C. ALCANTARA & SONS, INC., Petitioner, vs. COURT OF APPEALS, ABAD, J.

: This case is about a) the consequences of an illegally staged strike upon the employment status of the union officers and its ordinary members and b) the right of reinstated union members to go back to work pending the companys appeal from the order reinstating them. The Facts and the Case C. Alcantara & Sons, Inc., (the Company) is a domestic corporation engaged in the manufacture and processing of plywood. Nagkahiusang Mamumuo sa Alsons-SPFL (the Union) is the exclusive bargaining agent of the Companys rank and file 1 employees. The other parties to these cases are the Union officers and their striking 2 members. The Company and the Union entered into a Collective Bargaining Agreement (CBA) that bound them to hold no strike and no lockout in the course of its life. At some point the parties began negotiating the economic provisions of their CBA but this ended in a deadlock, prompting the Union to file a notice of strike. After efforts at conciliation by the Department of Labor and Employment (DOLE) failed, the Union conducted a strike vote that resulted in an overwhelming majority of its members favoring it. The Union reported the strike vote to the DOLE and, after the observance of the mandatory cooling-off period, went on strike. During the strike, the Company filed a petition for the issuance of a writ of preliminary injunction with prayer for the issuance of a temporary restraining order (TRO) Ex 3 Parte with the National Labor Relations Commission (NLRC) to enjoin the strikers from intimidating, threatening, molesting, and impeding by barricade the entry of nonstriking employees at the Companys premises. The NLRC first issued a 20 -day TRO and, after hearing, a writ of preliminary injunction, enjoining the Union and its officers and members from performing the acts complained of. But several attempts to implement the writ failed. Only the intervention of law enforcement units made such 4 implementation possible. Meantime, the Union filed a petition with the Court of Appeals (CA), questioning the preliminary injunction order. On February 8, 1999 the latter court dismissed the petition. The Union did not appeal from such dismissal. The Company, on the other hand, filed a petition with the Regional Arbitration Board 5 to declare the Unions strike illegal, citing its violation of the no strike, no lockout, provision of their CBA. Subsequently, the Company amended its petition to implead the named Union members who allegedly committed prohibited acts during the strike. For their part, the Union, its officers, and its affected members filed against the Company a counterclaim for unfair labor practices, illegal dismissal, and damages. The Union also assailed as invalid the service of summons on the individual Union members included in the amended petition.

On June 29, 1999 the Labor Arbiter rendered a decision, declaring the Unions strike illegal for violating the CBAs no strike, no lockout, provision. As a consequence, the Labor Arbiter held that the Union officers should be deemed to have forfeited their employment with the Company and that they should pay actual damages ofP3,825,000.00 plus 10% interest and attorneys fees. With re spect to the striking Union members, finding no proof that they actually committed illegal acts during the strike, the Labor Arbiter ordered their reinstatement without backwages. The Labor Arbiter denied the Unions counterclaim for lack of merit. On June 29, 1999 the terminated Union members promptly filed a motion for their immediate reinstatement but the Labor Arbiter did not act on the same. At any rate, 7 the Company did not reinstate them. Both parties appealed the Labor Arbiters decision to the NLRC. The Company impugned the Labor Arbiters decision insofar as it ordered the reinstatement of the terminated Union members. The Union, on the other hand, questioned the declaration of illegality of the strike as well as the dismissal of its officers and the order for them to pay damages. On November 8, 1999 the NLRC rendered a decision, affirming that of the Labor Arbiter insofar as the latter declared the strike illegal, ordered the Union officers terminated, and directed them to pay damages to the Company. The NLRC ruled, however, that the Union members involved, who were identified in the proceedings held in the case, should also be terminated for having committed prohibited and illegal acts. The Union filed a petition for certiorari with the CA, questioning the NLRC decision. Finding merit in the petition, the CA rendered a decision on March 20, 10 2002, annulling the NLRC decision and reinstating that of the Labor Arbiter. The Company and the Union with its officers and members filed separate petitions for review of the CA decision in G.R. 155109 and 155135, respectively. During the pendency of these cases, the affected Union members filed with the Labor Arbiter a motion for reinstatement pending appeal by the parties and the computation of their backwages based on the CA decision. After hearing, the Labor Arbiter issued 11 a resolution dated November 21, 2002, holding that due to the delay in the resolution of the dispute and the impracticability of reinstatement owing to the fact that the relations between the terminated Union members and the Company had been severely strained by the prolonged litigation, payment of separation pay to such Union members was in order. The Labor Arbiter thus approved the computation and payment of their separation pay and denied all their other claims. Both parties appealed the Labor Arbiters resolution to the NLRC. Initially, in its 13 resolution dated April 30, 2003, the NLRC declared the Labor Arbiters resolution of November 21, 2002 void for lack of factual and legal basis but ordered the Company to pay the affected employees accrued wages and 13th month pay consid ering the Companys refusal to reinstate them pending appeal. On motion for reconsideration by both parties, however, the NLRC issued a resolution on August 29, 14 2003, modifying its earlier resolution by deleting the grant of accrued wages and 13th month pay to the subject employees, thus denying their motion for computation. Upon the Unions petition for certiorari with the CA, questioning the NLRCs denial of the terminated Union members claim for separation pay, accrued wages, and
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other benefits, the CA rendered a decision on February 24, 2005, dismissing the petition. The CA ruled that the reinstatement pending appeal provided under Article 223 of the Labor Code contemplated illegal dismissal or termination cases and not cases under Article 263. Thus, the CA ruled that the resolution ordering the reinstatement of the terminated Union members and the payment of their wages and other benefits had no basis. Aggrieved, the Union sought intervention by this Court. The Issues Presented The issues presented in these cases are: 1. Whether or not the NLRC properly acquired jurisdiction over the persons of the individual Union members impleaded in the case; 2. Whether or not the Union staged an illegal strike; 3. Assuming the strike to be illegal, whether or not the impleaded Union members committed illegal acts during the strike, justifying their termination from employment; 4. Whether or not the terminated Union members are entitled to the payment of backwages on account of the Companys refusal to reinstate them, pending appeal by the parties, from the Labor Arbiters decision of June 29, 1999; and 5. Whether or not the terminated Union members are entitled to accrued backwages and separation pay. The Rulings of the Court One. The NLRC acquires jurisdiction over parties in cases before it either by summons served on them or by their voluntary appearance before its Labor Arbiter. Here, while the Union insists that summons were not properly served on the impleaded Union members with respect to the Companys amended petition that sought to declare the strike illegal, the records show that they were so served. The 17 18 Return of Service of Summons indicated that 74 out of the 81 impleaded Union members were served with summons. But they refused either to accept the summons or to acknowledge receipt of the same. Such refusal cannot of course frustrate the NLRCs acquisition of jurisdiction over them. Besides, the affected Union members voluntarily entered their appearance in the case when they sought affirmative relief in the course of the proceedings like an award of damages in their favor. Two. A strike may be regarded as invalid although the labor union has complied with the strict requirements for staging one as provided in Article 263 of the Labor Code when the same is held contrary to an existing agreement, such as a no strike clause 19 or conclusive arbitration clause. Here, the CBA between the parties contained a "no strike, no lockout" provision that enjoined both the Union and the Company from resorting to the use of economic weapons available to them under the law and to instead take recourse to voluntary arbitration in settling their disputes.

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No law or public policy prohibits the Union and the Company from mutually waiving the strike and lockout maces available to them to give way to voluntary arbitration. Indeed, no less than the 1987 Constitution recognizes in Section 3, Article XIII, preferential use of voluntary means to settle disputes. Thus 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. The Court finds no compelling reason to depart from the findings of the Labor Arbiter, the NLRC, and the CA regarding the illegality of the strike. Social justice is not onesided. It cannot be used as a badge for not complying with a lawful agreement. Three. Since the Unions strike has been declared illegal, the Union officers can, in accordance with law be terminated from employment for their actions. This includes the shop stewards. They cannot be shielded from the coverage of Article 264 of the Labor Code since the Union appointed them as such and placed them in positions of leadership and power over the men in their respective work units. As regards the rank and file Union members, Article 264 of the Labor Code provides that termination from employment is not warranted by the mere fact that a union member has taken part in an illegal strike. It must be shown that such a union member, clearly identified, performed an illegal act or acts during the 20 strike. 1avvphi1 Here, although the Labor Arbiter found no proof that the dismissed rank and file Union members committed illegal acts, the NLRC found following the injunction hearing in NLRC IC M-000126-98 that the Union members concerned committed such acts, for which they had in fact been criminally charged before various courts and the prosecutors office in Davao City. Since the CA held that the existence of criminal complaints against the Union members did not warrant their dismissal, it becomes necessary for the Court to go into the records to settle the issue. The striking Union members allegedly committed the following prohibited acts: a. They threatened, coerced, and intimidated non-striking employees, officers, suppliers and customers; b. They obstructed the free ingress to and egress from the company premises; and c. They resisted and defied the implementation of the writ of preliminary injunction issued against the strikers. Cornelio Caguiat, Ruben Tungapalan, and Eufracio Rabusa depicted the above prohibited acts in their affidavits and testimonies. The Sheriff of the NLRC said in his 21 Report that, in the course of his implementation of the writ of injunction, he observed that the striking employees blocked the exit lane of the Alson drive with their tent. Tungapalan, a non-striking employee, identified the Union members who threatened

and coerced him. Indeed, he filed criminal actions against them. Lastly, the photos taken of the strike show the strikers, properly identified, committing the acts complained of. These constitute substantial evidence in support of the termination of the subject Union members. The mere fact that the criminal complaints against the terminated Union members were subsequently dismissed for one reason or another does not extinguish their liability under the Labor Code. Nor does such dismissal bar the admission of the affidavits, documents, and photos presented to establish their identity and guilt during the hearing of the petition to declare the strike illegal. The technical grounds that the Union interposed for denying admission of the photos are also not binding on the 22 NLRC. Four. The terminated Union members contend that, since the Company refused to reinstate them after the Labor Arbiter rendered a decision in their favor, the Company should be ordered to pay them their wages during the pendency of the appeals from the Labor Arbiters decision. It will be recalled that after the Labor Arbiter rendered his decision on June 29, 1999, which decision ordered the reinstatement of the terminated Union members, the latter promptly filed a motion for their reinstatement pending appeal. But the Labor Arbiter did not for some reason act on the motion. As it happened, after about four months or on November 8, 1999, the NLRC reversed the Labor Arbiters reinstatement order. It cannot be said, therefore, that the Company had resisted a standing order of reinstatement directed at it at this point. Of course, on March 20, 2002 the CA restored the Labor Arbiters reinstatement order. And this prompted the affected Union members to again file with the Labor Arbiter a motion for their reinstatement pending appeal. But, acting on the motion, the Labor Arbiter resolved at this point that reinstatement was no longer practicable because of the severely strained relation between the company and the terminated Union members. In place of reinstatement, the Labor Arbiter ordered the Company to pay them their separation pays. Both parties appealed the Labor Arbiters above ruling to the NLRC. But, as it turned out the NLRC did not also favor reinstatement. It instead ordered the Company to pay the terminated Union members their accrued wages and 13th month pay considering its refusal to reinstate them pending appeal. On motion for reconsideration, however, the NLRC reconsidered and deleted altogether the grant of accrued wages and 13th month pay. The Union appealed the NLRC ruling to the CA on behalf of its terminated members but the CA denied their appeal. The CA denied reinstatement for the reason that the reinstatement pending appeal provided under Article 223 of the Labor Code contemplated illegal dismissal or termination cases and not cases under Article 264. But this perceived distinction does not find support in the provisions of the Labor Code. The grounds for termination under Article 264 are based on prohibited acts that employees could commit during a strike. On the other hand, the grounds for termination under Articles 282 to 284 are based on the employees conduct in connection with his assigned work. Still, Article 217, which defines the powers of
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Labor Arbiters, vests in the latter jurisdiction over all termination cases, whatever be the grounds given for the termination of employment. Consequently, Article 223, which provides that the decision of the Labor Arbiter reinstating a dismissed employee shall immediately be executory pending appeal, cannot but apply to all terminations irrespective of the grounds on which they are based. Here, although the Labor Arbiter failed to act on the terminated Union members motion for reinstatement pending appeal, the Company had the duty under Article 223 to immediately reinstate the affected employees even if it intended to appeal from the decision ordaining such reinstatement. The Companys failure to do so makes it liable for accrued backwages until the eventual reversal of the order of reinstatement 24 by the NLRC on November 8, 1999, a period of four months and nine days.1avvphi1 Five. While it is true that generally the grant of separation pay is not available to employees who are validly dismissed, there are, in furtherance of the laws policy of compassionate justice, certain circumstances that warrant the grant of some relief in favor of the terminated Union members based on equity. Bitter labor disputes, especially strikes, always generate a throng of odium and abhorrence that sometimes result in unpleasant, although unwanted, 25 consequences. Considering this, the striking employees breach of certain restrictions imposed on their concerted actions at their employers doorsteps cannot be regarded as so inherently wicked that the employer can totally disregard their long 26 years of service prior to such breach. The records also fail to disclose any past infractions committed by the dismissed Union members. Taking these circumstances in consideration, the Court regards the award of financial assistance to these Union members in the form of one-half month salary for every year of service to the company up to the date of their termination as equitable and reasonable. WHEREFORE, the Court DENIES the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and its officers and members in G.R. 155135 for lack of merit, and REVERSES and SETS ASIDE the decision of the Court of Appeals in CA-G.R. SP 59604 dated March 20, 2002. The Court, on the other hand, GRANTS the petition of C. Alcantara & Sons, Inc. in G.R. 155109 and REINSTATES the decision of the National Labor Relations Commission in NLRC CA M-004996-99 dated November 8, 1999. Further, the Court PARTIALLY GRANTS the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and their dismissed members in G.R. 179220 and ORDERS C. Alcantara & Sons, Inc. to pay the terminated Union members backwages for four (4) months and nine (9) days and separation pays equivalent to one-half month salary for every year of service to the company up to the date of their termination, with interest of 12% per annum from the time this decision becomes final and executory until such backwages and separation pays are paid. The Court DENIES all other claims. SO ORDERED. ROBERTO A. ABAD Associate Justice

CARGILL PHILIPPINES, INC., Petitioner, vs. SAN FERNANDO REGALA TRADING, INC., Respondent. DECISION PERALTA, J.: Before us is a petition for review on certiorari seeking to reverse and set aside the 1 2 Decision dated July 31, 2006 and the Resolution dated November 13, 2006 of the Court of Appeals (CA) in CA G.R. SP No. 50304. The factual antecedents are as follows: On June 18, 1998, respondent San Fernando Regala Trading, Inc. filed with the Regional Trial Court (RTC) of Makati City a Complaint for Rescission of Contract with 3 Damages against petitioner Cargill Philippines, Inc. In its Complaint, respondent alleged that it was engaged in buying and selling of molasses and petitioner was one of its various sources from whom it purchased molasses. Respondent alleged that it entered into a contract dated July 11, 1996 with petitioner, wherein it was agreed upon that respondent would purchase from petitioner 12,000 metric tons of Thailand origin cane blackstrap molasses at the price of US$192 per metric ton; that the delivery of the molasses was to be made in January/February 1997 and payment was to be made by means of an Irrevocable Letter of Credit payable at sight, to be opened by September 15, 1996; that sometime prior to September 15, 1996, the parties agreed that instead of January/February 1997, the delivery would be made in April/May 1997 and that payment would be by an Irrevocable Letter of Credit payable at sight, to be opened upon petitioner's advice. Petitioner, as seller, failed to comply with its obligations under the contract, despite demands from respondent, thus, the latter prayed for rescission of the contract and payment of damages. On July 24, 1998, petitioner filed a Motion to Dismiss/Suspend Proceedings and To 4 Refer Controversy to Voluntary Arbitration, wherein it argued that the alleged contract between the parties, dated July 11, 1996, was never consummated because respondent never returned the proposed agreement bearing its written acceptance or conformity nor did respondent open the Irrevocable Letter of Credit at sight. Petitioner contended that the controversy between the parties was whether or not the alleged contract between the parties was legally in existence and the RTC was not the proper forum to ventilate such issue. It claimed that the contract contained an arbitration clause, to wit: ARBITRATION Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of New York before the American Arbitration Association. The Arbitration Award shall be final and binding on both 5 parties. that respondent must first comply with the arbitration clause before resorting to court, thus, the RTC must either dismiss the case or suspend the proceedings and direct

the parties to proceed with arbitration, pursuant to Sections 6 and 7 of Republic Act (R.A.) No. 876, or the Arbitration Law. Respondent filed an Opposition, wherein it argued that the RTC has jurisdiction over the action for rescission of contract and could not be changed by the subject arbitration clause. It cited cases wherein arbitration clauses, such as the subject clause in the contract, had been struck down as void for being contrary to public policy since it provided that the arbitration award shall be final and binding on both parties, thus, ousting the courts of jurisdiction. In its Reply, petitioner maintained that the cited decisions were already inapplicable, having been rendered prior to the effectivity of the New Civil Code in 1950 and the Arbitration Law in 1953. In its Rejoinder, respondent argued that the arbitration clause relied upon by petitioner is invalid and unenforceable, considering that the requirements imposed by the provisions of the Arbitration Law had not been complied with. By way of Sur-Rejoinder, petitioner contended that respondent had even clarified that the issue boiled down to whether the arbitration clause contained in the contract subject of the complaint is valid and enforceable; that the arbitration clause did not violate any of the cited provisions of the Arbitration Law. On September 17, 1998, the RTC rendered an Order, the dispositive portion of which reads: Premises considered, defendant's "Motion To Dismiss/Suspend Proceedings and To Refer Controversy To Voluntary Arbitration" is hereby DENIED. Defendant is directed 9 to file its answer within ten (10) days from receipt of a copy of this order. In denying the motion, the RTC found that there was no clear basis for petitioner's plea to dismiss the case, pursuant to Section 7 of the Arbitration Law. The RTC said that the provision directed the court concerned only to stay the action or proceeding brought upon an issue arising out of an agreement providing for the arbitration thereof, but did not impose the sanction of dismissal. However, the RTC did not find the suspension of the proceedings warranted, since the Arbitration Law contemplates an arbitration proceeding that must be conducted in the Philippines under the jurisdiction and control of the RTC; and before an arbitrator who resides in the country; and that the arbitral award is subject to court approval, disapproval and modification, and that there must be an appeal from the judgment of the RTC. The RTC found that the arbitration clause in question contravened these procedures, i.e., the arbitration clause contemplated an arbitration proceeding in New York before a non-resident arbitrator (American Arbitration Association); that the arbitral award shall be final and binding on both parties. The RTC said that to apply Section 7 of the Arbitration Law to such an agreement would result in disregarding the other sections of the same law and rendered them useless and mere surplusages. Petitioner filed its Motion for Reconsideration, which the RTC denied in an 10 Order dated November 25, 1998.
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Petitioner filed a petition for certiorari with the CA raising the sole issue that the RTC acted in excess of jurisdiction or with grave abuse of discretion in refusing to dismiss or at least suspend the proceedings a quo, despite the fact that the party's agreement to arbitrate had not been complied with. Respondent filed its Comment and Reply. The parties were then required to file their respective Memoranda. On July 31, 2006, the CA rendered its assailed Decision denying the petition and affirming the RTC Orders. In denying the petition, the CA found that stipulation providing for arbitration in contractual obligation is both valid and constitutional; that arbitration as an alternative mode of dispute resolution has long been accepted in our jurisdiction and expressly provided for in the Civil Code; that R.A. No. 876 (the Arbitration Law) also expressly authorized the arbitration of domestic disputes. The CA found error in the RTC's holding that Section 7 of R.A. No. 876 was inapplicable to arbitration clause simply because the clause failed to comply with the requirements prescribed by the law. The CA found that there was nothing in the Civil Code, or R.A. No. 876, that require that arbitration proceedings must be conducted only in the Philippines and the arbitrators should be Philippine residents. It also found that the RTC ruling effectively invalidated not only the disputed arbitration clause, but all other agreements which provide for foreign arbitration. The CA did not find illegal or against public policy the arbitration clause so as to render it null and void or ineffectual. Notwithstanding such findings, the CA still held that the case cannot be brought under the Arbitration Law for the purpose of suspending the proceedings before the RTC, since in its Motion to Dismiss/Suspend proceedings, petitioner alleged, as one of the grounds thereof, that the subject contract between the parties did not exist or it was invalid; that the said contract bearing the arbitration clause was never consummated by the parties, thus, it was proper that such issue be first resolved by the court through an appropriate trial; that the issue involved a question of fact that the RTC should first resolve. Arbitration is not proper when one of the parties repudiated the existence or validity of the contract. Petitioner's motion for reconsideration was denied in a Resolution dated November 13, 2006. Hence, this petition. Petitioner alleges that the CA committed an error of law in ruling that arbitration cannot proceed despite the fact that: (a) it had ruled, in its assailed decision, that the arbitration clause is valid, enforceable and binding on the parties; (b) the case 11 of Gonzales v. Climax Mining Ltd. is inapplicable here; (c) parties are generally allowed, under the Rules of Court, to adopt several defenses, alternatively or hypothetically, even if such defenses are inconsistent with each other; and (d) the complaint filed by respondent with the trial court is premature.

Petitioner alleges that the CA adopted inconsistent positions when it found the arbitration clause between the parties as valid and enforceable and yet in the same breath decreed that the arbitration cannot proceed because petitioner assailed the existence of the entire agreement containing the arbitration clause. Petitioner claims the inapplicability of the cited Gonzales case decided in 2005, because in the present case, it was respondent who had filed the complaint for rescission and damages with the RTC, which based its cause of action against petitioner on the alleged agreement dated July 11, 2006 between the parties; and that the same agreement contained the arbitration clause sought to be enforced by petitioner in this case. Thus, whether petitioner assails the genuineness and due execution of the agreement, the fact remains that the agreement sued upon provides for an arbitration clause; that respondent cannot use the provisions favorable to him and completely disregard those that are unfavorable, such as the arbitration clause. Petitioner contends that as the defendant in the RTC, it presented two alternative defenses, i.e., the parties had not entered into any agreement upon which respondent as plaintiff can sue upon; and, assuming that such agreement existed, there was an arbitration clause that should be enforced, thus, the dispute must first be submitted to arbitration before an action can be instituted in court. Petitioner argues that under Section 1(j) of Rule 16 of the Rules of Court, included as a ground to dismiss a complaint is when a condition precedent for filing the complaint has not been complied with; and that submission to arbitration when such has been agreed upon is one such condition precedent. Petitioner submits that the proceedings in the RTC must be dismissed, or at least suspended, and the parties be ordered to proceed with arbitration. On March 12, 2007, petitioner filed a Manifestation saying that the CA's rationale in declining to order arbitration based on the 2005 Gonzales ruling had been modified upon a motion for reconsideration decided in 2007; that the CA decision lost its legal basis, because it had been ruled that the arbitration agreement can be implemented notwithstanding that one of the parties thereto repudiated the contract which contained such agreement based on the doctrine of separability. In its Comment, respondent argues that certiorari under Rule 65 is not the remedy against an order denying a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to Voluntary Arbitration. It claims that the Arbitration Law which petitioner invoked as basis for its Motion prescribed, under its Section 29, a remedy, i.e., appeal by a petition for review on certiorari under Rule 45. Respondent contends that the Gonzales case, which was decided in 2007, is inapplicable in this case, especially as to the doctrine of separability enunciated therein. Respondent argues that even if the existence of the contract and the arbitration clause is conceded, the decisions of the RTC and the CA declining referral of the dispute between the parties to arbitration would still be correct. This is so because respondent's complaint filed in Civil Case No. 98-1376 presents the principal issue of whether under the facts alleged in the complaint, respondent is entitled to rescind its contract with petitioner and for the latter to pay damages; that such issue constitutes a judicial question or one that requires the exercise of judicial function and cannot be the subject of arbitration. Respondent contends that Section 8 of the Rules of Court, which allowed a defendant to adopt in the same action several defenses, alternatively or hypothetically, even if such defenses are inconsistent with each other refers to allegations in the pleadings, such as complaint, counterclaim, cross-claim, third-party complaint, answer, but not to
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a motion to dismiss. Finally, respondent claims that petitioner's argument is premised on the existence of a contract with respondent containing a provision for arbitration. However, its reliance on the contract, which it repudiates, is inappropriate. In its Reply, petitioner insists that respondent filed an action for rescission and damages on the basis of the contract, thus, respondent admitted the existence of all the provisions contained thereunder, including the arbitration clause; that if respondent relies on said contract for its cause of action against petitioner, it must also consider itself bound by the rest of the terms and conditions contained thereunder notwithstanding that respondent may find some provisions to be adverse to its position; that respondents citation of the Gonzalescase, decided in 2005, to show that the validity of the contract cannot be the subject of the arbitration proceeding and that it is the RTC which has the jurisdiction to resolve the situation between the parties herein, is not correct since in the resolution of the Gonzales' motion for reconsideration in 2007, it had been ruled that an arbitration agreement is effective notwithstanding the fact that one of the parties thereto repudiated the main contract which contained it. We first address the procedural issue raised by respondent that petitioners petition for certiorari under Rule 65 filed in the CA against an RTC Order denying a Motion to Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration was a wrong remedy invoking Section 29 of R.A. No. 876, which provides: Section 29. x x x An appeal may be taken from an order made in a proceeding under this Act, or from a judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to question of law. x x x. To support its argument, respondent cites the case of Gonzales v. Climax Mining 13 Ltd. (Gonzales case), wherein we ruled the impropriety of a petition for certiorari under Rule 65 as a mode of appeal from an RTC Order directing the parties to arbitration. We find the cited case not in point. In the Gonzales case, Climax-Arimco filed before the RTC of Makati a petition to compel arbitration under R.A. No. 876, pursuant to the arbitration clause found in the Addendum Contract it entered with Gonzales. Judge Oscar Pimentel of the RTC of Makati then directed the parties to arbitration proceedings. Gonzales filed a petition forcertiorari with Us contending that Judge Pimentel acted with grave abuse of discretion in immediately ordering the parties to proceed with arbitration despite the proper, valid and timely raised argument in his Answer with counterclaim that the Addendum Contract containing the arbitration clause was null and void. ClimaxArimco assailed the mode of review availed of by Gonzales, citing Section 29 of R.A. No. 876 contending that certiorariunder Rule 65 can be availed of only if there was no appeal or any adequate remedy in the ordinary course of law; that R.A. No. 876 provides for an appeal from such order. We then ruled that Gonzales' petition for certiorarishould be dismissed as it was filed in lieu of an appeal by certiorari which was the prescribed remedy under R.A. No. 876 and the petition was filed far beyond the reglementary period.

We found that Gonzales petition for certiorari raises a question of law, but not a question of jurisdiction; that Judge Pimentel acted in accordance with the procedure prescribed in R.A. No. 876 when he ordered Gonzales to proceed with arbitration and appointed a sole arbitrator after making the determination that there was indeed an arbitration agreement. It had been held that as long as a court acts within its jurisdiction and does not gravely abuse its discretion in the exercise thereof, any supposed error committed by it will amount to nothing more than an error of judgment reviewable by a timely appeal and not assailable by a special civil action 14 of certiorari. In this case, petitioner raises before the CA the issue that the respondent Judge acted in excess of jurisdiction or with grave abuse of discretion in refusing to dismiss, or at least suspend, the proceedings a quo, despite the fact that the partys agreement to arbitrate had not been complied with. Notably, the RTC found the existence of the arbitration clause, since it said in its decision that "hardly disputed is the fact that the arbitration clause in question contravenes several provisions of the Arbitration Law x x x and to apply Section 7 of the Arbitration Law to such an agreement would result in the disregard of the afore-cited sections of the Arbitration Law and render them useless and mere surplusages." However, notwithstanding the finding that an arbitration agreement existed, the RTC denied petitioner's motion and directed petitioner to file an answer. In La Naval Drug Corporation v. Court of Appeals, it was held that R.A. No. 876 explicitly confines the courts authority only to the determination of whether or not there is an agreement in writing providing for arbitration. In the affirmative, the statute ordains that the court shall issue an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof. If the court, upon the other hand, finds that no such agreement exists, the proceedings shall be dismissed. In issuing the Order which denied petitioner's Motion to Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration, the RTC went beyond its authority of determining only the issue of whether or not there is an agreement in writing providing for arbitration by directing petitioner to file an answer, instead of ordering the parties to proceed to arbitration. In so doing, it acted in excess of its jurisdiction and since there is no plain, speedy, and adequate remedy in the ordinary course of law, petitioners resort to a petition for certiorari is the proper remedy. We now proceed to the substantive issue of whether the CA erred in finding that this case cannot be brought under the arbitration law for the purpose of suspending the proceedings in the RTC. We find merit in the petition. Arbitration, as an alternative mode of settling disputes, has long been recognized and 16 17 accepted in our jurisdiction. R.A. No. 876 authorizes arbitration of domestic disputes. Foreign arbitration, as a system of settling commercial disputes of an 18 international character, is likewise recognized. The enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use of alternative dispute resolution systems, 19 including arbitration, in the settlement of disputes.
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A contract is required for arbitration to take place and to be binding. Submission to 21 arbitration is a contract and a clause in a contract providing that all matters in 22 dispute between the parties shall be referred to arbitration is a contract. The provision to submit to arbitration any dispute arising therefrom and the relationship of 23 the parties is part of the contract and is itself a contract. In this case, the contract sued upon by respondent provides for an arbitration clause, to wit: ARBITRATION Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of New York before the American Arbitration Association, The Arbitration Award shall be final and binding on both parties. The CA ruled that arbitration cannot be ordered in this case, since petitioner alleged that the contract between the parties did not exist or was invalid and arbitration is not proper when one of the parties repudiates the existence or validity of the contract. Thus, said the CA: Notwithstanding our ruling on the validity and enforceability of the assailed arbitration clause providing for foreign arbitration, it is our considered opinion that the case at bench still cannot be brought under the Arbitration Law for the purpose of suspending the proceedings before the trial court. We note that in its Motion to Dismiss/Suspend Proceedings, etc, petitioner Cargill alleged, as one of the grounds thereof, that the alleged contract between the parties do not legally exist or is invalid. As posited by petitioner, it is their contention that the said contract, bearing the arbitration clause, was never consummated by the parties. That being the case, it is but proper that such issue be first resolved by the court through an appropriate trial. The issue involves a question of fact that the trial court should first resolve. Arbitration is not proper when one of the parties repudiates the existence or validity of the contract. Apropos is Gonzales v. Climax Mining Ltd., 452 SCRA 607, (G.R.No.161957), where the Supreme Court held that: The question of validity of the contract containing the agreement to submit to arbitration will affect the applicability of the arbitration clause itself. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions.... Consequently, the petitioner herein cannot claim that the contract was never consummated and, at the same time, invokes the arbitration clause provided for under the contract which it alleges to be non-existent or invalid. Petitioner claims that private respondent's complaint lacks a cause of action due to the absence of any valid contract between the parties. Apparently, the arbitration clause is being invoked merely as a fallback position. The petitioner must first adduce evidence in support of its claim that there is no valid contract between them and should the court a quo find

20

the claim to be meritorious, the parties may then be spared the rigors and expenses 24 that arbitration in a foreign land would surely entail. However, the Gonzales case, which the CA relied upon for not ordering arbitration, had been modified upon a motion for reconsideration in this wise: x x x The adjudication of the petition in G.R. No. 167994 effectively modifies part of the Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now hold that the validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause itself. A contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration. That is exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks to avoid. We add that when it was declared in G.R. No. 161957 that the case should not be brought for arbitration, it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the main contract on the ground of fraud, as it had already been determined that the case should have been brought before the regular courts 26 involving as it did judicial issues. In so ruling that the validity of the contract containing the arbitration agreement does not affect the applicability of the arbitration clause itself, we then applied the doctrine of separability, thus: The doctrine of separability, or severability as other writers call it, enunciates that an arbitration agreement is independent of the main contract. The arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is a part comes to an end. The separability of the arbitration agreement is especially significant to the determination of whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as the "container" contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration 27 clause/agreement still remains valid and enforceable. Respondent argues that the separability doctrine is not applicable in petitioner's case, since in the Gonzales case, Climax-Arimco sought to enforce the arbitration clause of its contract with Gonzales and the former's move was premised on the existence of a valid contract; while Gonzales, who resisted the move of Climax-Arimco for arbitration, did not deny the existence of the contract but merely assailed the validity thereof on the ground of fraud and oppression. Respondent claims that in the case before Us, petitioner who is the party insistent on arbitration also claimed in their Motion to Dismiss/Suspend Proceedings that the contract sought by respondent to be rescinded did not exist or was not consummated; thus, there is no room for the application of the separability doctrine, since there is no container or main contract or an arbitration clause to speak of. We are not persuaded.
25

Applying the Gonzales ruling, an arbitration agreement which forms part of the main contract shall not be regarded as invalid or non-existent just because the main contract is invalid or did not come into existence, since the arbitration agreement shall be treated as a separate agreement independent of the main contract. To reiterate. a contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration and that is exactly the situation that the separability doctrine sought to avoid. Thus, we find that even the party who has repudiated the main contract is not prevented from enforcing its arbitration clause. Moreover, it is worthy to note that respondent filed a complaint for rescission of contract and damages with the RTC. In so doing, respondent alleged that a contract exists between respondent and petitioner. It is that contract which provides for an arbitration clause which states that "any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled before the City of New York by the American Arbitration Association. The arbitration agreement clearly expressed the parties' intention that any dispute between them as buyer and seller should be referred to arbitration. It is for the arbitrator and not the courts to decide whether a contract between the parties exists or is valid. Respondent contends that assuming that the existence of the contract and the arbitration clause is conceded, the CA's decision declining referral of the parties' dispute to arbitration is still correct. It claims that its complaint in the RTC presents the issue of whether under the facts alleged, it is entitled to rescind the contract with damages; and that issue constitutes a judicial question or one that requires the exercise of judicial function and cannot be the subject of an arbitration proceeding. Respondent cites our ruling in Gonzales, wherein we held that a panel of arbitrator is bereft of jurisdiction over the complaint for declaration of nullity/or termination of the subject contracts on the grounds of fraud and oppression attendant to the execution of the addendum contract and the other contracts emanating from it, and that the complaint should have been filed with the regular courts as it involved issues which are judicial in nature. Such argument is misplaced and respondent cannot rely on the Gonzales case to support its argument. In Gonzales, petitioner Gonzales filed a complaint before the Panel of Arbitrators, Region II, Mines and Geosciences Bureau, of the Department of Environment and Natural Resources (DENR) against respondents Climax- Mining Ltd, Climax-Arimco and Australasian Philippines Mining Inc, seeking the declaration of nullity or termination of the addendum contract and the other contracts emanating from it on the grounds of fraud and oppression. The Panel dismissed the complaint for lack of jurisdiction. However, the Panel, upon petitioner's motion for reconsideration, ruled that it had jurisdiction over the dispute maintaining that it was a mining dispute, since the subject complaint arose from a contract between the parties which involved the exploration and exploitation of minerals over the disputed area. 1wphi1 Respondents assailed the order of the Panel of Arbitrators via a petition for certiorari before the CA. The CA granted the petition and declared that the Panel of Arbitrators did not have jurisdiction over the complaint, since its jurisdiction was limited to the resolution of mining disputes, such as those which raised a question of fact or matter requiring the technical knowledge and experience of mining authorities and not when the complaint alleged fraud and oppression which called for the interpretation and application of laws. The CA further ruled that the petition should have been settled through

arbitration under R.A. No. 876 the Arbitration Law as provided under the addendum contract. On a review on certiorari, we affirmed the CAs finding that the Panel of Arbitrators who, under R.A. No. 7942 of the Philippine Mining Act of 1995, has exclusive and original jurisdiction to hear and decide mining disputes, such as mining areas, mineral agreements, FTAAs or permits and surface owners, occupants and claimholders/concessionaires, is bereft of jurisdiction over the complaint for declaration of nullity of the addendum contract; thus, the Panels' jurisdiction is limited only to those mining disputes which raised question of facts or matters requiring the technical knowledge and experience of mining authorities. We then said: In Pearson v. Intermediate Appellate Court, this Court observed that the trend has been to make the adjudication of mining cases a purely administrative matter. Decisions of the Supreme Court on mining disputes have recognized a distinction between (1) the primary powers granted by pertinent provisions of law to the then Secretary of Agriculture and Natural Resources (and the bureau directors) of an executive or administrative nature, such as granting of license, permits, lease and contracts, or approving, rejecting, reinstating or canceling applications, or deciding conflicting applications, and (2) controversies or disagreements of civil or contractual nature between litigants which are questions of a judicial nature that may be adjudicated only by the courts of justice. This distinction is carried on even in Rep. Act 28 No. 7942. We found that since the complaint filed before the DENR Panel of Arbitrators charged respondents with disregarding and ignoring the addendum contract, and acting in a fraudulent and oppressive manner against petitioner, the complaint filed before the Panel was not a dispute involving rights to mining areas, or was it a dispute involving claimholders or concessionaires, but essentially judicial issues. We then said that the Panel of Arbitrators did not have jurisdiction over such issue, since it does not involve the application of technical knowledge and expertise relating to mining. It is in this context that we said that: Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the parties as to some provisions of the contract between them, which needs the interpretation and the application of that particular knowledge and expertise possessed by members of that Panel. It is not proper when one of the parties repudiates the existence or validity of such contract or agreement on the ground of fraud or oppression as in this case. The validity of the contract cannot be subject of arbitration proceedings. Allegations of fraud and duress in the execution of a contract are matters within the jurisdiction of the ordinary courts of law. These questions are legal in nature and require the application and interpretation of laws and 29 jurisprudence which is necessarily a judicial function. In fact, We even clarified in our resolution on Gonzales motion for recon sideration that "when we declared that the case should not be brought for arbitration, it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the main contract on the ground of fraud, as it had already been determined that the case should have been brought before the regular courts involving as it did judicial issues." We made such clarification in our resolution of the motion for reconsideration after ruling that the

parties in that case can proceed to arbitration under the Arbitration Law, as provided under the Arbitration Clause in their Addendum Contract. WHEREFORE, the petition is GRANTED. The Decision dated July 31, 2006 and the Resolution dated November 13, 2006 of the Court of Appeals in CA-G.R. SP No. 50304 are REVERSED and SET ASIDE. The parties are hereby ORDERED to SUBMIT themselves to the arbitration of their dispute, pursuant to their July 11, 1996 agreement. SO ORDERED. E.G & I. CONSTRUCTION CORPORATION and EDSEL GALEOS, Petitioners, vs. ANANIAS P. SATO, NILO BERDIN, ROMEO M. LACIDA, JR., and HEIRS OF ANECITO S. PARANTAR, SR., namely: YVONNE, KIMBERLY MAE, MARYKRIS, ANECITO, JR., and JOHN BRYAN, all surnamed PARANTAR, Respondents. DECISION NACHURA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of 1 2 Court, assailing the Decision dated October 24, 2007 and the Resolution dated March 3, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 02316. The factual and procedural antecedents of the case are as follows: Respondent Ananias P. Sato (Sato) was hired in October 1990 by petitioner E.G. & I. Construction Corporation as a grader operator, which is considered as technical labor. He held the position for more than thirteen (13) years. In April 2004, Sato discovered that petitioner corporation had not been remitting his premium contributions to the Social Security System (SSS). When Sato kept on telling petitioners to update his premium contributions, he was removed as a grader operator and made to perform manual labor, such as tilling the land in a private cemetery 3 and/or digging earthworks in petitioner corporations construction projects. In July 2004, an inspection team from the SSS went to petitioner corporations office to check its compliance with the SSS law. On July 22, 2004, petitioners told Sato that they could no longer afford to pay his wages, and he was advised to look for employment 4 in other construction companies. Sato, however, found difficulty in finding a job because he had been blacklisted in other construction companies and was prevented 5 from entering the project sites of petitioners. Respondent Nilo Berdin (Berdin) was hired by petitioners in March 1991 as a 6 steelman/laborer; respondent Anecito S. Parantar, Sr. (Parantar) was hired in 7 February 1997 as a steelman; and respondent Romeo M. Lacida, Jr. (Lacida) was 8 hired in March 2001 as a laborer. At the start of their employment, they were required by petitioners to sign several documents purporting to be employment 9 contracts. They immediately signed the documents without verifying their contents 10 for fear of forfeiting their employment.

Respondents were required to work from 7:00 a.m. until 5:00 p.m. While in the employ of petitioners, they devoted their time exclusively in the service of petitioners and were assigned to various construction projects of petitioners. They were tasked to set up steel bars used in the building foundation, to mix cement, and to perform 11 other tasks required of them by petitioners. On July 24, 2004, the project engineer of respondents Berdin, Parantar, and Lacida instructed them to affix their signatures on various documents. They refused to sign the documents because they were written in English, a language that they did not understand. Irked by their disobedience, the project engineer terminated their employment. On the same date, they were given their weekly wages. However, the wages that were paid to them were short of three (3) days worth of wages, as penalty for their refusal to sign the documents. The following day, they were not allowed to 12 enter the work premises. On July 26, 2004, respondents filed their respective complaints with the Regional Arbitration Branch of Cebu City for illegal dismissal, underpayment of wages (wage differentials), holiday pay, thirteenth (13th) month pay, and service incentive leave 13 pay. Petitioners, on the other hand, admitted that respondents were employed by them and were assigned in their various construction projects. However, they denied that they illegally terminated respondents employment. According to petitioners, respondents abandoned their work when they failed to report for work starting on July 22, 2004. Petitioner corporation sent letters advising respondents to report for work, but they refused. Petitioner corporation maintained that respondents are still 14 welcome, if they desire to work. As to respondent Sato, petitioner corporation alleged that it admonished respondent for having an illicit affair with another woman; that, in retaliation, Sato complained to the SSS for alleged non-remittance of his premium contributions; that Satos work was substandard; and that he also incurred unexplained absences and was constantly reprimanded for habitual tardiness. On July 27, 2005, the Labor Arbiter rendered a decision finding that respondents were illegally dismissed from employment. In lieu of reinstatement, due to the strained relations of the parties and as prayed for by respondents, each of them was granted separation pay equivalent to one (1) month pay for every year of service. The Labor Arbiter likewise awarded respondents claim for wage differentials, 13th month pay, holiday pay, and service incentive leave pay. The Labor Arbiter ruled in favor of granting the monetary claims of respondents because of petitioner corporations failure to effectively controvert the said claims by not presenting proof of payment, 16 such as payrolls or vouchers. The dispositive portion of the decision reads: WHEREFORE, premises considered, judgment is hereby rendered ordering respondent [petitioner] E.G. & I. Construction Corporation to pay [respondents] the following: 1. Ananias P. Sato P 107,250.00
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2. Anecito Parantar 3. Nilo Berdin

120,944.00 152,144.00 138,594.00

WHEREFORE, premises considered, this petition is GRANTED. The Decision and Resolution of the NLRC, dated July 31, 2006 and October 9, 2006, respectively, are hereby REVERSED and SET ASIDE. The Decision of the labor arbiter, dated July 27, 2005, is REINSTATED. Costs against private respondents.

4. Romeo M. Lacida, Jr. Total Award -

P 518,932.00 ==========

SO ORDERED.

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The other claims and the case against respondent Edsel Galeos are dismissed for lack of merit. SO ORDERED.
17

On appeal, the National Labor Relations Commission (NLRC) reversed the ruling of 18 the Labor Arbiter in a decision dated July 31, 2006. The fallo of the NLRC decision reads: WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED and a new one entered Dismissing the case. Respondents are however ordered to pay complainants proportionate 13th month [pay] for the year 2004 computed as follows: 1. Ananias Sato 2. Anecito Parantar 3. Nilo Berdin 4. Romeo Laceda Total
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The CA ruled that respondents were illegally dismissed. A written notice of dismissal 25 is not a pre-requisite for a finding of illegal dismissal. Respondents did not abandon 26 their work. They were refused entry into the companys project sites. As to the award of monetary claims, the CA decided in favor of the grant of the same. Petitioner corporation belatedly submitted copies of the weekly time record, payroll, and acknowledgement receipts of the 13th month pay. There was no explanation given why the said documents were not submitted before the Labor Arbiter in order to establish their authenticity and correctness, and to give respondents the opportunity 27 to refute the entries therein. Hence, this petition. The issue to be resolved in this case is whether the CA erred in reinstating the decision of the Labor Arbiter, declaring that respondents were illegally terminated from employment by petitioner corporation, and that respondents are entitled to their monetary claims. We sustain the ruling of the CA. Petitioner corporation failed to prove that respondents were dismissed for just or authorized cause. In an illegal dismissal case, the onus probandi rests on the employer to prove that the dismissal of an employee is 28 for a valid cause. For abandonment to exist, it is essential (a) that the employee must have failed to report for work or must have been absent without valid or justifiable reason; and (b) that there must have been a clear intention to sever the employer-employee 29 relationship manifested by some overt acts. The employer has the burden of proof to show the employee's deliberate and unjustified refusal to resume his employment without any intention of returning. Mere absence is not sufficient. There must be an 30 unequivocal intent on the part of the employee to discontinue his employment. In this case, petitioner corporation claims that respondent Sato committed unexplained absences on May 20, 24, and 25, 2004 and on June 7, 18, and 23, 2004. However, based on the findings of fact of the CA, respondent Sato worked on May 20, June 18 and 23, 2004. This was based on the weekly time record and payroll of respondent Sato that were presented by petitioner corporation in its appeal before the NLRC. On respondent Satos alleged absences on May 24 and 25 and on June 7, 2004, no time record and payroll documents were presented by petitioner corporation. With regard to respondents Berdin, Lacida, and Parantar, petitioner corporation alleges that they failed to report for work starting on July 22, 2004, and that petitioner even sent them letters advising them to report for work, but to no avail.

P 3,180.00 2,520.00 2,700.00 2,520.00 P 10,920.00

SO ORDERED.

In reversing the decision of the Labor Arbiter, the NLRC ratiocinated that, other than respondents bare allegation that they were dismissed, they failed to present a written 20 notice of dismissal, and that respondents individual complaints opted for the 21 payment of separation pay instead of reinstatement. The NLRC opined that illegal dismissal was inconsistent with the prayer for separation pay instead of reinstatement. As for the monetary reliefs prayed for by respondents, the NLRC withdrew the grant of the same because of petitioner corporations submission of the 22 copies of payrolls, annexed to its memorandum on appeal. Respondents filed a motion for reconsideration. However, the same was denied in a 23 resolution dated October 9, 2006. Aggrieved, respondents filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. On October 24, 2007, the CA rendered a Decision, the dispositive portion of which reads:

Notwithstanding these assertions of petitioner corporation, we sustain the ruling of the CA.lawphi1 The reason why respondents failed to report for work was because petitioner corporation barred them from entering its construction sites. It is a settled rule that failure to report for work after a notice to return to work has been served 31 does not necessarily constitute abandonment. The intent to discontinue the employment must be shown by clear proof that it was deliberate and 32 unjustified. Petitioner corporation failed to show overt acts committed by respondents from which it may be deduced that they had no more intention to work. Respondents filing of the case for illegal dismissal barely four (4) days from their alleged abandonment is totally inconsistent with our known concept of what constitutes abandonment. We sustain the ruling of the CA on respondents money claims. As a rule, one who pleads payment has the burden of proving it. Even as the employee must allege nonpayment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances, and other similar documents which will show that overtime, differentials, service incentive leave, and other claims of the worker have been paid are not in the possession of the worker but in 33 the custody and absolute control of the employer. In this case, the submission of petitioner corporation of the time records and payrolls of respondents only on their appeal before the NLRC is contrary to elementary precepts of justice and fair play. Respondents were not given the opportunity to check the authenticity and correctness of the same. Thus, we sustain the ruling of the CA in the grant of the monetary claims of respondents. We are guided by the time-honored principle that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. It is the rule in controversies between a laborer and his master that doubts reasonably arising from the evidence, or in the interpretation of agreements and writing, should be resolved in 34 the former's favor. WHEREFORE, in view of the foregoing, the Decision dated October 24, 2007 and the Resolution dated March 3, 2008 of the Court of Appeals in CA-G.R. SP No. 02316 are hereby AFFIRMED. Costs against the petitioners. SO ORDERED.

HA YUAN RESTAURANT, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and JUVY SORIA, Respondents. AUSTRIA-MARTINEZ, J.: Respondent Juvy Soria worked as a cashier in petitioners establishment located inside the SM Food Court Makati. On January 11, 1998, respondent assaulted her coworker Ma. Teresa Sumalague resulting in a scuffle between the two. Despite the intervention of their supervisor Fiderlie Recide, they were not pacified, prompting Recide to call for security assistance. The two were then brought to the SM Food Court Administration Office where they continued to cast tirades at each other notwithstanding the request of the SM Food Court Manager to stop. Because they refused to be mollified, they were brought to the Customer Relations Office for further investigation. As a result of the incident, the SM Food Court Manager banned the two from working within the SM Food Courts premises. Respondent then filed with the Labor Arbiter a complaint for illegal dismissal, salary differentials, service incentive leave, separation pay and damages. It was dismissed 1 by the Labor Arbiter for lack of merit in a Decision dated December 4, 1998. On appeal to the National Labor Relations Commission (NLRC), the Labor Arbiters decision was affirmed with the modification that respondent was awarded separation pay. The dispositive portion of NLRC Decision dated September 30, 1999, reads: WHEREFORE, the foregoing premises considered, the Decision of the Labor Arbiter is hereby AFFIRMED with the modification that the respondents are hereby ordered to pay complainant her separation pay equivalent to one (1) month salary per year of service, based on her last salary of P196.00/day and counted from 10 December 1984 until the finality of this Decision. SO ORDERED. lavvphil.ne+ This prompted petitioner to file a special civil action for certiorari with the Court of Appeals (CA), and in its Decision dated March 30, 2001, it affirmed the NLRCs decision and dismissed the petition for lack of merit. Hence, herein petition for review on certiorari under Rule 45 of the Rules of Court on the following grounds: THE PUBLIC RESPONDENT COURT OF APPEALS DEPARTED FROM ESTABLISHED JURISPRUDENCE AND ERRED AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE NLRC AWARD TO PRIVATE RESPONDENT JOVY SORIA SEPARATION PAY EVEN AS HER DISMISSAL ON GROUNDS OF SERIOUS MISCONDUCT WAS SUSTAINED CORROLARY (sic) TO THIS GROUND THE LEGAL ISSUE RAISED IS WHETHER AN AWARD OF SEPARATION PAY IS PROPER TO AN EMPLOYEE WHO IS FOUND TO HAVE BEEN VALIDLY DISMISSED ON THE GROUND OF SERIOUS 3 MISCONDUCT
2

The sole issue in this case --- whether a validly dismissed employee like respondent is entitled to an award of separation pay --- has already been squarely settled as early as 1988 in the leading case of Philippine Long Distance Telephone Co. vs. 4 NLRC, wherein it was stated, viz.: We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instanceswhere the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. (Emphasis supplied) Separation pay therefore, depends on the cause of dismissal, and may be accordingly awarded provided that the dismissal does not fall under either of two circumstances: (1) there was serious misconduct, or (2) the dismissal reflected on the 5 employees moral character. The question that now arises in this case is whether the cause of respondents dismissal falls under the two circumstances, i.e., serious misconduct or the dismissal reflected on the employees moral character.lavvphil.ne+ The Court holds that respondents cause of dismissal in this case amounts as a serious misconduct and as such, separation pay should not have been awarded to her. Thus, the petition should be granted. Misconduct is improper or wrongful conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment. To be a valid 6 cause for termination, the misconduct must be serious. While it is true, as respondent contends, that the Labor Arbiter did not tag her cause of dismissal as serious misconduct, nevertheless, it is its nature, not its label that characterizes the cause as serious misconduct. There is no question as regards the incident that caused respondents dismissal. While respondents co -worker Sumalague was eating at the back of the store, respondent rushed toward Sumalague and hit the latter on the face causing injuries. A scuffle ensued and despite their supervisor Recides pleas, the two continued to fight, prompting Recide to call the mall security. When the two were brought to the administration office, they continued bickering and did not heed the request of the manager to stop, and thus they were brought to the Customer Relations Office. Because of the incident, the two were banned from working within the premises. The fact that Sumalague sustained injuries is a matter that cannot be taken lightly. Moreover, the incident disturbed the peace in the work place, not to mention that respondent and Sumalague committed a 7 breach of its discipline. Clearly, respondent committed serious misconduct within the meaning of Art. 282 of the Labor Code, providing for the dismissal of employees. Her cause of dismissal amounting to a serious misconduct, respondent is not entitled to an award of separation pay. As further stated in Philippine Long Distance Telephone Co. vs. NLRC:

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes 8 of their own character. WHEREFORE, the petition is GRANTED. The Court of Appeals Decision dated March 30, 2001 in CA-G.R. SP No. 58219 is MODIFIED to the effect that the NLRC Decision dated September 30, 1999 is AFFIRMED with MODIFICATION in that the award of separation pay in favor of respondent Juvy Soria is DELETED. SO ORDERED. SAMAHAN NG MGA MANGGAGAWA SA HYATT (SAMASAHNUWHRAIN), Petitioner, vs. HON. VOLUNTARY ARBITRATOR BUENAVENTURA C. MAGSALIN and HOTEL ENTERPRISES OF THE PHILIPPINES, INC., Respondents. SAMAHAN NG MGA MANGGAGAWA SA HYATT (SAMASAHNUWHRAIN), Petitioner, vs. HOTEL ENTERPRISES OF THE PHILIPPINES, INC., Respondent. DECISION VILLARAMA, JR., J.: Before this Court are two consolidated petitions filed by petitioner Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL under Rule 45 of the 1997 Rules of Civil Procedure, as amended. The first petition, docketed as G.R. No. 164939, assails the 1 2 Resolutions dated October 3, 2003 and August 13, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 78364, which dismissed petitioners petition for review at the CA for being the wrong remedy. The second petition, docketed as G.R. No. 172303, 3 4 assails the Decision dated December 16, 2005 and Resolution dated April 12, 2006 of the CA in CA-G.R. SP No. 77478, modifying the judgment of the Voluntary Arbitrator in NCMB-NCR-CRN-07-008-01. The antecedent facts are as follows: Petitioner Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL is a duly registered union and the certified bargaining representative of the rank-and-file employees of Hyatt Regency Manila, a five-star hotel owned and operated by respondent Hotel Enterprises of the Philippines, Inc. On January 31, 2001, Hyatts

General Manager, David C. Pacey, issued a Memorandum informing all hotel employees that hotel security have been instructed to conduct a thorough bag inspection and body frisking in every entrance and exit of the hotel. He enjoined employees to comply therewith. Copies of the Memorandum were furnished petitioner. On February 3, 2001, Angelito Caragdag, a waiter at the hotels Cafe Al Fresco restaurant and a director of the union, refused to be frisked by the security personnel. The incident was reported to the hotels Human Resources Department (HRD), which 6 issued a Memorandum to Caragdag on February 5, 2001, requiring him to explain in writing within forty-eight (48) hours from notice why no disciplinary action should be taken against him. The following day, on February 6, 2001, Caragdag again refused to be frisked by the security personnel. Thus, on February 8, 2001, the HRD issued 7 another Memorandum requiring him to explain. On February 14, 2001, the HRD imposed on Caragdag the penalty of reprimand for the February 3, 2001 incident, which was considered a first offense, and suspended him for three days for the February 6, 2001 incident, which was considered as a 8 second offense. Both penalties were in accordance with the hotels Code of Discipline. Subsequently, on February 22, 2001, when Mike Moral, the manager of Hyatts Cafe Al Fresco and Caragdags immediate superior, was about to counsel two staff members, Larry Lacambacal and Allan Alvaro, at the training room, Caragdag suddenly opened the door and yelled at the two with an enraged look. In a disturbing voice he said, "Ang titigas talaga ng ulo nyo. Sinabi ko na s a inyo na huwag kayong makikipagusap sa management habang ongoing pa ang kaso!" (You are very stubborn. I told you not to speak to management while the case is ongoing!) Moral asked Caragdag what the problem was and informed him that he was simply talking to his staff. Moral also told Caragdag that he did not have the right to interrupt and intimidate him during his counseling session with his staff. On February 23, 2001, Moral issued a Memorandum requiring Caragdag to explain his actions in the training room. Caragdag submitted his written explanation on 10 February 25, 2001 narrating that he was informed by someone that Lacambacal and Alvaro were requesting for his assistance because Moral had invited them to the training room. Believing that he should advise the two that they should be accompanied by a union officer to any inquisition, he went to the training room. However, before he could enter the door, Moral blocked him. Thus, he told Lacambacal and Alvaro that they should be assisted by a union representative before giving any statement to management. Caragdag also prayed that Moral be investigated for harassing union officers and union members. On February 28, 2001, Moral found the explanations unsatisfactory. In a 11 Memorandum issued on the same date, Moral held Caragdag liable for Offenses Subject to Disciplinary Action (OSDA) 3.01 of the hotels Code of Discipline, i.e., "threatening, intimidating, coercing, and provoking to a fight your superior for reasons directly connected with his discharge of official duty." Thus, Caragdag was imposed the penalty of seven days suspension in accordance with the hotels Code of Discipline.
9

Still later, on March 2, 2001, Caragdag committed another infraction. At 9:35 a.m. on the said date, Caragdag left his work assignment during official hours without prior permission from his Department Head. He was required to submit an explanation, but 12 the explanation he submitted was found unsatisfactory. On March 17, 2001, Moral found Caragdag liable for violating OSDA 3.07, i.e., "leaving work assignment during official working hours without prior permission from the department head or 13 immediate superior," and suspended him for three days. Because of the succession of infractions he committed, the HRD also required Caragdag to explain on May 11, 2001 why the hotels OSDA 4.32 (Committing offenses which are penalized with three [3] suspensions during a 12-month period) 14 should not be enforced against him. An investigation board was formed after receipt of Caragdags written explanation, and the matter was set for hearing on May 19, 2001. However, despite notice of the scheduled hearing, both Caragdag and the Union President failed to attend. Thereafter, the investigating board resolved on the 15 said date to dismiss Caragdag for violation of OSDA 4.32. Caragdag appealed but the investigating board affirmed its resolution after hearing on May 24, 2001. On June 1, 2001, the hotel, through Atty. Juancho A. Baltazar, sent Caragdag a 16 Notice of Dismissal, the pertinent portion of which reads: Based on the findings of the Investigation Board dated May 19, 2001 which was approved by the General Manager Mr. David Pacey on the same day and which did not merit any reversal or modification after the hearing on your appeal on May 24, 2001, the penalty of DISMISSAL is therefore affirmed to take effect on June 1, 2001. Caragdags dismissal was questioned by petitioner, and the dispute was referred to voluntary arbitration upon agreement of the parties. On May 6, 2002, the Voluntary 17 Arbitrator rendered a decision, the dispositive portion of which reads: WHEREFORE, premises considered, this Arbiter rules that the three separate suspensions of Mr. Caragdag are valid, his dismissal is legal and OSDA 4.32 of Hyatts Code of Discipline is reasonable. However, for humanitarian considerations, Hyatt is hereby ordered to grant financial assistance to Mr. Caragdag in the amount of One Hundred Thousand Pesos (PhP100,000.00). In finding the three separate suspensions of Caragdag valid, the Voluntary Arbitrator reasoned that the union officers and members had no right to breach company rules and regulations on security and employee discipline on the basis of certain suspicions against management and an ongoing CBA negotiation standoff. The Voluntary Arbitrator also found that when Caragdag advised Lacambacal and Alvaro not to give any statement, he threatened and intimidated his superior while the latter was performing his duties. Moreover, there is no reason why he did not arrange his timeoff with the Department Head concerned. Thus, Caragdag was validly dismissed pursuant to OSDA 4.32 of Hyatts Code of Discipline, which states that an employee who commits three different acts of misconduct within a twelve (12)-month period commits serious misconduct.

Petitioner sought reconsideration of the decision while respondent filed a motion for partial reconsideration. However, the Voluntary Arbitrator denied both motions on 18 May 26, 2003. On August 1, 2003, petitioner assailed the decision of the Voluntary Arbitrator before 19 the CA in a petition for certiorari which was docketed as CA-G.R. SP No. 78364. As mentioned at the outset, the CA dismissed the petition outright for being the wrong remedy. The CA explained: Rule 43, Section 5 of the 1997 Rules of Civil Procedure explicitly provides that the proper mode of appeal from judgments, final orders or resolution of voluntary arbitrators is through a Petition for Review which should be filed within fifteen (15) days from the receipt of notice of judgment, order or resolution of the voluntary arbitrator. Considering that petitioner intends this petition to be a Petition for Certiorari, the Court hereby resolves to dismiss the petition outright for being an improper mode of appeal. Even if this Court treats the instant petition as a Petition for Review, still the Court has no alternative but to dismiss the same for having been filed out of time. As admitted by the petitioner it received the Order dated 26 May 2003 denying their motion for reconsideration on 02 June 2003. The fifteen (15) day period within which to appeal through a Petition for Review is until June 17, 2003. The petitioner filed the present petition on August 1, 2003, way beyond the reglementary period provided for by the 20 Rules. Petitioner duly filed a motion for reconsideration of the dismissal, but the motion was denied by the CA. Thus, petitioner filed before this Court a petition for review on certiorari which was docketed as G.R. No. 164939. In the meantime, on June 30, 2003, respondent also filed a petition for review with the CA on the ground that the Voluntary Arbitrator committed a grievous error in awarding financial assistance to Caragdag despite his finding that the dismissal due to serious misconduct was valid. On December 16, 2005, the CA promulgated a decision in CA-G.R. SP. No. 77478 as follows: WHEREFORE, the Decision dated May 6, 2002 of Voluntary Arbitrator Buenaventura C. Magsalin is AFFIRMED with MODIFICATION by DELETING the award of financial assistance in the amount of P100,000.00 to Angelito Caragdag. SO ORDERED.
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have been awarded to Caragdag. The CA also noted that it is the employers prerogative to prescribe reasonable rules and regulations necessary or proper for the conduct of its business or concern, to provide certain disciplinary measures to implement said rules and to ensure compliance therewith. Petitioner sought reconsideration of the decision, but the CA denied the motion for lack of merit. Hence, petitioner filed before us a petition for review on certiorari docketed as G.R. No. 172303. Considering that G.R. Nos. 164939 and 172303 have the same origin, involve the same parties, and raise interrelated issues, the petitions were consolidated. Petitioner raises the following issues: In G.R. No. 164939 THE COURT OF APPEALS ERRED IN DISMISSING OUTRIGHT THE PETITION FOR CERTIORARI ON THE GROUND THAT THE SAME IS AN IMPROPER MODE 24 OF APPEAL. In G.R. No. 172303 THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF FINANCIAL 25 ASSISTANCE IN THE AMOUNT OFP100,000.00 TO ANGELITO CARAGDAG. The issues for our resolution are thus two-fold: first, whether the CA erred in dismissing outright the petition for certiorari filed before it on the ground that the same is an improper mode of appeal; and second, whether the CA erred in deleting the award of financial assistance in the amount of P100,000.00 to Caragdag. On the first issue, petitioner argues that because decisions rendered by voluntary arbitrators are issued under Title VII-A of the Labor Code, they are not covered by Rule 43 of the 1997 Rules of Civil Procedure, as amended, by express provision of Section 2 thereof. Section 2, petitioner points out, expressly provides that Rule 43 "shall not apply to judgments or final orders issued under the Labor Code of the Philippines." Hence, a petition for certiorari under Rule 65 is the proper remedy for questioning the decision of the Voluntary Arbitrator, and petitioner having availed of such remedy, the CA erred in declaring that the petition was filed out of time since the petition was filed within the sixty (60)-day reglementary period. On the other hand, respondent maintains that the CA acted correctly in dismissing the petition for certiorari for being the wrong mode of appeal. It stresses that Section 1 of Rule 43 clearly states that it is the governing rule with regard to appeals from awards, judgments, final orders or resolutions of voluntary arbitrators. Respondent contends that the voluntary arbitrators authorized by law include the voluntary arbitrators appointed and accredited under the Labor Code, as they are considered as included in the term "quasi-judicial instrumentalities." Petitioners arguments fail to persuade.

In deleting the award of financial assistance to Caragdag, the CA cited the case of 23 Philippine Commercial International Bank v. Abad, which held that the grant of separation pay or other financial assistance to an employee dismissed for just cause is based on equity and is a measure of social justice, awarded to an employee who has been validly dismissed if the dismissal was not due to serious misconduct or causes that reflected adversely on the moral character of the employee. In this case, the CA agreed with the findings of the Voluntary Arbitrator that Caragdag was validly dismissed due to serious misconduct. Accordingly, financial assistance should not

In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. 26 Bacungan, we repeated the well-settled rule that a decision or award of a voluntary arbitrator is appealable to the CA via petition for review underRule 43. We held that: The question on the proper recourse to assail a decision of a voluntary arbitrator has already been settled in Luzon Development Bank v. Association of Luzon Development Bank Employees, where the Court held that the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95 (now embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like those of the quasi-judicial agencies, boards and commissions enumerated therein, and consistent with the original purpose to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities. Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-Olalia v. Court of Appeals, the Court reiterated the aforequoted ruling. In Alcantara, the Court held that notwithstanding Section 2 of Rule 43, the ruling in Luzon Development Bank still stands. The Court explained, thus: "The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rules 42 of the 1997 Rules of Civil Procedure, as presently worded, is nothing more but a reiteration of the exception to the exclusive appellate jurisdiction of the Court of Appeals, as provided for in Section 9, Batas Pambansa Blg. 129, as amended by Republic Act No. 7902: (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. "The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the decisions of voluntary arbitrators issued pursuant to the Labor Code do not come within its ambit x x x" Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended, provide: 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 the x x x, and voluntary arbitrators authorized by law. xxxx

SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of Appeals within the period and in the manner therein provided, whether the appeal involves questions of fact, of law, or mixed questions of fact and law. SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioners motion for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. x x x. (Emphasis supplied.) Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrators Resolution denying petitioners motion for reconsideration, petitioner should have filed with the CA, within the fifteen (15)-day reglementary period, a petition for review, not a petition for certiorari. Petitioner insists on a liberal interpretation of the rules but we find no cogent reason in this case to deviate from the general rule. Verily, rules of procedure exist for a noble purpose, and to disregard such rules in the guise of liberal construction would be to defeat such purpose. Procedural rules are not to be disdained as mere technicalities. They may not be ignored to suit the convenience of a party. Adjective law ensures the effective enforcement of substantive rights through the orderly and speedy administration of justice. Rules are not intended to hamper litigants or complicate litigation. But they help provide for a vital system of justice where suitors may be heard following judicial procedure and in the correct forum. Public order and our system of justice are well served by a conscientious observance by the parties of the 27 procedural rules. On the second issue, petitioner argues that Caragdag is entitled to financial assistance in the amount of P100,000 on humanitarian considerations. Petitioner stresses that Caragdags infractions were due to his being a union officer and his acts did not show moral depravity. Petitioner also adds that, while it is true that the award of financial assistance is given only for dismissals due to causes specified under Articles 283 and 284 of the Labor Code, as amended, this Court has, by way of exception, allowed the grant of financial assistance to an employee dismissed for just causes based on equity. Respondent on the other hand, asserts that the CA correctly deleted the award of financial assistance erroneously granted to Caragdag considering that he was found guilty of serious misconduct and other acts adversely reflecting on his moral character. Respondent stresses that Caragdags willful defiance of the hotels security policy, disrespect and intimidation of a superior, and unjustifiable desertion of his work assignment during working hours without permission, patently show his serious 28 and gross misconduct as well as amoral character. Again, petitioners arguments lack merit. The grant of separation pay or some other financial assistance to an employee 29 dismissed for just causes is based on equity. In Phil. Long Distance Telephone Co. 30 v. NLRC, we ruled that severance compensation, or whatever name it is called, on the ground of social justice shall be allowed only when the cause of the dismissal is other than serious misconduct or for causes which reflect adversely on the

employees moral character. The Court succinctly discussed the propriety of the grant of separation pay in this wise: We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution. The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes 31 of their own character. Here, Caragdags dismissal was due to several instances of willful disobedience to the reasonable rules and regulations prescribed by his employer. The Voluntary Arbitrator pointed out that according to the hotels Code of Discipline, an employee who commits three different acts of misconduct within a twelve (12)-month period commits serious misconduct. He stressed that Caragdags infractions were not even spread in a period of twelve (12) months, but rather in a period of a little over a month. Records show the various violations of the hotels rules and regulations were committed by Caragdag. He was suspended for violating the hotel policy on bag inspection and body frisking. He was likewise suspended for threatening and intimidating a superior while the latter was counseling his staff. He was again suspended for leaving his work assignment without permission. Evidently, Caragdags acts constitute serious misconduct.1wphi1 In Piedad v. Lanao del Norte Electric Cooperative, Inc., we ruled that a series of irregularities when put together may constitute serious misconduct, which under Article 282 of the Labor Code, as amended, is a just cause for dismissal.
32

Caragdags dismissal being due to serious misconduct, it follows that he should not be entitled to financial assistance. To rule otherwise would be to reward him for the grave misconduct he committed. We must emphasize that social justice is extended 33 only to those who deserve its compassion. WHEREFORE, the petitions for review on certiorari are DENIED. The October 3, 2003 and August 13, 2004 Court of Appeals Resolutions in CA-G.R. SP No. 78364, as well as the Court of Appeals December 16, 2005 Decision and April 12, 2006 Resolution in CA-G.R. SP No. 77478, are AFFIRMED and UPHELD. With costs against the petitioner. PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents. Solon Garcia for petitioner. Adolpho M. Guerzon for respondent PALEA. MELO, J.: In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation of a Code of Discipline among employees is a shared responsibility of the employer and the employees. On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline. The Code was circulated among the employees and was immediately implemented, and some employees were forthwith subjected to the disciplinary measures embodied therein. Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before the National Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-2051-85) with the following remarks: "ULP with arbitrary implementation of PAL's Code of Discipline without notice and prior discussion with Union by Management" (Rollo, p. 41). In its position paper, PALEA contended that PAL, by its unilateral implementation of the Code, was guilty of unfair labor practice, specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA alleged that copies of the Code had been circulated in limited numbers; that being penal in nature the Code must conform with the requirements of sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights of the employees. It prayed that implementation of the Code be held in abeyance; that PAL should discuss the substance of the Code with PALEA; that employees dismissed under the Code be reinstated and their cases subjected to further hearing; and that PAL be declared guilty of unfair labor practice and be ordered to pay damages (pp. 7-14, Record.)

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe rules and regulations regarding employess' conduct in carrying out their duties and functions, and alleging that by implementing the Code, it had not violated the collective bargaining agreement (CBA) or any provision of the Labor Code. Assailing the complaint as unsupported by evidence, PAL maintained that Article 253 of the Labor Code cited by PALEA reffered to the requirements for negotiating a CBA which was inapplicable as indeed the current CBA had been negotiated. In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was violated when PAL unilaterally implemented the Code, and cited provisions of Articles IV and I of Chapter II of the Code as defective for, respectively, running counter to the construction of penal laws and making punishable any offense within PAL's contemplation. These provisions are the following: Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and regulations of the company. Every employee is bound to comply with all applicable rules, regulations, policies, procedures and standards, including standards of quality, productivity and behaviour, as issued and promulgated by the company through its duly authorized officials. Any violations thereof shall be punishable with a penalty to be determined by the gravity and/or frequency of the offense. Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative. The penalty for an offense shall be determined on the basis of his past record of offenses of any nature or the absence thereof. The more habitual an offender has been, the greater shall be the penalty for the latest offense. Thus, an employee may be dismissed if the number of his past offenses warrants such penalty in the judgment of management even if each offense considered separately may not warrant dismissal. Habitual offenders or recidivists have no place in PAL. On the other hand, due regard shall be given to the length of time between commission of individual offenses to determine whether the employee's conduct may indicate occasional lapses (which may nevertheless require sterner disciplinary action) or a pattern of incorrigibility. Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed to appear at the scheduled date. Interpreting such failure as a waiver of the parties' right to present evidence, the labor arbiter considered the case submitted for decision. On November 7, 1986, a decision was rendered finding no bad faith on the part of PAL in adopting the Code and ruling that no unfair labor practice had been committed. However, the arbiter held that PAL was "not totally fault free" considering that while the issuance of rules and regulations governing the conduct of employees is a "legitimate management prerogative" such rules and regulations must meet the test of "reasonableness, propriety and fairness." She found Section 1 of the Code aforequoted as "an all embracing and all encompassing provision that makes punishable any offense one can think of in the company"; while Section 7, likewise quoted above, is "objectionable for it violates the rule against double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp. 38-39, Rollo.)

The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated." Noting that PAL's assertion that it had furnished all its employees copies of the Code is unsupported by documentary evidence, she stated that such "failure" on the part of PAL resulted in the imposition of penalties on employees who thought all the while that the 1966 Code was still being followed. Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses no one from compliance . . . finds application only after it has been conclusively shown that the law was circulated to all the parties concerned and efforts to disseminate information regarding the new law have been exerted. (p. 39, Rollo.) She thereupon disposed: WHEREFORE, premises considered, respondent PAL is hereby ordered as follows: 1. Furnish all employees with the new Code of Discipline; 2. Reconsider the cases of employees meted with penalties under the New Code of Discipline and remand the same for further hearing; and 3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the decision. All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit. SO ORDERED. (p. 40, Rollo.) PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no evidence of unfair labor practice committed by PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the NLRC made the following observations: Indeed, failure of management to discuss the provisions of a contemplated code of discipline which shall govern the conduct of its employees would result in the erosion and deterioration of an otherwise harmonious and smooth relationship between them as did happen in the instant case. There is no dispute that adoption of rules of conduct or discipline is a prerogative of management and is imperative and essential if an industry, has to survive in a competitive world. But labor climate has progressed, too. In the Philippine scene, at no time in our contemporary history is the need for a cooperative, supportive and smooth relationship between labor and management more keenly felt if we are to survive economically. Management can no longer exclude labor in the deliberation and adoption of rules and regulations that will affect them. The complainant union in this case has the right to feel isolated in the adoption of the New Code of Discipline. The Code of Discipline

involves security of tenure and loss of employment a property right! It is time that management realizes that to attain effectiveness in its conduct rules, there should be candidness and openness by Management and participation by the union, representing its members. In fact, our Constitution has recognized the principle of "shared responsibility" between employers and workers and has likewise recognized the right of workers to participate in "policy and decision-making process affecting their rights . . ." The latter provision was interpreted by the Constitutional Commissioners to mean participation in "management"' (Record of the Constitutional Commission, Vol. II). In a sense, participation by the union in the adoption of the code if conduct could have accelerated and enhanced their feelings of belonging and would have resulted in cooperation rather than resistance to the Code. In fact, labor-management cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.) Respondent Commission thereupon disposed: WHEREFORE, premises considered, we modify the appealed decision in the sense that the New Code of Discipline should be reviewed and discussed with complainant union, particularly the disputed provisions [.] (T)hereafter, respondent is directed to furnish each employee with a copy of the appealed Code of Discipline. The pending cases adverted to in the appealed decision if still in the arbitral level, should be reconsidered by the respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained. SO ORDERED. (p. 5, NLRC Decision.) PAL then filed the instant petition for certiorari charging public respondents with grave abuse of discretion in: (a) directing PAL "to share its management prerogative of formulating a Code of Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative with the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to reconsider pending cases still in the arbitral level (p. 7, Petition; p. 8,Rollo.) As stated above, the Principal issue submitted for resolution in the instant petition is whether management may be compelled to share with the union or its employees its prerogative of formulating a code of discipline. PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the sharing of responsibility therefor between employer and employee. Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article 211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure the participation of workers in decision and policy-making

processes affecting the rights, duties and welfare." However, even in the absence of said clear provision of law, the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that management's prerogatives must be without abuse of discretion. In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the company's right to implement a new system of distributing its products, but gave the following caveat: So long as a company's management prerogatives are exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold them. (at p. 28.) All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is circumscribed by limitations found in law, a collective bargaining agreement, or the general principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be duly established that the prerogative being invoked is clearly a managerial one. A close scrutiny of the objectionable provisions of the Code reveals that they are not purely business-oriented nor do they concern the management aspect of the business of the company as in the San Miguel case. The provisions of the Code clearly have repercusions on the employee's right to security of tenure. The implementation of the provisions may result in the deprivation of an employee's means of livelihood which, as correctly pointed out by the NLRC, is a property right (Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border on infringement of constitutional rights, we must uphold the constitutional requirements for the protection of labor and the promotion of social justice, for these factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker" (Employees Association of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635). Verily, a line must be drawn between management prerogatives regarding business operations per se and those which affect the rights of the employees. In treating the latter, management should see to it that its employees are at least properly informed of its decisions or modes action. PAL asserts that all its employees have been furnished copies of the Code. Public respondents found to the contrary, which finding, to say the least is entitled to great respect. PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27, 1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules and regulations to carry out the functions of management without having to discuss the same with PALEA and much less, obtain the latter'sconformity thereto" (pp. 11-12, Petitioner's Memorandum; pp 180181, Rollo.) Petitioner's view is based on the following provision of the agreement:

The Association recognizes the right of the Company to determine matters of management it policy and Company operations and to direct its manpower. Management of the Company includes the right to organize, plan, direct and control operations, to hire, assign employees to work, transfer employees from one department, to another, to promote, demote, discipline, suspend or discharge employees for just cause; to lay-off employees for valid and legal causes, to introduce new or improved methods or facilities or to change existing methods or facilities and the right to make and enforce Company rules and regulations to carry out the functions of management. The exercise by management of its prerogative shall be done in a just reasonable, humane and/or lawful manner. Such provision in the collective bargaining agreement may not be interpreted as cession of employees' rights to participate in the deliberation of matters which may affect their rights and the formulation of policies relative thereto. And one such mater is the formulation of a code of discipline. Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared a policy of the State, "(d) To promote the enlightenment of workers concerning their rights and obligations . . . as employees." This was, of course, amplified by Republic Act No 6715 when it decreed the "participation of workers in decision and policy making processes affecting their rights, duties and welfare." PAL's position that it cannot be saddled with the "obligation" of sharing management prerogatives as during the formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such "obligation" was not yet founded in law when the Code was formulated, the attainment of a harmonious labor-management relationship and the then already existing state policy of enlightening workers concerning their rights as employees demand no less than the observance of transparency in managerial moves affecting employees' rights. Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the nature of its business cannot be overemphasized. In fact, its being a local monopoly in the business demands the most stringent of measures to attain safe travel for its patrons. Nonetheless, whatever disciplinary measures are adopted cannot be properly implemented in the absence of full cooperation of the employees. Such cooperation cannot be attained if the employees are restive on account, of their being left out in the determination of cardinal and fundamental matters affecting their employment. WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special pronouncement is made as to costs. SO ORDERED.

PHILIPPINE LONG DISTANCE and TELEPHONE COMPANY, INC., Petitioner, vs. AMPARO BALBASTRO and NATIONAL LABOR RELATIONS COMMISSION, Respondents. AUSTRIA-MARTINEZ, J.: Before us is a Petition for Review on Certiorari filed by Philippine Long Distance and 1 Telephone Company, Inc. (petitioner) seeking to annul the Decision dated July 31, 2 2002 and the Resolution dated February 7, 2003 of the Court of Appeals (CA) in CAG.R. SP No. 51060. Amparo Balbastro (private respondent) was employed by petitioner in 1978 as its telephone operator until her questioned dismissal from employment on October 5, 1989. She was dismissed by petitioner for her absences without authorized leave due to unconfirmed sick leave on June 28 to July 14, 1989, which constituted her third 3 4 offense punishable by dismissal under petitioners rules and regulations. On October 28, 1991, private respondent filed a Complaint with the Labor Arbiter against petitioner and its President, Antonio Cojuangco, for illegal dismissal, nonpayment of salary wage, premium pay for rest day, 13th month pay, and damages. In her position paper, she alleged that she was dismissed on the ground of unconfirmed sick leave despite her presentation of medical certificates from her attending physicians which were not considered by petitioners medical doctors; and that she has four minor children and it was not her intention to habitually absent herself without reason considering that her loss of job which was based only on opinions of petitioners doctors had caused her great deprivation and moral suffering. She prayed for reinstatement, backwages, and damages. Petitioner filed its position paper with Motion to Dismiss alleging that private respondents habitual and unjustified absences was a just and valid cause for her termination under its rules and regulations; and that her record of unauthorized absences for 1989 showed the following: First unauthorized absences, from March 19 to 29, 1989. Private respondent absented herself from work for nine days excluding rest days on March 23 to 24, 1989 without notice to petitioner. She gave marital problem as the reason for her absence. She was penalized with 18 days suspension for violating petitioners rules and regulations regarding absences. Second unauthorized absences, from June 11 to 13, 1989. Private respondent called in sick from Tanauan, Batangas on June 5 that she was suffering from gastroenteritis. She absented herself from June 5 to 13, 1989. On June 14, 1989, she presented herself to petitioners doctor, Dr. Melissa Musngi and submitted a medical certificate where it was stated that she was under treatment from June 5 to 8, 1989 of gastroenteritis. Dr. Musngi confirmed private respondents sick leave from June 5 to 10, 1989 but did not confirm her absences from June 11 to 13, 1989 because her medical certificate covered only the period from June 5 to 8, 1989. Furthermore, petitioner reasons out that if she really had such illness, certain normal logical medical procedures should have been taken, such as stool examinations and hospitalization; and she bore no post-illness manifestations of gastroenteritis. Private
6 5

respondents unconfirmed leave of absence was considered by petitioner unauthorized due to her patent abuse of sick leave privileges and treated it as her second offense and was penalized with 15 days suspension. Third unauthorized absences, from June 28 to July 14, 1989. On June 25, 1989, private respondent made a sick call that she had sore eyes and absented herself from June 25 to July 14, 1989. On July 3, 1989, she was outvisited at her given address in Makati but was not found home. On July 15, 1989, she reported for work and presented herself to the clinic for confirmation. She had her medical certificate issued by her attending physician showing that she had been under his professional treatment from June 25 to July 12, 1989 for systemic viral infection. Petitioners doctor, Dr. Benito Dungo, confirmed her sick leave from June 25 to 27, 1989 but did not confirm as to the rest of the dates when she was absent from work. When asked to explain, private respondent said that she had a viral infection during the said period; and that she was in Tanauan, Batangas during the said dates so she was not found in Makati when outvisited. Petitioners doctor did not confirm her leave of absence from June 28 to July 14, 1989 on the ground that such illness did not warrant a very long time of rest; certain laboratory examinations should have been conducted by her attending physician; and there was patent abuse of her sick leave privileges. While private respondents third leave of absence was being deliberated upon, she absented herself from August 6 to 12, 1989. She called in sick on August 6, 1989 informing her supervisor that she had a fever. The medical certificate issued by her attending physician showed that she was under treatment from August 7 to 10, 1989 for influenza. Petitioners doctor, Dr. Eduardo Co, confirmed private respondents leave of absence from August 6 to 8, 1989 but did not confirm the rest because her absences from August 9 to 12, 1989 were not covered by a medical certificate; her illness did not warrant prolonged absence; and it was medically impossible for her to contract the same illness which she contracted the previous month since it is a medical fact that there is no such thing as an immediately recurrent viral infection. In view of her repeated absences without authorized leave for the third time, petitioner terminated private respondents service effective October 5, 1989. The Labor Arbiter conducted a hearing where private respondent testified on her behalf, while petitioner presented the three medical doctors who did not confirm portions of private respondents leave of absence, and its Employee Relations and Service Department Manager. On May 30, 1994, the Labor Arbiter issued its Decision, the dispositive portion of which reads: WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the respondent Philippine Long Distance [and] Telephone Co. to reinstate the complainant to her former position as telephone operator with all the rights, privileges and benefits appertaining thereto, including seniority, plus backwages equivalent to one (1) year salary in the sum of P78,000.00 (P6,500.00/mo. x 12 mos.). SO ORDRED.
8 7

The Labor Arbiter held that private respondents first incident of absence from March 19 to 29, 1989 were unauthorized but not as to the other succeeding absences. It found that private respondent, on her first day of absence, called in sick and when she reported for work, she went to petitioners clinic for check -up and submitted her medical certificates, thus she complied with the standard requirements on matters of sick leave; that petitioners doctors did not confirm some portions of private respondents leave of absence based merely on their medical opinions; that such justification was not warranted under Department Order No. ADM-79-02 wherein absences due to illness were considered unauthorized and without pay when the attending doctors signature is forged, there is alteration as to the date and contents of the medical certificate, the certificate is false as to the facts alleged therein, the doctor issuing the medical certificate is not qualified to attend to the illness, there are falsities and misrepresentations, and when there is patent abuse of sick leave privileges; and that these circumstances were not proven in this case. The Labor Arbiter gave more credence to the doctor who actually attended to private respondent rather than to the medical opinion of petitioners doctors. It concluded that petitioners doctors should have coordinated with private respondents attending physicians to settle any doubts as to the medical certificates. Petitioner filed its appeal with the National Labor Relations Commission (NLRC). On January 19, 1996, the NLRC issued a Resolution
10 9

affirming the decision of the Labor Arbiter.

The NLRC found that company practice allows leave of absence due to sickness if supported by a medical certificate issued by the attending physician; that a difference in opinion by the Medical Director from that of the attending physician should not prejudice private respondent since the Medical Director can consider absences unauthorized only in cases of forgery and patent abuse of sick leave privileges which were not proven in this case; that if the Medical Director entertained doubts as to the medical certificate, he should have asked the attending physician to submit himself for cross-examination and then present an independent physician for an expert opinion on the matter. Petitioners Motion for Reconsideration was denied in a Resolution 1996.
11

dated March 14,

Undaunted, petitioner filed with us a Petition for Certiorari with prayer for the issuance of a Temporary Restraining Order (TRO). A TRO was issued to enjoin the 12 enforcement of the NLRC Resolution until further orders. In a Resolution dated December 7, 1998,
13

we referred the petition to

the CA in accordance with the St. Martin Funeral Home v. National Labor Relations 14 Commission ruling. On July 31, 2002, the CA issued its assailed Decision which dismissed the petition and affirmed the NLRC Decision. The CA held that as long as the medical certificate presented did not fall under any of the infirmities set forth in petitioners rules and

regulations, the unconfirmed leave should be treated merely as absence without leave and was not subject to disciplinary action; that petitioner may not rely on the previous absences of respondents in 1978 and 1982 to show abuse of sick leave privileges because petitioner had acknowledged that respondent had already been penalized with suspension, and those absences were committed beyond the threeyear period mentioned in their rules and regulations; that in its desire to clothe private respondents dismissal with a semblance of legality, petitioner points to private respondents fourth unauthorized leave of absence committed in August 1989 while the third unauthorized leave of absence was being deliberated upon; and that the notice of dismissal referred only to her third unauthorized leave, thus she could not be faulted for an infraction for which she was not charged. Petitioners Motion for Reconsideration was denied in a Resolution dated February 7, 2003. Hence, petitioner filed the instant Petition for Review on Certiorari alleging the following grounds: I WITH ALL DUE RESPECT, THE HONORABLE COURT FAILED TO CONSIDER THAT THE PETITION HEREIN DOES NOT MERELY INQUIRE UPON THE RELATIVE WEIGHT OF THE EVIDENCE PRESENTED BY THE PARTIES, BUT IS ANCHORED ON MANIFESTLY ERRONEOUS CONCLUSIONS ON THE PART OF THE NLRC ARISING FROM GROSS MISAPPREHENSION OF THE FACTS OBTAINING IN THE CASE. AMONG OTHERS, IT WAS GRAVE ERROR TO CONCLUDE THAT THERE WAS NO PATENT ABUSE OF THE SICK LEAVE PRIVILEGE ON THE PART OF THE PRIVATE RESPONDENT BECAUSE THE MEDICAL CERTIFICATES SHE PRESENTED WERE NOT FALSE, FORGED, OR ALTERED TOTALLY DISREGARDING THE FACT THAT "ABUSE OF SICK LEAVE PRIVILEGE" IS A CAUSE SEPARATELY ENUMERATED UNDER THE RULES AS A GROUND FOR DISCIPLINARY ACTION. II WITH ALL DUE RESPECT, THE HONORABLE COURT FAILED TO CONSIDER THAT THE CONCLUSIONS OF THE NLRC ARE BEREFT OF ANY LEGAL OR FACTUAL BASES AS THERE WERE LEGALLY NO MEDICAL CERTIFICATES TO SPEAK OF, AND THE EXISTENCE THEREOF ARE PURE AND SIMPLE HEARSAY, HENCE COULD NOT BE VALIDLY RELIED UPON OR INVOKED BY THE PRIVATE RESPONDENT TO SUPPORT HER DEFENSE EVEN SUPPOSING TECHNICAL RULES ON EVIDENCE COULD BE RELAXED IN LABOR 15 PROCEEDINGS. Petitioner argues that the NLRCs conclusions that private respondent had not committed a patent abuse of sick leave privileges and that her dismissal was illegal are utterly without any factual or legal basis; that the NLRCs conclusion that the dismissal was illegal was merely based: (1) on the evidence of private respondent; (2) on medical certificates which are clearly hearsay and of no probative value whatsoever; and (3) on medical certificates which, even supposing could be

considered, simply failed to cover the period of the leave requested and set forth implausible diagnoses. Petitioner claims that the CA as well as the NLRC failed to resolve the issue of whether or not the medical certificate should be given any credence at all; that it had presented four witnesses which included their three medical doctors who were subjected to cross-examinations, and yet credence was given to private respondents hearsay evidence consisting merely of a medical certificate by the latters attending physician who was not even presented to testify; that since the content of the medical certificate had been rebutted and refuted by petitioners witnesses, the burden of evidence is shifted to private respondent to show that the medical certificate she submitted was competent, proper, and sound which she failed to do. Petitioner further claims that the CA erred in not finding that private respondent committed a patent abuse of sick leave privileges which does not arise solely from forgery or alteration of the medical certificate, but on the fact that an employee had frequently and incorrigibly absented herself and then applied for sick leave with absolute impunity armed with medical certificates which not only failed to cover the entire length of the leave but also with implausible diagnoses; that excluding private respondents unauthorized absences in 1989, she had accumulated 93 days of sick leave from January to July 1989 and 115 days of sick leave in 1988, thus, how can the conclusion be drawn that there was no patent abuse of sick leave privileges; and that her unauthorized absence for which she was terminated all occurred in 1989, thus, the CA erred in saying that petitioner may not rely on the previous absences of respondent in 1978 and 1982 to justify private respondents dismissal. We find the petition meritorious. Private respondent was validly dismissed by petitioner. It must be borne in mind that the basic principle in termination cases is that the burden of proof rests upon the employer to show that the dismissal is for just and valid cause and failure to do so would necessarily mean that the dismissal was not 16 justified and, therefore, was illegal. For dismissal to be valid, the evidence must be 17 substantial and not arbitrary and must be founded on clearly established facts. We find that petitioner had discharged this burden. Under petitioners Department Order No. ADM-79-02, for the absence due to an alleged illness to be considered unauthorized, without pay, and subject to disciplinary action, it must be shown that the medical certificate is forged, altered as to the date and contents, false as to the facts stated therein, issued by a doctor not qualified to attend to the patients illness, and there is patent abuse of sick leave privileges. The penalty for three offenses of unauthorized absences committed within the three-year period is dismissal. Private respondents unconfirmed absences from June 28 to July 14, 1989 is the crucial period in this particular case. The Labor Arbiter and the NLRC found that private respondent was illegally dismissed by petitioner. Such finding was affirmed by the CA. They all concluded that the medical certificate which private respondent presented did not fall under the circumstances enumerated in Department Order No. ADM-79-02, and there was no patent abuse of sick leave privileges, thus, there was no basis for petitioners doctors not to confirm her sick leave and consider the same unauthorized.

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 evidence on record or the impugned judgment is based on a 18 misapprehension of facts. We find that those exceptions are present in the instant case. We find that petitioner had sufficiently established that private respondent committed a patent abuse of her sick leave privileges which is one of the grounds listed in Department Order No. ADM-79-02 for disciplinary action. Private respondent was absent on June 25, 1989 and the reason given was sore eyes. She was then absent from June 25 to July 14, 1989. When she reported for work on July 15, 1989, she went to petitioners doctor, Dr. Benito Dungo, for 19 confirmation of her leave of absence and presented a medical certificate from her attending physician, Dr. Manuel C. Damian of Tanauan Batangas, who certified that she had been under his professional care from June 25 to July 12, 1989 for systemic viral disease. Dr. Dungo confirmed private respondents leave of absence from June 25 to 27, 1989 only and did not confirm her leave from June 28 to July 14, 1989 for the following reasons: (a) systemic viral disease indicated in the medical certificate does not warrant such a very long time of rest and recuperation; (b) if she really had an infection, the logical recourse is for the attending physician to conduct a chest x-ray and blood examination to determine the cause of the prolonged fever, but such was not made; (c) if she was really ill for such a long time, she would have already been confined in a hospital for treatment as petitioner has standing agreements with various hospitals to provide immediate medical assistance free of charge; (d) she displayed no residue of symptoms of flu, thus casting doubt on the veracity of her claim; (e) she called in sick on June 25, 1989 that she was suffering from sore eyes but her medical certificate made no mention of such condition; and (f) her medical 20 records reveal a pattern of abuse of sick leave privileges. Private respondents reason for her absence on June 25, 1989 was sore eyes, however the medical certificate that she presented for her prolonged absence from June 25 to July 14, 1989 was systemic viral disease and as correctly observed by Dr. Dungo, sore eyes was never mentioned therein. Moreover, in the medical progress note of Dr. Damian dated October 10, 1989 attached to private respondents position paper submitted before the Labor Arbiter, it was shown that private respondent was seen by Dr. Damian on June 25, 1989 at 9:00 a.m. and her temperature was 40 degrees and she was complaining of severe headache and body pain. It would appear that there was a discrepancy between the reason given when she called in sick on June 25, 1989 and her complaints when she consulted Dr. Damian on the same day. In fact, when private respondent was asked on cross-examination why sore eyes was never mentioned in her medical certificate, all that she could say was "the diagnosis was systemic viral disease, sama-sama na 22 lahat". The medical certificate issued by Dr. Damian showed that private respondent was under his professional care from June 25 to July 12, 1989. However, the medical progress note dated October 10, 1989 of the same doctor showed that private
21

respondent consulted him only on June 25, 27, and 29, 1989. It was never mentioned that Dr. Damian had seen private respondent after June 29, 1989. Thus, there was even a discrepancy between the medical certificate dated July 13, 1989 and the medical progress note as to the time frame that private respondent was seen by Dr. Damian. The medical certificate did not cover private respondents absences from July 13 to 14, 1989 and she only reported for work on July 15, 1989. It bears stressing that from the time private respondent called in sick on June 25, 1989 due to sore eyes, she never called up petitioner again until she reported for work on July 15, 1989. She never went to petitioners doctors for them to verify her sickness. Private respondent had committed the first two offenses of unauthorized absences in the same year. First, she did not report for work from March 19 to 29, 1989 without notice to petitioner, thus her absence was treated as unauthorized and considered her first offense for which she was penalized with suspension. Second, she again did not report for work from June 5 to 13, 1989 and when she reported for work and presented her medical certificate, it covered the period from June 5 to 8, 1989 only but she did not report for work until June 14, 1989. Petitioners doctor did not confirm her absences from June 11 to 13, 1989, thus, the same was considered unauthorized and her second offense for which she was penalized again with suspension. These two unauthorized absences together with her third unauthorized absences committed from June 28 to July 14, 1989 are sufficient bases for petitioners finding that p rivate respondent patently abused her sick leave privileges. Previous infractions may be used as justification for an employees dismissal from 23 work in connection with a subsequent similar offense. Moreover, it is in petitioners rules and regulations that the same offense committed within the three-year period merits the penalty of dismissal. The CAs finding that petitioner may not rely on the previous absences of private respondent in 1978 and 1982 to show abuse of sick leave privileges has no basis since private respondent was dismissed for committing her three unauthorized absences all in 1989. It had also been established by Dr. Dungos testimony that private respondents medical record showed that she did not go to the clinic for consultation as she would 24 only present a medical certificate and get a clearance for her sick leave; that the same medical record showed her absences in 1989 as follows: (1) From April 27 to 25 May 4 due to urinary tract infection and she submitted a medical certificate; (2) 26 27 From May 5 to 14 due to back pain; (3) From May 20 to 21 due to migraine; (4) June 5 to 13 due to gastroenteritis (penalized as her second offense); (5) June 15 to 28 24 due to conjunctivitis and submitted a medical certificate; and (6) June 25 to July 14, 1989 due to systemic viral disease with medical certificate (her third offense penalized with dismissal). Private respondent had incurred a total absence of 85 days 29 30 from January to October 1989; and 115 days in 1988. It had also been established 31 that petitioners doctors confirmed most of her sick leave out of compassion and that her medical records showed that there were several warnings given her regarding her 32 unconfirmed sick leave. As petitioner stated in its pleadings, it is a telecommunication service company which provides the country with various telecommunication services and facilities. Its operations are a vital part to many transactions all over the country and abroad, and

private respondent was one of its telephone operators who used to connect all these calls. Thus, her patent abuse of her sick leave privileges is detrimental to petitioners business. While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the employer. The law in protecting the rights of the 33 employees authorizes neither oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice 34 is to be denied to none). WHEREFORE, the instant petition is GRANTED. The Decision dated July 31, 2002 and the Resolution dated February 7, 2003 of the Court of Appeals in CA-G.R. SP No. 51060 are hereby REVERSED and SET ASIDE. The complaint of Amparo Balbastro is DISMISSED.
THE UNIVERSITY OF THE IMMACULATE CONCEPTION and MO. MARIA ASSUMPTA DAVID, RVM, Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and TEODORA AXALAN, Respondents. DECISION 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 memorandum 6 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 2004.1wphi1 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.

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.

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 certiora ri, 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. 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 decis ion 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.1wphi1 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.