27, 1985, ordered the dismissal of the complaints. The private respondents sought the reversalof the Labor Arbiter's order before the respondent NLRC. On August 20, 1987, the publicrespondent rendered the assailed resolution reversing the order of Ovejera, and remanded the

57

case to the Labor Arbiter for further proceedings. A motion for reconsideration was filed by thepetitioner 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 Tagapayapaas a jurisdictional requirement at the trial level apply to labor cases. More particularly, thepetitioner insists that the failure of the private respondents to first submit their complaints forpossible conciliation and amicable settlement in the proper barangay court in Bacolod City and tosecure a certification from the Lupon Chairman prior to their filing with the Labor Arbiter, diveststhe Labor Arbiter, as well as the respondent Commission itself, of jurisdiction over these laborcontroversies and renders their judgments thereon null and void.

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

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

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

For a better understanding of the issue in this case, the provisions of P.D. No. 1508 invoked bythe 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 asprovided in Section 2 hereof shall be filed or instituted in court or any othergovernment office for adjudication unless there has been a confrontation of theparties before the Lupon Chairman or the Pangkat and no conciliation or settlementhas been reached as certified by the Lupon Secretary or the Pangkat Secretary,attested by the Lupon or Pangkat Chairman, or unless the settlement has beenrepudiated. 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 forhabeas 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 thethree "WHEREAS" clauses of P.D. No. 1508 can be gleaned clearly the decree's intendedapplicability 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", orsimply to "courts" are significant. On the other band, there is no mention at all of labor relationsor 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 ofamicably settling disputes among family and barangay members at the barangaylevel without judicial resources would promote the speedy administration of justiceand implement the constitutional mandate to preserve and develop Filipino cultureand to strengthen the family as a basic social institution;

WHEREAS, the indiscriminate filing of cases in the courts of justice contributesheavily and unjustifiably to the congestion of court dockets, thus causing adeterioration in the quality of justice;

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

In addition, Letter of Instructions No. 956 and Letter of Implementation No. 105, both issued onNovember 12, 1979 by the former President in connection with the implementation of theKatarungang Pambarangay Law, affirm this conclusion. These Letters were addressed only to thefollowing officials: all judges of the Courts of first Instance, Circuit Criminal Courts, Juvenile andDomestic Relations Courts, Courts of Agrarian Relations, City Courts and Municipal Courts, andall Fiscals and other Prosecuting Officers. These presidential issuances make clear that the onlyofficial directed to oversee the implementation of the provisions of the KatarungangPambarangay Law (P.D. No. 1508) are the then Minister of Justice, the then Minister of LocalGovernments and Community Development, and the Chief Justice of the Supreme Court. If thecontention of the petitioner were correct, the then Minister (now Secretary) of Labor andEmployment would have been included in the list, and the two presidential issuances also wouldhave been addressed to the labor relations officers, labor arbiters, and the members of theNational Labor Relations Commission. Expressio unius est exclusio alterius.

Nor can we accept the petitioner's contention that the "other government office" referred to inSection 6 of P.D. No. 1508 includes the Office of the Labor Arbiter and the Med-Arbiter. Thedeclared concern of the Katarungan Pambarangay Law is "to help relieve the courts of suchdocket 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 officesas the Fiscal's Office or, in localities where there is no fiscal, the Municipal Trial Courts, wherecomplaints 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 arenot amicably settled, are subsequently filed for proper disposition.

But, the opinion of the Honorable Minister of Justice (Opinion No. 59, s. 1983) to the contrarynotwithstanding, 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 exclusivejurisdiction over the conciliation and mediation of disputes, grievances, or problems in theregional offices of the Department of Labor and Employ- ment. It is the said Bureau and itsdivisions, and not the barangay Lupong Tagapayapa, which are vested by lawwith originaland exclusive authority to conduct conciliation and mediation proceedings on laborcontroversies before their endorsement to the appropriate Labor Arbiter for adjudication. Article226, previously adverted to is clear on this regard. It provides:

ART. 226. Bureau of Labor Relations.- The Bureau of Labor Relations and the Laborrelations divisions in the regional officer of the Department of Labor shall haveoriginal and exclusive authority to act, at their own initiative or upon request ofeither 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 allworkplaces whether agricultural or non-agricultural, except those arising from theimplementation or interpretation of collective bargaining agreements which shall bethe subject of grievance procedure and/or voluntary arbitration.

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

Requiring conciliation of labor disputes before the barangay courts would defeat the verysalutary purposes of the law. Instead of simplifying labor proceedings designed at expeditioussettlement or referral to the proper court or office to decide it finally, the position taken by thepetitioner would only duplicate the conciliation proceedings and unduly delay the disposition ofthe labor case. The fallacy of the petitioner's submission can readily be seen by following it to itslogical conclusion. For then, if the procedure suggested is complied with, the private respondentwould 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 theDepartment of Labor and Employment, in Bacolod City, for another round of conciliationproceedings. Failing there, their long travail would continue to the Office of the Labor Arbiter,

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then to the NLRC, and finally to us. This suggested procedure would destroy the salutarypurposes of P.D. 1508 and of The Labor Code Of The Philippines. And labor would then be givenanother unnecessary obstacle to hurdle. We reject the petitioner's submission. It does violence tothe 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 incharacter vis-a-vis labor disputes which are primarily governed by labor laws. 3 And "(A)ll doubtsin the implementation and interpretation of this Code (Labor), including its implementing rulesand regulations, shall be resolved in favor of labor. 4

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

G.R. No. 118651 October 16, 1997

PIONEER TEXTURIZING CORP. and/or JULIANO LIM, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, PIONEER TEXTURIZING WORKERS UNION and LOURDES A. DE JESUS, respondents.

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 whichcontains 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. Shethereafter submitted tickets corresponding to the work done to her supervisor. Three days later, deJesus received from petitioners' personnel manager a memorandum requiring her to explain why nodisciplinary action should be taken against her for dishonesty and tampering of official records anddocuments with the intention of cheating as P.O. No. 3853 allegedly required no trimming. Thememorandum 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 intrimming P.O. No. 3853 as it has the same style and design as P.O. No. 3824 which has an attachedprice list for trimming the ribs and admitted that she may have been negligent in presuming that thesame 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 oftermination dated September 18, 1992.

On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. The LaborArbiter who heard the case noted that de Jesus was amply accorded procedural due process in hertermination from service. Nevertheless, after observing that de Jesus made some further trimming onP.O. No. 3853 and that her dismissal was not justified, the Labor Arbiter held petitioners guilty ofillegal dismissal. Petitioners were accordingly ordered to reinstate de Jesus to her previous positionwithout loss of seniority rights and with full backwages from the time of her suspension on August 19,1992. Dissatisfied with the Labor Arbiter's decision, petitioners appealed to public respondentNational Labor Relations Commission (NLRC). In its July 21, 1994 decision, the NLRC 1 ruled that deJesus was negligent in presuming that the ribs of P.O. No. 3853 should likewise be trimmed for having

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the same style and design as P.O. No. 3824, thus petitioners cannot be entirely faulted for dismissingde Jesus. The NLRC declared that the status quo between them should be maintained and affirmedthe Labor Arbiter's order of reinstatement, but without backwages. The NLRC further "directedpetitioner to pay de Jesus her back salaries from the date she filed her motion for execution onSeptember 21, 1993 up to the date of the promulgation of [the] decision." 2 Petitioners filed theirpartial motion for reconsideration which the NLRC denied, hence this petition anchored substantiallyon the alleged NLRC's error in holding that de Jesus is entitled to reinstatement and back salaries. OnMarch 6, 1996, petitioners filed its supplement to the petition amplifying further their arguments. In aresolution dated February 20, 1995, the Court required respondents to comment thereon. Privaterespondent 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] torespondents' respective comments. Respondents in due time filed their rejoinders.

There are two interrelated and crucial issues, namely: (1) whether or not de Jesus was illegallydismissed, 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 toreinstatement to her previous position for she was not illegally dismissed in the first place. In supportthereof, petitioners quote portions of the NLRC decision which stated that "respondents [petitionersherein] cannot be entirely faulted for dismissing the complainant" 3 and that there was "no illegaldismissal to speak of in the case at bar". 4 Petitioners further add that de Jesus breached the trustreposed in her, hence her dismissal from service is proper on the basis of loss of confidence, citing asauthority the cases of Ocean Terminal Services, Inc. v. NLRC, 197 SCRA 491; Coca-Cola BottlersPhil., Inc. v. NLRC, 172 SCRA 751, and Piedad v. Lanao del Norte Electric Cooperative, 5 154 SCRA 500.

The arguments lack merit.

The entire paragraph which comprises the gist of the NLRC's decision from where petitioners derivedand isolated the aforequoted portions of the NLRC's observation reads in full as follows:

We cannot fully subscribe to the complainant's claim that she trimmed the ribs of PO3853 inthe light of the sworn statement of her supervisor Rebecca Madarcos (Rollo, p. 64) that notrimming was necessary because the ribs were already of the proper length. The complainantherself admitted in her sinumpaang salaysay (Rollo, p. 45) that "Aking napansin na hindipantay-pantay ang lapad ng mga ribs PO3853 — mas maigsi ang nagupit ko sa mga ribs ngPO3853 kaysa sa mga ribs ng mga nakaraang PO's. The complainant being an experiencedreviser/trimmer for almost twelve (12) years should have called the attention of her supervisorregarding her observation of PO3853. It should be noted that complainant was trying to claimas production output 447 pieces of trimmed ribs of PO3853 which respondents insists thatcomplainant did not do any. She was therefore negligent in presuming that the ribs of PO3853should likewise be trimmed for having the same style and design as PO3824. Complainantcannot pass on the blame to her supervisor whom she claimed checked the said tickets prior tothe submission to the Accounting Department. As explained by respondent, what thesupervisor does is merely not the submission of tickets and do some checking beforeforwarding the same to the Accounting Department. It was never disputed that it is theAccounting Department who does the detailed checking and computation of the tickets as hasbeen the company policy and practice. Based on the foregoing and considering thatrespondent cannot be entirely faulted for dismissing complainant as the complainant herselfwas also negligent in the performance of her job, We hereby rule that status quo betweenthem should be maintained as a matter of course. We thus affirm the decision of Labor Arbiterreinstating the complainant but without backwages. The award of backwages in general aregranted on grounds of equity for earnings which a worker or employee has lost due to hisillegal 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 backwagesshould necessarily be deleted. 6

We note that the NLRC's decision is quite categorical in finding that de Jesus was merely negligent inthe performance of her duty. Such negligence, the Labor Arbiter delineated, was brought about by thepetitioners' plain improvidence. Thus:

After careful assessment of the allegations and documents available on record, we areconvinced 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 thesame style and design as P.O. 3824; that P.O. 3824 was made as guide for the work done onP.O. 3853; and, most importantly, that the notation correction on P.O. 3824 was made onlyafter the error was discovered by respondents' Accounting Department.

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Be that as it may, the factual issue in this case is whether or not complainant trimmed the ribsof P.O. 3853?

Respondents maintained that she did not because the record in Accounting Departmentallegedly indicates that no trimming is to be done on P.O. 3853. Basically, this allegation isunsubstantiated.

It must be emphasized that in termination cases the burden of proof rests upon the employer.

In the instant case, respondents' mere allegation that P.O. 3853 need not be trimmed does notsatisfy the proof required to warrant complainant's dismissal.

Now, granting that the Accounting record is correct, we still believe that complainant did somefurther trimming on P.O. 3853 based on the following grounds:

Firstly, Supervisor Rebecca Madarcos who ought to know the work to be performed becauseshe was in-charged of assigning jobs, reported no anomally when the tickets were submitted toher.

Incidentally, supervisor Madarcos testimony is suspect because if she could recall what sheordered the complainant to do seven (7) months ago (to revise the collars and plackets ofshirts) there was no reason for her not to detect the alleged tampering at the time complainantsubmitted 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 it is true, is well explained in that the parts shehad trimmed were lesser compared to those which she had cut before.

In this connection, respondents misinterpreted the handwritten explanation of the complainantdated 20 August 1992, because the letter never admits that she never trimmed P.O. 3853, onthe contrary the following sentence,

Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang inalis napala 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 Arbiter's observations or from the NLRC's assessment, it distinctlyappears that petitioners' accusation of dishonesty and tampering of official records and documentswith 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 burden of proofand 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 orauthorized cause under the Label Code. 8 Lack of a just cause in the dismissal from service of anemployee, as in this case, renders the dismissal illegal, despite the employer's observance ofprocedural due process. 9 And while the NLRC stated that "there was no illegal dismissal to speak of inthe case at bar" and that petitioners cannot be entirely faulted therefor, said statements areinordinate 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 harshand grossly disproportionate to the negligence committed, especially where said employee holds afaithful and an untarnished twelve-year service record. While an employer has the inherent right todiscipline its employees, we have always held that this right must always be exercised humanely, andthe penalty it must impose should be commensurate to the offense involved and to the degree of itsinfraction. 10 The employer should bear in mind that, in the exercise of such right, what is at stake isnot only the employee's position but her livelihood as well.

Equally unmeritorious is petitioners' assertion that the dismissal is justified on the basis of loss ofconfidence. While loss of confidence, as correctly argued by petitioners, is one of the valid grounds fortermination of employment, the same, however, cannot be used as a pretext to vindicate each andevery instance of unwarranted dismissal. To be a valid ground, it must be shown that the employeeconcerned is responsible for the misconduct or infraction and that the nature of his participationtherein rendered him absolutely unworthy of the trust and confidence demanded by his position. 11 Inthis case, petitioners were unsuccessful in establishing their accusations of dishonesty and tamperingof records with intention of cheating. Indeed, even if petitioners' allegations against de Jesus were

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true, they just the same failed to prove that her position needs the continued and unceasing trust ofher employers. The breach of trust must be related to the performance of the employee'sfunctions. 12 Surely, de Jesus who occupies the position of a reviser/trimmer does not require thepetitioners' perpetual and full confidence. In this regard, petitioners' reliance on the cases of OceanTerminal Services, Inc. v. NLRC; Coca-Cola Bottlers Phil., Inc. v. NLRC; and Piedad v. Lanao del NorteElectric Cooperative, which when perused involve positions that require the employers' full trust andconfidence, is wholly misplaced. In Ocean Terminal Services, for instance, the dismissed employeewas designated as expediter and canvasser whose responsibility is mainly to make emergencyprocurements 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 tothe everyday financial transactions involving the employer's goods and funds, while thatof Piedad concerns a bill collector who essentially handles the employer's cash collections.Undoubtedly, the position of a reviser/trimmer could not be equated with that of a canvasser, salesagent, or a bill collector. Besides, the involved employees in the three aforementioned cases wereclearly proven guilty of infractions unlike private respondent in the case at bar. Thus, petitionersdependence on these cited cases is inaccurate, to say the least. More, whether or not de Jesus meetsthe day's 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 toreinstatement and backwages as mandated bylaw. 14 Whence, we move to the second issue, i.e., whether or not an order for reinstatement needs awrit of execution.

Petitioners' theory is that an order for reinstatement is not self-executory. They stress that there mustbe a writ of execution which may be issued by the NLRC or by the Labor Arbiter motu proprio or onmotion of an interested party. They further maintain that even if a writ of execution was issued, atimely 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. Assupporting authority, petitioners emphatically cite and bank on the case of Maranaw Hotel ResortCorporation (Century Park Sheraton Manila) v. NLRC, 238 SCRA 190.

Private respondent de Jesus, for her part, maintains that petitioners should have reinstated herimmediately after the decision of the Labor Arbiter ordering her reinstatement was promulgated sincethe 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 ormerely reinstated in the payroll without need of a writ of execution. De Jesus argues that a writ ofexecution is necessary only for the enforcement of decisions, orders, or awards which have acquiredfinality. 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. — Decision, awards, or orders of the Labor Arbiter are final and executoryunless appealed to the Commission by any or both parties within ten (10) calendar days fromreceipt of such decisions, awards, or orders. Such appeal may be entertained only on any ofthe following grounds:

xxx xxx xxx

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, evenpending appeal. The employee shall either be admitted back to work under the same termsand 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 theexecution for reinstatement provided herein.

xxx xxx xxx

We initially interpreted the aforequoted provision in Inciong v. NLRC. 15 The Court 16 made this briefcomment:

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 (whichbecame law on March 21, 1989), providing that a decision of the Labor Arbiter ordering thereinstatement of a dismissed or separated employee shall be immediately executory insofar asthe reinstatement aspect is concerned, and the posting of an appeal bond by the employer

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shall not stay such execution. Since this new law contains no provision giving it retroactiveeffect (Art. 4, Civil Code), the amendment may not be applied to this case.

which the Court adopted and applied in Callanta v. NLRC. 17 In Zamboanga City Water Districtv. Buat, 18 the Court 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 orseparated employee insofar as the reinstatement aspect is concerned, shall be immediatelyexecutory, even pending appeal. The employer shall reinstate the employee concerned eitherby: (a) actually admitting him back to work under the same terms and conditions prevailingprior to his dismissal or separation; or (b) at the option of the employer, merely reinstating himin the payroll. Immediate reinstatement is mandated and is not stayed by the fact that theemployer 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 20and laid down the rule that an employer who fails to comply with an order of reinstatementmakes him liable for the employee's salaries. Thus:

Petitioners construe the above paragraph to mean that the refusal of the employer to reinstatean employee as directed in an executory order of reinstatement would make it liable to pay thelatter's salaries. This interpretation is correct. Under Article 223 of the Labor Code, asamended, an employer has two options in order for him to comply with an order ofreinstatement, which is immediately executory, even pending appeal. Firstly, he can admit thedismissed employee back to work under the same terms and conditions prevailing prior to hisdismissal or separation or to a substantially equivalent position if the former position is alreadyfilled 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 theemployee merely in the payroll. Failing to exercise any of the above options, the employer canbe compelled under pain of contempt, to pay instead the salary of the employee. Thisinterpretation 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 themeaning of the constitutional guaranty that no one shall be deprived of life, liberty, andproperty without due process of law. Therefore, he should be protected against any arbitraryand unjust deprivation of his job (Bondoc vs. People's Bank and Trust Co., Inc., 103 SCRA 599[1981]). The employee should not be left without any remedy in case the employerunreasonably delays reinstatement. Therefore, we hold that the unjustified refusal of theemployer to reinstate an illegally dismissed employee entitles the employee to payment of hissalaries . . . . 21

The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting theimport of Article 223 in Maranaw, the Court 22 declared that the reinstatement aspect of the LaborArbiter's decision needs a writ of execution as it is not self-executory, a declaration the Court recentlyreiterated and adopted in Archilles Manufacturing Corp.v. NLRC. 23

We note that prior to the enactment of R.A. No. 6715, Article 223 24 of the Labor Code contains noprovision dealing with the reinstatement of an illegally dismissed employee. The amendmentintroduced by R.A. No. 6715 is an innovation and a far departure from the old law indicating therebythe legislature's unequivocal intent to insert a new rule that will govern the reinstatement aspect of adecision 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 theidea of discretion 25 and that the presumption is that the word "shall", when used in a statute, ismandatory. 26 An appeal or posting of bond, by plain mandate of the law, could not even forestall norstay 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, 27 we held that:

Under the principles of statutory construction, if a statute is clear, plain and free fromambiguity, it must be given its literal meaning and applied without attempted interpretation.This plain-meaning rule or verba legisderived from the maxim index animi sermo est (speech isthe index of intention) rests on the valid presumption that the words employed by thelegislature in a statute correctly express its intent or will and preclude the court fromconstruing it differently. The legislature is presumed to know the meaning of the words, to haveused words advisedly, and to have expressed its intent by the use of such words as are foundin the statute. Verba legis non est recedendum, or from the words of a statute there should beno departure. 28

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And in conformity with the executory nature of the reinstatement order, Rule V, Section 16 (3) of theNew Rules of Procedure of the NLRC strictly requires the Labor Arbiter to direct the employer toimmediately reinstate the dismissed employee. Thus:

In case the decision includes an order of reinstatement, the Labor Arbiter shall direct theemployer 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 towork under the same terms and conditions prevailing prior to his dismissal or separation or, atthe 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 decisionis immediately executory, it does not follow that it is self-executory. There must be a writ ofexecution which may be issuedmotu proprio or on motion of an interested party. Article 224 ofthe Labor Code provides:

Art. 224. Execution of decision, orders or awards. — (a) The Secretary of Labor andEmployment or any Regional Director, the Commission or any Labor Arbiter, or med-arbitter orvoluntary arbitrator may, motu proprio or on motion of any interested party, issue a writ ofexecution 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 alsoprovides:

The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearingofficer of origin shall, motu proprio or on motion of any interested party, issue a writ ofexecution on a judgment only within five (5) years from the date it becomes final andexecutory . . . . No motion for execution shall be entertained nor a writ he issued unless theLabor Arbiter is in possession of the records of the case which shall include an entry ofjudgment. (emphasis supplied)

xxx xxx xxx

In the absence then of an order for the issuance of a writ of execution on the reinstatementaspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation toadmit back to work the private respondent under the terms and conditions prevailing prior toher dismissal or, at the petitioner's option, to merely reinstate her in the payroll. An option is aright of election to exercise a privilege, and the option in Article 223 of the Labor Code isexclusively granted to the employer. The event that gives rise for its exercise is not thereinstatement decree of a Labor Arbiter, but the writ for its execution commanding theemployer to reinstate the employee, while the final act which compels the employer toexercise the option is the service upon it of the writ of execution when, instead of admittingthe employee back to his work, the employer chooses to reinstate the employee in the payrollonly. If the employer does not exercise this option, it must forthwith admit the employee backto work, otherwise it may be punished for contempt. 29

A closer examination, however, shows that the necessity for a writ of execution under Article 224applies only to final and executory decisions which are not within the coverage of Article 223. Forcomparison, we quote the material portions of the subject articles:

Art. 223. Appeal. . . .

In any event, the decision of the Labor Arbiter reinstating a dismissed or separatedemployee, 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 sameterms and conditions prevailing prior to his dismissal or separation or, at the option of theemployer, merely reinstated in the payroll. The posting of a bond by the employer shall notstay the execution for reinstatement provided herein.

xxx xxx xxx

Art. 224. Execution of decisions, orders, or awards. — (a) The Secretary of Labor andEmployment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter orvoluntary arbitrator may, motu propio or on motion of any interested party, issue a writ of

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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 decisions, orders orawards of the Secretary of Labor and Employment or regional director, the Commission, theLabor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the duty of theresponsible officer to separately furnish immediately the counsels of record and the partieswith copies of said decisions, orders or awards. Failure to comply with the duty prescribedherein 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 datea decision, an order or award becomes final and executory. It can not relate to an award or order ofreinstatement still to be appealed or pending appeal which Article 223 contemplates. The provision ofArticle 223 is clear that an award for reinstatement shall be immediately executory even pendingappeal and the posting of a bond by the employer shall not stay the execution for reinstatement. Thelegislative intent 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 asprerequisites for the execution of a reinstatement award would certainly betray and run counter tothe very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. Thereason is simple. An application for a writ of execution and its issuance could be delayed fornumerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or aninaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writthereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In otherwords, if the requirements of Article 224 were to govern, as we so declared in Maranaw, then theexecutory nature of a reinstatement order or award contemplated by Article 223 will be undulycircumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to haveordained a valid and sensible law, one which operates no further than may be necessary to achieveits specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achievedand the evil sought to be remedied. 30 And where the statute is fairly susceptible of two or moreconstructions, that construction should be adopted which will most tend to give effect to the manifestintent of the lawmaker and promote the object for which the statute was enacted, and a constructionshould be rejected which would tend to render abortive other provisions of the statute and to defeatthe object which the legislator sought to attain by its enactment. 31 In introducing a new rule on thereinstatement aspect of a labor decision under R.A. No. 6715, Congress should not be considered tobe indulging in mere semantic exercise. On appeal, however, the appellate tribunal concerned mayenjoin 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 shouldbe resolved in favor of labor. 32 In ruling that an order or award for reinstatement does not require awrit of execution the Court is simply adhering and giving meaning to this rule. Henceforth, we rulethat an award or order for reinstatement is self-executory. After receipt of the decision or resolutionordering the employee's reinstatement, the employer has the right to choose whether to re-admit theemployee to work under the same terms and conditions prevailing prior to his dismissal or toreinstate the employee in the payroll. In either instance, the employer has to inform the employee ofhis choice. The notification is based on practical considerations for without notice, the employee hasno 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.

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