Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 165881             April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner, vs.COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the Resolution3of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision4of the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he operated by employing drivers on a "boundary basis." One of those drivers was respondent Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings as compensation for driving the vehicle. In August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where Bustamante would remit to Villarama P550.00 a day for a period of four years; Bustamante would then become the owner of the vehicle and continue to drive the same under Villamaria’s franchise. It was also agreed that Bustamante would make a downpayment of P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog"5 over the passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay the boundary-hulog for three days, Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears, including a penalty of P50.00 a day; in case Bustamante failed to remit the daily boundary-hulog for a period of one week, the Kasunduan would cease to have legal effect and Bustamante would have to return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from Villamaria Motors. Thus, Bustamante was authorized to operate the vehicle to transport passengers only and not for other purposes. He was also required to display an identification card in front of the windshield of the vehicle; in case of failure to do so, any fine that may be imposed by government authorities would be charged against his account. Bustamante further obliged himself to pay for the cost of replacing any parts of the vehicle that would be lost or damaged due to his negligence. In case the vehicle sustained serious damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs. Bustamante was not allowed to wear slippers, short pants or undershirts while driving. He was required to be polite and respectful towards the passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased for two or more days and was required to attend any meetings which may be called from time to time. Aside from the boundary-hulog, Bustamante was also obliged to pay for the annual registration fees of the vehicle and the premium for the vehicle’s comprehensive insurance. Bustamante promised to strictly comply with the rules and regulations imposed by Villamaria for the upkeep and maintenance of the jeepney.

Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed upon, he made daily remittances of P550.00 in payment of the purchase price of the vehicle. Bustamante failed to pay for the annual registration fees of the vehicle, but Villamaria allowed him to continue driving the jeepney.

In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed to pay their respective boundary-hulog. This prompted Villamaria to serve a "Paalala,"6 reminding them that under the Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their respective jeepneys would be returned to him without any complaints. He warned the drivers that the Kasunduan would henceforth be strictly enforced and urged them to comply with their obligation to avoid litigation.

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On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from driving the vehicle.

On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife Teresita. In his Position Paper,8 Bustamante alleged that he was employed by Villamaria in July 1996 under the boundary system, where he was required to remit P450.00 a day. After one year of continuously working for them, the spouses Villamaria presented the Kasunduan for his signature, with the assurance that he (Bustamante) would own the jeepney by March 2001 after paying P550.00 in daily installments and that he would thereafter continue driving the vehicle along the same route under the same franchise. He further narrated that in July 2000, he informed the Villamaria spouses that the surplus engine of the jeepney needed to be replaced, and was assured that it would be done. However, he was later arrested and his driver’s license was confiscated because apparently, the replacement engine that was installed was taken from a stolen vehicle. Due to negotiations with the apprehending authorities, the jeepney was not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and he was no longer allowed to drive the vehicle since then unless he paid them P70,000.00.

Bustamante prayed that judgment be rendered in his favor, thus:

WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered ordering the respondents, jointly and severally, the following:

1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed of Sale in favor of the complainant relative to the PUJ with Plate No. PVU-660;

2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits computed from July 24, 2000 up to the time of his actual reinstatement;

3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses incurred by the complainant in the repair and maintenance of the subject jeep;

4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day counted from August 7, 1997 up to June 2000 or a total of P91,200.00;

5. To pay moral and exemplary damages of not less than P200,000.00;

6. Attorney’s fee[s] of not less than 10% of the monetary award.

Other just and equitable reliefs under the premises are also being prayed for.9

In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but alleged that Bustamante failed to pay the P10,000.00 downpayment and the vehicle’s annual registration fees. They further alleged that Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a day, which prompted them to issue the Paalaala. Instead of complying with his obligations, Bustamante stopped making his remittances despite his daily trips and even brought the jeepney to the province without permission. Worse, the jeepney figured in an accident and its license plate was confiscated; Bustamante even abandoned the vehicle in a gasoline station in Sucat, Parañaque City for two weeks. When the security guard at the gasoline station requested that the vehicle be retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante told her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were worn, the alternator was gone, and the battery was no longer working.

Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency Corporation v. NLRC,12 the spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan executed on August 7, 1997 transformed the employer-employee relationship into that of vendor-vendee. Hence, the spouses concluded, there was no legal basis to hold them liable for illegal dismissal. They prayed that the case be dismissed for lack of jurisdiction and patent lack of merit.

In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the conduct of his employment. He maintained that the rulings of the Court in National Labor Union v. Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free Workers v. Abbas16 are germane to the issue as they define the nature of the owner/operator-driver relationship under the boundary system. He further reiterated that it was the Villamaria spouses who presented the Kasunduan to him and that he conformed thereto only upon their representation that he would own the vehicle after four years. Moreover, it appeared that the Paalala was duly received by him, as he, together with other drivers, was made to affix his signature on a blank piece of paper purporting to be an "attendance sheet."

On March 15, 2002, the Labor Arbiter rendered judgment17 in favor of the spouses Villamaria and ordered the complaint dismissed on the following ratiocination:

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Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim that complainant violated the terms of their contract and afterwards abandoned the vehicle assigned to him. As against the foregoing, [the] complaint’s (sic) mere allegations to the contrary cannot prevail.

Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees.18

Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the employer-employee relationship between him and Villamaria. While he did not receive fixed wages, he kept only the excess of the boundary-hulog which he was required to remit daily to Villamaria under the agreement. Bustamante maintained that he remained an employee because he was engaged to perform activities which were necessary or desirable to Villamaria’s trade or business.

The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:

WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not stated in the Labor Arbiter's decision but mainly on a jurisdictional issue, there being none over the subject matter of the controversy.21

The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for Reconsideration, which the NLRC resolved to deny on May 30, 2003.22

Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred

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IN DISMISSING PETITIONER’S APPEAL "FOR REASON NOT STATED IN THE LABOR ARBITER’S DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"

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IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23

Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued to be that of employer-employee and as such, the Labor Arbiter had jurisdiction over his complaint. He further alleged that it is common knowledge that operators of passenger jeepneys (including taxis) pay their drivers not on a regular monthly basis but on commission or boundary basis, or even the boundary-hulog system. Bustamante asserted that he was dismissed from employment without any lawful or just cause and without due notice.

For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee relationship. He further pointed out that the Dinglasan case pertains to the boundary system and not the boundary-hulog system, hence inapplicable in the instant case. He argued that upon the execution of the Kasunduan, the juridical tie between him and Bustamante was transformed into a vendor-vendee relationship. Noting that he was engaged in the manufacture and sale of jeepneys and not in the business of transporting passengers for consideration, Villamaria contended that the daily fees which Bustmante paid were actually periodic installments for the the vehicle and were not the same fees as understood in the boundary system. He added that the boundary-hulog plan was basically a scheme to help the driver-buyer earn money and eventually pay for the unit in full, and for the owner to profit not from the daily earnings of the driver-buyer but from the purchase price of the unit sold. Villamaria further asserted that the apparently restrictive conditions in the Kasunduan did not mean that the means and method of driver-buyer’s conduct was controlled, but were mere ways to preserve the vehicle for the benefit of both parties: Villamaria would be able to collect the agreed purchase price, while Bustamante would be assured that the vehicle would still be in good running condition even after four years. Moreover, the right of vendor to impose certain conditions on the buyer should be respected until full ownership of the property is vested on the latter. Villamaria insisted that the parallel circumstances obtaining in Singer Sewing Machine Company v. Drilon24 has analogous application to the instant issue.

In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of the decision reads:

UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE, and judgment entered in favor of petitioner:

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1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation pay computed from the time of his employment up to the time of termination based on the prevailing minimum wage at the time of termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back wages computed from the time of his dismissal up to March 2001 based on the prevailing minimum wage at the time of his dismissal.

Without Costs.

SO ORDERED.26

The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamante’s complaint. Under the Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and employer-employee. The CA ratiocinated that Villamaria’s exercise of control over Bustamante’s conduct in operating the jeepney is inconsistent with the former’s claim that he was not engaged in the transportation business. There was no evidence that petitioner was allowed to let some other person drive the jeepney.

The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean that Villamaria could not exercise it. It explained that the existence of an employment relationship did not depend on how the worker was paid but on the presence or absence of control over the means and method of the employee’s work. In this case, Villamaria’s directives (to drive carefully, wear an identification card, don decent attire, park the vehicle in his garage, and to inform him about provincial trips, etc.) was a means to control the way in which Bustamante was to go about his work. In view of Villamaria’s supervision and control as employer, the fact that the "boundary" represented installment payments of the purchase price on the jeepney did not remove the parties’ employer-employee relationship.

While the appellate court recognized that a week’s default in paying the boundary-hulog constituted an additional cause for terminating Bustamante’s employment, it held that the latter was illegally dismissed. According to the CA, assuming that Bustamante failed to make the required payments as claimed by Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for Bustamante to abandon it. It also pointed out that Villamaria neither submitted any police report to support his claim that the vehicle figured in a mishap nor presented the affidavit of the gas station guard to substantiate the claim that Bustamante abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a motion for reconsideration thereof. The CA denied the motion in a Resolution27 dated November 2, 2004, and Villamaria received a copy thereof on November 8, 2004.

Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of the Rules of Court, alleging that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling that the juridical relationship between him and respondent under the Kasunduan was a combination of employer-employee and vendor-vendee relationships. The terms and conditions of the Kasunduan clearly state that he and respondent Bustamante had entered into a conditional deed of sale over the jeepney; as such, their employer-employee relationship had been transformed into that of vendor-vendee. Petitioner insists that he had the right to reserve his title on the jeepney until after the purchase price thereof had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal via a petition for review on certiorari under Rule 45 of the Rules of Court and not a special civil action of certiorari under Rule 65. He argues that petitioner failed to establish that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in its decision, as the said ruling is in accord with law and the evidence on record.

Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a boundary-hulog scheme was a devious circumvention of the Labor Code of the Philippines. Respondent insists that his juridical relationship with petitioner is that of employer-employee because he was engaged to perform activities which were necessary or desirable in the usual business of petitioner, his employer.

In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence, it behooves the Court to resolve the merits of his petition.

We agree with respondent’s contention that the remedy of petitioner from the CA decision was to file a petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his motion for

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the reconsideration within which to file the petition under Rule 45.28 But instead of doing so, he filed a petition for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend the running of the 15-day reglementary period; consequently, the CA decision became final and executory upon the lapse of the reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed.29

It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is proscribed by the remedy of appeal under Rule 45. As the Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals:30

We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or issues of law within fifteen days from notice of the said resolution. Otherwise, the decision of the CA shall become final and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal to this Court from the decision of the CA. It is a continuation of the appellate process over the original case. A review is not a matter of right but is a matter of judicial discretion. The aggrieved party may, however, assail the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty days from notice of the decision of the CA or its resolution denying the motion for reconsideration of the same. This is based on the premise that in issuing the assailed decision and resolution, the CA acted with grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy and adequate remedy in the ordinary course of law. A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower court.

The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. The aggrieved party is, likewise, barred from filing a petition for certiorari if the remedy of appeal is lost through his negligence. A petition for certiorari is an original action and does not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding. A petition for certiorari must be based on jurisdictional grounds because, as long as the respondent court acted within its jurisdiction, any error committed by it will amount to nothing more than an error of judgment which may be corrected or reviewed only by appeal.31

However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under Rule 45, conformably with the principle that rules of procedure are to be construed liberally, provided that the petition is filed within the reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid and compelling circumstances warrant that the petition be resolved on its merits.32 In this case, the petition was filed within the reglementary period and petitioner has raised an issue of substance: whether the existence of a boundary-hulog agreement negates the employer-employee relationship between the vendor and vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such case.

We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency of the government has jurisdiction over the same, are determined by the material allegations of the complaint in relation to the law involved and the character of the reliefs prayed for, whether or not the complainant/plaintiff is entitled to any or all of such reliefs.33 A prayer or demand for relief is not part of the petition of the cause of action; nor does it enlarge the cause of action stated or change the legal effect of what is alleged.34 In determining which body has jurisdiction over a case, the better policy is to consider not only the status or relationship of the parties but also the nature of the action that is the subject of their controversy.35

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only over the following:

x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work, and other terms and conditions of employment;

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

5. Cases arising from violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relationship, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining agreements, and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements.

In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite.36 The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes or their collective bargaining agreement.37 Not every dispute between an employer and employee involves matters that only the Labor Arbiter and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees where the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the regular courts.38 When the principal relief is to be granted under labor legislation or a collective bargaining agreement, the case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might be asserted as an incident to such claim.39

We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-employee relationship of the parties extant before the execution of said deed.

As early as 1956, the Court ruled in National Labor Union v. Dinglasan40 that the jeepney owner/operator-driver relationship under the boundary system is that of employer-employee and not lessor-lessee. This doctrine was affirmed, under similar factual settings, in Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was analogously applied to govern the relationships between auto-calesa owner/operator and driver,43 bus owner/operator and conductor,44 and taxi owner/operator and driver.45

The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common carrier to primarily govern the compensation of the driver, that is, the latter’s daily earnings are remitted to the owner/operator less the excess of the boundary which represents the driver’s compensation. Under this system, the owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels where the lessor loses complete control over the chattel leased but the lessee is still ultimately responsible for the consequences of its use. The management of the business is still in the hands of the owner/operator, who, being the holder of the certificate of public convenience, must see to it that the driver follows the route prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the business operations. The fact that the driver does not receive fixed wages but only the excess of the "boundary" given to the owner/operator is not sufficient to change the relationship between them. Indubitably, the driver performs activities which are usually necessary or desirable in the usual business or trade of the owner/operator.46

Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which represented the boundary of petitioner as well as respondent’s partial payment (hulog) of the purchase price of the jeepney.

Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily remittances also had a dual purpose: that of petitioner’s boundary and respondent’s partial payment (hulog) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The well-settled rule is that an obligation is not novated by an instrument that expressly recognizes the old one, changes only the terms of payment, and adds other obligations not incompatible with the old provisions or where the new contract merely supplements the previous one. 47 The two obligations of the respondent to remit to petitioner the boundary-hulog can stand together.

In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind that when the terms of the agreement are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations shall prevail.48 The intention of the contracting parties should be ascertained by looking at the words used to project their intention, that is, all the words, not

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just a particular word or two or more words standing alone. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.49 The parts and clauses must be interpreted in relation to one another to give effect to the whole. The legal effect of a contract is to be determined from the whole read together.50

Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as driver of the jeepney, thus:

Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga sumusunod:

1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.

2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o pangangalakal sa malinis at maayos na pamamaraan.

3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga bagay na makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.

4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.

5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa harap ng windshield upang sa pamamagitan nito ay madaliang malaman kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi.

6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID card sa wastong lugar o anuman kasalanan o kapabayaan.

7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan.

8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan.

9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng VILLAMARIA MOTORS.

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang kasuotan upang igalang ng mga pasahero.

11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng magandang asal sa mga pasaheros at hindi dapat magsasalita ng masama kung sakali man may pasaherong pilosopo upang maiwasan ang anumang kaguluhan na maaaring kasangkutan.

12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng responsibilidad. Ang halagang dapat bayaran sa opisina ay may karagdagang multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA MOTORS.

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG.

14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive insurance taon-taon at kahit anong uri ng aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.

15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa ikasusulong ng samahan.

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16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na magkakaroon ng pagbabago o karagdagan sa mga darating na panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.

17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi kainisan ng kapwa driver at maiwasan ang pagkakasangkot sa anumang gulo.

18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito.

19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw sa lalawigan ay dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin.

20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang aksidente.

21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang maiwasan ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA MOTORS.

22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa paghahanapbuhay at wala nang iba pa.51

The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a contract to sell the jeepney on a daily installment basis of P550.00 payable in four years and that petitioner would thereafter become its owner. A contract is one of conditional sale, oftentimes referred to as contract to sell, if the ownership or title over the

property sold is retained by the vendor, and is not passed to the vendee unless and until there is full payment of the purchase price and/or upon faithful compliance with the other terms and conditions that may lawfully be stipulated.52 Such payment or satisfaction of other preconditions, as the case may be, is a positive suspensive condition, the failure of which is not a breach of contract, casual or serious, but simply an event that would prevent the obligation of the vendor to convey title from acquiring binding force.53 Stated differently, the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.54 The vendor may extrajudicially terminate the operation of the contract, refuse conveyance, and retain the sums or installments already received, where such rights are expressly provided for.55

Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material possession was vested in respondent as its driver. In case respondent failed to make his P550.00 daily installment payment for a week, the agreement would be of no force and effect and respondent would have to return the jeepney to petitioner; the employer-employee relationship would likewise be terminated unless petitioner would allow respondent to continue driving the jeepney on a boundary basis of P550.00 daily despite the termination of their vendor-vendee relationship.

The juridical relationship of employer-employee between petitioner and respondent was not negated by the foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondent’s conduct as driver of the vehicle. As correctly ruled by the CA:

The exercise of control by private respondent over petitioner’s conduct in operating the jeepney he was driving is inconsistent with private respondent’s claim that he is, or was, not engaged in the transportation business; that, even if petitioner was allowed to let some other person drive the unit, it was not shown that he did so; that the existence of an employment relation is not dependent on how the worker is paid but on the presence or absence of control over the means and method of the work; that the amount earned in excess of the "boundary hulog" is equivalent to wages; and that the fact that the power of dismissal was not mentioned in the Kasunduan did not mean that private respondent never exercised such power, or could not exercise such power.

Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors about the fact that the unit would be going out to the province for two days of more, or to drive the unit carefully, etc. necessarily related to control over the means by which the petitioner was to go about his work; that the ruling applicable here is not Singer Sewing Machine but National Labor Union since the latter case involved jeepney owners/operators and jeepney drivers, and that the fact that the "boundary"

8

here represented installment payment of the purchase price on the jeepney did not withdraw the relationship from that of employer-employee, in view of the overt presence of supervision and control by the employer.56

Neither is such juridical relationship negated by petitioner’s claim that the terms and conditions in the Kasunduan relative to respondent’s behavior and deportment as driver was for his and respondent’s benefit: to insure that respondent would be able to pay the requisite daily installment of P550.00, and that the vehicle would still be in good condition despite the lapse of four years. What is primordial is that petitioner retained control over the conduct of the respondent as driver of the jeepney.

Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise supervision and control over the respondent, by seeing to it that the route provided in his franchise, and the rules and regulations of the Land Transportation Regulatory Board are duly complied with. Moreover, in a business establishment, an identification card is usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide employee of the firm who issues it.57

As respondent’s employer, it was the burden of petitioner to prove that respondent’s termination from employment was for a lawful or just cause, or, at the very least, that respondent failed to make his daily remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled by the appellate court:

It is basic of course that termination of employment must be effected in accordance with law. The just and authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor Code.

Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the boundary hulog for one week or longer may be considered an additional cause for termination of employment. The reason is because the Kasunduan would be of no force and effect in the event that the purchaser failed to remit the boundary hulog for one week. The Kasunduan in this case pertinently stipulates:

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol pa.

Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an employee is for a just cause. The failure of the employer to discharge this burden means that the dismissal is not justified and that the employee is entitled to reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that petitioner failed to pay the miscellaneous fee of P10,000.00 and the yearly registration of the unit; that petitioner also stopped remitting the "boundary hulog," prompting him (private respondent) to issue a "Paalala," which petitioner however ignored; that petitioner even brought the unit to his (petitioner’s) province without informing him (private respondent) about it; and that petitioner eventually abandoned the vehicle at a gasoline station after figuring in an accident. But private respondent failed to substantiate these allegations with solid, sufficient proof. Notably, private respondent’s allegation viz, that he retrieved the vehicle from the gas station, where petitioner abandoned it, contradicted his statement in the Paalala that he would enforce the provision (in the Kasunduan) to the effect that default in the remittance of the boundary hulog for one week would result in the forfeiture of the unit. The Paalala reads as follows:

"Sa lahat ng mga kumukuha ng sasakyan

"Sa pamamagitan ng ‘BOUNDARY HULOG’

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing Kasunduan kaya’t aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.

"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso.

9

"Sumasainyo

"Attendance: 8/27/99

"(The Signatures appearing herein

include (sic) that of petitioner’s) (Sgd.)

OSCAR VILLAMARIA, JR."

If it were true that petitioner did not remit the boundary hulog for one week or more, why did private respondent not forthwith take steps to recover the unit, and why did he have to wait for petitioner to abandon it?1avvphil.net

On another point, private respondent did not submit any police report to support his claim that petitioner really figured in a vehicular mishap. Neither did he present the affidavit of the guard from the gas station to substantiate his claim that petitioner abandoned the unit there.58

Petitioner’s claim that he opted not to terminate the employment of respondent because of magnanimity is negated by his (petitioner’s) own evidence that he took the jeepney from the respondent only on July 24, 2000.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.

SO ORDERED.

10

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 166920             February 19, 2007

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER HENRICHSEN, Petitioners, vs.KLAUS K. SCHONFELD, Respondent.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-00 dismissing the complaint of respondent Klaus K. Schonfeld.

The antecedent facts are as follows:

Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia, Canada. He had been a consultant in the field of environmental engineering and water supply and sanitation. Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in accordance with the laws of the Philippines. The primary purpose of PPI was to engage in the business of providing specialty and technical services both in and out of the Philippines.2 It is a subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter Henrichsen, who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted from Japan to Manila and vice versa, as well as in other countries where PCIJ had business.

In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines. In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI in its Water and Sanitation Department. However, PCIJ assigned him as PPI sector manager in the Philippines. His salary was to be paid partly by PPI and PCIJ.

On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada, requesting him to accept the same and affix his conformity thereto. Respondent made some revisions in the letter of employment and signed the contract.3 He then sent a copy to Henrichsen. The letter of employment reads:

Mr. Klaus K. SchonfeldII-365 Ginger DriveNew Westminster, B.C.Canada V3L 5L5Tokyo 7

January 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the agreement under which you will be engaged by our Company on the terms and conditions defined hereunder. In case of any discrepancies or contradictions between this Letter of Employment and the General Conditions of Employment, this Letter of Employment will prevail.

You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines, Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a separate contract, which will define that part of the present terms and conditions for which Pacicon is responsible. In case of any discrepancies or contradictions between the present Letter of Employment and the contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its obligations, this Letter of Employment will prevail.

11

1. Project Country: The Philippines with possible short-term assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager, Water and Sanitation.

5. Commencement: 1st October 1997.

6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary (US$2,100.00 per month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI to bank accounts to be nominated by you.

A performance related component corresponding to 17.6% of the total annual remuneration, subject to satisfactory performance against agreed tasks and targets, paid offshore.

7. Accommodation: The company will provide partly furnished accommodation to a rent including association fees, taxes and VAT not exceeding the Pesos equivalent of US$2,900.00 per month.

8. Transportation: Included for in the remuneration.

9. Leave Travels: You are entitled to two leave travels per year.

10. Shipment of Personal

Effects: The maximum allowance is US$4,000.00.

11. Mobilization

Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.

Yours sincerely,

Pacific Consultants InternationalJens Peter Henrichsen

Above terms and conditions accepted

Date: 2 March 1998

(Sgd.)Klaus Schonfeld

as annotated and initialed4

Section 21 of the General Conditions of Employment appended to the letter of employment reads:

21 Arbitration

Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any question arising between the Employee and the Company which is in consequence of or connected with his employment with the Company and which can not be settled amicably, is to be finally settled, binding to both parties through written submissions, by the Court of Arbitration in London.5

Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was accorded the status of a resident alien.

As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the Department of Labor and Employment (DOLE). It appended respondent’s contract of employment to the application.1awphi1.net

On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It reads:

12

Republic of the PhilippinesDepartment of Labor & EmploymentNational Capital Region

ALIEN EMPLOYMENT PERMIT

ISSUED TO: SCHONFELD, KLAUS KURT

DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian

POSITION: VP – WATER & SANITATION

EMPLOYER: PACICON PHILIPPINES, INC.

ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City

P E R M I T

ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:

VALID UNTIL: January 7, 2000 (Sgd.)

APPROVED: BIENVENIDO S. LAGUESMA

By: MAXIMO B. ANITOREGIONAL DIRECTOR

(Emphasis supplied)6

Respondent received his compensation from PPI for the following periods: February to June 1998, November to December 1998, and January to August 1999. He was also reimbursed by PPI for the expenses he incurred in connection with his work as sector manager. He reported for work in Manila except for occasional assignments abroad, and received instructions from Henrichsen.7

On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment had been terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been successful in the water and sanitation sector in the Philippines.8 However, on July 24, 1999, Henrichsen, by electronic mail,9 requested respondent to stay put in his job after August 5, 1999, until such time that he would be able to report on certain projects and discuss all the opportunities he had developed.10 Respondent continued his work with PPI until the end of business hours on October 1, 1999.

Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of his claims (US$5,635.99), but refused to pay the rest.

On December 5, 2000, respondent filed a Complaint11 for Illegal Dismissal against petitioners PPI and Henrichsen with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.

In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE of its decision to close one of its departments, which resulted in his dismissal; and they failed to notify him that his employment was terminated after August 4, 1999. Respondent also claimed for separation pay and other unpaid benefits. He alleged that the company acted in bad faith and disregarded his rights. He prayed for the following reliefs:

1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to his former position without loss of seniority and other privileges and benefits, and to pay his full backwages from the time compensation was with held (sic) from him up to the time of his actual reinstatement. In the alternative, if reinstatement is no longer feasible, respondents must pay the complainant full backwages, and separation pay equivalent to one month pay for every year of service, or in the amount of US$16,400.00 as separation pay;

2. Judgment be rendered ordering the respondents to pay the outstanding monetary obligation to complainant in the amount of US$10,131.76 representing the balance of unpaid salaries, leave pay, cost of his air travel and shipment of goods from Manila to Canada; and

3. Judgment be rendered ordering the respondent company to pay the complainant damages in the amount of no less than US $10,000.00 and to pay 10% of the total monetary award as attorney’s fees, and costs.

13

Other reliefs just and equitable under the premises are, likewise, prayed for.12 1awphi1.net

Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred that respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He was employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since respondent’s cause of action was based on his letter of employment executed in Tokyo, Japan dated January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his complaint against PPI before the NLRC in the Philippines. Moreover, under Section 12 of the General Conditions of Employment appended to the letter of employment dated January 7, 1998, complainant and PCIJ had agreed that any employment-related dispute should be brought before the London Court of Arbitration. Since even the Supreme Court had already ruled that such an agreement on venue is valid, Philippine courts have no jurisdiction.13

Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines under contract separate from his January 7, 1998 contract of employment with PCIJ. He insisted that his employer was PPI, a Philippine-registered corporation; it is inconsequential that PPI is a wholly-owned subsidiary of PCIJ because the two corporations have separate and distinct personalities; and he received orders and instructions from Henrichsen who was the president of PPI. He further insisted that the principles of forum non conveniens and lex loci contractus do not apply, and that although he is a Canadian citizen, Philippine Labor Laws apply in this case.

Respondent adduced in evidence the following contract of employment dated January 9, 1998 which he had entered into with Henrichsen:

Mr. Klaus K. Schonfeld

II-365 Ginger DriveNew Westminster, B.C.Canada V3L 5L5

Manila 9 January, 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the agreement, under which you will be engaged by Pacicon Philippines, Inc. on the terms and conditions defined hereunder.

1. Project Country: The Philippines with possible assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager – Water and Sanitation Sector.

5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by you.

7. Accommodation: The company will provide partly furnished accommodation to a rent including association fees, taxes and VAT not exceeding the Pesos equivalent of US$2300.00 per month.

8. Transportation: Included for in the remuneration.

9. Shipment of Personal The maximum allowance is US$2500.00 in Effects: connection with initial shipment of personal effects from Canada.

10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.

Yours sincerely,

14

Pacicon Philippines, Inc.Jens Peter HenrichsenPresident14

According to respondent, the material allegations of the complaint, not petitioners’ defenses, determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the General Conditions of Employment does not provide for an exclusive venue where the complaint against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that PPI had adopted two inconsistent positions: it was first alleged that he should have filed his complaint in Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court of Arbitration.15

In their reply, petitioners claimed that respondent’s employer was PCIJ, which had exercised supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of Henrichsen under the letterhead of PCIJ in Japan.16 The letter of employment dated January 9, 1998 which respondent relies upon did not bear his (respondent’s) signature nor that of Henrichsen.

On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners’ Motion to Dismiss. The dispositive portion reads:

WHEREFORE, finding merit in respondents’ Motion to Dismiss, the same is hereby granted. The instant complaint filed by the complainant is dismissed for lack of merit.

SO ORDERED.17

The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between respondent and PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld was required to work under the General Conditions of Employment. PCIJ remained respondent’s employer despite his having been sent to the Philippines. Since the parties had agreed that any differences regarding employer-employee relationship should be submitted to the jurisdiction of the court of arbitration in London, this agreement is controlling.

On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter’s decision in toto.18

Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the following arguments:

I

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE LABOR ARBITER’S DECISION CONSIDERING THAT:

A. PETITIONER’S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF JAPAN BUT RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS JURISDICTION OVER THE INSTANT CASE; AND

B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF THE NLRC AND NOT THE COURT OF ARBITRATION IN LONDON.

II

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DISMISSAL OF THE COMPLAINT CONSIDERING THAT PETITIONER’S TERMINATION FROM EMPLOYMENT IS ILLEGAL:

A. THE CLOSURE OF RESPONDENT COMPANY’S WATER AND SANITATION SECTOR WAS NOT BONA FIDE.

B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANY’S WATER AND SANITATION SECTOR WAS JUSTIFIABLE, PETITIONER’S DISMISSAL WAS INEFFECTUAL AS THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) AND PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED CLOSURE.19

Respondent averred that the absence or existence of a written contract of employment is not decisive of whether he is an employee of PPI. He maintained that PPI, through its president Henrichsen, directed his work/duties as Sector Manager of PPI; proof of this was his letter-proposal to the Development Bank of

15

the Philippines for PPI to provide consultancy services for the Construction Supervision of the Water Supply and Sanitation component of the World Bank-Assisted LGU Urban Water and Sanitation Project.20 He emphasized that as gleaned from Alien Employment Permit (AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999, he is an employee of PPI. It was PPI president Henrichsen who terminated his employment; PPI also paid his salary and reimbursed his expenses related to transactions abroad. That PPI is a wholly-owned subsidiary of PCIJ is of no moment because the two corporations have separate and distinct personalities.

The CA found the petition meritorious. Applying the four-fold test21 of determining an employer-employee relationship, the CA declared that respondent was an employee of PPI. On the issue of venue, the appellate court declared that, even under the January 7, 1998 contract of employment, the parties were not precluded from bringing a case related thereto in other venues. While there was, indeed, an agreement that issues between the parties were to be resolved in the London Court of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint cannot be filed in any other forum other than in the Philippines.

On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of which reads:

WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby REVERSED and SET ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for disposition of the case on the merits.

SO ORDERED.22

A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the appellate court denied for lack of merit.23

In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:

I

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND WAS MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA.

II

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO HAS JURISDICTION OVER RESPONDENT’S CLAIM DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN LONDON."24

Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners aver that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They maintain that it is not within the province of the appellate court in a petition for certiorari to review the facts and evidence on record since there was no conflict in the factual findings and conclusions of the lower tribunals. Petitioners assert that such findings and conclusions, having been made by agencies with expertise on the subject matter, should be deemed binding and conclusive. They contend that it was the PCIJ which employed respondent as an employee; it merely seconded him to petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner PPI, being a wholly-owned subsidiary of PCIJ, was never the employer of respondent.

Petitioners assert that the January 9, 1998 letter of employment which respondent presented to prove his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the purported parties. They insist that PCIJ paid respondent’s salaries and only coursed the same through petitioner PPI. PPI, being its subsidiary, had supervision and control over respondent’s work, and had the responsibilities of monitoring the "daily administration" of respondent. Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to prove that he was an employee of petitioner PPI because these documents are of doubtful authenticity.

Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of PPI, it was he who signed the termination letter of respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ’s letterhead was used to inform him that his employment was terminated. Petitioners further assert that all work instructions came from PCIJ and that petitioner PPI only served as a "conduit." Respondent’s Alien Employment Permit stating that petitioner PPI was his employer is but a

16

necessary consequence of his being "seconded" thereto. It is not sufficient proof that petitioner PPI is respondent’s employer. The entry was only made to comply with the DOLE requirements.

There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no jurisdiction over respondent’s complaint.

Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim that the principlesof forum non conveniens and lex loci contractus are applicable. They also point out that the principal office, officers and staff of PCIJ are stationed in Tokyo, Japan; and the contract of employment of respondent was executed in Tokyo, Japan.

Moreover, under Section 21 of the General Conditions for Employment incorporated in respondent’s January 7, 1998 letter of employment, the dispute between respondent and PCIJ should be settled by the court of arbitration of London. Petitioners claim that the words used therein are sufficient to show the exclusive and restrictive nature of the stipulation on venue.

Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers, while the Labor Code of the Philippines applies only to Filipino employers and Philippine-based employers and their employees, not to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter do not extend to foreign workers who executed employment agreements with foreign employers abroad, although "seconded" to the Philippines.25

In his Comment,26 respondent maintains that petitioners raised factual issues in their petition which are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary evidence which both the Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss his complaint on the basis of the letter of employment and Section 21 of the General Conditions of Employment. In contrast, the CA took into account the evidence on record and applied case law correctly.

The petition is denied for lack of merit.

It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from reviewing the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No. 7902, the CA is empowered to pass upon the evidence, if and when necessary, to resolve factual issues.27 If it appears that the Labor Arbiter and the NLRC misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated, the factual findings of such tribunals cannot be given great respect and finality.28

Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent appended to his pleadings showing that he was an employee of petitioner PPI; they merely focused on the January 7, 1998 letter of employment and Section 21 of the General Conditions of Employment.

Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said application, PPI averred that respondent is its employee. To show that this was the case, PPI appended a copy of respondent’s employment contract. The DOLE then granted the application of PPI and issued the permit.

It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the requirements for the issuance of an employment permit is the employment contract. Section 5, Rule XIV (Employment of Aliens) of the Omnibus Rules provides:

SECTION 1. Coverage. – This rule shall apply to all aliens employed or seeking employment in the Philippines and the present or prospective employers.

SECTION 2. Submission of list. – All employers employing foreign nationals, whether resident or non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship, foreign and local address, nature of employment and status of stay in the Philippines.

SECTION 3. Registration of resident aliens. – All employed resident aliens shall register with the Bureau under such guidelines as may be issued by it.

SECTION 4. Employment permit required for entry. – No alien seeking employment, whether as a resident or non-resident, may enter the Philippines without first securing an employment permit from the Ministry. If an alien enters the country under a non-working visa and wishes to be employed thereafter, he may only be allowed to be employed upon presentation of a duly approved employment permit.

SECTION 5. Requirements for employment permit applicants. – The application for an employment permit shall be accompanied by the following:

17

(a) Curriculum vitae duly signed by the applicant indicating his educational background, his work experience and other data showing that he possesses technical skills in his trade or profession.

(b) Contract of employment between the employer and the principal which shall embody the following, among others:

1. That the non-resident alien worker shall comply with all applicable laws and rules and regulations of the Philippines;

2. That the non-resident alien worker and the employer shall bind themselves to train at least two (2) Filipino understudies for a period to be determined by the Minister; and

3. That he shall not engage in any gainful employment other than that for which he was issued a permit.

(c) A designation by the employer of at least two (2) understudies for every alien worker. Such understudies must be the most ranking regular employees in the section or department for which the expatriates are being hired to insure the actual transfer of technology.

Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the following:

(a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;

(b) Report of the Bureau Director as to the availability or non-availability of any person in the Philippines who is competent and willing to do the job for which the services of the applicant are desired;

(c) His assessment as to whether or not the employment of the applicant will redound to the national interest;

(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;

(e) The recommendation of the Board of Investments or other appropriate government agencies if the applicant will be employed in preferred areas of investments or in accordance with the imperative of economic development.

Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise, petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are thus estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of respondent all along.

We agree with the conclusion of the CA that there was an employer-employee relationship between petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct. It is the so-called "control test" which constitutes the most important index of the existence of the employer-employee relationship–that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.29 We quote with approval the following ruling of the CA:

[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent company is the true employer of petitioner. In the case at bar, the power to control and supervise petitioner’s work performance devolved upon the respondent company. Likewise, the power to terminate the employment relationship was exercised by the President of the respondent company. It is not the letterhead used by the company in the termination letter which controls, but the person who exercised the power to terminate the employee. It is also inconsequential if the second letter of employment executed in the Philippines was not signed by the petitioner. An employer-employee relationship may indeed exist even in the absence of a written contract, so long as the four elements mentioned in the Mafinco case are all present.30

The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine Banking Corporation v. Tensuan,31 is that while they are considered valid and enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to the specified place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict venue, there must be accompanying

18

language clearly and categorically expressing their purpose and design that actions between them be litigated only at the place named by them.32

In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other court save —," "particularly," "nowhere else but/except —," or words of equal import were stated in the contract.33 It cannot be said that the court of arbitration in London is an exclusive venue to bring forth any complaint arising out of the employment contract.

Petitioners contend that respondent should have filed his Complaint in his place of permanent residence, or where the PCIJ holds its principal office, at the place where the contract of employment was signed, in London as stated in their contract. By enumerating possible venues where respondent could have filed his complaint, however, petitioners themselves admitted that the provision on venue in the employment contract is indeed merely permissive.

Petitioners’ insistence on the application of the principle of forum non conveniens must be rejected. The bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the application of the principle for the following reasons:

First. The Labor Code of the Philippines does not include forum non conveniens as a ground for the dismissal of the complaint.34

Second. The propriety of dismissing a case based on this principle requires a factual determination; hence, it is properly considered as defense.35

Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,36 this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 76563 is AFFIRMED. This case is REMANDED to the Labor Arbiter for disposition of the case on the merits. Cost against petitioners.

SO ORDERED.

19

Republic of the PhilippinesSUPREME COURT

FIRST DIVISION

G.R. No. 120077             October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G. SANTOS,respondents.

PARDO, J.:

The case before the Court is a petition for certiorari1 to annul the following orders of the National Labor Relations Commission (hereinafter referred to as "NLRC") for having been issued without or with excess jurisdiction and with grave abuse of discretion:2

(1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28, 1992.4 The questioned order declared that the NLRC, not the Philippine Overseas Employment Administration (hereinafter referred to as "POEA"), had jurisdiction over private respondent's complaint;

(2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay private respondent twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for the unexpired portion of his contract; three thousand six hundred dollars (US$3,600.00) as extra four months salary for the two (2) year period of his contract, three thousand six hundred dollars (US$3,600.00) as "14th month pay" or a total of nineteen thousand and eight hundred dollars (US$19,800.00) or its peso equivalent and attorney's fees amounting to ten percent (10%) of the total award; and

(3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners.

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's Republic of China and later terminated due to retrenchment.

Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel International Company, Limited (hereinafter referred to as "MHICL").

When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly organized and existing under the laws of the Philippines.

MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an "incorporator" of MHICL, owning 50% of its capital stock.8

By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited), MHICL10 trained the personnel and staff of the Palace Hotel at Beijing, China.

Now the facts.

During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one Nestor Buenio, a friend of his.

Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and increased benefits. The position was slated to open on October 1, 1988.11

On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.

On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment contract to respondent Santos. Mr. Henk advised respondent Santos that if the contract was acceptable, to return the same to Mr. Henk in Manila, together with his passport and two additional pictures for his visa to China.

20

On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30, 1988, under the pretext that he was needed at home to help with the family's piggery and poultry business.

On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4) signed copies of the employment contract (dated June 4, 1988) and notified them that he was going to arrive in Manila during the first week of July 1988.

The employment contract of June 4, 1988 stated that his employment would commence September 1, 1988 for a period of two years.12 It provided for a monthly salary of nine hundred dollars (US$900.00) net of taxes, payable fourteen (14) times a year.13

On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.

On July 1, 1988, respondent Santos arrived in Manila.

On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace Hotel.14

Subsequently, respondent Santos signed an amended "employment agreement" with the Palace Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and Development) of petitioner MHICL Miguel D. Cergueda signed the employment agreement under the word "noted".

From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned to China and reassumed his post on July 17, 1989.

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten note that respondent Santos be given one (1) month notice of his release from employment.

On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that his employment at the Palace Hotel print shop would be terminated due to business reverses brought about by the political upheaval in China.15 We quote the letter:16

"After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square incidents), our business has been severely affected. To reduce expenses, we will not open/operate printshop for the time being.

"We sincerely regret that a decision like this has to be made, but rest assured this does in no way reflect your past performance which we found up to our expectations."

"Should a turnaround in the business happen, we will contact you directly and give you priority on future assignment."

On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid all benefits due him, including his plane fare back to the Philippines.

On October 3, 1989, respondent Santos was repatriated to the Philippines.

On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt, demanding full compensation pursuant to the employment agreement.

On November 11, 1989, Mr. Shmidt replied, to wit:17

His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-month notice clause and Mr. Santos received all benefits due him.

"For your information the Print Shop at the Palace Hotel is still not operational and with a low business outlook, retrenchment in various departments of the hotel is going on which is a normal management practice to control costs.

"When going through the latest performance ratings, please also be advised that his performance was below average and a Chinese National who is doing his job now shows a better approach.

"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still enjoyed free accommodation/laundry/meals up to the day of his departure."

On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC). He prayed for an award of nineteen thousand nine hundred and twenty three dollars (US$19,923.00) as actual damages, forty

21

thousand pesos (P40,000.00) as exemplary damages and attorney's fees equivalent to 20% of the damages prayed for. The complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.

The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings before the Labor Arbiter.18

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19

"WHEREFORE, judgment is hereby rendered:

"1. directing all the respondents to pay complainant jointly and severally;

"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;

"b) P50,000.00 as moral damages;

"c) P40,000.00 as exemplary damages; and

"d) Ten (10) percent of the total award as attorney's fees.

"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction over the case.

On August 28, 1992, the NLRC promulgated a resolution, stating:20

"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA.

"SO ORDERED."

On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted resolution. He argued that the case was not cognizable by the POEA as he was not an "overseas contract worker."21

On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor Arbiter Emerson Tumanon to hear the case on the question of whether private respondent was retrenched or dismissed.22

On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial and documentary evidence presented to and heard by him.23

Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera.24

On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He found that respondent Santos was illegally dismissed from employment and recommended that he be paid actual damages equivalent to his salaries for the unexpired portion of his contract.26

On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:27

"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by substantial evidence, judgment is hereby rendered, directing the respondents to jointly and severally pay complainant the following computed contractual benefits: (1) US$12,600.00 as salaries for the unexpired portion of the parties' contract; (2) US$3,600.00 as extra four (4) months salary for the two (2) years period (sic) of the parties' contract; (3) US$3,600.00 as "14th month pay" for the aforesaid two (2) years contract stipulated by the parties or a total of US$19,800.00 or its peso equivalent, plus (4) attorney's fees of 10% of complainant's total award.

"SO ORDERED."

On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Vera's recommendation had no basis in law and in fact.28

On March 30, 1995, the NLRC denied the motion for reconsideration.29

22

Hence, this petition.30

On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary restraining order and/or writ of preliminary injunction and a motion for the annulment of the entry of judgment of the NLRC dated July 31, 1995.31

On November 20, 1995, the Court denied petitioner's urgent motion. The Court required respondents to file their respective comments, without giving due course to the petition.32

On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition and its annexes, they can not defend and sustain the position taken by the NLRC in its assailed decision and orders. The Solicitor General prayed that he be excused from filing a comment on behalf of the NLRC33

On April 30,1996, private respondent Santos filed his comment.34

On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC to file its own comment to the petition.35

On January 7, 1997, the NLRC filed its comment.

The petition is meritorious.

I. Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried here.

The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without the intervention of the POEA or any authorized recruitment agency of the government.36

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its decision.37 The conditions are unavailing in the case at bar.

Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents of the case — from the time of recruitment, to employment to dismissal occurred outside the Philippines. The inconvenience is compounded by the fact that the proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines. Neither .are they "doing business in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines.

No power to determine applicable law. — Neither can an intelligent decision be made as to the law governing the employment contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci contractus (the law of the place where the contract was made).38

The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the People's Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic of China. The NLRC was not in a position to determine whether the Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify respondent Santos' retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision could be reached by the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not even served with summons. Jurisdiction over its person was not acquired.

23

This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign employers. Neither are we saying that we do not have power over an employment contract executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum, specifically the POEA, not the NLRC, would protect him.39 He is not an "overseas contract worker" a fact which he admits with conviction.40

Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision cannot be sustained.

II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable.

True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not enough to pierce the veil of corporate fiction between MHICL and MHC.

Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done only when a corporation is a mere alter ego or business conduit of a person or another corporation.

In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities."

The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control or complete domination of the other corporation's finances, policy and business practices with regard to the transaction attacked. There must be proof that the other corporation had no separate mind, will or existence with respect the act complained of. Second, control must be used by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must be the proximate cause of the injury or loss complained of. The absence of any of the elements prevents the piercing of the corporate veil.43

It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of any other legal entity to which it may be related.44 Clear and convincing evidence is needed to pierce the veil of corporate fiction.45 In this case, we find no evidence to show that MHICL and MHC are one and the same entity.

III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment contract with the Palace Hotel. This fact fails to persuade us.

First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed the employment contract as a mere witness. He merely signed under the word "noted".

When one "notes" a contract, one is not expressing his agreement or approval, as a party would.46 In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term "noted" means that the person so noting has merely taken cognizance of the existence of an act or declaration, without exercising a judicious deliberation or rendering a decision on the matter.

Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the document is that which, "in a deed or other formal instrument is that part which comes after the recitals, or where there are no recitals, after the parties (emphasis ours)."48 As opposed to a party to a contract, a witness is simply one who, "being present, personally sees or perceives a thing; a beholder, a spectator, or eyewitness."49 One who "notes" something just makes a "brief written statement"50 a memorandum or observation.

Second, and more importantly, there was no existing employer-employee relationship between Santos and MHICL. In determining the existence of an employer-employee relationship, the following elements are considered:51

"(1) the selection and engagement of the employee;

"(2) the payment of wages;

"(3) the power to dismiss; and

24

"(4) the power to control employee's conduct."

MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of employment were negotiated and finalized through correspondence between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos' services.

Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof that MHICL "supplied" respondent Santos or even referred him for employment to the Palace Hotel.

Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL and the Palace Hotel.

IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and considering further that no employer-employee relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90.

Labor Arbiters have exclusive and original jurisdiction only over the following:53

"1. Unfair labor practice cases;

"2. Termination disputes;

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

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

"5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and

"6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement."

In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement.

The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can be resolved by reference to the Labor Code, or other labor statutes, or their collective bargaining agreements.54

"To determine which body has jurisdiction over the present controversy, we rely on the sound judicial principle that jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein."55

The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His failure to dismiss the case amounts to grave abuse of discretion.56

V. The Fallo

WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and resolutions of the National Labor Relations Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).

No costs.

SO ORDERED.

25

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 G.R. No. 120677 December 21, 1998

FOOD TRADERS HOUSE, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and BARBARA A. CAMACHO-ESPINO, respondents.

 BELLOSILLO, J.:

FOOD TRADERS HOUSE, INC. hired Barbara Camacho-Espino as its Marketing Manager. Eventually however discord set in between her and its President and General Manager Orlando Alinas. On 30 January 1992 Espino was summoned to the office of Alinas and summarily notified of her dismissal effective the following day. Petitioner withheld Espino's salary for the period 15-30 January 1992 and applied it to her personal loan with Alinas.

In a Complaint for Illegal Dismissal and Illegal Deduction filed by Espino against petitioner and Alinas, the Labor Arbiter found that Espino's dismissal was illegal as it was without valid cause and due process, at the same time ruling that petitioner was correct in garnishing the salary of Espino and applying the same to her personal loan. Consequently, the Labor Arbiter ordered Espino's immediate reinstatement, payment of full back wages and attorney's fees.

After the National Labor Relations Commission affirmed the decision of the Labor Arbiter, Espino filed a Motion for Execution. On 14 April 1994 a writ of execution was issued  1 and Deputy Sheriff Ricardo B. Perona was ordered to proceed to the premises of petitioner to reinstate Espino and to collect the sum of P428,340.00 representing Espino's full back wages plus attorney's fees.

Petitioner moved to quash the writ of execution alleging that reinstatement was no longer feasible considering Espino's employment with Higure International Corporation. Nevertheless, during subsequent conferences, Espino made known her desire to be reinstated. Consequently, she was reemployed on 4 July 1994.

Conceding to the argument that income earned elsewhere by Espino during the pendency of the case should be deducted from her back wages, the Labor Arbiter, in an Order dated 22 July 1994, deducted P36,000.00 from Espino's previously computed back wages. Four (4) days after receipt of the 22 July 1994 Order Espino filed an Urgent Omnibus Motion 2 with the NLRC arguing that the back wages accruing for the period 1 April 1994 up to 2 July 1994 plus 13th month pay should be included in the computation since she was only reinstated on 4 July 1994.

From the same order, petitioner filed a Partial Appeal 3 alleging grave abuse of discretion on the part of the Labor Arbiter in deducting P36,000.00 only instead of P80,000.00. Petitioner contended that P80,000.00 should be deducted from the back wages as it was the amount which Espino admitted to have earned during the pendency of the case. It likewise asserted that Espino's P15,000.00 personal loan from Alinas should also be deducted from the total award of back wages.

On appeal, the NLRC sustained petitioner and ruled that P80,000.00, which Espino admitted to have earned elsewhere, was the amount properly deductible from the computation of back wages. The NLRC further ordered that Espino's personal loan, now amounting only to P7,500.00, should also be deducted from the computation of back wages. Lastly, the NLRC held that Espino was entitled to back wages and 13th month pay from the time she was illegally dismissed up to the date of her actual reinstatement.

Petitioner filed a Partial Motion for Reconsideration with the NLRC insofar as it awarded additional back wages and payment of 13th month pay. It was denied. Hence, this Petition for Certiorari under Rule 65 of the Rules of Court.

Art. 279 of the Labor Code, as amended by R.A. 6715 which took effect 21 March 1989, now provides —

. . . An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

26

As the law now stands, an illegally dismissed employee is entitled to his full back wages, without deduction of earnings earned elsewhere, from the time his compensation was withheld until his actual reinstatement. As such, earnings earned elsewhere during the pendency of the case should not be deducted from the computation of his back wages. The rationale is that —

the employee, while litigating the legality (illegality) of his dismissal, must still earn a living to support himself and family, while full backwages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them under the Mercury Drug rule or the "deduction of earnings elsewhere" rule. Thus, a closer adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning exactly that,  i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. In other words, the provision calling for "full backwages" to illegally dismissed employees is clear, plain and free from ambiguity and, therefore, must be applied without attempted or strained interpretation. Index animi sermo est. 4

It was error therefore on the part of the NLRC to deduct earnings earned elsewhere by Espino during the pendency of the case in the computation of her back wages.

But the NLRC was correct in holding that Espino was entitled to additional back wages. In the instant case, Espino was illegally dismissed on 31 January 1992 and was only actually reinstated on 4 July 1994. Conformably with Art. 279 of the Labor Code, which provides that an illegally dismissed employee is entitled to full back wages from the time his compensation was withhem from him up to the time of his actual reinstatement, Espino's back wages should January 1992 until 4 July 1994, plus the corresponding increases and other benefits, including 13th month pay. Thus, in case reinstatement is adjudged, the award of back wages and other benefits continues beyond the date of the labor arbiter's decision ordering reinstatement and extends up to the time said order of reinstatement is actually carried out. 5

The Labor Arbiter gravely abused his discretion when he ordered the garnishment of Espino's salary for the period 15-30 January 1992 and applied the same to Espino's personal loan to Alinas. Article 217 of the Labor Code limits the jurisdiction of labor arbiters to (a) unfair labor practice cases; (b) termination disputes; (c) if accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; (d) claims for actual, moral exemplary and other forms of damages arising from the employer-employee relations; (e) cases arising from any violation of Art. 264 of this Code, including questions involving the legality of strikes and lockouts; and, (f) except for claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding P5,000.00 regardless of whether accompanied with a claim for reinstatement.

In the instant case, there is want of evidence that the P15,000 6 or P7,500.00 7 supposed indebtedness of Espino to Alinas arose out of employer-employee relationship. On the contrary, it was admitted by both parties that such indebtedness was a personal loan to Espino and out of the personal funds of Alinas. Clearly, this personal loan is not within the ambit of the Labor Arbiter's jurisdiction.

Under par. (b) of Art. 217 of the Labor Code, the NLRC shall have exclusive appellate jurisdiction over all cases decided by labor arbiters. This simply means that if a claim does not fall within the exclusive original jurisdiction of the labor arbiter, the NLRC cannot have appellate jurisdiction thereon, 8 much less receive additional evidence. As a result, the NLRC gravely abused its discretion when it affirmed the garnishment of Espino's salary and allowed its set-off against Espino's personal loan on the ground that it does not fall within the Labor Arbiter's exclusive original jurisdiction.

WHEREFORE, the decision of public respondent National Labor Relations Commission is MODIFIED. Private respondent BARBARA A. CAMACHO-ESPINO is AWARDED full back wages, including 13th month pay and other benefits, computed from 31 January 1992, the date when her compensation was withheld, until 4 July 1994, the date of her actual reinstatement.

Meanwhile, the garnishment of private respondent Barbara A. Camacho-Espino's salary and allowing the set-off against her supposed personal loan with Alinas is nullified and disregarded.

SO ORDERED.

27

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 131750 November 16, 1998

FRANCISCO GUICO, JR., doing business under the name and style of COPYLANDIA SERVICES & TRADING, petitioner, vs.THE HON. SECRETARY OF LABOR & EMPLOYMENT LEONARDO A. QUISUMBING, THE OFFICE OF REGIONAL DIRECTOR OF REGION I, DEP'T. OF LABOR & EMPLOYMENT, ROSALINA CARRERA, ET. AL.,respondents.

 PUNO, J.:

This is a petition for certiorari seeking a review of two (2) Orders 1 issued by the respondent Secretary of Labor and Employment dismissing petitioner's appeal.

The case started when the Office of the Regional Director, Department of Labor and Employment (DOLE), Region I, San Fernando, La Union, received a letter-complaint dated April 25, 1995, requesting for an investigation of petitioner's establishment, Copylandia Services & Trading, for violation of labor standards laws. Pursuant to the visitorial and enforcement powers of the Secretary of Labor and Employment or his duly authorized representative under Article 128 of the Labor Code, as amended, inspections were conducted at Copylandia's outlets on April 27 and May 2, 1995. The inspections yielded the following violations involving twenty-one (21) employees who are copier operators: (1) underpayment of wages; (2) underpayment of 13th month pay; and (3) no service incentive leave with pay. 2

The first hearing of the case was held on June 14, 1995, where petitioner was represented by Joseph Botea, Officer-in-Charge of the Dagupan City outlets, while the 21 employees were represented by Leilani Barrozo, Gemma Gales, Majestina Raymundo and Laureta Clauna. It was established that a copier operator was receiving a daily salary ranging from P35.00 to P60.00 plus commission of P20.00 per P500.00 worth of photocopying. There was also incentive pay of P20.00 per P250.00 worth of photocopying in excess of the first P500.00. 3

On July 13, 1995, petitioner's representative submitted a Joint Affidavit signed and executed by the 21 employees expressing their disinterest in prosecuting the case and their waiver and release of petitioner from his liabilities arising from non-payment and underpayment of their salaries and other benefits. Individually signed documents dated December 21, 1994, purporting to be the employees' Receipt, Waiver and Quitclaim were also submitted. 4

In the investigation conducted by Hearing Officer Adonis Peralta on July 21, 1995, the 21 employees claimed that they signed the Joint Affidavit for fear of losing their jobs. They added that their daily salary was increased to P92.00 effective July 1, 1995, but the incentive and commission schemes were discontinued. They alleged that they did not waive the unpaid benefits due to them. 5

On October 30, 1995, Regional Director Guerrero N. Cirilo issued an Order 6 favorable to the 21 employees. First, he ruled that the purported Receipt, Waiver and Quitclaim dated December 21 and 22, 1994, could not cause the dismissal of the labor standards case against the petitioner since the same were executed before the filing of the said case. Moreover, the employees repudiated said waiver and quitclaim. Second, he held that despite the salary increase granted by the petitioner, the daily salary of the employees was still below the minimum daily wage rate of P119.00 under Wage Order No. RB-I-03. Thirdly, he held that the removal of the commission and incentive schemes during the pendency of the case violated the prohibition against elimination or diminution of benefits under Article 100 of the Labor Code, as amended. The dispositive portion of the Order states:

WHEREFORE, premises considered and pursuant to the Rules on the Disposition of Labor Standards Cases in the Regional Offices issued by the Secretary of Labor and Employment on 16 September 1987, respondent Copylandia Services and Trading thru its owner/manager Mr. Francisco Guico, is hereby ORDERED to pay the employees the amount of ONE MILLION EIGHTY ONE THOUSAND SEVEN HUNDRED FIFTY SIX PESOS AND SEVENTY CENTAVOS (P1,081,756.70) representing their backwages, distributed as follows:

1. Rosalina Carrera — P 68,010.91

2. Joanna Ventura — 28,568.10

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3. Mercelita Paredes — 68,010.91

4. Aida Licuanan — 68,010.91

5. Gemma Gales — 68,010.91

6. Clotilda Zarata — 27,808.33

7. Consolacion Miguel — 65,708.28

8. Gemma Macalalay — 68,010.91

9. Wandy Aquino — 19,559.58

10. Laureta Clauna — 68,010.91

11. Josephine Valdez — 27,808.33

12. Leilani Berrozo — 27,808.33

13. Majestina Raymundo — 68,010.91

14. Theresa Rosario — 68,010.91

15. Edelyn Maramba — 68,010.91

16. Yolly Dimabayao — 40,380.60

17. Vilma Calaguin — 68,010.91

18. Maila Balolong — 40,380.60

19. Clarissa Villena — 27,808.33

20. Maryann Galinato — 68,010.91

21. Desiree Cabansag — 27,808.33

——————

Total P1,081,756.70.

and to submit proof of payment to this Office within seven (7) day is from receipt hereof. Otherwise, a Writ of Execution will be issued to enforce this Order.

SO ORDERED. 7

Petitioner received a copy of the Order on November 10, 1995. On November 15, 1995, petitioner filed a Notice of Appeal. 8 The next day, he filed a Memorandum of Appeal accompanied by a Motion to Reduce Amount of Appeal Bond and a Manifestation of an Appeal Bond.

In his appeal memorandum, 9 petitioner questioned the jurisdiction of the Regional Director citing Article 123 of the Labor Code, as amended, 10 and Section 1, Rule IX of the Implementing Rules of Republic Act No. 6715. 11 He argued that the Regional Director has no jurisdiction over the complaint of the 21 employees since their individual monetary claims exceed the P5,000.00 limit. He alleged that the Regional Director should have indorsed the case to the Labor Arbiter for proper adjudication and for a more formal proceeding where there is ample opportunity for him to present evidence to contest the claims of the employees. He further alleged that the Regional Director erred in computing the monetary award since it was done without regard to the actual number of days and time worked by the employees. He also faulted the Regional Director for not giving credence to the Receipt, Waiver and Quitclaim of the employees.

In the Motion to Reduce Amount of Appeal Bond, 12 petitioner claimed he was having difficulty in raising the monetary award which he denounced as exorbitant. Pending resolution of the motion, he posted an appeal bond in the amount of P105,000.00 insisting that the jurisdiction of the Regional Director is limited to claims of P5,000.00 per employee and there were 21 employees involved in the case.

29

On November 22, 1995, petitioner also filed a request to hold in abeyance any action relative to the case for a possible amicable settlement with the employees. 13

On January 10, 1996, District Labor Officer Adonis Peralta forwarded a Report showing that the petitioner and most of the 21 employees had reached a compromise agreement. The Release, Waiver and Quitclaim was signed by the following employees and show the following amounts they received, viz:

1. Aida Licuanan — P 3,000.00

2. Clarissa Villena — 3,000.00

3. Gemma Gales — 3,000.00

4. Desiree Cabansag — 3,000.00

5. Clotilda Zarata — 3,000.00

6. Consolacion Miguel — 5,000.00

7. Josephine Valdez — 3,000.00

8. Maryann Galinato — 5,000.00

9. Theresa Rosario — 3,000.00

10. Yolly Dimabayao — 3,000.00

11. Vilma Calaguin — 3,000.00

12. Gemma Macalalay — 3,000.00

13. Edelyn Maramba — 5,000.00

14. Charito Gonzales — 3,000.00

15. Joanna Ventura — 3,000.00

Four (4) employees did not sign in the compromise agreement. They insisted that they be paid what is due to them according to the Order of the Regional Director in the total amount of P231,841.06. They were Laureta Clauna, Majestina Raymundo, Leilani Barrozo and Rosalina Carrera. 14

In a letter 15 dated February 23, 1996, the Regional Director informed petitioner that he could not give due course to his appeal since the appeal bond of P105,000.00 fell short of the amount due to the 4 employees who did not participate in the settlement of the case. In the same letter, he directed petitioner to post, within ten (10) days from receipt of the letter, the amount of P126,841.06 or the difference between the monetary award due to the 4 employees and the appeal bond previously posted.

On March 13, 1996, petitioner filed a Motion for Reconsideration to Reduce Amount of Appeal Bond. 16 He manifested that he has closed down his business operations due to severe financial losses and implored the Regional Director to accept the appeal bond already filed for reasons of justice and equity.

In an Order dated December 3, 1936, the respondent Secretary denied the foregoing Motion for Reconsideration on the ground that the directive from the Regional Director to post an additional surety bond is contained in a "mere letter" which cannot be the proper subject of a Motion for Reconsideration and/or Appeal before his office. He added that for failure of the petitioner to post the correct amount of surety or cash bond, his appeal was not perfected following Article 128 (b) of the Labor Code, as amended. Despite the non-perfection of the appeal, respondent Secretary looked into the Receipt, Waiver and Quitclaim signed by the employees and rejected it on the ground that the consideration was unconscionably inadequate. He ruled, nonetheless, that the amount received by the said employees should be deducted from the judgment award and the difference should be paid by the petitioner.

On December 26, 1996, petitioner filed a Motion for Reconsideration. On February 13, 1997, he filed a Motion to Admit Additional Bond and posted the amount of P126,841.06 in compliance with the order of the Regional Director in his letter dated February 13, 1996. 17

30

On October 24, 1997, the respondent Secretary denied the Motion for Reconsideration. He ruled that the Regional Director has jurisdiction over the case citing Article 128 (b) of the Labor Code, as amended. He pointed out that Republic Act No. 7730 repealed the jurisdictional limitations imposed by Article 129 on the visitorial and enforcement powers of the Secretary of Labor and Employment or his duly authorized representatives. In addition, he held that petitioner is now estopped from questioning the computation made by the Regional Director as a result of the compromise agreement he entered into with the employees. Lastly, he reiterated his ruling that the Receipt, Waiver and Quitclaim signed by the employees was not valid.

Petitioner is now before this Court raising the following issues:

I

Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of jurisdiction when he set aside the Release and Quitclaim executed by the seventeen (sic) complainants before the Office of the Regional Director when Public Respondent himself ruled that the Appeal of the Petitioner was not perfected and, therefore, Public Respondent did not acquire jurisdiction over the case.

II

Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of jurisdiction when in complete disregard of Article 227 of the Labor Code, Public Respondent set aside and nullified the Release and Quitclaim executed by the seventeen (sic) complainants.

III

Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of jurisdiction when he affirmed the Order of the Regional Director who, in complete disregard of the due process requirements of law, computed the monetary award given to the private respondents without notice to petitioner and without benefit of hearing.

IV

Whether or not petitioner is deemed estopped from appealing the decision of the Regional Director when it (sic) entered into a compromise settlement with complainants/private respondents.

The threshold issues that need to be settled in this case are: (1) whether or not the Regional Director has jurisdiction over the instant labor standards case, and (2) whether or not petitioner perfected his appeal.

With regard to the issue of jurisdiction, petitioner alleged that the Regional Director has no jurisdiction over the instant case since the individual monetary claims of the 21 employees exceed P5,000.00. He further argued that following Article 129 of the Labor Code, as amended, and Section 1, Rule IX of the Implementing Rules of Republic Act No. 6715, the jurisdiction over this case belongs to the Labor Arbiter, and the Regional Director should have indorsed it to the appropriate regional branch of the National Labor Relations Commission (NLRC). On the other hand, the respondent Secretary held that the jurisdictional limitation imposed by Article 129 on his visitorial and enforcement power under Article 128 (b) of the Labor Code, as amended, has been repealed by Republic Act No. 7730. 18 He pointed out that the amendment "[n]otwithstanding the provisions of Article 129 and 217 of the Labor Code to the contrary" erased all doubts as to the amendatory nature of the new law, and in effect, overturned this Court's ruling in the case of Servando's Inc. v. Secretary of Labor and Employment. 19

We sustain the jurisdiction of the respondent Secretary. As the respondent correctly pointed out, this Court's ruling in Servando — that the visitorial power of the Secretary of Labor to order and enforce compliance with labor standard laws cannot be exercised where the individual claim exceeds P5,000.00, can no longer be applied in view of the enactment of R.A. No. 7730 amending Article 128(b) of the Labor Code, viz:

Art. 128 (b) — Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of the Code and other labor legislation based on the findings of the labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the

31

employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from. (Emphasis supplied.)

The records of the House of Representatives 20 show that Congressmen Alberto S. Veloso and Eriberto V. Loreto sponsored the law. In his sponsorship speech, Congressman Veloso categorically declared that "this bill seeks to do away with the jurisdictional limitations imposed through said ruling (referring to Servando) and to finally settle any lingering doubts on the visitorial and enforcement powers of the Secretary of Labor and Employment." 21 Petitioner's reliance on Servando is thus untenable.

The next issue is whether petitioner was able to perfect his appeal to the Secretary of Labor and Employment. Article 128(b) of the Labor Code clearly provides that the appeal bond must be "in the amount equivalent to the monetary award in the order appealed from." The records show that petitioner failed to post the required amount of the appeal bond. His appeal was therefore not perfected.

IN VIEW WHEREOF, the petition for certiorari is dismissed. No pronouncement as to costs.

Melo and Mendoza, JJ., concur.

32

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 109272 August 10, 1994

GEORG GROTJAHN GMBH & CO., petitioner, vs.HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br. 59; ROMANA R. LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents.

PUNO, J.:

Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent judge for lack of jurisdiction and lack of capacity to sue.

The records show that petitioner is a multinational company organized and existing under the laws of the Federal Republic of Germany. On July 6, 1983, petitioner filed an application, dated July 2, 1983, 1 with the Securities and Exchange Commission (SEC) for the establishment of a regional or area headquarters in the Philippines, pursuant to Presidential Decree No. 218. The application was approved by the Board of Investments (BOI) on September 6, 1983. Consequently, on September 20, 1983, the SEC issued a Certificate of Registration and License to petitioner. 2

Private respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983 to mid-1992. On March 12, 1992, she secured a loan of twenty-five thousand pesos (P25,000.00) from petitioner. On March 26 and June 10, 1992, she made additional cash advances in the sum of ten thousand pesos (P10,000.00). Of the total amount, twelve thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained unpaid. Despite demand, private respondent Romana failed to settle her obligation with petitioner.

On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal and non-payment of commissions against petitioner. On August 18, 1992, petitioner in turn filed against private respondent a Complaint for damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the NLRC Arbitration Branch (Manila). 3 The two cases were consolidated.

On September 2, 1992, petitioner filed another Complaint for collection of sum of money against private respondents spouses Romana and Teofilo Lanchinebre which was docketed as Civil Case No. 92-2486 and raffled to the sala of respondent judge. Instead of filing their Answer, private respondents moved to dismiss the Complaint. This was opposed by petitioner.

On December 21, 1992, respondent judge issued the first impugned Order, granting the motion to dismiss. She held, viz:

Jurisdiction over the subject matter or nature of the action is conferred by law and not subject to the whims and caprices of the parties.

Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision, the following cases involving all workers, whether agricultural or non-agricultural:

(4) claims for actual, moral, exemplary and other forms of damages arising from an employer-employee relations.

xxx xxx xxx

(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether or not accompanied with a claim for reinstatement.

In its complaint, the plaintiff (petitioner herein) seeks to recover alleged cash advances made by defendant (private respondent herein) Romana Lanchinebre while the latter was in the employ of the former. Obviously the said cash advances were made pursuant to the employer-employee relationship between the (petitioner) and the said (private respondent)

33

and as such, within the original and exclusive jurisdiction of the National Labor Relations Commission.

Again, it is not disputed that the Certificate of Registration and License issued to the (petitioner) by the Securities and Exchange Commission was merely "for the establishment of a regional or area headquarters in the Philippines, pursuant to Presidential Decree No. 218 and its implementing rules and regulations." It does not include a license to do business in the Philippines. There is no allegation in the complaint moreover that (petitioner) is suing under an isolated transaction. It must be considered that under Section 4, Rule 8 of the Revised Rules of Court, facts showing the capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or the legal existence of an organized association of persons that is made a party must be averred. There is no averment in the complaint regarding (petitioner's) capacity to sue or be sued.

Finally, (petitioner's) claim being clearly incidental to the occupation or exercise of (respondent) Romana Lanchinebre's profession, (respondent) husband should not be joined as party defendant. 4

On March 8, 1993, the respondent judge issued a minute Order denying petitioner's Motion for Reconsideration.

Petitioner now raises the following assignments of errors:

I

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE REGULAR COURTS HAVE NO JURISDICTION OVER DISPUTES BETWEEN AN EMPLOYER AND AN EMPLOYEE INVOLVING THE APPLICATION PURELY OF THE GENERAL CIVIL LAW.

II

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT PETITIONER HAS NO CAPACITY TO SUE AND BE SUED IN THE PHILIPPINES DESPITE THE FACT THAT PETITIONER IS DULY LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION TO SET UP AND OPERATE A REGIONAL OR AREA HEADQUARTERS IN THE COUNTRY AND THAT IT HAS CONTINUOUSLY OPERATED AS SUCH FOR THE LAST NINE (9) YEARS.

III

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE ERRONEOUS INCLUSION OF THE HUSBAND IN A COMPLAINT IS A FATAL DEFECT THAT SHALL RESULT IN THE OUTRIGHT DISMISSAL OF THE COMPLAINT.

IV

THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE HUSBAND IS NOT REQUIRED BY THE RULES TO BE JOINED AS A DEFENDANT IN A COMPLAINT AGAINST THE WIFE.

There is merit to the petition.

Firstly, the trial court should not have held itself without jurisdiction over Civil Case No. 92-2486. It is true that the loan and cash advances sought to be recovered by petitioner were contracted by private respondent Romana Lanchinebre while she was still in the employ of petitioner. Nonetheless, it does not follow that Article 217 of the Labor Code covers their relationship.

Not every dispute between an employer and employee involves matters that only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining agreement. In this regard, we held in the earlier case of Molave Motor Sales, Inc. vs. Laron, 129 SCRA 485 (1984), viz:

Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the Labor Code had jurisdiction over "all other cases arising from employer-employee relation, unless expressly excluded by this Code." Even then, the principal followed by this Court was that, although a controversy is between an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved.

34

In Medina vs. Castro-Bartolome, 116 SCRA 597, 604 in negating jurisdiction of the Labor Arbiter, although the parties were an employer and two employees, Mr. Justice Abad Santos stated:

The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary.

xxx xxx xxx

And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677, the following was said:

Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute.

xxx xxx xxx

In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the doctrines set forth in the Medina, Singapore Airlines, and Molave Motors cases, thus:

. . . The important principle that runs through these three (3) cases is that where the claim to the principal relief sought is to be resolved not by reference to the Labor Code or other labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such situations, resolutions of the dispute requires expertise, not in labor management relations nor in wage structures and other terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears.

Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as creditor, against private respondent Romana Lanchinebre, as debtor. The fact that they were employer and employee at the time of the transaction does not negate the civil jurisdiction of the trial court. The case does not involve adjudication of a labor dispute but recovery of a sum of money based on our civil laws on obligation and contract.

Secondly, the trial court erred in holding that petitioner does not have capacity to sue in the Philippines. It is clear that petitioner is a foreign corporation doing business in the Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. Said law defines "doing business," as follows:

. . . shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. 5

There is no general rule or governing principle as to what constitutes "doing" or "engaging in" or "transacting" business in the Philippines. Each case must be judged in the light of its peculiar circumstances. 6 In the case at bench, petitioner does not engage in commercial dealings or activities in the country because it is precluded from doing so by P.D. No. 218, under which it was established. 7 Nonetheless, it has been continuously, since 1983, acting as a supervision, communications and coordination center for its home office's affiliates in Singapore, and in the process has named its local agent and has employed Philippine nationals like private respondent Romana Lanchinebre. From this uninterrupted performance by petitioner of acts pursuant to its primary purposes and functions as a regional/area headquarters for its home office, it is clear that petitioner is doing business in the country. Moreover, private respondents are estopped from assailing the personality of petitioner. So we held inMerrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837 (1992):

35

The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the "doctrine of estoppel to deny corporate existence applies to foreign as well as to domestic corporations;" "one who has dealth with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity." The principle "will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract, . . . (Citations omitted.)

Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be the misjoinder of private respondent Teofilo Lanchinebre as party defendant. It is a basic rule that "(m)isjoinder or parties is not ground for dismissal of an action." 8 Moreover, the Order of the trial court is based on Section 4(h), Rule 3 of the Revised Rules of Court, which provides:

A married woman may not . . . be sued alone without joining her husband, except . . . if the litigation is incidental to the profession, occupation or business in which she is engaged,

Whether or not the subject loan was incurred by private respondent as an incident to her profession, occupation or business is a question of fact. In the absence of relevant evidence, the issue cannot be resolved in a motion to dismiss.

IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992 and March 8, 1993, in Civil Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of Makati, Br. 59, is hereby ordered to hear the reinstated case on its merits. No costs.

SO ORDERED.

36

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 G.R. No. 92598 May 20, 1994

PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and BENJAMIN C. YBANEZ, petitioners, vs.THE COURT OF APPEALS, ET AL., respondents.

Rufino L. Remoreras for petitioners.

Danilo L. Pilapil for private respondents.

 PUNO, J.:

This is an appeal by certiorari from the Decision of the Court of Appeals, 1 dated November 16, 1989, denying due course to and dismissing the petition in CA-G.R. SP NO. 18017. 2

The case at bench finds its roots in the Decision of the Department of Labor and Employment (Region VII), ordering Inductocast Cebu, a partnership based in Mandaue City, to pay its former employees a total of P232,908.00. As a consequence of the judgment, the labor department's regional sheriff levied the buildings and improvements standing on Lot 109, Plan 11-5121-Amd., at Tipolo, Mandaue City. The levied properties (hereinafter referred to as the "Tipolo properties") were subsequently sold at public auction to said employees.

On May 25, 1988, petitioners filed with the RTC of Cebu City, 7th Judicial Branch, a Complaint  3 which sought the lifting of the levy over, and annulment of the sale of, the Tipolo properties. The Complaint was docketed as Civil Case No. Ceb-6917, and raffled to Branch 8 of the trial court. Petitioners therein alleged that: they are the owners of the Lot 109; they entered into a lease agreement with Inductocast Cebu over Lot 109; the lease contract provided that, except for machineries and equipment, all improvements introduced in the leased premises shall automatically be owned by the Lessor (petitioners) upon the expiration/termination of the contract; 4 the lease agreement was terminated by petitioners in November, 1980 due to non-payment of rentals by Inductocast Cebu; 5thereafter, petitioners took actual possession of and occupied the Tipolo properties. Petitioners likewise alleged in their Complaint that they became aware of the labor dispute involving Inductocast only after the impugned public auction sale. 6

Atty. Danilo Pilapil, claiming to be the John Doe named in the Complaint, filed a motion to dismiss on the ground that the trial court had no jurisdiction over the case. The buyers of the Tipolo properties, as intervenors, also filed a motion to dismiss on the same ground. Both motions, which were opposed by petitioners, were denied.

The intervenors, however, moved for reconsideration of the denial. In an Order dated April 18, 1989, the trial court granted the motion and dismissed Civil Case No. Ceb-6917. It held that the civil case "is actually in the nature of a quashal of the levy and the certificate of sale, a case arising out of a dispute that was instituted by the previous employees of Inductocast before the Department of Labor and Employment, Region 7." 7 Citing Pucan vs.Bengzon, 155 SCRA 692 (1987), it held it had no jurisdiction over the case since the levy and sale "are connected with the case within the exclusive jurisdiction of the Department of Labor and Employment." 8

Petitioners questioned the dismissal of their Complaint to the respondent Court of Appeals, through a petition forcertiorari and preliminary injunction. 9 The appellate court, in its impugned Decision, denied the petition as it held:

To Our minds, the issue on what forum the case must be tried or heard is a settled one. The Department of Labor is the agency upon which devolves the jurisdiction over disputes emanating from and in relation with labor controversies to the exclusion of the regular courts.

The issue in the case at bar concerns the levy of a property in pursuance to a writ of execution, arising out of labor disputes. There can be no doubt that jurisdiction pertains to the Department of Labor.

xxx xxx xxx

37

In the light of the factual antecedents and incidents that transpired in the hearing of this case at bar, the (trial court) correctly ruled that indeed the Department of Labor has jurisdiction over the case. Consequently, WE see no abuse of discretion let alone a grave one, amounting to lack or in excess of its jurisdiction correctible with a writ of certiorari.

Indeed, the issue of granting or denying a motion to dismiss is addressed to the sound discretion of the court, and in the absence of a capricious and whimsical exercise of power, certiorari will not lie.

Thus, this appeal where petitioners contend:

THE RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE DEPARTMENT OF LABOR HAS JURISDICTION ON THE SUBJECT MATTER AND NATURE OF THE CASE AS AGAINST THE CIVIL COURT.

We find merit in the appeal. Firstly, respondent court erred in holding that the trial court does not have jurisdiction over the case filed by petitioners. It is at once evident that the Civil Case No. Ceb-6917 is not a labor case. No employer-employee relationship exists between petitioners and the other parties, and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement. Neither can we characterize petitioner's action before the trial court as arising out of a labor dispute. It was not brought to reverse or modify the judgment of the Department of Labor and Employment (DOLE). Neither did it question the validity of, or pray for, the quashal of the writ of execution against Inductocast.

What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the Tipolo properties. Clearly, it is the RTC and not the labor department which can take cognizance of the case, as provided by B.P. Blg. 129 ("An Act Reorganizing the Judiciary, Appropriating Funds Therefor, and For Other Purposes"), thus:

Sec. 19. Jurisdiction in civil case. — Regional Trial Courts shall exercise exclusive original jurisdiction:

xxx xxx xxx

(2) In all civil actions which involve the title to, or possession of real property, or any interest therein, except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts;

xxx xxx xxx

The action taken by petitioners before the RTC asserting their ownership over the levied properties is mandated by Section 17, Rule 39 of the Revised Rules of Court. Time and again, we have held that:

Under Section 17, Rule 39, a third person who claims property levied upon on execution may vindicate such claim by action. . . . The right of a person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be suffered by the third-party claimant. By "action", as stated in the Rule, what is meant is a separate and independent action. 10

Secondly, it is incorrect to argue that the trial court cannot take cognizance of Civil Case No. Ceb-6917 without interfering with the writ of attachment and writ of execution of a co-equal body. It is settled that the levy and sale of property by virtue of a writ of attachment is lawful only when the levied property indubitably belongs to the defendant. If property other than those of the defendant is attached and sold by the sheriff, he acts beyond the limits of his and the court's authority. 11 In this regard, we held in the case of Uy, Jr. vs. Court of Appeals, 191 SCRA 275 (1991) that:

The main issue in this case is whether or not properties levied and seized by virtue of a writ of attachment and later by a writ of execution, were under custodia legis and therefore not subject to the jurisdiction of another co-equal court where a third party claimant claimed ownership of the same properties.

The issue has long been laid to rest in the case of Manila Herald Publishing Co., Inc. v. Ramos (88 Phil. 94 [1951]) where the Court ruled that while it is true that property in custody of the law may not be interfered with, without the permission of the proper court, this rule is confined to cases where the property belongs to the defendant or one in which the defendant has proprietary interests. But when the Sheriff, acting beyond

38

the bounds of his office seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another court's order of attachment.

Also, in the more recent case of Santos vs. Bayhon, 199 SCRA 525 (1991), we stated, viz.:

The general rule that no court has the power to interfere by injunction with the judgments or decrees of another court with concurrent or coordinate jurisdiction possessing equal power to grant injunctive relief, applies only when no third-party claimant is involved. . . . When a third party, or stranger to the action, asserts a claim over the property levied upon, the claimant may vindicate his claim by an independent action in the proper civil court which may stop the execution of the judgment on property not belonging to the judgment debtor (Citations omitted.)

Finally, it must be noted that the Pucan case relied upon by respondent court is inapplicable to the case at bench which involves a third-party claim over property levied on execution. In Pucan, we enjoined the Regional Trial Court from acting on the petition for damages and prohibition against the enforcement of the writ of execution issued by the NCR director of the then Ministry of Labor and Employment in a labor case for the following reason:

A perusal of the petition for damages and prohibition filed by Saulog Transit, Inc., in the lower court reveals that basically, what was being questioned was the legality or propriety of the alias writ of execution dated March 1, 1985, as well as the acts performed by the Ministry officials in implementing the same. In other words, the petition was actually in the nature of a motion to quash the writ; and with respect to the acts of the Ministry officials, a case growing out of a labor dispute, as the acts complained of, were perpetrated during the execution of a decision of the then Minister of Labor and Employment. However characterized, jurisdiction over the petition pertains to the Labor Ministry, now Department and not the regular courts. This conclusion is evident, not only from the provisions of Article 224(b) of the Labor Code, but also of Article 218, as amended by Batas Pambansa Blg. 227 in connection with Article 255 of the same Code.

xxx xxx xxx

Apparently, Saulog Transit, Inc. was misled by its own prayer for actual, moral and exemplary damages. It believed that such additional cause of action could clothe the petition with the mantle of a regular action cognizable by the regular courts. It was, of course, mistaken for the fact remains that the acts complained of are mere incidents of a labor dispute. Such prayer therefore did not alter the complexion of the case as one arising from a labor dispute, but was subsumed by the nature of the main case, over which the regular courts had no jurisdiction, much less the power to issue a temporary or permanent injunction or restraining order. . . .12

In fine, we prohibited the action before the trial court in Pucan because it attacked the regularity of the issuance of the alias writ of execution in the labor case, which is but an incident of the labor dispute. This is not so in the case at bench where the civil case filed by petitioners does not even collaterally attack the validity of the DOLE's writ of attachment. On the contrary, petitioners in Civil Case No. Ceb-6917 pray for the trial court's ruling that the DOLE's judgment could not be validly executed on the Tipolo properties, which allegedly do not belong to Inductocast.

IN VIEW WHEREOF, the petition for review is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 18017, dated November 16, 1989, is REVERSED and SET ASIDE. The Regional Trial Court of Cebu City, Branch 8 is ordered to try Civil Case Ceb-6917 on its merit. No costs.

SO ORDERED.

39

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 118216             March 9, 2000

DELTAVENTURES RESOURCES, INC., petitioner, vs.HON. FERNANDO P. CABATO, Presiding Judge Regional Trial Court, La Trinidad, Benguet, Branch 62; HON. GELACIO L. RIVERA, JR., Executive Labor Arbiter, NLRC-CAR, Baguio City, ADAM P. VENTURA, Deputy-Sheriff, NLRC-CAR, Baguio City; ALEJANDRO BERNARDINO, AUGUSTO GRANADOS, PILANDO TANGAY, NESTOR RABANG, RAY DAYAP, MYRA BAYAONA, VIOLY LIBAO, AIDA LIBAO, JESUS GATCHO and GREGORIO DULAY, respondents.

QUISUMBING, J.:

This special civil action for certiorari seeks to annual the Order dated November 7, 1994,1 of respondent Judge Fernando P. Cabato of the Regional Trial Court of La Trinidad, Benguet, Branch 62, in Civil Case No. 94-CV-0948, dismissing petitioner's amended third-party complaint, as well as the Order dated December 14, 1994,2denying motion for reconsideration.

On July 15, 1992, a Decision3 was rendered by Executive Labor Arbiter Norma Olegario, National Labor Relations Commission — Regional Arbitration Board, Cordillera Autonomous Region (Commission), in NLRC Case No. 01-08-0165-89 entitled "Alejandro Bernardino, et al, vs. Green Mountain Farm, Roberto Ongpin and Almus Alabe", the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered declaring the respondents guilty of Illegal Dismissal and Unfair Labor Practice and ordering them to pay the complainants, in solidum, in the amount herein below listed:

1. Violy Libao P131,368.07

2. Myra Bayaona 121,470.23

3. Gregorio Dulay 128,362.17

4. Jesus Gatcho 126,475.17

5. Alejandro Bernardino 110,158.20

6. Pilando Tangay 107,802.66

7. Aida Libao 129,967.34

8. Rey Dayap 123,289.21

9. Nestor Rabang 90,611.69

10. Augusto Granados 108,106.03

plus attorney's fees in the amount of P10.000.00.

Respondent Almus Alabe is also ordered to answer in exemplary damages in the amount of P5,00.00 each to all the complainants.

x x x           x x x          x x x

SO ORDERED. 4

On May 19, 1994, complainants in the abovementioned labor case filed before the Commission a motion for the issuance of a writ of execution as respondent's appeal to the Commission and this Court 5 were respectively denied.

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On June 16, 1994, Executive Labor Arbiter Gelacio C. Rivera, Jr. to whom the case was reassigned in view of Labor Arbiter Olegario's transfer, issued a writ of execution6 directing NLRC Deputy Sheriff Adam Ventura to execute the judgment against respondents, Green Mountain Farm, Roberto Ongpin and Almus Alabe Sheriff Ventura then proceeded to enforce the writ by garnishing certain personal properties of respondents. Findings that said judgment debtors do not have sufficient personal properties to satisfy the monetary award, Sheriff Ventura proceeded to levy upon a real property covered by Tax Declaration No. 9697, registered in the name of Roberto Ongpin, one of the respondents in the labor case. Thereafter, Sheriff Ventura caused the publication on the July 17, 1994 edition of the Baguio Midland Courier the date of the public auction of said real property.

On July 27, 1994, a month before the scheduled auction sale, herein petitioner filed before the Commission a third-party claim7 asserting ownership over the property levied upon and subject of the Sheriff notice of sale. Labor Arbiter Rivera thus issued an order directing the suspension of the auction sale until the merits of petitioner's claim has been resolved.8

However, on August 16, 1994, petitioner filed with the Regional Trial Court of La Trinidad, Benguet a complaint for injunction and damages, with a prayer for the issuance of a temporary retraining order against Sheriff Ventura, reiterating the same allegations it raised in the third party claim it field with the Commission. The petition was docketed as Civil Case No. 94-CV-0948, entitled "Deltaventures Resources, Inc., petitioner vs. Adam P. Ventura,et al., defendants." The next day, August 17, 1994, respondent Judge Cabato issued a temporary restraining order, enjoining respondents in the civil case before him to hold in abeyance any action relative to the enforcement of the decision in the labor case.9

Petitioner likewise filed on August 30, 1994, an amended complaint10 to implead Labor arbiter Rivera and herein private respondent-laborers.

Further, on September 20, 1994, petitioner, filed with the Commission a manifestation11 questioning the latter's authority to hear the case, the matter being within the jurisdiction of the regular courts. The manifestation however, was dismissed by Labor arbiter Rivera on October 3, 1994.12

Meanwhile, on September 20, 1994, private respondent-laborers, moved for the dismissal of the civil case on the ground of the court's lack of jurisdiction.13 Petitioner filed its opposition to said motion on October 4, 1994.14

On November 7, 1994, after both parties had submitted their respective briefs, respondent court rendered its assailed decision premised on the following grounds:

First, this Court is equal rank with the NLRC, hence, has no jurisdiction to issue an injunction against the execution of the NLRC decision. . . .

Second, the NLRC retains authority over all proceedings anent the execution of its decision. This power carries with it the right to determine every question which may be involved in the execution of its decision. . . .

Third, Deltaventures Resources, Inc. should rely on and comply with the Rules of the NLRC because it is the principal procedure to be followed, the Rules of Court being merely suppletory in application, . . .

Fourth, the invocation of estoppel by the plaintiffs is misplaced. . . . . [B]efore the defendants have filed their formal answer to the amended complaint, they moved to dismiss it for lack of jurisdiction.

Lastly, the plaintiff, having in the first place addressed to the jurisdiction of the NLRC by filing with it a Third Party Claim may not at the same time pursue the present amended Complaint under the forum shopping rule.15

Their motion for reconsideration having been denied by respondent Judge, 16 petitioner promptly filed this petition now before us.

In spite of the many errors assigned by petitioner,17 we find that here the core issue is whether or not the trial court may take cognizance of the complaint filed by petitioner and consequently provide the injunction relief sought. Such cognizance in turn, would depend on whether the acts complained of are related to, connected or interwoven with the cases falling under the exclusive jurisdiction of the Labor arbiter or the NLRC.

Petitioner avers that court a quo erred in dismissing the third-party claim on the ground of lack of jurisdiction. Further, it contends that the NLRC-CAR did not acquire jurisdiction over the claim for it did not impugn the decision of the NLRC-CAR but merely questioned the propriety of the levy made by Sheriff Ventura. In support of its claim, petitioner asserts that the instant case does not involve a labor

41

dispute, as no-employer-employee relationship exists between the parties. Nor is the petitioner's case related in any way to either parties' case before the NLRC-CAR hence, not within the jurisdiction of the Commission.

Basic as a hornbook principle, jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complainant18 which comprise a concise statement of the ultimate facts constituting the petitioner's cause of action.19 Thus we have held that:

Jurisdiction over the subject-matter is determined upon the allegations made in the complainant, irrespective of whether the plaintiff is entitled or not entitled to recover upon the claim asserted therein - a matter resolved only after and as a result of the trial. 20

Petitioner filed the third-party claim before the court a quo by reason of a writ of execution issued by the NLRC-CAR Sheriff against a property to which it claims ownership. The writ was issued to enforce and execute the commission's decision in NLRC Case No. 01-08-0165-89 (Illegal Dismissal and Unfair Labor Practice) against Green Mountain Farm, Roberto Ongpin and Almus Alabe.

Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the writ. The complainant was in effect a motion to quash the writ of execution of a decision rendered on a case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and Unfair Labor Practice. Considering the factual setting, it is then logical to conclude that the subject matter of the third party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional trial courts.

Precedents abound confirming the rule that said courts have no labor jurisdiction to act on labor cases or various incidents arising therefrom, including the execution of decisions, awards or orders.21 Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor official concerned under the Department of Labor and Employment. To hold otherwise is to sanction split jurisdiction which is obnoxious to the orderly administration of justice.22

Petitioner failed to realize that by filing its third-party claim with the deputy sheriff, it submitted itself to the jurisdiction of the Commission acting through the Labor Arbiter.1âwphi1 It failed to perceive the fact that what it is really controverting is the decision of the Labor arbiter and not the act of the deputy sheriff in executing said order issued as a consequence of said decision rendered.

Jurisdiction once acquired is not lost upon the instance of the parties but continues until the case is terminated.23Whatever irregularities attended the issuance and execution of the alias writ of execution should be referred to the same administrative tribunal which rendered the decision.24 This is because any court which issued a writ of execution has the inherent power, for the advancement of justice, to correct errors of its ministerial officers and to control its own processes.25

The broad powers granted to the Labor Arbiter and to the National Labor Relations Commission by Articles 217, 218 and 224 of the Labor Code can only be interpreted as vesting in them jurisdiction over incidents arising from, in connection with or relating to labor disputes, as the controversy under consideration, to the exclusion of the regular courts.

Having established that jurisdiction over the case rests with the Commission, we find no grave abuse of discretion on the part of respondent Judge Cabato in denying petitioner's motion for the issuance of an injunction against the execution of the decision of the National Labor Relations Commission.

Moreover, it must be noted that the Labor Code in Article 254 explicitly prohibits issuance of a temporary or permanent injunction or restraining order in any case involving or growing out of labor disputes by any court or other entity (except as otherwise provided in Arts. 218 and 264). As correctly observed by court a quo, the main issue and the subject of the amended complaint for injunction are questions interwoven with the execution of the Commission's decision. No doubt the aforecited prohibition in Article 254 is applicable.1âwphi1

Petitioner should have filed its third-party claim before the Labor Arbiter, from whom the writ of execution originated, before instituting said civil case. The NLRC's Manual on Execution of Judgment,26 issued pursuant to Article 218 of the Labor Code, provides the mechanism for a third-party claimant to assert his claim over a property levied upon by the sheriff pursuant to an order or decision of the Commission or of the Labor Arbiter. The power of the Labor Arbiter to issue a writ of execution carries with it the power to inquire into the correctness of the execution of his decision and to consider whatever supervening events might transpire during such execution.

Moreover, in denying petitioner's petition for injunction, the court a quo is merely upholding the time-honored principle that a Regional Trial Court, being a co-equal body of the National Labor Relations

42

Commission, has no jurisdiction to issue any restraining order or injunction to enjoin the execution of any decision of the latter.27

WHEREFORE, the petition for certiorari and prohibition is DENIED. The assailed Orders of respondent Judge Fernando P. Cabato dated November 7, 1994 and December 14, 1994, respectively are AFFIRMED. The records of this case are hereby REMANDED to the National Labor Relations Commission for further proceedings.1âwphi1.nêt

Costs against petitioner.

SO ORDERED.

43

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 128024 May 9, 2000

BEBIANO M. BAÑEZ, petitioner,vs.HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC., respondents.

 GONZAGA-REYES, J.:

The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking jurisdiction over an action for damages filed by an employer against its dismissed employee, are assailed in this petition for certiorari under Rule 65 of the Rules of Court for having been issued in grave abuse of discretion.

Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In 1993, private respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal dismissal with the National Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July 7, 1994, Labor Arbiter Nicodemus G. Palangan found petitioner to have been illegally dismissed and ordered the payment of separation pay in lieu of reinstatement, and of backwages and attorney's fees. The decision was appealed to the NLRC, which dismissed the same for having been filed out of time. 2 Elevated by petition for certiorari before this Court, the case was dismissed on technical grounds3; however, the Court also pointed out that even if all the procedural requirements for the filing of the petition were met, it would still be dismissed for failure to show grave abuse of discretion on the part of the NLRC.

On November 13, 1995, private respondent filed a complaint for damages before the Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which prayed for the payment of the following:

a. P709,217.97 plus 12% interest as loss of profit and/or unearned income of three years;

b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties, space, etc. for three years;

c. P5,000.00 as initial expenses of litigation; and

d. P25,000.00 as attorney's fees. 4

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He interposed in the court below that the action for damages, having arisen from an employer-employee relationship, was squarely under the exclusive original jurisdiction of the NLRC under Article 217(a), paragraph 4 of the Labor Code and is barred by reason of the final judgment in the labor case. He accused private respondent of splitting causes of action, stating that the latter could very well have included the instant claim for damages in its counterclaim before the Labor Arbiter. He also pointed out that the civil action of private respondent is an act of forum-shopping and was merely resorted to after a failure to obtain a favorable decision with the NLRC.

Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which summarized the basis for private respondent's action for damages in this manner:

Paragraph 5 of the complaint alleged that the defendant violated the plaintiff's policy re: His business in his branch at Iligan City wherein defendant was the Sales Operations Manager, and paragraph 7 of the same complaint briefly narrated the modus operandi of defendant, quoted herein: Defendant canvassed customers personally or through salesmen of plaintiff which were hired or recruited by him. If said customer decided to buy items from plaintiff on installment basis, defendant, without the knowledge of said customer and plaintiff, would buy the items on cash basis at ex-factory price, a privilege not given to customers, and thereafter required the customer to sign promissory notes and other documents using the name and property of plaintiff, purporting that said customer purchased the items from plaintiff on installment basis. Thereafter, defendant collected the installment payments either personally or through Venus Lozano, a Group Sales Manager of plaintiff but also utilized by him as secretary in his own business for collecting and receiving of installments, purportedly for the plaintiff but in reality on his own account or business. The collection and receipt of payments were made inside the Iligan City branch

44

using plaintiff's facilities, property and manpower. That accordingly plaintiff's sales decreased and reduced to a considerable extent the profits which it would have earned. 5

In declaring itself as having jurisdiction over the subject matter of the instant controversy, respondent court stated:

A perusal of the complaint which is for damages does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages as redress for defendant's breach of his contractual obligation to plaintiff who was damaged and prejudiced. The Court believes such cause of action is within the realm of civil law, and jurisdiction over the controversy belongs to the regular courts.

While seemingly the cause of action arose from employer-employee relations, the employer's claim for damages is grounded on the nefarious activities of defendant causing damage and prejudice to plaintiff as alleged in paragraph 7 of the complaint. The Court believes that there was a breach of a contractual obligation, which is intrinsically a civil dispute. The averments in the complaint removed the controversy from the coverage of the Labor Code of the Philippines and brought it within the purview of civil law. (Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.) . . . 6

Petitioner's motion for reconsideration of the above Order was denied for lack of merit on October 16, 1996. Hence, this petition.

Acting on petitioner's prayer, the Second Division of this Court issued a Temporary Restraining Order ("TRO") on March 5, 1997, enjoining respondents from further proceeding with Civil Case No. 95-554 until further orders from the Court.

By way of assignment of errors, the petition reiterates the grounds raised in the Motion to Dismiss dated January 30, 1996, namely, lack of jurisdiction over the subject matter of the action, res judicata, splitting of causes of action, and forum-shopping. The determining issue, however, is the issue of jurisdiction.

Art. 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the filing of this case, reads:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

xxx xxx xxx

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

xxx xxx xxx

The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.") No. 6715, which took effect on March 21, 1989, and which put to rest the earlier confusion as to who between Labor Arbiters and regular courts had jurisdiction over claims for damages as between employers and employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including claims for damages, was originally lodged with the Labor Arbiters and the NLRC by Article 217 of the Labor Code. 7 On May 1, 1979, however, Presidential Decree ("P.D.") No. 1367 amended said Article 217 to the effect that "Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages." 8This limitation in jurisdiction, however, lasted only briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code almost to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for all forms of damages "arising from the employer-employee relations"

Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for damages filed by employees, 9 we hold that by the designating clause "arising from the employer-employee relations" Article 217 should apply with equal force to the claim of an employer for actual damages against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

45

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded by the Labor Code), jurisprudence was settled that where the plaintiff's cause of action for damages arose out of, or was necessarily intertwined with, an alleged unfair labor practice committed by the union, the jurisdiction is exclusively with the (now defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular courts over the same is a nullity. 10 To allow otherwise would be "to sanction split jurisdiction, which is prejudicial to the orderly administration of justice." 11 Thus, even after the enactment of the Labor Code, where the damages separately claimed by the employer were allegedly incurred as a consequence of strike or picketing of the union, such complaint for damages is deeply rooted from the labor dispute between the parties, and should be dismissed by ordinary courts for lack of jurisdiction. As held by this Court in National Federation of Labor vs. Eisma, 127 SCRA 419:

Certainly, the present Labor Code is even more committed to the view that on policy grounds, and equally so in the interest of greater promptness in the disposition of labor matters, a court is spared the often onerous task of determining what essentially is a factual matter, namely, the damages that may be incurred by either labor or management as a result of disputes or controversies arising from employer-employee relations.

There is no mistaking the fact that in the case before us, private respondent's claim against petitioner for actual damages arose from a prior employer-employee relationship. In the first place, private respondent would not have taken issue with petitioner's "doing business of his own" had the latter not been concurrently its employee. Thus, the damages alleged in the complaint below are: first, those amounting to lost profits and earnings due to petitioner's abandonment or neglect of his duties as sales manager, having been otherwise preoccupied by his unauthorized installment sale scheme; and second, those equivalent to the value of private respondent's property and supplies which petitioner used in conducting his "business ".

Second, and more importantly, to allow respondent court to proceed with the instant action for damages would be to open anew the factual issue of whether petitioner's installment sale scheme resulted in business losses and the dissipation of private respondent's property. This issue has been duly raised and ruled upon in the illegal dismissal case, where private respondent brought up as a defense the same allegations now embodied in his complaint, and presented evidence in support thereof. The Labor Arbiter, however, found to the contrary — that no business losses may be attributed to petitioner as in fact, it was by reason of petitioner's installment plan that the sales of the Iligan branch of private respondent (where petitioner was employed) reached its highest record level to the extent that petitioner was awarded the 1989 Field Sales Achievement Award in recognition of his exceptional sales performance, and that the installment scheme was in fact with the knowledge of the management of the Iligan branch of private respondent. 12 In other words, the issue of actual damages has been settled in the labor case, which is now final and executory.

Still on the prospect of re-opening factual issues already resolved by the labor court, it may help to refer to that period from 1979 to 1980 when jurisdiction over employment-predicated actions for damages vacillated from labor tribunals to regular courts, and back to labor tribunals. In Ebon vs. de Guzman, 113 SCRA 52, 1 this Court discussed:

The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award moral and other forms of damages in labor cases could have assumed that the Labor Arbiters' position-paper procedure of ascertaining the facts in dispute might not be an adequate tool for arriving at a just and accurate assessment of damages, as distinguished from backwages and separation pay, and that the trial procedure in the Court of First Instance would be a more effective means of determining such damages. . . .

Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and the NLRC of the jurisdiction to award damages in labor cases because that setup would mean duplicity of suits, splitting the cause of action and possible conflicting findings and conclusions by two tribunals on one and the same claim.

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217 in its original form) nullified Presidential Decree No. 1367 and restored to the Labor Arbiter and the NLRC their jurisdiction to award all kinds of damages in cases arising from employer-employee relations. . . . (Emphasis supplied).

Clearly, respondent court's taking jurisdiction over the instant case would bring about precisely the harm that the lawmakers sought to avoid in amending the Labor Code to restore jurisdiction over claims for damages of this nature to the NLRC.

This is, of course, to distinguish from cases of actions for damages where the employer-employee relationship is merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of regular courts was upheld where the damages, claimed for were based on tort 14, malicious prosecution 15, or breach of contract, as when the claimant seeks to recover a debt from a former employee 16 or seeks liquidated damages in enforcement of a prior employment contract. 17

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Neither can we uphold the reasoning of respondent court that because the resolution of the issues presented by the complaint does not entail application of the Labor Code or other labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for damages arising from employer-employee relations — in other words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages governed by the Civil Code.18

Thus, it is obvious that private respondent's remedy is not in the filing of this separate action for damages, but in properly perfecting an appeal from the Labor Arbiter's decision. Having lost the right to appeal on grounds of untimeliness, the decision in the labor case stands as a final judgment on the merits, and the instant action for damages cannot take the place of such lost appeal.

Respondent court clearly having no jurisdiction over private respondent's complaint for damages, we will no longer pass upon petitioner's other assignments of error.

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554 before Branch 39 of the Regional Trial Court of Misamis Oriental is hereby DISMISSED. No pronouncement as to costs.

SO ORDERED.

47

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 157010               June 21, 2005

PHILIPPINE NATIONAL BANK, petitioner, vs.FLORENCE O. CABANSAG, respondent.

D E C I S I O N

PANGANIBAN, J.:

The Court reiterates the basic policy that all Filipino workers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations. Our labor statutes may not be rendered ineffective by laws or judgments promulgated, or stipulations agreed upon, in a foreign country.

The Case

Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to reverse and set aside the July 16, 2002 Decision2 and the January 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 68403. The assailed Decision dismissed the CA Petition (filed by herein petitioner), which had sought to reverse the National Labor Relations Commission (NLRC)’s June 29, 2001 Resolution,4 affirming Labor Arbiter Joel S. Lustria’s January 18, 2000 Decision.5

The assailed CA Resolution denied herein petitioner’s Motion for Reconsideration.

The Facts

The facts are narrated by the Court of Appeals as follows:

"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She applied for employment, with the Singapore Branch of the Philippine National Bank, a private banking corporation organized and existing under the laws of the Philippines, with principal offices at the PNB Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was under the helm of Ruben C. Tobias, a lawyer, as General Manager, with the rank of Vice-President of the Bank. At the time, too, the Branch Office had two (2) types of employees: (a) expatriates or the regular employees, hired in Manila and assigned abroad including Singapore, and (b) locally (direct) hired. She applied for employment as Branch Credit Officer, at a total monthly package of $SG4,500.00, effective upon assumption of duties after approval. Ruben C. Tobias found her eminently qualified and wrote on October 26, 1998, a letter to the President of the Bank in Manila, recommending the appointment of Florence O. Cabansag, for the position.

x x x x x x x x x

"The President of the Bank was impressed with the credentials of Florence O. Cabansag that he approved the recommendation of Ruben C. Tobias. She then filed an ‘Application,’ with the Ministry of Manpower of the Government of Singapore, for the issuance of an ‘Employment Pass’ as an employee of the Singapore PNB Branch. Her application was approved for a period of two (2) years.

"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a temporary appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month and, upon her successful completion of her probation to be determined solely, by the Bank, she may be extended at the discretion of the Bank, a permanent appointment and that her temporary appointment was subject to the following terms and conditions:

‘1. You will be on probation for a period of three (3) consecutive months from the date of your assumption of duty.

‘2. You will observe the Bank’s rules and regulations and those that may be adopted from time to time.

‘3. You will keep in strictest confidence all matters related to transactions between the Bank and its clients.

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‘4. You will devote your full time during business hours in promoting the business and interest of the Bank.

‘5. You will not, without prior written consent of the Bank, be employed in anyway for any purpose whatsoever outside business hours by any person, firm or company.

‘6. Termination of your employment with the Bank may be made by either party after notice of one (1) day in writing during probation, one month notice upon confirmation or the equivalent of one (1) day’s or month’s salary in lieu of notice.’

"Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine Embassy in Singapore processed the employment contract of Florence O. Cabansag and, on March 8, 1999, she was issued by the Philippine Overseas Employment Administration, an ‘Overseas Employment Certificate,’ certifying that she was a bona fide contract worker for Singapore.

x x x x x x x x x

"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on March 9, 1999, her initial ‘Performance Report.’ Ruben C. Tobias was so impressed with the ‘Report’ that he made a notation and, on said ‘Report’: ‘GOOD WORK.’ However, in the evening of April 14, 1999, while Florence O. Cabansag was in the flat, which she and Cecilia Aquino, the Assistant Vice-President and Deputy General Manager of the Branch and Rosanna Sarmiento, the Chief Dealer of the said Branch, rented, she was told by the two (2) that Ruben C. Tobias has asked them to tell Florence O. Cabansag to resign from her job. Florence O. Cabansag was perplexed at the sudden turn of events and the runabout way Ruben C. Tobias procured her resignation from the Bank. The next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia Aquino and Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the information, with the explanation that her resignation was imperative as a ‘cost-cutting measure’ of the Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB Singapore Branch will be sold or transformed into a remittance office and that, in either way, Florence O. Cabansag had to resign from her employment. The more Florence O. Cabansag was perplexed. She then asked Ruben C. Tobias that she be furnished with a ‘Formal Advice’ from the PNB Head Office in Manila. However, Ruben C. Tobias flatly refused. Florence O. Cabansag did not submit any letter of resignation.

"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and demanded that she submit her letter of resignation, with the pretext that he needed a Chinese-speaking Credit Officer to penetrate the local market, with the information that a Chinese-speaking Credit Officer had already been hired and will be reporting for work soon. She was warned that, unless she submitted her letter of resignation, her employment record will be blemished with the notation ‘DISMISSED’ spread thereon. Without giving any definitive answer, Florence O. Cabansag asked Ruben C. Tobias that she be given sufficient time to look for another job. Ruben C. Tobias told her that she should be ‘out’ of her employment by May 15, 1999.

"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and adamantly ordered her to submit her letter of resignation. She refused. On April 20, 1999, she received a letter from Ruben C. Tobias terminating her employment with the Bank.

x x x x x x x x x

"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and against the Respondents, the decretal portion of which reads as follows:

‘WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding respondents guilty of Illegal dismissal and devoid of due process, and are hereby ordered:

1. To reinstate complainant to her former or substantially equivalent position without loss of seniority rights, benefits and privileges;

2. Solidarily liable to pay complainant as follows:

a) To pay complainant her backwages from 16 April 1999 up to her actual reinstatement. Her backwages as of the date of the promulgation of this decision amounted to SGD 40,500.00 or its equivalent in Philippine Currency at the time of payment;

b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine Currency at the time of payment;

c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in Philippine Currency at the time of payment;

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d) Monetary equivalent of leave credits earned on Sunday banking in the amount of SGD 1,557.67 or its equivalent in Philippine Currency at the time of payment;

e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60 or its equivalent in Philippine Currency at the time of payment.

f) Monetary equivalent of unused vacation leave benefits in the amount of SGD 319.85 or its equivalent in Philippine Currency at the time of payment.

g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine Currency at the time of payment;

3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its equivalent in Philippine Currency at the time of payment, and moral damages in the amount of PhP 200,000.00, exemplary damages in the amount of PhP 100,000.00;

4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine Currency at the time of payment, representing attorney’s fees.

SO ORDERED." 6 [Emphasis in the original.]

PNB appealed the labor arbiter’s Decision to the NLRC. In a Resolution dated June 29, 2001, the Commission affirmed that Decision, but reduced the moral damages to P100,000 and the exemplary damages to P50,000. In a subsequent Resolution, the NLRC denied PNB’s Motion for Reconsideration.

Ruling of the Court of Appeals

In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in evidence the Singaporean law supposedly governing the latter’s employment Contract with respondent. The appellate court found that the Contract had actually been processed by the Philippine Embassy in Singapore and approved by the Philippine Overseas Employment Administration (POEA), which then used that Contract as a basis for issuing an Overseas Employment Certificate in favor of respondent.

According to the CA, even though respondent secured an employment pass from the Singapore Ministry of Employment, she did not thereby waive Philippine labor laws, or the jurisdiction of the labor arbiter or the NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit herself solely to the Ministry of Manpower of Singapore’s jurisdiction over disputes arising from her employment. The appellate court further noted that a cursory reading of the Ministry’s letter will readily show that no such waiver or submission is stated or implied.

Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of respondent. The bank had also failed to give her sufficient notice and an opportunity to be heard and to defend herself. The CA ruled that she was consequently entitled to reinstatement and back wages, computed from the time of her dismissal up to the time of her reinstatement.

Hence, this Petition.7

Issues

Petitioner submits the following issues for our consideration:

"1. Whether or not the arbitration branch of the NLRC in the National Capital Region has jurisdiction over the instant controversy;

"2. Whether or not the arbitration of the NLRC in the National Capital Region is the most convenient venue or forum to hear and decide the instant controversy; and

"3. Whether or not the respondent was illegally dismissed, and therefore, entitled to recover moral and exemplary damages and attorney’s fees."8

In addition, respondent assails, in her Comment,9 the propriety of Rule 45 as the procedural mode for seeking a review of the CA Decision affirming the NLRC Resolution. Such issue deserves scant consideration. Respondent miscomprehends the Court’s discourse in St. Martin Funeral Home v. NLRC,10 which has indeed affirmed that the proper mode of review of NLRC decisions, resolutions or orders is by a special civil action for certiorari under Rule 65 of the Rules of Court. The Supreme Court and the Court of Appeals have concurrent original jurisdiction over such petitions for certiorari. Thus, in observance of the doctrine on the hierarchy of courts, these petitions should be initially filed with the CA.11

50

Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for Certiorari. In seeking a review by this Court of the CA Decision -- on questions of jurisdiction, venue and validity of employment termination -- petitioner is likewise correct in invoking Rule 45.12

It is true, however, that in a petition for review on certiorari, the scope of the Supreme Court’s judicial review of decisions of the Court of Appeals is generally confined only to errors of law. It does not extend to questions of fact. This doctrine applies with greater force in labor cases. Factual questions are for the labor tribunals to resolve. 13In the present case, the labor arbiter and the NLRC have already determined the factual issues. Their findings, which are supported by substantial evidence, were affirmed by the CA. Thus, they are entitled to great respect and are rendered conclusive upon this Court, absent a clear showing of palpable error or arbitrary disregard of evidence.14

The Court’s Ruling

The Petition has no merit.

First Issue:

Jurisdiction

The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as follows:

"ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work and other terms and conditions of employment

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

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount of exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.

(b) The commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

x x x x x x x x x."

More specifically, Section 10 of RA 8042 reads in part:

"SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of damages.

x x x x x x x x x"

Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over claims arising from employer-employee relations, including termination disputes involving all workers, among whom are overseas Filipino workers (OFW).15

We are not unmindful of the fact that respondent was directly hired, while on a tourist status in Singapore, by the PNB branch in that city state. Prior to employing respondent, petitioner had to obtain an employment pass for her from the Singapore Ministry of Manpower. Securing the pass was a regulatory requirement pursuant to the immigration regulations of that country.16

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Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a local work permit in order to be legally employed here. That permit, however, does not automatically mean that the non-citizen is thereby bound by local laws only, as averred by petitioner. It does not at all imply a waiver of one’s national laws on labor. Absent any clear and convincing evidence to the contrary, such permit simply means that its holder has a legal status as a worker in the issuing country.1avvphil.zw+

Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment Certificate from the POEA through the Philippine Embassy in Singapore. The Certificate, issued on March 8, 1999, declared her a bona fide contract worker for Singapore. Under Philippine law, this document authorized her working status in a foreign country and entitled her to all benefits and processes under our statutes. Thus, even assuming arguendothat she was considered at the start of her employment as a "direct hire" governed by and subject to the laws, common practices and customs prevailing in Singapore17 she subsequently became a contract worker or an OFW who was covered by Philippine labor laws and policies upon certification by the POEA. At the time her employment was illegally terminated, she already possessed the POEA employment Certificate.

Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office in Singapore.18 Significantly, respondent’s employment by the Singapore branch office had to be approved by Benjamin P. Palma Gil,19 the president of the bank whose principal offices were in Manila. This circumstance militates against petitioner’s contention that respondent was "locally hired"; and totally "governed by and subject to the laws, common practices and customs" of Singapore, not of the Philippines. Instead, with more reason does this fact reinforce the presumption that respondent falls under the legal definition of migrant worker, in this case one deployed in Singapore. Hence, petitioner cannot escape the application of Philippine laws or the jurisdiction of the NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court in Royal Crown Internationale v. NLRC:20

"x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers.1awphi1.net For the State assures the basic rights of all workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that laws ‘which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determination or conventions agreed upon in a foreign country.’"

Second Issue:

Proper Venue

Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:

"Section 1. Venue – (a) All cases which Labor Arbiters have authority to hear and decide may be filed in the Regional Arbitration Branch having jurisdiction over the workplace of the complainant/petitioner; Provided, however that cases of Overseas Filipino Worker (OFW) shall be filed before the Regional Arbitration Branch where the complainant resides or where the principal office of the respondent/employer is situated, at the option of the complainant.

"For purposes of venue, workplace shall be understood as the place or locality where the employee is regularly assigned when the cause of action arose. It shall include the place where the employee is supposed to report back after a temporary detail, assignment or travel. In the case of field employees, as well as ambulant or itinerant workers, their workplace is where they are regularly assigned, or where they are supposed to regularly receive their salaries/wages or work instructions from, and report the results of their assignment to their employers."

Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a migrant worker "refers to a person who is to be engaged, is engaged or has been engaged in a remunerated activity in a state of which he or she is not a legal resident; to be used interchangeably with overseas Filipino worker."21 Undeniably, respondent was employed by petitioner in its branch office in Singapore. Admittedly, she is a Filipino and not a legal resident of that state. She thus falls within the category of "migrant worker" or "overseas Filipino worker."

As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal. The law gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2) at the RAB where the principal office of her employer is situated. Since her dismissal by petitioner, respondent

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has returned to the Philippines -- specifically to her residence at Filinvest II, Quezon City. Thus, in filing her Complaint before the RAB office in Quezon City, she has made a valid choice of proper venue.

Third Issue:

Illegal Dismissal

The appellate court was correct in holding that respondent was already a regular employee at the time of her dismissal, because her three-month probationary period of employment had already ended. This ruling is in accordance with Article 281 of the Labor Code: "An employee who is allowed to work after a probationary period shall be considered a regular employee." Indeed, petitioner recognized respondent as such at the time it dismissed her, by giving her one month’s salary in lieu of a one-month notice, consistent with provision No. 6 of her employment Contract.

Notice and Hearing Not Complied With

As a regular employee, respondent was entitled to all rights, benefits and privileges provided under our labor laws. One of her fundamental rights is that she may not be dismissed without due process of law. The twin requirements of notice and hearing constitute the essential elements of procedural due process, and neither of these elements can be eliminated without running afoul of the constitutional guarantee.22

In dismissing employees, the employer must furnish them two written notices: 1) one to apprise them of the particular acts or omissions for which their dismissal is sought; and 2) the other to inform them of the decision to dismiss them. As to the requirement of a hearing, its essence lies simply in the opportunity to be heard.23

The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission for which her dismissal was being sought. Neither was she given any chance to be heard, as required by law. At any rate, even if she were given the opportunity to be heard, she could not have defended herself effectively, for she knew no cause to answer to.

All that petitioner tendered to respondent was a notice of her employment termination effective the very same day, together with the equivalent of a one-month pay. This Court has already held that nothing in the law gives an employer the option to substitute the required prior notice and opportunity to be heard with the mere payment of 30 days’ salary.24

Well-settled is the rule that the employer shall be sanctioned for noncompliance with the requirements of, or for failure to observe, due process that must be observed in dismissing an employee.25

No Valid Cause for Dismissal

Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid grounds or causes for an employee’s dismissal. The employer has the burden of proving that it was done for any of those just or authorized causes. The failure to discharge this burden means that the dismissal was not justified, and that the employee is entitled to reinstatement and back wages.29

Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for terminating the employment of respondent. It merely insists that her dismissal was validly effected pursuant to the provisions of her employment Contract, which she had voluntarily agreed to be bound to.

Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force of law between them. However, petitioner overlooks the qualification that those terms and conditions agreed upon must not be contrary to law, morals, customs, public policy or public order.30 As explained earlier, the employment Contract between petitioner and respondent is governed by Philippine labor laws. Hence, the stipulations, clauses, and terms and conditions of the Contract must not contravene our labor law provisions.

Moreover, a contract of employment is imbued with public interest. The Court has time and time again reminded parties that they "are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other."31 Also, while a contract is the law between the parties, the provisions of positive law that regulate such contracts are deemed included and shall limit and govern the relations between the parties.32

Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal.33

Awards for Damages Justified

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Finally, moral damages are recoverable when the dismissal of an employee is attended by bad faith or constitutes an act oppressive to labor or is done in a manner contrary to morals, good customs or public policy.34 Awards for moral and exemplary damages would be proper if the employee was harassed and arbitrarily dismissed by the employer.35

In affirming the awards of moral and exemplary damages, we quote with approval the following ratiocination of the labor arbiter:

"The records also show that [respondent’s] dismissal was effected by [petitioners’] capricious and high-handed manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to morals, good customs and public policy. Bad faith and fraud are shown in the acts committed by [petitioners] before, during and after [respondent’s] dismissal in addition to the manner by which she was dismissed. First, [respondent] was pressured to resign for two different and contradictory reasons, namely, cost-cutting and the need for a Chinese[-]speaking credit officer, for which no written advice was given despite complainant’s request. Such wavering stance or vacillating position indicates bad faith and a dishonest purpose. Second, she was employed on account of her qualifications, experience and readiness for the position of credit officer and pressured to resign a month after she was commended for her good work. Third, the demand for [respondent’s] instant resignation on 19 April 1999 to give way to her replacement who was allegedly reporting soonest, is whimsical, fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic] until 15 May 1999 within which to leave. Fourth, the pressures made on her to resign were highly oppressive, anti-social and caused her absolute torture, as [petitioners] disregarded her situation as an overseas worker away from home and family, with no prospect for another job. She was not even provided with a return trip fare. Fifth, the notice of termination is an utter manifestation of bad faith and whim as it totally disregards [respondent’s] right to security of tenure and due process. Such notice together with the demands for [respondent’s] resignation contravenes the fundamental guarantee and public policy of the Philippine government on security of tenure.

"[Respondent] likewise established that as a proximate result of her dismissal and prior demands for resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock and social humiliation. Her standing in the social and business community as well as prospects for employment with other entities have been adversely affected by her dismissal. [Petitioners] are thus liable for moral damages under Article 2217 of the Civil Code.

x x x x x x x x x

"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating [respondent’s] employment and are therefore liable for exemplary damages. This should served [sic] as protection to other employees of [petitioner] company, and by way of example or correction for the public good so that persons similarly minded as [petitioners] would be deterred from committing the same acts."36

The Court also affirms the award of attorney’s fees. It is settled that when an action is instituted for the recovery of wages, or when employees are forced to litigate and consequently incur expenses to protect their rights and interests, the grant of attorney’s fees is legally justifiable.37

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

54

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 172101               November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners, vs.ASIAPRO COOPERATIVE, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16 September 2004,4respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282.5 Petitioner SSS is a government corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 69386 and duly registered with the Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.7

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2) associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-laws.8 Its primary objectives are to provide savings and credit facilities and to develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into several Service Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share in the service surplus10 which the respondent cooperative earns from different areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The owners-members get their income from the service surplus generated by the quality and amount of services they rendered, which is determined by the Board of Directors of the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS as self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of both the employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a letter11 to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions in accordance with the Social Security Law of 1997. On 9 October 2002,12 respondent cooperative, through its counsel, sent a reply to petitioner SSS’s letter asserting that it is not an employer because its owners-members are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to respondent cooperative ordering the latter to register as an employer and report its owners-members as employees for compulsory coverage with the petitioner SSS. Respondent cooperative continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the respondent cooperative and Stanfilco praying that the respondent cooperative or, in the alternative,

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Stanfilco be directed to register as an employer and to report respondent cooperative’s owners-members as covered employees under the compulsory coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative. The respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied in another Order issued by the SSC dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for Review before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors:

I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in that:

A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo, considering that it failed to first resolve the issue of the existence of an employer-employee relationship between [respondent] cooperative and its owners-members.

B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law with respect to coverage, benefits, contributions, and related matters, it is respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases where there is no dispute as to the existence of an employer-employee relationship.

C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship raised in [respondent’s] Motion to Dismiss can be preliminarily resolved through summary hearings prior to the hearing on the merits. However, any inquiry beyond a preliminary determination, as what [petitioner SSC] wants to accomplish, would be to encroach on the jurisdiction of the National Labor Relations Commission [NLRC], which is the more competent body clothed with power to resolve issues relating to the existence of an employment relationship.

II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.

A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-purpose cooperative created pursuant to Republic Act No. 6938 and composed of owners-members, not employees.

B. The rights and obligations of the owners-members of [respondent] cooperative are derived from their Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and not from any contract of employment or from the Labor Laws. Moreover, said owners-members enjoy rights that are not consistent with being mere employees of a company, such as the right to participate and vote in decision-making for the cooperative.

C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are not paid any compensation income.15 (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent cooperative. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004], are ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner] Social Security System.16

Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate court in its Resolution dated 20 March 2006.

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC has jurisdiction over the subject matter and it has a valid basis in denying respondent’s Motion to Dismiss. The said issue is supported by the following arguments:

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I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under R.A. No. 8282.

II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.

III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperative’s] [M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary.

V. There is an employer-employee relationship between [respondent cooperative] and its [owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsory upon all employees. Thus, when petitioner SSS filed a petition-complaint against the respondent cooperative and Stanfilco before the petitioner SSC for the compulsory coverage of respondent cooperative’s owners-members as well as for collection of unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid petition-complaint was within the expertise and jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-employee relationship between the respondent cooperative and its owners-members, said issue does not preclude petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal relief sought in the said petition-complaint has to be resolved by reference to the Social Security Law and not to the Labor Code or other labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.

Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss grounded on the alleged lack of employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC because the latter has the authority and power to deny the same. Moreover, the existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary. Petitioners also maintain that the respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it has already filed its Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the petitioner SSC.

Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and its owners-members. The respondent cooperative is the employer of its owners-members considering that it undertook to provide services to Stanfilco, the performance of which is under the full and sole control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-employee relationship can arise between them. The persons of the employer and the employee are merged in the owners-members themselves. Likewise, respondent cooperative’s owners-members even requested the respondent cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint filed before it by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave abuse of discretion when it assumed jurisdiction over the petition-complaint without determining first if there was an employer-employee relationship between the respondent cooperative and its owners-members. Respondent cooperative claims that the question of whether an employer-employee relationship exists between it and its owners-members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner SSC simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first instance and where the only relief being sought is the dismissal of the petition-complaint for lack of jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the respondent cooperative.

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II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had already filed an Answer with Motion to Dismiss before the said body.

Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under the SSS Law is premised on the existence of an employer-employee relationship17 except in cases of compulsory coverage of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely upon the defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the court, it remains with it until the full termination of the case.19 The said principle may be applied even to quasi-judicial bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the compulsory coverage of the SSS because they are employees of the respondent cooperative. Consequently, the respondent cooperative being the employer of its owners-members must register as employer and report its owners-members as covered members of the SSS and remit the necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-employee relationship that exists between the respondent cooperative and its owners-members.

The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

x x x x

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.20

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on the existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under the Social Security Law of 1997.

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On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may inquire into the presence or absence of an employer-employee relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has the authority to inquire into the relationship existing between the worker and the person or entity to whom he renders service to determine if the employment, indeed, is one that is excepted by the Social Security Law of 1997 from compulsory coverage.21

Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship, however, the respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC became a party to the said Petition for Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate court ruled in favor of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-complaint filed before it because there was no employer-employee relationship between the respondent cooperative and its owners-members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition for Review before this Court.

Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and the findings of fact of the Court of Appeals are conclusive and binding on the Court,23 said rule is not without exceptions. There are several recognized exceptions24 in which factual issues may be resolved by this Court. One of these exceptions finds application in this present case which is, when the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the petitioner SSC and the appellate court relative to the existence of employer-employee relationship between the respondent cooperative and its owners-members, which necessitates a departure from the oft-repeated rule that factual issues may not be the subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power to control the worker’s conduct, with the latter assuming primacy in the overall consideration.25 The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish.26 The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power.27 All the aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in the selection and engagement of the owners-members as well as its team leaders who will be assigned at Stanfilco.28 Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered."29 In this case, the weekly stipends or the so-called shares in the service surplus given by the respondent cooperative to its owners-members were in reality wages, as the same were equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same shall not be lower than the prevailing rates of wages.30 It cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because these are given to the owners-members as compensation in rendering services to respondent cooperative’s client, Stanfilco. Third. It is also stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power to investigate, discipline and remove the owners-members and its team leaders who were rendering services at Stanfilco.31Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the most important. In the case at bar, it is the respondent cooperative which has the sole control over the manner and means of performing the services under the Service Contracts with Stanfilco as well as the means and methods of work.32 Also, the respondent cooperative is solely and entirely responsible for its owners-members, team leaders and other representatives at Stanfilco.33 All these clearly prove that, indeed, there is an employer-employee relationship between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that there shall be no employer-employee relationship between the respondent cooperative and its owners-members.34 This Court, however, cannot give the said provision force and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent cooperative and its owners-members. The four elements in the four-fold test for the existence of an employment relationship have been complied with. The respondent cooperative must not be allowed to deny its employment relationship with its owners-members by invoking the questionable Service

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Contracts provision, when in actuality, it does exist. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be.35

It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force of law between them. However, the agreed terms and conditions must not be contrary to law, morals, customs, public policy or public order.36 The Service Contract provision in question must be struck down for being contrary to law and public policy since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the others are its employees x x x.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for being themselves co-owners of the cooperative.1awp++i1

However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in the aforesaid case was made in the context of whether an employee who is also an owner-member of a cooperative can exercise the right to bargain collectively with the employer who is the cooperative wherein he is an owner-member. Obviously, an owner-member cannot bargain collectively with the cooperative of which he is also the owner because an owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-member’s right to bargain collectively with the cooperative. The question involved here is whether an employer-employee relationship can exist between the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it actually recognized that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative Development Authority.38 It has its Board of Directors, which directs and supervises its business; meaning, its Board of Directors is the one in charge in the conduct and management of its affairs.39 With that, a cooperative can be likened to a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and an employer-employee relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board of Directors directs, controls, and supervises the business and manages the property of the respondent cooperative. Clearly then, the management of the affairs of the respondent cooperative is vested in its Board of Directors and not in its owners-members as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical person represented by its Board of Directors, can enter into an employment with its owners-members.

In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS. This being our conclusion, it is no longer necessary to discuss the issue of whether the respondent cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-members. No costs.

SO ORDERED.

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61

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 172101               November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners, vs.ASIAPRO COOPERATIVE, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16 September 2004,4respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282.5 Petitioner SSS is a government corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 69386 and duly registered with the Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.7

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2) associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-laws.8 Its primary objectives are to provide savings and credit facilities and to develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into several Service Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share in the service surplus10 which the respondent cooperative earns from different areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The owners-members get their income from the service surplus generated by the quality and amount of services they rendered, which is determined by the Board of Directors of the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS as self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of both the employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a letter11 to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions in accordance with the Social Security Law of 1997. On 9 October 2002,12 respondent cooperative, through its counsel, sent a reply to petitioner SSS’s letter asserting that it is not an employer because its owners-members are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to respondent cooperative ordering the latter to register as an employer and report its owners-members as employees for compulsory coverage with the petitioner SSS. Respondent cooperative continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the respondent cooperative and Stanfilco praying that the respondent cooperative or, in the alternative,

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Stanfilco be directed to register as an employer and to report respondent cooperative’s owners-members as covered employees under the compulsory coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative. The respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied in another Order issued by the SSC dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for Review before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors:

I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in that:

A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo, considering that it failed to first resolve the issue of the existence of an employer-employee relationship between [respondent] cooperative and its owners-members.

B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law with respect to coverage, benefits, contributions, and related matters, it is respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases where there is no dispute as to the existence of an employer-employee relationship.

C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship raised in [respondent’s] Motion to Dismiss can be preliminarily resolved through summary hearings prior to the hearing on the merits. However, any inquiry beyond a preliminary determination, as what [petitioner SSC] wants to accomplish, would be to encroach on the jurisdiction of the National Labor Relations Commission [NLRC], which is the more competent body clothed with power to resolve issues relating to the existence of an employment relationship.

II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.

A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-purpose cooperative created pursuant to Republic Act No. 6938 and composed of owners-members, not employees.

B. The rights and obligations of the owners-members of [respondent] cooperative are derived from their Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and not from any contract of employment or from the Labor Laws. Moreover, said owners-members enjoy rights that are not consistent with being mere employees of a company, such as the right to participate and vote in decision-making for the cooperative.

C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are not paid any compensation income.15 (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent cooperative. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004], are ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner] Social Security System.16

Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate court in its Resolution dated 20 March 2006.

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC has jurisdiction over the subject matter and it has a valid basis in denying respondent’s Motion to Dismiss. The said issue is supported by the following arguments:

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I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under R.A. No. 8282.

II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.

III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperative’s] [M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary.

V. There is an employer-employee relationship between [respondent cooperative] and its [owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsory upon all employees. Thus, when petitioner SSS filed a petition-complaint against the respondent cooperative and Stanfilco before the petitioner SSC for the compulsory coverage of respondent cooperative’s owners-members as well as for collection of unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid petition-complaint was within the expertise and jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-employee relationship between the respondent cooperative and its owners-members, said issue does not preclude petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal relief sought in the said petition-complaint has to be resolved by reference to the Social Security Law and not to the Labor Code or other labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.

Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss grounded on the alleged lack of employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC because the latter has the authority and power to deny the same. Moreover, the existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary. Petitioners also maintain that the respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it has already filed its Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the petitioner SSC.

Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and its owners-members. The respondent cooperative is the employer of its owners-members considering that it undertook to provide services to Stanfilco, the performance of which is under the full and sole control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-employee relationship can arise between them. The persons of the employer and the employee are merged in the owners-members themselves. Likewise, respondent cooperative’s owners-members even requested the respondent cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint filed before it by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave abuse of discretion when it assumed jurisdiction over the petition-complaint without determining first if there was an employer-employee relationship between the respondent cooperative and its owners-members. Respondent cooperative claims that the question of whether an employer-employee relationship exists between it and its owners-members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner SSC simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first instance and where the only relief being sought is the dismissal of the petition-complaint for lack of jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the respondent cooperative.

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II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had already filed an Answer with Motion to Dismiss before the said body.

Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under the SSS Law is premised on the existence of an employer-employee relationship17 except in cases of compulsory coverage of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely upon the defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the court, it remains with it until the full termination of the case.19 The said principle may be applied even to quasi-judicial bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the compulsory coverage of the SSS because they are employees of the respondent cooperative. Consequently, the respondent cooperative being the employer of its owners-members must register as employer and report its owners-members as covered members of the SSS and remit the necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-employee relationship that exists between the respondent cooperative and its owners-members.

The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

x x x x

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.20

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on the existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under the Social Security Law of 1997.

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On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may inquire into the presence or absence of an employer-employee relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has the authority to inquire into the relationship existing between the worker and the person or entity to whom he renders service to determine if the employment, indeed, is one that is excepted by the Social Security Law of 1997 from compulsory coverage.21

Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship, however, the respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC became a party to the said Petition for Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate court ruled in favor of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-complaint filed before it because there was no employer-employee relationship between the respondent cooperative and its owners-members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition for Review before this Court.

Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and the findings of fact of the Court of Appeals are conclusive and binding on the Court,23 said rule is not without exceptions. There are several recognized exceptions24 in which factual issues may be resolved by this Court. One of these exceptions finds application in this present case which is, when the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the petitioner SSC and the appellate court relative to the existence of employer-employee relationship between the respondent cooperative and its owners-members, which necessitates a departure from the oft-repeated rule that factual issues may not be the subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power to control the worker’s conduct, with the latter assuming primacy in the overall consideration.25 The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish.26 The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power.27 All the aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in the selection and engagement of the owners-members as well as its team leaders who will be assigned at Stanfilco.28 Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered."29 In this case, the weekly stipends or the so-called shares in the service surplus given by the respondent cooperative to its owners-members were in reality wages, as the same were equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same shall not be lower than the prevailing rates of wages.30 It cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because these are given to the owners-members as compensation in rendering services to respondent cooperative’s client, Stanfilco. Third. It is also stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power to investigate, discipline and remove the owners-members and its team leaders who were rendering services at Stanfilco.31Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the most important. In the case at bar, it is the respondent cooperative which has the sole control over the manner and means of performing the services under the Service Contracts with Stanfilco as well as the means and methods of work.32 Also, the respondent cooperative is solely and entirely responsible for its owners-members, team leaders and other representatives at Stanfilco.33 All these clearly prove that, indeed, there is an employer-employee relationship between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that there shall be no employer-employee relationship between the respondent cooperative and its owners-members.34 This Court, however, cannot give the said provision force and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent cooperative and its owners-members. The four elements in the four-fold test for the existence of an employment relationship have been complied with. The respondent cooperative must not be allowed to deny its employment relationship with its owners-members by invoking the questionable Service

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Contracts provision, when in actuality, it does exist. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be.35

It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force of law between them. However, the agreed terms and conditions must not be contrary to law, morals, customs, public policy or public order.36 The Service Contract provision in question must be struck down for being contrary to law and public policy since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the others are its employees x x x.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for being themselves co-owners of the cooperative.1awp++i1

However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in the aforesaid case was made in the context of whether an employee who is also an owner-member of a cooperative can exercise the right to bargain collectively with the employer who is the cooperative wherein he is an owner-member. Obviously, an owner-member cannot bargain collectively with the cooperative of which he is also the owner because an owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-member’s right to bargain collectively with the cooperative. The question involved here is whether an employer-employee relationship can exist between the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it actually recognized that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative Development Authority.38 It has its Board of Directors, which directs and supervises its business; meaning, its Board of Directors is the one in charge in the conduct and management of its affairs.39 With that, a cooperative can be likened to a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and an employer-employee relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board of Directors directs, controls, and supervises the business and manages the property of the respondent cooperative. Clearly then, the management of the affairs of the respondent cooperative is vested in its Board of Directors and not in its owners-members as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical person represented by its Board of Directors, can enter into an employment with its owners-members.

In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS. This being our conclusion, it is no longer necessary to discuss the issue of whether the respondent cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-members. No costs.

SO ORDERED.

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68

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 110740            August 9, 2001

NDC-GUTHRIE PLANTATIONS, INC., NDC-GUTHRIE ESTATES, INC., and DAVID SUDHIR KUMAR DAS,petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, JESSIE OMAMALIN, EDWIN M. CRUZ, REMEDIOS CUBITA, LORENZO M. BETINOL, EULALIO E. EBAÑEZ, PEDRO A. LONGKAKIT, MERELYN D. JARA, NELSON B. BERNALES, DOMINADOR C. IOLATA, EDMUNDO S. INCHOCO, ROLITO S. COCAMAS, NEMESIO L. TAGAHANAN, JACQUELINE P. TEJADA, DANILO P. CUADRA and HERMES C. ARCEÑAS, respondents.

DE LEON, JR., J.:

Before us is a petition for certiorari seeking to annul the Resolution1 of the National Labor Relations Commission (NLRC), Fifth Division, dated May 27, 1993 which affirmed the Decision2 of the Labor Arbiter dated January 13, 1992 holding petitioners NDC-Guthrie Plantations, Inc. (NGPI), NDC-Guthrie Estates, Inc. (NGEI) and David Sudhir Kumar Das liable for unfair labor practice, illegal dismissal and ordering them to reinstate private respondents to their former positions or to pay them their separation pay plus backwages.

Petitioner companies are both government-controlled corporations, Sixty Percent (60%) of their stocks being owned by the National Development Corporation. They were incorporated in the early 1980's to develop, operate and maintain integrated palm projects in Agusan del Sur.3 Pursuant to their purpose clause, NGPI and NGEI hired hundreds of farm workers to establish and maintain their respective plantations4 as well as several supervisors to oversee and superintend their workers. Petitioner Kumar Das was the designated general manager of petitioner companies at the time of the supposed illegal dismissal.

Sometime in 1989, NGPI discovered that it was sustaining tremendous losses which threatened to further upset its precarious financial condition. In 1987 alone it incurred a net loss of Eighty Six Million Three Hundred Eighteen Thousand Five Hundred Eighty Pesos (P86,318,580.00) while in 1988 its net loss amounted to Eighty Three Million Nine Hundred Fifty Thousand Nine Hundred Thirty Pesos (P83,950,930.00). In a desperate attempt to reverse its fortune and prevent its coffers from further depletion, NGPI terminated the services of seventy-two (72) field workers. Still, the company was confronted with an audit report prepared by the Commission on Audit reflecting losses of Sixty Four Million Three Hundred Fifteen Thousand One Hundred Forty-Four Pesos (P64,315,144.00) and One Hundred Forty Three Million Nine Hundred Thirty Nine Thousand Eight Hundred Ninety-Three Pesos (P143,939,893.00) for 1989 and 1990, respectively. Faced with mounting losses, NGPI further terminated the employment of forty-nine (49) field workers in February 1990, followed by another one hundred fifty-eight (158) farm hands in September of that year.

NGEI was not spared from a similar fate as it likewise fell into dire straits during the same period. Based on the 1990 Audit Report furnished to the company by the Commission on Audit, NGEI incurred a net loss of Forty Four Million Seven Hundred Ninety Seven Thousand Eight Hundred Sixty-Eight Pesos (P44,797,868.00) for 1990. Previous financial statements of the company indicated a trend of dwindling current assets. NGEI's assets diminished from Thirteen Million Forty Four Thousand Seven Hundred Twenty Seven Pesos (P13,044,727.00) in 1987 to Seven Million Six Hundred Forty Five Thousand Four Hundred Seventy-Three Pesos (P7,645,473.00) in 1988 to Five Million Eight Hundred Sixty One Thousand Two Hundred Eighty-Five Pesos (P5,861,285.00) in 1989 to Three Million Five Hundred Seventy Six Thousand Three Hundred Fifty-Two Pesos (P3,576,352.00) in 1990.5Thus, it was compelled to take the same course of action undertaken by NGPI and retrenched or laid off eighty-eight (88) farm workers in December 1989, seven (7) field workers in February 1990 and fifty-eight (58) farm helpers in September of that year.

With this as backdrop, several employees of petitioner companies bonded together and formed the NDC-GUTHRIE Staff Workers Union hereinafter called the Union. On October 7, 1990, after it had been issued a Certificate of Recognition by the Department of Labor and Employment (DOLE), the Union sent notice to NGPI and NGEI requesting that it be recognized as the sole and exclusive bargaining agent of all its member-employees. Petitioner companies jointly replied asking that they be furnished proof confirming the Union's claim that it represented the majority of the employees covered by the proposed bargaining unit. In compliance with the request, petitioner companies were provided with a copy of the minutes of the Union's organizational meeting as well as the minutes of the meeting when its proposed collective bargaining agreement was ratified.

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Since the documents submitted did not constitute proof of majority representation, petitioner companies denied recognition of the Union. Consequently, the Union filed a petition for a certification election among all employees covered by the proposed bargaining unit.6

Meanwhile, on January 16, 1991, petitioner companies notified the DOLE of their financial condition and their decision to retrench employees numbering about one hundred and twenty (120).7 Subsequently, on January 21, 1991 petitioner companies sent notices to seventeen (17) of their office and supervisory employees advising them that in view of the companies' financial problems, they would be retrenched from their employment effective February 28, 1991. Believing that their dismissal was resorted to because of their union activities and hence, in violation of their rights to self-organization and to collective bargaining, the said seventeen (17) employees who were laid off filed with the Labor Arbiter's Office a Complaint for illegal dismissal and unfair labor practice against petitioner companies and petitioner Kumar Das.

As petitioners failed to attend any of the scheduled conferences and hearings before Labor Arbiter Irving A. Petilla thereby rendering all efforts towards conciliation in vain, the Labor Arbiter issued an order directing the parties to submit their respective position papers.

In their position paper, private respondents averred that prior to their dismissal from their employment they had been pleading with petitioner companies for a salary increase. However, petitioner companies rejected their demand and even removed certain privileges to which they had been previously entitled such as the use of the companies' clubhouses. Perturbed by the apparent arrogance of the management of petitioner companies, private respondents decided to form a union in the belief that it would increase their bargaining power. Their decision proved calamitous as petitioner companies called attention to their financial woes and got back at them by dismissing them purportedly by reason of retrenchment.

Petitioners, on the other hand, denied the claim of illegal dismissal and asserted that it was their prerogative to lay off their employees to prevent or forestall further losses. They countered that their financial obligations had eaten up most of their capital outlay resulting in unabated losses from 1987 to 1990, thus constraining them to adopt and implement retrenchment programs. The petitioner companies presented financial statements prepared by the Commission on Audit showing tremendous losses for four (4) consecutive years, i.e., from 1987 to 1990. They further claimed that the retrenchment of private respondents was done in good faith as it was based on a number of criteria, namely, seniority, service record and performance.

One of the complainants, Paul V. Martinet, was dropped from the complaint after it was found that he had accepted his separation pay from NGPI and executed a deed of quitclaim releasing the latter from liability. Accordingly, his complaint was dismissed with prejudice.

On January 13, 1992, Labor Arbiter Petilla rendered judgment ordering the reinstatement of private respondents, with full backwages, on the ground that petitioner companies failed to substantiate their supposed losses incurred from 1987 to 1990 which led to the retrenchment of employees. The Labor Arbiter pointed out in his Decision that petitioners' alleged losses were merely conjured as "a convenient excuse to get rid of herein complainants who displayed more determination, motivation, zeal and enthusiasm in going through with their union . . . It constitutes nothing less than an unfair labor practice."8

Aggrieved, petitioner companies appealed to the NLRC. Pending appeal, complainants Joel F. Fortich, Merelyn D. Jara and Edwin M. Cruz entered into an amicable settlement with petitioner companies thereby extinguishing whatever claim they had against the latter. On the basis of the aforementioned settlement, petitioners moved for the dismissal of the complaint insofar as Fortich, Jara and Cruz were concerned.

On 27 May 1993, the NLRC dismissed the appeal and held:

We are subsequently in accord with the findings and conclusions of the Labor Arbiter below. Appellants miserably failed to establish the grave abuse of discretion and/or serious errors allegedly committed by the Labor Arbiter a quo when he rendered the decision in question. The records of the case plausibly show that the assailed decision was amply supported by relevant and material evidence.9

The NLRC expressed the view that the decision of petitioner companies to layoff private respondents was calculated to douse the embers of unionism among the workers. The NLRC, however, granted the Motion to Dismiss filed by complainants Fortich, Jara and Cruz.10

Inasmuch as their motion for reconsideration was denied by the NLRC, petitioners filed with this Court the instant petition for certiorari. The veracity of their claim of financial distress and the validity of private respondents' dismissal, as a consequence of their distressful financial condition, are the basic issues which they submitted for the Court's consideration.

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Instead of commenting on the petition, the Solicitor General filed his Manifestation and Motion which gave credence to petitioner companies' plea of financial distress and supported the retrenchment of employees. In recommending the granting of the petition, the Solicitor General remarked that "had the Labor Arbiter and the NLRC studied more carefully the financial statements offered in evidence by petitioner companies, they would have found that the two companies were losing."11

On the other hand the NLRC, in its Comment, strongly opposed the granting of the petition and averred that the mass layoff could not be justified by losses suffered by petitioner companies inasmuch as there were no proof presented in support thereof. The NLRC further argued that assuming arguendo that petitioner companies were suffering losses, there was no showing that they observed fair and reasonable standards in effecting retrenchment nor was there proof that they adopted cost reduction measures before resorting to retrenchment.12

In the meantime, by authority of the Securities and Exchange Commission, petitioner companies were merged, with NGPI as the surviving corporation. Accordingly, the entire assets and liabilities of NGEI were transferred to and absorbed by NGPI.13

After an assiduous evaluation of the record, we are convinced that there truly existed a persistent and irreversible financial instability in petitioner companies, thus amply justifying their resort to drastic cuts in personnel. We cannot share the posture adopted by the Labor Arbiter and the NLRC rejecting petitioners' defense of financial distress. On the contrary, it is more logical to conclude from the evidence on record that petitioner companies had indeed been deeply troubled by a continuing downtrend in their financial resources and had been struggling to keep their businesses afloat. From the evidence presented by NGPI, in 1987 alone it sustained a net loss of Eighty Six Million Three Hundred Eighteen Thousand Five Hundred Eighty Pesos (P86,318,580.00), followed by Eighty Three Million Nine Hundred Fifty Thousand Nine Hundred Thirty Pesos (P83,950,930.00) in 1988, Sixty Four Million Three Hundred Fifteen Thousand One Hundred Forty-Four Pesos (P64,315,144.00) in 1989 and One Hundred Forty Three Million Nine Hundred Thirty Nine Thousand Eight Hundred Ninety-Three Pesos (P143,939,893.00) in 1990. On the other hand, NGEI reported an alarming constriction in its current assets from Thirteen Million Forty Four Thousand Seven Hundred Twenty-Seven Pesos (P13,044,727.00) in 1987 to a measly Three Million Five Hundred Seventy Six Thousand Three Hundred Fifty-Two Pesos (P3,576,352.00) in 1990; while its net loss for 1990 was Forty Four Million Seven Hundred Ninety Seven Thousand Eight Hundred Sixty-Eight Pesos (P44,797,868.00). Proof was also presented supporting petitioners' claim that even prior to the dismissal of private respondents, hundreds of farm workers of petitioner companies had already been retrenched to save on much needed capital.

In the context of the submitted financial statements prepared by the Commission on Audit itemizing and explaining the losses suffered by petitioner companies, the Court is unable to understand the rationale behind the NLRC's challenged judgment. These financial documents duly audited by the Commission on Audit constitute the normal and reliable method of proof of the profit and loss performance of a government-controlled corporation.14 The Court cannot also conceive how the Labor Arbiter, despite these financial statements, was able to opine that "the financial statements submitted by respondents failed to show losses incurred in business operation deducted from gains."

As the retrenchment programs undertaken by petitioner companies were purely business decisions properly within the reasonable exercise of management prerogative, the NLRC has been denied the authority to delve into their wisdom and soundness.15 Indeed, management cannot be denied recourses to retrenchment if it can successfully prove the existence of the following factors: (a) substantial losses which are not merely de minimis in extent; (b) imminence of such substantial losses; (c) retrenchment would effectively prevent the expected additional losses; and, (d) alleged losses and expected losses must be proven by sufficient and convincing evidence.16 As these guidelines were faithfully observed by petitioner companies, the respondent NLRC's opinion in the case at bar is thus shown, upon analysis, to be nothing but rhetoric of hyperbolic character, finding no justification whatever in the facts, or in law or logic.17 Accordingly, NLRC's subject resolution will have to be rejected for having been rendered with grave abuse of discretion amounting to lack of jurisdiction.

However, notwithstanding the propriety of the retrenchment programs, petitioner companies are not excused from complying with the required written notice to the affected employees and the Department of Labor and Employment at least one month before the intended date of termination.18 In this case, it is undisputed that petitioner companies informed both the retrenched employees and DOLE of the impending retrenchment. The requirement of law mandating the giving of notices was intended not only to enable the employees to look for other employment and therefore ease the impact of the loss of their jobs and the corresponding income,19 but, more importantly, to give the DOLE the opportunity to ascertain the verity of the alleged authorized cause of termination.20

Accordingly, inasmuch as private respondents' separation from service was both substantively and procedurally just, petitioner companies should only be held liable for separation pay at the rate of one month for every year of service and the proportionate 13th month pay.21

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At this point, we take notice of the July 9, 1991 Order22 issued by Labor Arbiter Petilla which, in our view, was rendered in grave abuse of discretion. The facts surrounding the issuance of the said order are as follows: It appears that by reason of the nature of their work, each of the private respondents was allowed to avail of petitioner companies' loan policy intended exclusively for the purchase of motorcycles. Under that policy, the company would advance the purchase price of the motorcycle to be paid back by the employee through monthly deductions from his salary with the company retaining the ownership of the motorcycle until it was fully paid for. All the private respondents availed of petitioner companies' motorcycle loan policy.

After they had been dismissed from their employment private respondents, fearing that their motorcycles would be taken, sought a temporary restraining order from the Labor Arbiter to stop petitioner companies from seizing their motorcycles pending the final resolution of their complaints for illegal dismissal. Labor Arbiter Petilla responded favorably and immediately issued a restraining order forbidding petitioners from disturbing private respondents in their possession of the said motorcycles. Petitioner companies moved for reconsideration but their motion was denied.

The 1990 Rules of Procedure of the National Labor Relations Commission grant labor arbiters with the power to issue preliminary injunction or restraining order "as an incident to cases pending before them in order to preserve the rights of the parties during the pendency of the cases but excluding labor disputes involving strike or lock-out."23 The said Rules, however, limit the exercise of the power over labor disputes only, which as defined, refer to "any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee."24

In the present case, petitioners' supposed attempt to seize the said motorcycles from the private respondents is not a labor, but a civil dispute. The issue, inasmuch as it relates directly to the enforcement of the loan agreement, between petitioners and private respondents, involves debtor-creditor relations founded on a contract and does not in any way concern employer-employee relations. As such, it should be enforced through a separate civil action in the regular courts and not before the Labor Arbiter.

Since the seizure of the motorcycles is unrelated to any labor dispute under which an injunction may be issued by a labor arbiter, it was plain grave abuse of discretion for Labor Arbiter Petilla to have issued a writ of injunction restraining the petitioner companies from seizing the motorcycles subject of the loan agreement between petitioner companies and private respondents.

WHEREFORE, the petition is GRANTED. The questioned Resolution issued on May 27, 1993 by respondent National Labor Relations Commission (NLRC) is MODIFIED by ordering petitioner NDC-GUTHRIE Plantations, Inc., as the surviving corporation of the original petitioner companies, to pay private respondents separation pay equivalent to one month pay for every year of service and their proportionate 13th month pay. For this purpose, this case is REMANDED to the Labor Arbiter for computation of the separation pay and the proportionate 13th month pay due to the private respondents.

The writ of preliminary injunction issued by the Labor Arbiter a quo is hereby ordered dissolved.

SO ORDERED.

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Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 G.R. No. 112940 November 21, 199

DAI-CHI ELECTRONICS MANUFACTURING CORPORATION, petitioner, vs.HON. MARTIN S. VILLARAMA, JR., Presiding Judge, Regional Trial Court, Branch 156, Pasig, Metro Manila and ADONIS C. LIMJUCO, respondents.

QUIASON, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court in relation to R.A. No. 5440 and Circular No. 2-90 of the following orders of the Regional Trial Court, Branch 156, Pasig, Metro Manila, in Civil Case No. 63448: 1) Order dated September 20, 1993, dismissing the complaint of petitioner on the ground of lack of jurisdiction over the subject matter of the controversy; and 2) Order dated November 29, 1993, denying petitioner's motion for reconsideration.

I

On July 29, 1993, petitioner filed a complaint for damages with the Regional Trial Court, Branch 156, Pasig, Metro Manila, against private respondent, a former employee.

Petitioner alleged that private respondent violated paragraph five of their Contract of Employment dated August 27, 1990, which provides:

That for a period of two (2) years after termination of service from EMPLOYER, EMPLOYEE shall not in any manner be connected, and/or employed, be a consultant and/or be an informative body directly or indirectly, with any business firm, entity or undertaking engaged in a business similar to or in competition with that of the EMPLOYER (Rollo, p. 24).

Petitioner claimed that private respondent became an employee of Angel Sound Philippines Corporation, a corporation engaged in the same line of business as that of petitioner, within two years from January 30, 1992, the date of private respondent's resignation from petitioner's employ. Petitioner further alleged that private respondent is holding the position of Head of the Material Management Control Department, the same position he held while in the employ of petitioner.

Petitioner sought to recover liquidated damages in the amount of One Hundred Thousand Pesos (P100,000.00), as provided for in paragraph seven of the contract, which provides:

That a violation of the conditions set forth in provisions Nos. (2) and (5) of this contract shall entitle the EMPLOYER to collect from the EMPLOYEE the sum of ONE HUNDRED THOUSAND PESOS (P100,000.00) by way of liquidated damages and likewise to adopt appropriate legal measures to prevent the EMPLOYEE from accepting employment and/or engaging, directly or indirectly, in a business similar to or in competition with that of the EMPLOYER, before the lapse of the aforesaid period of TWO (2) YEARS from date of termination of service from EMPLOYER (Rollo, p. 25).

Respondent court, in its Order dated September 20, 1993, ruled that it had no jurisdiction over the subject matter of the controversy because the complaint was for damages arising from employer-employee relations. Citing Article 217(4) of the Labor Code of the Philippines, as amended by R.A. No. 6715, respondent court stated that it is the Labor Arbiter which had original and exclusive jurisdiction over the subject matter of the case (Rollo, pp. 28-32).

In this petition, petitioner asks for the reversal of respondent court's dismissal of the civil case, contending that the case is cognizable by the regular courts. It argues that the cause of action did not arise from employer-employee relations, even though the claim is based on a provision in the employment contract.

II

This issue is: Is petitioner's claim for damages one arising from employer-employee relations?

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We answer in the negative.

Article 217, as amended by Section 9 of R.A. No. 6715, provides as follows:

Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

xxx xxx xxx

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; (Emphasis supplied)

xxx xxx xxx

Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages agreed upon in the contract as redress for private respondent's breach of his contractual obligation to its "damage and prejudice" (Rollo, p. 57). Such cause of action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so when we consider that the stipulation refers to the post-employment relations of the parties.

A case in point is Singapore Airlines Limited v. Paño, 122 SCRA 671 (1983), which also dealt with the employee's breach of an obligation embodied in a written employment agreement. Singapore Airlines filed a complaint in the trial court for damages against its employee for "wanton failure and refusal" without just cause to report to duty and for having "maliciously and with bad faith" violated the terms and conditions of its "Agreement for a Course of Conversion Training at the Expense of Singapore Airlines Limited." This agreement provided that the employee shall agree to remain in the service of the employer for a period of five years from the date of the commencement of the training program. The trial court dismissed the complaint on the grounds that it did not have jurisdiction over the subject matter of the controversy.

On appeal to this court, we held that jurisdiction over the controversy belongs to the civil courts. We stated that the action was for breach of a contractual obligation, which is intrinsically a civil dispute. We further stated that while seemingly the cause of action arose from employer-employee relations, the employer's claim for damages is grounded on "wanton failure and refusal" without just cause to report to duty coupled with the averment that the employee "maliciously and with bad faith" violated the terms and conditions of the contract to the damage of the employer. Such averments removed the controversy from the coverage of the Labor Code of the Philippines and brought it within the purview of Civil Law.

Jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be cognizable by the Labor Arbiter, must have a reasonable causal connection with any of the claims provided for in that article. Only if there is such a connection with the other claims can the claim for damages be considered as arising from employer-employee relations.

In San Miguel Corporation v. National Labor Relations Commission, 161 SCRA 719 (1988), we had occasion to construe Article 217, as amended by B.P. Blg. 227. Article 217 then provided that the Labor Arbiter had jurisdiction over all money claims of workers, but the phrase "arising from employer-employee relation" was deleted. We ruled thus:

While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the entire universe of money claims that might be asserted by workers against their employers has been absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but rather within the context formed by paragraph 1 (relating to unfair labor practices), paragraph 2 (relating to claims concerning terms and conditions of employment), paragraph 4 (claims relating to household services, a particular species of employer-employee relations), and paragraph 5 (relating to certain activities prohibited to employees or to employers). It is evident that there is a unifying element which runs through paragraphs 1 to 5 and that is, that they all refer to cases or disputes arising out of or in connection with an employer-employee relationship. This is, in other words, a situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as amended. We reach the above conclusion from an examination of the terms themselves of Article 217, as last amended by B.P Blg. 227, and even though earlier versions of Article 217 of the Labor Code expressly brought within the jurisdiction of the Labor Arbiters and the NLRC "cases arising from employer-employee relations," which clause was not expressly carried over, in printer's ink, in Article 217 as it exists today. For it cannot be presumed that money claims of workers which do not arise out of or in connection with their employer-employee

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relationship, and which would therefore fall within the general jurisdiction of regular courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the "money claims of workers" referred to in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the employer-employee relationship or some aspect or incident of some relationship. Put a little differently, that money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connectionwith the employer-employee relationship (Emphasis supplied).

San Miguel was cited in Ocheda v. Court of Appeals, 214 SCRA 629 (1992), where we held that when the cause of action is based on a quasi-delict or tort, which has no reasonable causal connection with any of the claims provided for in Article 217, jurisdiction over the action is with the regular courts.

We also applied the "reasonable causal connection rule" in Pepsi-Cola Distributors of the Philippines, Inc. v.Gallang, 201 SCRA 695 (1991), where we held that an action filed by employees against an employer for damages for the latter's malicious filing of a criminal complaint for falsification of private documents against them came under the jurisdiction of the regular courts (See also Honiron Philippines, Inc. v. Intermediate Appellate Court, G.R. No. 66929, August 13, 1990 and Abejaron v. Court of Appeals, 208 SCRA 899 [1992]).

The rationale behind the holdings in these cases is that the complaint for damages was anchored not on the termination of the employee's services per se, but rather on the manner and consequent effects of such termination.

Cases decided under earlier versions of Article 217 were consistent also in that intrinsically civil disputes, even if these involve an employer and his employee, are cognizable by the regular courts. In Medina vs. Castro-Bartolome, 116 SCRA 597 (1982), a civil complaint for damages against the employer for slanderous remarks made against them, we upheld the regular court's jurisdiction after finding that the plaintiffs did not allege any unfair labor practice, their complaint being a simple action for damages for tortious acts allegedly committed by the defendants. In Molave Sales, Inc. v. Laron, 129 SCRA 485 (1984), we held that the claim of the plaintiff against its sales manager for payment of certain accounts and cash advances was properly cognizable by the regular courts because "although a controversy is between an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved."

Private respondent also raises the issue of forum shopping. He asserts that the petition should be dismissed pursuant to Circular No. 28-91 because petitioner merely "mentioned in passing a labor case between petitioner and private respondent which is being handled by petitioner's other counsel" (Rollo, p. 42). Private respondent is referring to NLRC NCR Case No. 00-11-0689493 filed by him on November 8, 1993.

Petitioner asserts that the case before the Labor Arbiter was filed by private respondent against petitioner for alleged illegal dismissal, underpayment of wages and non-payment of overtime and premium pay with prayer for moral and exemplary damages, to which petitioner, through its other counsel, "logically raised as one of its several counterclaims against private respondent the liquidated damages mentioned in the contract of employment between the parties" (Rollo, p. 69).

Petitioner did not fail to disclose the pending labor case in the certification required under Circular No. 28-91. Thus, petitioner cannot be considered to have submitted a false certification warranting summary dismissal of the petition (Par. 3[a] of Circular No. 28-91).

Petitioner did not commit forum shopping. It set up its counterclaim for liquidated damages merely as a defense against private respondent's complaint before the Labor Arbiter.

ACCORDINGLY, the Orders of the Regional Trial Court dated September 20, 1993 and November 29, 1993 are SET ASIDE. The trial court is ORDERED to continue with the proceedings in Civil Case No. 63448.

SO ORDERED.

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