SECOND DIVISION

LEPANTO CERAMICS, INC., Petitioner,

- versus -

LEPANTO CERAMICS EMPLOYEES ASSOCIATION, Respondent.

G.R. No. 180866

Present:

CARPIO, J., Chairperson,BRION,DEL CASTILLO, ABAD, andPEREZ, JJ.

Promulgated:

March 2, 2010

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D E C I S I O N

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45[footnoteRef:2] of the 1997 Rules of Civil Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision[footnoteRef:3] of the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of the Voluntary Arbitrator[footnoteRef:4] granting the members of the respondent association a Christmas Bonus in the amount of Three Thousand Pesos (P3,000.00), or the balance of Two Thousand Four Hundred Pesos (P2,400.00) for the year 2002, and the (2) Resolution[footnoteRef:5] of the same court dated 13 December 2007 denying Petitioners Motion for Reconsideration. [2: Appeal by Certiorari to the Supreme Court.] [3: Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices Fernanda Lampas Peralta and Sesinando E. Villon concurring. Rollo, pp. 10-19. ] [4: Penned by Voluntary Arbitrator Lydia A. Navarro. Id. at 167-169. ] [5: Id. at 30.]

The facts are:

Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and operating by virtue of Philippine Laws. Its business is primarily to manufacture, make, buy and sell, on wholesale basis, among others, tiles, marbles, mosaics and other similar products.[footnoteRef:6] [6: CA rollo, p. 36.]

Respondent Lepanto Ceramics Employees Association (respondent Association) is a legitimate labor organization duly registered with the Department of Labor and Employment. It is the sole and exclusive bargaining agent in the establishment of petitioner.[footnoteRef:7] [7: Id. at 39.]

In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the respondent Association.[footnoteRef:8] [8: Id. at 42.]

Subsequently, in September 1999, petitioner and respondent Association entered into a Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to the members of the respondent Association.[footnoteRef:9] The Christmas bonus was one of the enumerated existing benefit, practice of traditional rights which shall remain in full force and effect. [9: Records, p. 7.]

The text reads:Section 8. All other existing benefits, practice of traditional rights consisting of Christmas Gift package/bonus, reimbursement of transportation expenses in case of breakdown of service vehicle and medical services and safety devices by virtue of company policies by the UNION and employees shall remain in full force and effect.

Section 1. EFFECTIVITY

This agreement shall become effective on September 1, 1999 and shall remain in full force and effect without change for a period of four (4) years or up to August 31, 2004 except as to the representation aspect which shall be effective for a period of five (5) years. It shall bind each and every employee in the bargaining unit including the present and future officers of the Union.

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner gave each of the members of respondent Association Tile Redemption Certificates equivalent to P3,000.00.[footnoteRef:10] The bonus for the year 2002 is the root of the present dispute. Petitioner gave a year-end cash benefit of Six Hundred Pesos (P600.00) and offered a cash advance to interested employees equivalent to one (1) month salary payable in one year.[footnoteRef:11] The respondent Association objected to the P600.00 cash benefit and argued that this was in violation of the CBA it executed with the petitioner. [10: Rollo, pp. 43-44. ] [11: Id. at 45. ]

The parties failed to amicably settle the dispute. The respondent Association filed a Notice of Strike with the National Conciliation Mediation Board, Regional Branch No. IV, alleging the violation of the CBA. The case was placed under preventive mediation. The efforts to conciliate failed. The case was then referred to the Voluntary Arbitrator for resolution where the Complaint was docketed as Case No. LAG-PM-12-095-02.

In support of its claim, respondent Association insisted that it has been the traditional practice of the company to grant its members Christmas bonuses during the end of the calendar year, each in the amount of P3,000.00 as an expression of gratitude to the employees for their participation in the companys continued existence in the market. The bonus was either in cash or in the form of company tiles. In 2002, in a speech during the Christmas celebration, one of the companys top executives assured the employees of said bonus. However, the Human Resources Development Manager informed them that the traditional bonus would not be given as the companys earnings were intended for the payment of its bank loans. Respondent Association argued that this was in violation of their CBA.

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no basis as the same was not a demandable and enforceable obligation. It argued that the giving of extra compensation was based on the companys available resources for a given year and the workers are not entitled to a bonus if the company does not make profits. Petitioner adverted to the fact that it was debt-ridden having incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and since 1999, when the CBA was signed, the companys accumulated losses amounted to over P2.7 billion. Petitioner further argued that the grant of a one (1) month salary cash advance was not meant to take the place of a bonus but was meant to show the companys sincere desire to help its employees despite its precarious financial condition. Petitioner also averred that the CBA provision on a Christmas gift/bonus refers to alternative benefits. Finally, petitioner emphasized that even if the CBA contained an unconditional obligation to grant the bonus to the respondent Association, the present difficult economic times had already legally released it therefrom pursuant to Article 1267 of the Civil Code.[footnoteRef:12] [12: Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.]

The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the bonus was given prior to the effectivity of the CBA between the parties and that the financial losses of the company is not a sufficient reason to exempt it from granting the same. It stressed that the CBA is a binding contract and constitutes the law between the parties. The Voluntary Arbitrator further expounded that since the employees had already been given P600.00 cash bonus, the same should be deducted from the claimed amount of P3,000.00, thus leaving a balance of P2,400.00. The dispositive portion of the decision states, viz:

Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the members of the complainant union LCEA their respective Christmas bonus in the amount of three thousand (P3,000.00) pesos for the year 2002 less the P600.00 already given or a balance of P2,400.00.[footnoteRef:13] [13: Rollo, p. 169.]

Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an Order dated 27 June 2003, in this wise:

The Motion for Reconsideration filed by the respondent in the above-entitled case which was received by the Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule XIX on Grievance Machinery and Voluntary Arbitration; Amending The Implementing Rules of Book V of the Labor Code of the Philippines; to wit:

Section 7. Finality of Award/Decision The decision, order, resolution or award of the voluntary arbitrator or panel of voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties and it shall not be subject of a motion for reconsideration.[footnoteRef:14] [14: Id. at 170. ]

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of Court docketed as CA-G.R. SP No. 78334.[footnoteRef:15] As adverted to earlier, the Court of Appeals affirmed in toto the decision of the Voluntary Arbitrator. The appellate court also denied petitioners motion for reconsideration. [15: The Court of Appeals gave due course to the Petition although the proper remedy should have been a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure.Rule 43. Appeals From the Court of Tax Appeals and Quasi-Judicial Agencies to the Court of Appeals.Section 1. Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are x x x, and voluntary arbitrators authorized by law. ]

In affirming respondent Associations right to the Christmas bonus, the Court of Appeals held:

In the case at bar, it is indubitable that petitioner offered private respondent a Christmas bonus/gift in 1998 or before the execution of the 1999 CBA which incorporated the said benefit as a traditional right of the employees. Hence, the grant of said bonus to private respondent can be deemed a practice as the same has not been given only in the 1999 CBA. Apparently, this is the reason why petitioner specifically recognized the grant of a Christmas bonus/gift as a practice or tradition as stated in the CBA. x x x.

x x x x

Evidently, the argument of petitioner that the giving of a Christmas bonus is a management prerogative holds no water. There were no conditions specified in the CBA for the grant of said benefit contrary to the claim of petitioner that the same is justified only when there are profits earned by the company. As can be gleaned from the CBA, the payment of Christmas bonus was not contingent upon the realization of profits. It does not state that if the company derives no profits, there are no bonuses to be given to the employees. In fine, the payment thereof was not related to the profitability of business operations.

Moreover, it is undisputed that petitioner, aside from giving the mandated 13th month pay, has further been giving its employees an additional Christmas bonus at the end of the year since 1998 or before the effectivity of the CBA in September 1999. Clearly, the grant of Christmas bonus from 1998 up to 2001, which brought about the filing of the complaint for alleged non-payment of the 2002 Christmas bonus does not involve the exercise of management prerogative as the same was given continuously on or about Christmas time pursuant to the CBA. Consequently, the giving of said bonus can no longer be withdrawn by the petitioner as this would amount to a diminution of the employees existing benefits.[footnoteRef:16] [16: Id. at 16-17. ]

Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether or not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner is obliged to give the members of the respondent Association a Christmas bonus in the amount of P3,000.00 in 2002.[footnoteRef:17] [17: Id. at 9.]

We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality, and bind us when supported by substantial evidence. This is the rule particularly where the findings of both the arbitrator and the Court of Appeals coincide.[footnoteRef:18] [18: Philippine Airlines, Inc. v. Philippine Airlines Employees Association (PALEA), G.R. No. 142399, 12 March 2008, 548 SCRA 117, 129 citing Stamford Marketing Corporation v. Julian, 468 Phil. 34, 55 (2004). ]

As a general proposition, an arbitrator is confined to the interpretation and application of the CBA. He does not sit to dispense his own brand of industrial justice: his award is legitimate only in so far as it draws its essence from the CBA.[footnoteRef:19] That was done in this case. [19: United Kimberly-Clark Employees Union-Philippine Transport General Workers Organization v. Kimberly-Clark Philippines, Inc., G.R. No. 162957, 6 March 2006, 484 SCRA 187, 200.]

By definition, a bonus is a gratuity or act of liberality of the giver. It is something given in addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for his industry and loyalty which contributed to the success of the employers business and made possible the realization of profits.[footnoteRef:20] [20: Protacio v. Laya Mananghaya and Co., G.R. No. 168654, 25 March 2009.]

A bonus is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits.[footnoteRef:21] [21: Philippine Airlines, Inc. v. Philippine Airlines Employees Association (PALEA), supra note 16 at 133 citing Philippine Education Co., Inc. (PECO) v. Court of Industrial Relations, 92 Phil. 381, 385 (1952).]

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties.[footnoteRef:22] Given that the bonus in this case is integrated in the CBA, the same partakes the nature of a demandable obligation. Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to respondent Association has become more than just an act of generosity on the part of the petitioner but a contractual obligation it has undertaken.[footnoteRef:23] [22: American Wire and Cable Daily Rated Employees Union v. American Wire and Cable, 497 Phil. 213, 224 (2005).] [23: Philippine Airlines, Inc. v Philippine Airlines Employees Association (PALEA), supra note 16 at 133.]

A CBA refers to a negotiated contract between a legitimate labor organization and the employer, concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all other contracts, the parties to a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public policy.[footnoteRef:24] [24: Honda Philippines, Inc. v. Samahan ng Malayang Manggagawa sa Honda, G.R. No. 145561, 15 June 2005, 460 SCRA 186,190.]

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions.[footnoteRef:25] This principle stands strong and true in the case at bar. [25: University of San Agustin v. University of San Agustin Employees Union, G.R. No. 177594, 23 July 2009; HFJ Philippines, Inc. v. Pilar, G.R. No. 168716, 16 April 2009.]

A reading of the provision of the CBA reveals that the same provides for the giving of a Christmas gift package/bonus without qualification. Terse and clear, the said provision did not state that the Christmas package shall be made to depend on the petitioners financial standing. The records are also bereft of any showing that the petitioner made it clear during CBA negotiations that the bonus was dependent on any condition. Indeed, if the petitioner and respondent Association intended that the P3,000.00 bonus would be dependent on the company earnings, such intention should have been expressed in the CBA.

It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that the 1997 financial crisis in the Asian region adversely affected the Philippine economy.[footnoteRef:26] [26: Said Financial Statements further noted that The Asian Crisis led to a volatile foreign exchange and interest rates. During the first half of 1999, the situation has improved with the peso moving in a relatively narrow range of $38 to $40 against the US dollar between 31 December 1998 and 30 September 1999 x x x. Records, p. 215.]

From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its undertaking. It is manifestly clear that petitioner was very much aware of the imminence and possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss of P14,347,548.00.[footnoteRef:27] Yet it gave a P3,000.00 bonus to the members of the respondent Association. In 1999, when petitioners very own financial statement reflected that the positive developments in the economy have yet to favorably affect the operations of the company,[footnoteRef:28] and reported a loss of P346,025,733.00,[footnoteRef:29] it entered into the CBA with the respondent Association whereby it contracted to grant a Christmas gift package/bonus to the latter. Petitioner supposedly continued to incur losses in the years 2000[footnoteRef:30] and 2001. Still and all, this did not deter it from honoring the CBA provision on Christmas bonus as it continued to give P3,000.00 each to the members of the respondent Association in the years 1999, 2000 and 2001. [27: Id. at 218. ] [28: Id. at 215.] [29: Id. at 218.] [30: Petitioners financial statement states that in year 2000 it incurred a net loss of P865,137,705.00 and P958,602,659.00 in the year 2001.]

All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. The rule is settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full protection.[footnoteRef:31] [31: Arco Metal Products, Co., Inc. v. Samahan ng Mga Mangagagawa sa Arco Metal-NAFLU (SAMARM-NAFLU), G.R. No. 170734, 14 May 2008, 554 SCRA 110, 118-119.]

Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or duress, it is presumed that it entered into the CBA voluntarily and had full knowledge of the contents thereof and was aware of its commitments under the contract.

The Court is fully aware that implementation to the letter of the subject CBA provision may further deplete petitioners resources. Petitioners remedy though lies not in the Courts invalidation of the provision but in the parties clarification of the same in subsequent CBA negotiations. Article 253 of the Labor Code is relekvant:Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement. - When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the sixty (60)-day period and/or until a new agreement is reached by the parties.

WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of the Court of Appeals dated 5 April 2006 and the Resolution of the same court dated 13 December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.

SO ORDERED.

Republic of the PhilippinesSupreme CourtManila

FIRST DIVISION

RENATO REAL,G.R. No. 168757

Petitioner,

Present:

CORONA, C. J., Chairperson,

- versus-VELASCO, JR.,

LEONARDO-DE CASTRO,

DEL CASTILLO, and

PEREZ, JJ.

SANGU PHILIPPINES, INC. and/ or KIICHI ABE,Promulgated:

Respondents.January 19, 2011

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D E C I S I O N

DEL CASTILLO, J.:

The perennial question of whether a complaint for illegal dismissal is intra-corporate and thus beyond the jurisdiction of the Labor Arbiter is the core issue up for consideration in this case.

This Petition for Review on Certiorari assails the Decision[footnoteRef:32] dated June 28, 2005 of the Court of Appeals (CA) in CA-G.R. SP. No. 86017 which dismissed the petition for certiorari filed before it. [32: CA rollo, pp. 370-394; penned by Associate Justice Perlita J. Tria Tirona and concurred in by Associate Justices Delilah Vidallon-Magtolis and Jose C. Reyes, Jr.]

Factual Antecedents

Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a corporation engaged in the business of providing manpower for general services, like janitors, janitresses and other maintenance personnel, to various clients. In 2001, petitioner, together with 29 others who were either janitors, janitresses, leadmen and maintenance men, all employed by respondent corporation, filed their respective Complaints[footnoteRef:33] for illegal dismissal against the latter and respondent Kiichi Abe, the corporations Vice-President and General Manager. These complaints were later on consolidated. [33: Id. at 51-71.]

With regard to petitioner, he was removed from his position as Manager through Board Resolution 2001-03[footnoteRef:34] adopted by respondent corporations Board of Directors. Petitioner complained that he was neither notified of the Board Meeting during which said board resolution was passed nor formally charged with any infraction. He just received from respondents a letter[footnoteRef:35] dated March 26, 2001 stating that he has been terminated from service effective March 25, 2001 for the following reasons: (1) continuous absences at his post at Ogino Philippines Inc. for several months which was detrimental to the corporations operation; (2) loss of trust and confidence; and, (3) to cut down operational expenses to reduce further losses being experienced by respondent corporation. [34: Id. at 115-116.] [35: Id. at 117.]

Respondents, on the other hand, refuted petitioners claim of illegal dismissal by alleging that after petitioner was appointed Manager, he committed gross acts of misconduct detrimental to the company since 2000. According to them, petitioner would almost always absent himself from work without informing the corporation of his whereabouts and that he would come to the office only to collect his salaries. As he was almost always absent, petitioner neglected to supervise the employees resulting in complaints from various clients about employees performance. In one instance, petitioner together with a few others, while apparently drunk, went to the premises of one of respondents clients, Epson Precision (Phils.) Inc., and engaged in a heated argument with the employees therein. Because of this, respondent Abe allegedly received a complaint from Epsons Personnel Manager concerning petitioners conduct. Respondents likewise averred that petitioner established a company engaged in the same business as respondent corporations and even submitted proposals for janitorial services to two of the latters clients. Because of all these, the Board of Directors of respondent corporation met on March 24, 2001 and adopted Board Resolution No. 2001-03 removing petition ner as Manager. Petitioner was thereafter informed of his removal through a letter dated March 26, 2001 which he, however, refused to receive.

Further, in what respondents believed to be an act of retaliation, petitioner allegedly encouraged the employees who had been placed in the manpower pool to file a complaint for illegal dismissal against respondents. Worse, he later incited those assigned in Epson Precision (Phils.) Inc., Ogino Philippines Corporation, Hitachi Cable Philippines Inc. and Philippine TRC Inc. to stage a strike on April 10 to 16, 2001. Not satisfied, petitioner together with other employees also barricaded the premises of respondent corporation. Such acts respondents posited constitute just cause for petitioners dismissal and that same was validly effected.

Rulings of the Labor Arbiter and the National Labor Relations Commission

The Labor Arbiter in a Decision[footnoteRef:36] dated June 5, 2003 declared petitioner and his co-complainants as having been illegally dismissed and ordered respondents to reinstate complainants to their former positions without loss of seniority rights and other privileges and to pay their full backwages from the time of their dismissal until actually reinstated and furthermore, to pay them attorneys fees. The Labor Arbiter found no convincing proof of the causes for which petitioner was terminated and noted that there was complete absence of due process in the manner of his termination. [36: Id. at 162-181.]

Respondents thus appealed to the National Labor Relations Commission (NLRC) and raised therein as one of the issues the lack of jurisdiction of the Labor Arbiter over petitioners complaint. Respondents claimed that petitioner is both a stockholder and a corporate officer of respondent corporation, hence, his action against respondents is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction.

The NLRC found such contention of respondents to be meritorious. Aside from petitioners own admission in the pleadings that he is a stockholder and at the same time occupying a managerial position, the NLRC also gave weight to the corporations General Information Sheet[footnoteRef:37] (GIS) dated October 27, 1999 listing petitioner as one of its stockholders, consequently his termination had to be effected through a board resolution. These, the NLRC opined, clearly established petitioners status as a stockholder and as a corporate officer and hence, his action against respondent corporation is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction. As to the other complainants, the NLRC ruled that there was no dismissal. The NLRC however, modified the appealed decision of the Labor Arbiter in a Decision[footnoteRef:38] dated February 13, 2004, the dispositive portion of which reads: [37: Id. at 237-240.] [38: Id. at 32-46. ]

WHEREFORE, all foregoing premises considered, the appealed Decision dated June 5, 2003 is hereby MODIFIED. Accordingly, judgment is hereby rendered DISMISSING the complaint of Renato Real for lack of jurisdiction. As to the rest of the complainants, they are hereby ordered to immediately report back to work but without the payment of backwages.

All other claims against respondents including attorneys fees are DISMISSED for lack of merit.

SO ORDERED.

Still joined by his co-complainants, petitioner brought the case to the CA by way of petition for certiorari.Ruling of the Court of Appeals

Before the CA, petitioner imputed upon the NLRC grave abuse of discretion amounting to lack or excess of jurisdiction in declaring him a corporate officer and in holding that his action against respondents is an intra-corporate controversy and thus beyond the jurisdiction of the Labor Arbiter.

While admitting that he is indeed a stockholder of respondent corporation, petitioner nevertheless disputed the declaration of the NLRC that he is a corporate officer thereof. He posited that his being a stockholder and his being a managerial employee do not ipso facto confer upon him the status of a corporate officer. To support this contention, petitioner called the CAs attention to the same GIS relied upon by the NLRC when it declared him to be a corporate officer. He pointed out that although said information sheet clearly indicates that he is a stockholder of respondent corporation, he is not an officer thereof as shown by the entry N/A or not applicable opposite his name in the officer column. Said column requires that the particular position be indicated if the person is an officer and if not, the entry N/A. Petitioner further argued that the fact that his dismissal was effected through a board resolution does not likewise mean that he is a corporate officer. Otherwise, all that an employer has to do in order to avoid compliance with the requisites of a valid dismissal under the Labor Code is to dismiss a managerial employee through a board resolution. Moreover, he insisted that his action for illegal dismissal is not an intra-corporate controversy as same stemmed from employee-employer relationship which is well within the jurisdiction of the Labor Arbiter. This can be deduced and is bolstered by the last paragraph of the termination letter sent to him by respondents stating that he is entitled to benefits under the Labor Code, to wit:

In this connection (his dismissal) you are entitled to separation pay and other benefits provided for under the Labor Code of the Philippines.[footnoteRef:39] (Emphasis supplied) [39: Id. at 117.]

In contrast, respondents stood firm that the action against them is an intra-corporate controversy. It cited Tabang v. National Labor Relations Commission[footnoteRef:40] wherein this Court declared that an intra-corporate controversy is one which arises between a stockholder and the corporation; that [t]here is no distinction, qualification, nor any exemption whatsoever; and that it is broad and covers all kinds of controversies between stockholders and corporations. In view of this ruling and since petitioner is undisputedly a stockholder of the corporation, respondents contended that the action instituted by petitioner against them is an intra-corporate controversy cognizable only by the appropriate regional trial court. Hence, the NLRC correctly dismissed petitioners complaint for lack of jurisdiction. [40: 334 Phil.424, 430 (1997).]

In the assailed Decision[footnoteRef:41] dated June 28, 2005, the CA sided with respondents and affirmed the NLRCs finding that aside from being a stockholder of respondent corporation, petitioner is also a corporate officer thereof and consequently, his complaint is an intra-corporate controversy over which the labor arbiter has no jurisdiction. Said court opined that if it was true that petitioner is a mere employee, the respondent corporation would not have called a board meeting to pass a resolution for petitioners dismissal considering that it was very tedious for the Board of Directors to convene and to adopt a resolution every time they decide to dismiss their managerial employees. To support its finding, the CA likewise cited Tabang. As to petitioners co-complainants, the CA likewise affirmed the NLRCS finding that they were never dismissed from the service. The dispositive portion of the CA Decision reads: [41: CA rollo, pp. 370-394.]

WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the assailed decision and resolution of the public respondent National Labor Relations Commission in NLRC NCR CA No. 036128-03 NLRC SRAB-IV-05-6618-01-B/05-6619-02-B/05-6620-02-B/10-6637-01-B/10-6833-01-B, STANDS.

SO ORDERED.Now alone but still undeterred, petitioner elevated the case to us through this Petition for Review on Certiorari.

The Parties Arguments

Petitioner continues to insist that he is not a corporate officer. He argues that a corporate officer is one who holds an elective position as provided in the Articles of Incorporation or one who is appointed to such other positions by the Board of Directors as specifically authorized by its By-Laws. And, since he was neither elected nor is there any showing that he was appointed by the Board of Directors to his position as Manager, petitioner maintains that he is not a corporate officer contrary to the findings of the NLRC and the CA.

Petitioner likewise contends that his complaint for illegal dismissal against respondents is not an intra-corporate controversy. He avers that for an action or suit between a stockholder and a corporation to be considered an intra-corporate controversy, same must arise from intra-corporate relations, i.e., an action involving the status of a stockholder as such. He believes that his action against the respondents does not arise from intra-corporate relations but rather from employer-employee relations. This, according to him, was even impliedly recognized by respondents as shown by the earlier quoted portion of the termination letter they sent to him.

For their part, respondents posit that what petitioner is essentially assailing before this Court is the finding of the NLRC and the CA that he is a corporate officer of respondent corporation. To the respondents, the question of whether petitioner is a corporate officer is a question of fact which, as held in a long line of jurisprudence, cannot be the subject of review under this Petition for Review on Certiorari. At any rate, respondents insist that petitioner who is undisputedly a stockholder of respondent corporation is likewise a corporate officer and that his action against them is an intra-corporate dispute beyond the jurisdiction of the labor tribunals. To support this, they cited several jurisprudence such as Pearson & George (S.E. Asia), Inc. v. National Labor Relations Commission,[footnoteRef:42] Philippine School of Business Administration v. Leano,[footnoteRef:43] Fortune Cement Corporation v. National Labor Relations Commission[footnoteRef:44] and again, Tabang v. National Labor Relations Commission.[footnoteRef:45] [42: 323 Phil. 166 (1996).] [43: 212 Phil. 716 (1984).] [44: G.R. No. 79762, January 24, 1991, 193 SCRA 258.] [45: Supra note 9.]

Moreover, in an attempt to demolish petitioners claim that the present controversy concerns employer-employee relations, respondents enumerated the following facts and circumstances: (1) Petitioner was an incorporator, stockholder and manager of respondent company; (2) As an incorporator, he was one of only seven incorporators of respondent corporation and one of only four Filipino members of the Board of Directors; (3) As stockholder, he has One Thousand (1,000) of the Ten Thousand Eight Hundred (10,800) common shares held by Filipino stockholders, with a par-value of One Hundred Thousand Pesos (P100,000.00); (4) His appointment as manager was by virtue of Section 1, Article IV of respondent corporations By-Laws; (5) As manager, he had direct management and authority over all of respondent corporations skilled employees; (6) Petitioner has shown himself to be an incompetent manager, unable to properly supervise the employees and even causing friction with the corporations clients by engaging in unruly behavior while in clients premises; (7) As if his incompetence was not enough, in a blatant and palpable act of disloyalty, he established another company engaged in the same line of business as respondent corporation; (8) Because of these acts of incompetence and disloyalty, respondent corporation through a Resolution adopted by its Board of Directors was finally constrained to remove petitioner as Manager and declare his office vacant; (9) After his removal, petitioner urged the employees under him to stage an unlawful strike by leading them to believe that they have been illegally dismissed from employment.[footnoteRef:46] Apparently, respondents intended to show from this enumeration that petitioners removal pertains to his relationship with respondent corporation, that is, his utter failure to advance its interest and the prejudice caused by his acts of disloyalty. For this reason, respondents see the action against them not as a case between an employer and an employee as what petitioner alleges, but one by an officer and at same time a major stockholder seeking to be reinstated to his former office against the corporation that declared his position vacant. [46: Respondents Comment/Opposition (To the Petition for Review), rollo, pp. 89-100.]

Finally, respondents state that the fact that petitioner is being given benefits under the Labor Code as stated in his termination letter does not mean that they are recognizing the employer-employee relations between them. They explain that the benefits provided under the Labor Code were merely made by respondent corporation as the basis in determining petitioners compensation package and that same are merely part of the perquisites of petitioners office as a director and manager. It does not and it cannot change the intra-corporate nature of the controversy. Hence, respondents pray that this petition be dismissed for lack of merit.

Issues

From the foregoing and as earlier mentioned, the core issue to be resolved in this case is whether petitioners complaint for illegal dismissal constitutes an intra-corporate controversy and thus, beyond the jurisdiction of the Labor Arbiter.

Our Ruling

Two-tier test in determining the existence of intra-corporate controversy

Respondents strongly rely on this Courts pronouncement in the 1997 case of Tabang v. National Labor Relations Commission, to wit:

[A]n intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification nor any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations.[footnoteRef:47] [47: Supra note 9 at 430.]

In view of this, respondents contend that even if petitioner challenges his being a corporate officer, the present case still constitutes an intra-corporate controversy as petitioner is undisputedly a stockholder and a director of respondent corporation.

It is worthy to note, however, that before the promulgation of the Tabang case, the Court provided in Mainland Construction Co., Inc. v. Movilla[footnoteRef:48] a better policy in determining which between the Securities and Exchange Commission (SEC) and the Labor Arbiter has jurisdiction over termination disputes,[footnoteRef:49] or similarly, whether they are intra-corporate or not, viz: [48: 320 Phil. 353, 359-360 (1995).] [49: See C.A. Azucena Jr.s The Labor Code With Comments and Cases, Volume II, 6th Edition (2007) pp. 46-49.]

The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of the SEC (now the Regional Trial Court[footnoteRef:50]). The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is subject of their controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only SEC (now the Regional Trial Court[footnoteRef:51]) can resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours) [50: Pursuant to Section 5.2 of Republic Act No. 8799 otherwise known as The Securities Regulation Code.] [51: Id. ]

And, while Tabang was promulgated later than Mainland Construction Co., Inc., the better policy enunciated in the latter appears to have developed into a standard approach in classifying what constitutes an intra-corporate controversy. This is explained lengthily in Reyes v. Regional Trial Court of Makati, Br. 142,[footnoteRef:52] to wit: [52: G.R. No. 165744, August 11, 2008, 561 SCRA 593, 609-612.]

Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in the Courts approach in classifying what constitutes an intra-corporate controversy. Initially, the main consideration in determining whether a dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among the parties. The types of relationships embraced under Section 5(b) x x x were as follows:

1. between the corporation, partnership or association and the public;1. between the corporation, partnership or association and its stockholders, partners, members or officers;1. between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and1. among the stockholders, partners or associates themselves.

The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC (now the RTC), regardless of the subject matter of the dispute. This came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the Court introduced the nature of the controversy test. We declared in this case that it is not the mere existence of an intra-corporate relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or stockholders. We saw that there is no legal sense in disregarding or minimizing the value of the nature of the transactions which gives rise to the dispute.

Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists.

The Court then combined the two tests and declared that jurisdiction should be determined by considering not only the status or relationship of the parties, but also the nature of the question under controversy. This two-tier test was adopted in the recent case of Speed Distribution Inc. v. Court of Appeals:

To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or associates, between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership, or association and the State insofar as it concerns the individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy. [Citations omitted.]

Guided by this recent jurisprudence, we thus find no merit in respondents contention that the fact alone that petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as to consider them as intra-corporate controversies.

What then is the nature of petitioners Complaint for Illegal Dismissal? Is it intra-corporate and thus beyond the jurisdiction of the Labor Arbiter? We shall answer this question by using the standards set forth in the Reyes case.

No intra-corporate relationship between the parties

As earlier stated, petitioners status as a stockholder and director of respondent corporation is not disputed. What the parties disagree on is the finding of the NLRC and the CA that petitioner is a corporate officer. An examination of the complaint for illegal dismissal, however, reveals that the root of the controversy is petitioners dismissal as Manager of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is involved in this case not in his capacity as a stockholder or director, but as an alleged corporate officer. In applying the relationship test, therefore, it is necessary to determine if petitioner is a corporate officer of respondent corporation so as to establish the intra-corporate relationship between the parties. And albeit respondents claim that the determination of whether petitioner is a corporate officer is a question of fact which this Court cannot pass upon in this petition for review on certiorari, we shall nonetheless proceed to consider the same because such question is not the main issue to be resolved in this case but is merely collateral to the core issue earlier mentioned.

Petitioner negates his status as a corporate officer by pointing out that although he was removed as Manager through a board resolution, he was never elected to said position nor was he appointed thereto by the Board of Directors. While the By-Laws of respondent corporation provides that the Board may from time to time appoint such officers as it may deem necessary or proper, he avers that respondents failed to present any board resolution that he was appointed pursuant to said By-Laws. He instead alleges that he was hired as Manager of respondent corporation solely by respondent Abe. For these reasons, petitioner claims to be a mere employee of respondent corporation rather than as a corporate officer.

We find merit in petitioners contention.

Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the Corporation Code or by the corporations by-laws. There are three specific officers whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer. The number of officers is not limited to these three. A corporation may have such other officers as may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The number of corporate officers is thus limited by law and by the corporations by-laws.[footnoteRef:53] [53: Garcia v. Eastern Telecommunications Philippines, Inc., G.R. Nos. 173115 and 173163-164, April 16, 2009, 585 SCRA 450, 468.]

Respondents claim that petitioner was appointed Manager by virtue of Section 1, Article IV of respondent corporations By-Laws which provides:ARTICLE IVOFFICER

Section 1. Election/Appointment Immediately after their election, the Board of Directors shall formally organize by electing the President, Vice-President, the Secretary at said meeting.

The Board, may from time to time, appoint such other officers as it may determine to be necessary or proper. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as President and Treasurer or Secretary at the same time.

x x x x[footnoteRef:54] (Emphasis ours) [54: CA rollo, pp. 266-273.]

We have however examined the records of this case and we find nothing to prove that petitioners appointment was made pursuant to the above-quoted provision of respondent corporations By-Laws. No copy of board resolution appointing petitioner as Manager or any other document showing that he was appointed to said position by action of the board was submitted by respondents. What we found instead were mere allegations of respondents in their various pleadings[footnoteRef:55] that petitioner was appointed as Manager of respondent corporation and nothing more. The Court has stressed time and again that allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.[footnoteRef:56] [55: Respondents Position Paper filed with the Labor Arbiter, id. at 94-113; Memorandum on Appeal and Rejoinder filed with the NLRC, id. at 182-220 and 285-294; Comment filed with the CA, id. at 302-319; Comment/Opposition (To The Petition for Review) and Memorandum filed before this Court, rollo, pp. 89-100 and 169-187.] [56: General Milling Corporation v. Casio, G.R. No. 149552, March 10, 2010 citing Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation, 507 Phil. 631, 648-649 (2005).]

It also does not escape our attention that respondents made the following conflicting allegations in their Memorandum on Appeal[footnoteRef:57] filed before the NLRC which cast doubt on petitioners status as a corporate officer, to wit: [57: CA rollo, pp. 122-220 at 191 and 212.]

x x x x

24. Complainant-appellee Renato Real was appointed as the manager of respondent-appellant Sangu on November 6, 1998. Priorly [sic], he was working at Atlas Ltd. Co. at Mito-shi, Ibaraki-ken Japan. He was staying in Japan as an illegal alien for the past eleven (11) years. He had a problem with his family here in the Philippines which prompted him to surrender himself to Japans Bureau of Immigration and was deported back to the Philippines. His former employer, Mr. Tsutomo Nogami requested Mr. Masahiko Shibata, one of respondent-appellant Sangus Board of Directors, if complainant-appellee Renato Real could work as one of its employees here in the Philippines because he had been blacklisted at Japans Immigration Office and could no longer go back to Japan. And so it was arranged that he would serve as respondent-appellant Sangus manager, receiving a salary of P25,000.00. As such, he was tasked to oversee the operations of the company. x x x (Emphasis ours)

x x x xAs earlier stated, complainant-appellee Renato Real was hired as the manager of respondent-appellant Sangu. As such, his position was reposed with full trust and confidence. x x x

While respondents repeatedly claim that petitioner was appointed as Manager pursuant to the corporations By-Laws, the above-quoted inconsistencies in their allegations as to how petitioner was placed in said position, coupled by the fact that they failed to produce any documentary evidence to prove that petitioner was appointed thereto by action or with approval of the board, only leads this Court to believe otherwise. It has been consistently held that [a]n office is created by the charter of the corporation and the officer is elected (or appointed) by the directors or stockholders.[footnoteRef:58] Clearly here, respondents failed to prove that petitioner was appointed by the board of directors. Thus, we cannot subscribe to their claim that petitioner is a corporate officer. Having said this, we find that there is no intra-corporate relationship between the parties insofar as petitioners complaint for illegal dismissal is concerned and that same does not satisfy the relationship test. [58: Easycall Communications Phils., Inc. v. King, G.R. No. 145901, December 15, 2005, 478 SCRA 102, 110.]

Present controversy does not relate to intra-corporate dispute

We now go to the nature of controversy test. As earlier stated, respondents terminated the services of petitioner for the following reasons: (1) his continuous absences at his post at Ogino Philippines, Inc; (2) respondents loss of trust and confidence on petitioner; and, (3) to cut down operational expenses to reduce further losses being experienced by the corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement, backwages, moral damages and attorneys fees. From these, it is not difficult to see that the reasons given by respondents for dismissing petitioner have something to do with his being a Manager of respondent corporation and nothing with his being a director or stockholder. For one, petitioners continuous absences in his post in Ogino relates to his performance as Manager. Second, respondents loss of trust and confidence in petitioner stemmed from his alleged acts of establishing a company engaged in the same line of business as respondent corporations and submitting proposals to the latters clients while he was still serving as its Manager. While we note that respondents also claim these acts as constituting acts of disloyalty of petitioner as director and stockholder, we, however, think that same is a mere afterthought on their part to make it appear that the present case involves an element of intra-corporate controversy. This is because before the Labor Arbiter, respondents did not see such acts to be disloyal acts of a director and stockholder but rather, as constituting willful breach of the trust reposed upon petitioner as Manager.[footnoteRef:59] It was only after respondents invoked the Labor Arbiters lack of jurisdiction over petitioners complaint in the Supplemental Memorandum of Appeal[footnoteRef:60] filed before the NLRC that respondents started considering said acts as such. Third, in saying that they were dismissing petitioner to cut operational expenses, respondents actually want to save on the salaries and other remunerations being given to petitioner as its Manager. Thus, when petitioner sought for reinstatement, he wanted to recover his position as Manager, a position which we have, however, earlier declared to be not a corporate position. He is not trying to recover a seat in the board of directors or to any appointive or elective corporate position which has been declared vacant by the board. Certainly, what we have here is a case of termination of employment which is a labor controversy and not an intra-corporate dispute. In sum, we hold that petitioners complaint likewise does not satisfy the nature of controversy test. [59: Respondents Position Paper, CA rollo, pp. 94-113 at 109-110.] [60: Id. at 221-236. ]

With the elements of intra-corporate controversy being absent in this case, we thus hold that petitioners complaint for illegal dismissal against respondents is not intra-corporate. Rather, it is a termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter pursuant to Section 217[footnoteRef:61] of the Labor Code. [61: ART. 217. Jurisdiction of the 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:Unfair labor practice cases;Termination disputes;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;Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lock-outs; andExcept 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 reinstatementx x x x]

We take note of the cases cited by respondents and find them inapplicable to the case at bar. Fortune Cement Corporation v. National Labor Relations Commission[footnoteRef:62] involves a member of the board of directors and at the same time a corporate officer who claims he was illegally dismissed after he was stripped of his corporate position of Executive Vice-President because of loss of trust and confidence. On the other hand, Philippine School of Business Administration v. Leano[footnoteRef:63] and Pearson & George v. National Labor Relations Commission[footnoteRef:64] both concern a complaint for illegal dismissal by corporate officers who were not re-elected to their respective corporate positions. The Court declared all these cases as involving intra-corporate controversies and thus affirmed the jurisdiction of the SEC (now the RTC)[footnoteRef:65] over them precisely because they all relate to corporate officers and their removal or non-reelection to their respective corporate positions. Said cases are by no means similar to the present case because as discussed earlier, petitioner here is not a corporate officer. [62: Supra note 13.] [63: Supra note 12.] [64: Supra note 11 at 173-174.] [65: Pursuant to Section 5.2 of Republic Act No. 8799 otherwise known as The Securities Regulation Code.]

With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which dismissed petitioners complaint for lack of jurisdiction. In cases such as this, the Court normally remands the case to the NLRC and directs it to properly dispose of the case on the merits. However, when there is enough basis on which a proper evaluation of the merits of petitioners case may be had, the Court may dispense with the time-consuming procedure of remand in order to prevent further delays in the disposition of the case.[footnoteRef:66] It is already an accepted rule of procedure for us to strive to settle the entire controversy in a single proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the records, the pleadings, and other evidence, the dispute can be resolved by us, we will do so to serve the ends of justice instead of remanding the case to the lower court for further proceedings.[footnoteRef:67] We have gone over the records before us and we are convinced that we can now altogether resolve the issue of the validity of petitioners dismissal and hence, we shall proceed to do so. [66: Leandro M. Alcantara v. The Philippine Commercial and International Bank, G.R. No. 151349, October 20, 2010 citing Somoso v. Court of Appeals, G.R. No. 78050, October 23, 1989, 178 SCRA 654, 663; Bach v. Ongkiko Kalaw Manhit & Acorda Law Offices, G.R. No. 160334, September 11, 2006, 501 SCRA 419, 426.] [67: Id. citing Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, February 6, 2007, 514 SCRA 537, 555.]

Petitioners dismissal not in accordance with law

In an illegal dismissal case, the onus probandi rests on the employer to prove that [the] dismissal of an employee is for a valid cause.[footnoteRef:68] Here, as correctly observed by the Labor Arbiter, respondents failed to produce any convincing proof to support the grounds for which they terminated petitioner. Respondents contend that petitioner has been absent for several months, yet they failed to present any proof that petitioner was indeed absent for such a long time. Also, the fact that petitioner was still able to collect his salaries after his alleged absences casts doubts on the truthfulness of such charge. Respondents likewise allege that petitioner engaged in a heated argument with the employees of Epson, one of respondents clients. But just like in the charge of absenteeism, there is no showing that an investigation on the matter was done and that disciplinary action was imposed upon petitioner. At any rate, we have reviewed the records of this case and we agree with the Labor Arbiter that under the circumstances, said charges are not sufficient bases for petitioners termination. As to the charge of breach of trust allegedly committed by petitioner when he established a new company engaged in the same line of business as respondent corporations and submitted proposals to two of the latters clients while he was still a Manager, we again observe that these are mere allegations without sufficient proof. To reiterate, allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.[footnoteRef:69] [68: Pepsi Cola Products Philippines, Inc. v. Santos, G.R. No. 165968, April 14, 2008, 551 SCRA 245, 252.] [69: Supra note 25.]

Moreover, petitioners dismissal was effected without due process of law. The twin requirements of notice and hearing constitute the essential elements of due process. The law requires the employer to furnish the employee sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee of the employers decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality.[footnoteRef:70] Since in this case, petitioners dismissal was effected through a board resolution and all that petitioner received was a letter informing him of the boards decision to terminate him, the abovementioned procedure was clearly not complied with. All told, we agree with the findings of the Labor Arbiter that petitioner has been illegally dismissed. And, as an illegally dismissed employee is entitled to the two reliefs of backwages and reinstatement,[footnoteRef:71] we affirm the Labor Arbiters judgment ordering petitioners reinstatement to his former position without loss of seniority rights and other privileges and awarding backwages from the time of his dismissal until actually reinstated. Considering that petitioner has to secure the services of counsel to protect his interest and necessarily has to incur expenses, we likewise affirm the award of attorneys fees which is equivalent to 10% of the total backwages that respondents must pay petitioner in accordance with this Decision. [70: Supra note 27 at 113-114.] [71: Golden Ace Builders v. Jose Talde, G.R. No. 187200, May 5, 2010.]

WHEREFORE, the petition is hereby GRANTED. The assailed June 28, 2005 Decision of the Court of Appeals insofar as it affirmed the National Labor Relations Commissions dismissal of petitioners complaint for lack of jurisdiction, is hereby REVERSED and SET ASIDE. The June 5, 2003 Decision of the Labor Arbiter with respect to petitioner Renato Real is AFFIRMED and this case is ordered REMANDED to the National Labor Relations Commission for the computation of petitioners backwages and attorneys fees in accordance with this Decision.

SO ORDERED. SECOND DIVISION

THE UNIVERSITY OF THE G.R. No. 181146IMMACULATE CONCEPTIONand MO. MARIA ASSUMPTA Present:DAVID, RVM,Petitioners, CARPIO, J., Chairperson, NACHURA,PERALTA,ABAD, and- versus - MENDOZA, JJ.

NATIONAL LABOR RELATIONS Promulgated:COMMISSION and TEODORA AXALAN,Respondents. January 26, 2011x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review on certiorari1 of the 13 December 2007 Decision2 of the Court of Appeals in CA-G.R. SP No. 00812 affirming the 15 August 2005 and the 24 October 2005 Resolutions3 of the National Labor Relations Commission in NLRC CA No. M-008333-2005, which sustained the 11 October 2004 Decision4 of the Labor Arbiter in RAB-11-12-01187-03 ordering petitioner to reinstate private respondent to her former position without loss of seniority rights and to pay her backwages, salary differentials, damages, and attorneys fees.

The Facts

Petitioner University of the Immaculate Conception is a private educational institution located in Davao City. Private respondent Teodora C. Axalan is a regular faculty member in the university holding the position of Associate Professor II. Aside from being a regular faculty member, Axalan is the elected president of the employees union.5

From 18 November to 22 November 2002, Axalan attended a seminar in Quezon City on website development. Axalan then received a memorandum6 from Dean Maria Rosa Celestial asking her to explain in writing why she should not be dismissed for having been absent without official leave.

In her letter,7 Axalan claimed that she held online classes while attending the seminar. She explained that she was under the impression that faculty members would not be marked absent even if they were not physically present in the classroom as long as they conducted online classes.

In reply,8 Dean Celestial relayed to Axalan the message of the university president that no administrative charge would be filed if Axalan would admit having been absent without official leave and write a letter of apology seeking forgiveness. `Convinced that she could not be deemed absent since she held online classes, Axalan opted not to write the letter of admission and contrition the university president requested.9 The Dean wrote Axalan that the university president had created an ad hoc grievance committee to investigate the AWOL charge.10

From 28 January to 3 February 2003, Axalan attended a seminar in Baguio City on advanced paralegal training. Dean Celestial wrote Axalan informing her that her participation in the paralegal seminar in Baguio City was the subject of a second AWOL charge.11 The dean asked Axalan to explain in writing why no disciplinary action should be taken against her.12

In her letter,13 Axalan explained that before going to Baguio City for the seminar, she sought the approval of Vice-President for Academics Alicia Sayson. In a letter,14 VP Sayson denied having approved Axalans application for official leave. The VP stated in her letter that it was the university president, Maria Assumpta David, who must approve the application.

After conducting hearings and receiving evidence, the ad hoc grievance committee found Axalan to have incurred AWOL on both instances and recommended that Axalan be suspended without pay for six months on each AWOL charge.15 The university president approved the committees recommendation.

The university president then wrote Axalan informing her that she incurred absences without official leave when she attended the seminars on website development in Quezon City and on advanced paralegal training in Baguio City on 18-22 November 2002 and on 28 January-3 February 2003, respectively. In the same letter, the university president informed Axalan that the total penalty of one-year suspension without pay for both AWOL charges would be effective immediately.16

On 1 December 2003, Axalan filed a complaint17 against the university for illegal suspension, constructive dismissal, reinstatement with backwages, and unfair labor practice with prayer for damages and attorneys fees.

The university moved to dismiss the complaint on the ground that the Labor Arbiter had no jurisdiction over the subject matter of the complaint. The university maintained that jurisdiction lay in the voluntary arbitrator.18

In denying the universitys motion to dismiss, the Labor Arbiter held that there being no existing collective bargaining agreement between the parties, no grievance machinery was constituted, which barred resort to voluntary arbitration.19

Meanwhile, upon the expiration of the one-year suspension, Axalan promptly resumed teaching at the university on 1 October 2004.

The Ruling of the Labor Arbiter

On 11 October 2004, the Labor Arbiter rendered a Decision holding that the suspension of Axalan amounted to constructive dismissal entitling her to reinstatement and payment of backwages, salary differentials, damages, and attorneys fees, thus:

WHEREFORE, premises laid, judgment is hereby rendered declaring that the suspension of complainant amounted to constructive dismissal, and as such, she is entitled to reinstatement and payment of her full backwages reckoned from the time it was withheld from her up to the time of reinstatement. Accordingly, Respondent University of the Immaculate Conception acting through its President, Respondent Mo. Maria Assumpta David, RVM, is directed to reinstate the complainant to her former position without loss of seniority rights and to pay her the sum of Five Hundred Forty Three Thousand Four Hundred Fifty Two Pesos (P543,452.00) representing her backwages, salary differentials (diminution) and damages plus ten percent (10%) thereof as attorneys fees or the sum of P54,345.20.

The Respondent UIC and its President are hereby directed to inform this Office of the mode of compliance it will avail itself by reason of the Order of reinstatement.

SO ORDERED.20

The university appealed the Labor Arbiters Decision to the National Labor Relations Commission (NLRC). It challenged the jurisdiction of the Labor Arbiter insisting that the voluntary arbitrator had jurisdiction over the labor dispute. The university pointed out that when the Labor Arbiter rendered his Decision on 11 October 2004, Axalan had returned to work on 1 October 2004 upon the expiration of the one-year suspension.

The Ruling of the NLRC

The NLRC held that the Labor Arbiter, not the voluntary arbitrator, had jurisdiction as the controversy did not pertain to a dispute involving the union and the university. In its 15 August 2005 Resolution, the NLRC ruled:

WHEREFORE, for want of merit, the instant appeal is hereby DISMISSED.

SO ORDERED.21

NLRC Commissioner Jovito C. Cagaanan, in his dissenting opinion,22 stressed that the parties previously agreed to submit the dispute to voluntary arbitration, which cast doubt on the jurisdiction of the Labor Arbiter.

The university moved for reconsideration of the NLRC Resolution. But the NLRC, in its 24 October 2005 Resolution,23 denied the motion for reconsideration for lack of merit. The university challenged both Resolutions of the NLRC before the Court of Appeals via a petition for certiorari.

The Ruling of the Court of Appeals

The Court of Appeals affirmed the findings of the Labor Arbiter and the NLRC. In its 13 December 2007 Decision, the Court of Appeals dismissed the universitys petition for certiorari, thus:

We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent in affirming the Labor Arbiter. Respondent Commissions ruling finds more than ample support in statutory and case law. It cannot, therefore, be characterized as whimsical, arbitrary, or oppressive.

WHEREFORE, the instant petition is hereby DISMISSED.

SO ORDERED.24

Dissatisfied, the university filed in this Court the instant petition for review on certiorari.

The Issues

The issues for resolution are (1) whether the voluntary arbitrator had jurisdiction over the labor dispute; (2) whether Axalan was constructively dismissed; and (3) whether the Labor Arbiters computation of backwages, damages, and attorneys fees was correct.

The Courts Ruling

The petition is impressed with merit.

The university contends that based on the transcript of stenographic notes from the ad hoc grievance committee hearing held on 20 February 2003, the parties agreed that the voluntary arbitrator would have jurisdiction over the labor dispute. The university maintains that Axalans suspension does not constitute constructive dismissal and that the Labor Arbiters decision treating it as such is an attempt to make it appear that the voluntary arbitrator has no jurisdiction. The university points out that for constructive dismissal to exist, there must be severance of employment by the employee because of unbearable act of discrimination, insensibility, or disdain on the part of the employer leaving the employee with no choice but to forego continued employment. The university claims that on the contrary, Axalan eagerly reported for work as soon as the one-year suspension was over. The university further argues that assuming Axalan is entitled to backwages, it should have been based on Axalans average gross monthly income at the time she was suspended in SY2003-2004, which was P14,145.00, not on her average gross monthly income in SY2002-2003, which was P18,502.00.

Private respondent Axalan counters that the university raises the same factual issues already decided unanimously by the Labor Arbiter, the NLRC, and the Court of Appeals. On the issue of jurisdiction, Axalan stresses that the present labor case, being a complaint for constructive dismissal and unfair labor practice, is within the jurisdiction of the Labor Arbiter. On the finding of constructive dismissal, Axalan points out that the Labor Arbiters factual finding of constructive dismissal, when affirmed by the NLRC and the Court of Appeals, binds this Court. Axalan claims that both AWOL charges against her were without basis and were only a form of harassment amounting to unfair labor practice. As to the computation of the award of backwages, Axalan points out that her average gross monthly income in SY2002-2003 was reduced in SY2003-2004 precisely because she was not given an overload of two extra assignments resulting in the diminution of her income. Axalan maintains that the award of damages was just proper considering that her suspension was without basis and amounted to unfair labor practice.

Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not supported by the evidence on record or the impugned judgment is based on a misapprehension of facts. Patently erroneous findings of the Labor Arbiter, even when affirmed by the NLRC and the Court of Appeals, are not binding on this Court.25 As to the first issue, Article 217 of the Labor Code states that unfair labor practices and termination disputes fall within the original and exclusive jurisdiction of the Labor Arbiter:

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 x x x the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;2. Termination disputes;x x x x (Emphasis supplied)

Article 262 of the same Code provides the exception:ART. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks. (Emphasis supplied)

In San Miguel Corp. v. NLRC,26 the Court ruled that for the exception to apply, there must be agreement between the parties clearly conferring jurisdiction to the voluntary arbitrator. Such agreement may be stipulated in a collective bargaining agreement. However, in the absence of a collective bargaining agreement, it is enough that there is evidence on record showing the parties have agreed to resort to voluntary arbitration.27

As can be gleaned from the transcript of stenographic notes of the administrative hearing held on 20 February 2003, the parties in this case clearly agreed to resort to voluntary arbitration. To quote the exact words of the parties counsels:

Atty. Dante Sandiego: x x x So, are we to understand that the decision of the President shall be without prejudice to the right of the employees to contest the validity or legality of his dismissal or of the disciplinary action imposed upon him by asking for voluntary arbitration under the Labor Code or when applicable availing himself of the grievance machinery under the Labor Code which ends in voluntary arbitration. That will be the steps that we will have to follow.

Atty. Sabino Padilla, Jr.: Yes, agreed.28

Thus, the Labor Arbiter should have immediately disposed of the complaint and referred the same to the voluntary arbitrator when the university moved to dismiss the complaint for lack of jurisdiction.

No less than Section 3, Article XIII of the Constitution declares as state policy the preferential use of voluntary modes in settling disputes, to wit:

Sec. 3. x x x x The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. (Emphasis supplied)

As to the second issue, constructive dismissal occurs when there is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely as when there is a demotion in rank or diminution in pay or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee leaving the latter with no other option but to quit.29

In this case however, there was no cessation of employment relations between the parties. It is unrefuted that Axalan promptly resumed teaching at the university right after the expiration of the suspension period. In other words, Axalan never quit. Hence, Axalan cannot claim that she was left with no choice but to quit, a crucial element in a finding of constructive dismissal. Thus, Axalan cannot be deemed to have been constructively dismissed.

Significantly, at the time the Labor Arbiter rendered his Decision on 11 October 2004, Axalan had already returned to her teaching job at the university on 1 October 2004. The Labor Arbiters Decision ordering the reinstatement of Axalan, who at the time had already returned to work, is thus absurd.

There being no constructive dismissal, there is no legal basis for the Labor Arbiters order of reinstatement as well as payment of backwages, salary differentials, damages, and attorneys fees.30 Thus, the third issue raised in the petition is now moot.Note that on the first AWOL incident, the university even offered to drop the AWOL charge against Axalan if she would only write a letter of contrition. But Axalan adamantly refused knowing fully well that the administrative case would take its course leading to possible sanctions. She cannot now be heard that the imposition of the penalty of six-month suspension without pay for each AWOL charge is unreasonable. We are convinced that Axalan was validly suspended for cause and in accord with procedural due process.

The Court recognizes the right of employers to discipline its employees for serious violations of company rules after affording the latter due process and if the evidence warrants. The university, after affording Axalan due process and finding her guilty of incurring AWOL on two separate occasions, acted well within the bounds of labor laws in imposing the penalty of six-month suspension without pay for each incidence of AWOL.

As a learning institution, the university cannot be expected to take lightly absences without official leave among its employees, more so among its faculty members even if they happen to be union officers. To do so would send the wrong signal to the studentry and the rest of its teaching staff that irresponsibility is widely tolerated in the academe.

The law protects both the welfare of employees and the prerogatives of management.31 Courts will not interfere with prerogatives of management on the discipline of employees, as long as they do not violate labor laws, collective bargaining agreements if any, and general principles of fairness and justice.32

WHEREFORE, we GRANT the petition. The 13 December 2007 Decision of the Court of Appeals in CA-G.R. SP No. 00812 affirming the 15 August 2005 and the 24 October 2005 Resolutions of the National Labor Relations Commission in NLRC CA No. M-008333-2005, which sustained the 11 October 2004 Decision of the Labor Arbiter in RAB-11-12-01187-03, is SET ASIDE.

No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSupreme CourtManila

SECOND DIVISION

THE HERITAGE HOTEL MANILA, acting through its owner, GRAND PLAZA HOTEL CORPORATION,Petitioner,

- versus -

NATIONAL UNION OF WORKERS IN THE HOTEL, RESTAURANT AND ALLIED INDUSTRIES-HERITAGE HOTEL MANILA SUPERVISORS CHAPTER (NUWHRAIN-HHMSC),Respondent.G.R. No. 178296

Present:

CARPIO, J., Chairperson,NACHURA, LEONARDO-DE CASTRO,[footnoteRef:72]* [72: * Additional member in lieu of Associate Justice Diosdado M. Peralta per Raffle dated January 12, 2011.]

ABAD, andMENDOZA, JJ.

Promulgated:

January 12, 2011

x----------------------------------------------------------------------------------x

DECISION

NACHURA, J.:Before the Court is a petition for review on certiorari of the Decision[footnoteRef:73] of the Court of Appeals (CA) dated May 30, 2005 and Resolution dated June 4, 2007. The assailed Decision affirmed the dismissal of a petition for cancellation of union registration filed by petitioner, Grand Plaza Hotel Corporation, owner of Heritage Hotel Manila, against respondent, National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC), a labor organization of the supervisory employees of Heritage Hotel Manila. [73: Penned by Associate Justice Ruben T. Reyes (now a retired member of this Court), with Associate Justices Josefina Guevara-Salonga and Fernanda Lampas Peralta, concurring; rollo, pp. 38-54.]

The case stemmed from the following antecedents:

On October 11, 1995, respondent filed with the Department of Labor and Employment-National Capital Region (DOLE-NCR) a petition for certification election.[footnoteRef:74] The Med-Arbiter granted the petition on February 14, 1996 and ordered the holding of a certification election.[footnoteRef:75] On appeal, the DOLE Secretary, in a Resolution dated August 15, 1996, affirmed the Med-Arbiters order and remanded the case to the Med-Arbiter for the holding of a preelection conference on February 26, 1997. Petitioner filed a motion for reconsideration, but it was denied on September 23, 1996. [74: Id. at 62-64.] [75: Id. at 133. ]

The preelection conference was not held as initially scheduled; it was held a year later, or on February 20, 1998. Petitioner moved to archive or to dismiss the petition due to alleged repeated non-appearance of respondent. The latter agreed to suspend proceedings until further notice. The preelection conference resumed on January 29, 2000.

Subsequently, petitioner discovered that respondent had failed to submit to the Bureau of Labor Relations (BLR) its annual financial report for several years and the list of its members since it filed its registration papers in 1995. Consequently, on May 19, 2000, petitioner filed a Petition for Cancellation of Registration of respondent, on the ground of the non-submission of the said documents. Petitioner prayed that respondents Certificate of Creation of Local/Chapter be cancelled and its name be deleted from the list of legitimate labor organizations. It further requested the suspension of the certification election proceedings.[footnoteRef:76] [76: Id. at 67-74.]

On June 1, 2000, petitioner reiterated its request by filing a Motion to Dismiss or Suspend the [Certification Election] Proceedings,[footnoteRef:77] arguing that the dismissal or suspension of the proceedings is warranted, considering that the legitimacy of respondent is seriously being challenged in the petition for cancellation of registration. Petitioner maintained that the resolution of the issue of whether respondent is a legitimate labor organization is crucial to the issue of whether it may exercise rights of a legitimate labor organization, which include the right to be certified as the bargaining agent of the covered employees. [77: Id. at 83-85.]

Nevertheless, the certification election pushed through on June 23, 2000. Respondent emerged as the winner.[footnoteRef:78] [78: Id. at 100.]

On June 28, 2000, petitioner filed a Protest with Motion to Defer Certification of Election Results and Winner,[footnoteRef:79] stating that the certification election held on June 23, 2000 was an exercise in futility because, once respondents registration is cancelled, it would no longer be entitled to be certified as the exclusive bargaining agent of the supervisory employees. Petitioner also claimed that some of respondents members were not qualified to join the union because they were either confidential employees or managerial employees. It then prayed that the certification of the election results and winner be deferred until the petition for cancellation shall have been resolved, and that respondents members who held confidential or managerial positions be excluded from the supervisors bargaining unit. [79: Id. at 87-95.]

Meanwhile, respondent filed its Answer[footnoteRef:80] to the petition for the cancellation of its registration. It averred that the petition was filed primarily to delay the conduct of the certification election, the respondents certification as the exclusive bargaining representative of the supervisory employees, and the commencement of bargaining negotiations. Respondent prayed for the dismissal of the petition for the following reasons: (a) petitioner is estopped from questioning respondents status as a legitimate labor organization as it had already recognized respondent as such during the preelection conferences; (b) petitioner is not the party-in-interest, as the union members are the ones who would be disadvantaged by the non-submission of financial reports; (c) it has already complied with the reportorial requirements, having submitted its financial statements for 1996, 1997, 1998, and 1999, its updated list of officers, and its list of members for the years 1995, 1996, 1997, 1998, and 1999; (d) the petition is already moot and academic, considering that the certification election had already been held, and the members had manifested their will to be represented by respondent. [80: Id. at 76-81.]

Citing National Union of Bank Employees v. Minister of Labor, et al.[footnoteRef:81] and Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma,[footnoteRef:82] the Med-Arbiter held that the pendency of a petition for cancellation of registration is not a bar to the holding of a certification election. Thus, in an Order[footnoteRef:83] dated January 26, 2001, the Med-Arbiter dismissed petitioners protest, and certified respondent as the sole and exclusive bargaining agent of all supervisory employees. [81: 196 Phil. 441 (1981).] [82: 334 Phil. 955 (1997).] [83: Rollo, pp. 100-103.]

Petitioner subsequently appealed the said Order to the DOLE Secretary.[footnoteRef:84] The appeal was later dismissed by DOLE Secretary Patricia A. Sto. Tomas (DOLE Secretary Sto. Tomas) in the Resolution of August 21, 2002.[footnoteRef:85] Petitioner moved for reconsideration, but the motion was also denied.[footnoteRef:86] [84: Id. at 104-110.] [85: Id. at 133-136.] [86: Id. at 158.]

In the meantime, Regional Director Alex E. Maraan (Regional Director Maraan) of DOLE-NCR finally resolved the petition for cancellation of registration. While finding that respondent had indeed failed to file financial reports and the list of its members for several years, he, nonetheless, denied the petition, ratiocinating that freedom of association and the employees right to self-organization are more substantive considerations. He took into account the fact that respondent won the certification election and that it had already been certified as the exclusive bargaining agent of the supervisory employees. In view of the foregoing, Regional Director Maraanwhile emphasizing that the non-compliance with the law is not viewed with favorconsidered the belated submission of the annual financial reports and the list of members as sufficient compliance t