J.A.B. Bulao & Associates

SOLIDBANK CORP VS. ERNESTO U. GAMIER ET AL (G.R. NO. 159460, 15 NOVEMBER 2010).

THIS CASE IS ABOUT LABOR STRIKES. IT DISTINGUISHES LIABILITY OF A UNION OFFICER FROM LIABILITY OF MERE UNION MEMBER.

READ THE FULL TEXT OF THE DECISION IN jabbulao.com under the category RECENT SUPREME COURT DECISIONS.

THIS DIGEST ALSO APPEARS IN jabbulao.com under the category: LEGAL DIGESTS. 

DOCTRINE:  DEMONSTRATIONS AND WORK BOYCOTTS IN VIOLATION OF DOLE ORDER AFTER DOLE ASSUMES JURISDICTION CONSTITUTES ILLEGAL STRIKE. UNION OFFICERS CAN BE TERMINATED IF THEY PARTICIPATE IN ILLEGAL STRIKES. BUT MERE MEMBERS CAN BE TERMINATED ONLY IF THEY COMMIT ILLEGAL ACTS DURING SUCH STRIKES.

DIGEST:

FACTS:

XYZ BANK AND ABC LABOR UNION WERE RENEGOTIATING THEIR CBA. NOT BEING ABLE TO AGREE, ABC LABOR UNION DECLARED DEADLOCK AND FILED NOTICE TO STRIKE. DOLE ASSUMED JURISDICTION AND ISSUED AN ORDER ON THE ISSUES IN DISPUTE. DISSATISFILED WITH THE ORDER, ABC LABOR UNION FILED A MOTION FOR RECONSIDERATION. WHILE FILING SUCH MOTION THEY STAGED DEMONSTRATION AT DOLE. THEY ALSO DID NOT REPORT TO WORK FOR 3 DAYS. XYZ BANK TERMINATED MANY OF THOSE WHO PARTICIPATED IN THE STRIKE. EMPLOYEES AFFECTED FILED CASE FOR ILLEGAL DISMISSAL BEFORE TWO ARBITERS. ONE ARBITER DISMISSED THE COMPLAINT. ANOTHER ARBITER RULED IN FAVOR OF EMPLOYEES. NLRC RULED THAT THE DISMISSAL WAS ILLEGAL. PARTIES APPEALED TO THE CA. CA RULED  THAT THE DISMISSAL WAS ILLEGAL. THE PROTEST ACTION STAGED BY THE EMPLOYEES BEFORE DOLE AND THEIR WALK OUT FOR 3 DAYS WAS NOT A STRIKE BUT AN EXERCISE OF RIGHT TO EXPRESS DISSATISFACTION OF DOLE DECISION. XYZ BANK FILED PETITION BEFORE THE SC.

ISSUES:

THE FUNDAMENTAL ISSUES TO BE RESOLVED IN THIS CONTROVERSY ARE: (1) WHETHER THE PROTEST RALLY AND CONCERTED WORK ABANDONMENT/BOYCOTT STAGED BY THE RESPONDENTS VIOLATED THE ORDER DATED JANUARY 18, 2000 OF THE SECRETARY OF LABOR; (2) WHETHER THE RESPONDENTS WERE VALIDLY TERMINATED; AND (3) WHETHER THE RESPONDENTS ARE ENTITLED TO SEPARATION PAY OR FINANCIAL ASSISTANCE.

RULING:

THE DEMONSTRATION AT DOLE AND THE 3 DAY BOYCOTT WAS IN VIOLATION OF THE ORDER OF DOLE. THEREFORE, SUCH CONSTITUTES AN ILLEGAL STRIKE. ONCE DOLE TAKES OVER JURISDICTION THE SAME MUST NOT BE ALLOWED.

NOT ALL EMPLOYEES CAN BE TERMINATED ON SAME GROUNDS. UNION OFFICERS CAN BE TERMINATED ON THE BASIS OF THEIR BEING INVOLVED IN ILLEGAL STRIKES. MERE UNION MEMBERS CAN BE TERMINATED ONLY IF THEY COMMIT ILLEGAL ACTS DURING THE STRIKES.

UNION MEMBERS WHO ARE DUE FOR REINSTATEMENT AFTER THEY JOINED THE ILLEGAL STRIKES CANNOT CLAIM BACKWAGES. BUT SINCE REINSTATEMENT IS NOT POSSIBLE ANYMORE, THEY ARE ENTITLED TO SEPARATION PAY.

Said the Supreme Court:

Our Ruling

          Article 212 of the Labor Code, as amended, defines strike as any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute. A labor dispute includes any controversy or matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment, regardless of whether or not the disputants stand in the proximate relation of employers and employees.^[1][41]  The term “strike” shall comprise not only concerted work stoppages, but also slowdowns, mass leaves, sitdowns, attempts to damage, destroy or sabotage plant equipment and facilities and similar activities.^[2][42]  Thus, the fact that the conventional term “strike” was not used by the striking employees to describe their common course of action is inconsequential, since the substance of the situation, and not its appearance, will be deemed to be controlling.^[3][43]

          After a thorough review of the records, we hold that the CA patently erred in concluding that the concerted mass actions staged by respondents cannot be considered a strike but a legitimate exercise of the respondents’ right to express their dissatisfaction with the Secretary’s resolution of the economic issues in the deadlocked CBA negotiations with petitioners.  It must be stressed that the concerted action of the respondents was not limited to the protest rally infront of the DOLE Office on April 3, 2000.  Respondent Union had also picketed the Head Office and Paseo de Roxas Branch.  About 712 employees, including those in the provincial branches, boycotted and absented themselves from work in a concerted fashion for three continuous days that virtually paralyzed the employer’s banking operations.   Considering that these mass actions stemmed from a bargaining deadlock and an order of assumption of jurisdiction had already been issued by the Secretary of Labor to avert an impending strike, there is no doubt that the concerted work abandonment/boycott was the result of a labor dispute.   

          In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations Commission,^[4][44] petitioners union and members held similar protest rallies infront of the offices of BLR and DOLE Secretary and at the company plants.  We declared that said mass actions constituted illegal strikes:

Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are not within the ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their right to peaceably assemble and petition the government for redress of grievances. Mainly relying on the doctrine laid down in the case of Philippine Blooming Mills Employees Organization v. Philippine Blooming Mills Co., Inc., it argues that the protest was not directed at Toyota but towards the Government (DOLE and BLR).  It explains that the protest is not a strike as contemplated in the Labor Code.  The Union points out that in Philippine Blooming Mills Employees Organization, the mass action staged in Malacañang to petition the Chief Executive against the abusive behavior of some police officers was a proper exercise of the employees’ right to speak out and to peaceably gather and ask government for redress of their grievances. 

The Union’s position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some respects to that of the present case, the Union fails to realize one major difference: there was no labor dispute in Philippine Blooming Mills Employees Organization.  In the present case, there was an on-going labor dispute arising from Toyota’s refusal to recognize and negotiate with the Union, which was the subject of the notice of strike filed by the Union on January 16, 2001.  Thus, the Union’s reliance on Philippine Blooming Mills Employees Organization is misplaced, as it cannot be considered a precedent to the case at bar.

x x x x

Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by the Union officials and members on February 21 to 23, 2001 are not valid and proper exercises of their right to assemble and ask government for redress of their complaints, but are illegal strikes in breach of the Labor Code. The Union’s position is weakened by the lack of permit from the City of Manila to hold “rallies.” Shrouded as demonstrations, they were in reality temporary stoppages of work perpetrated through the concerted action of the employees who deliberately failed to report for work on the convenient excuse that they will hold a rally at the BLR and DOLE offices in Intramuros, Manila, on February 21 to 23, 2001. x x x (Emphasis supplied.)

          Moreover, it is explicit from the directive of the Secretary in his January 18, 2000 Order that the Union and its members shall refrain from committing “any and all acts that might exacerbate the situation,”^[5][45] which certainly includes concerted actions.  For all intents and purposes, therefore, the respondents staged a strike ultimately aimed at realizing their economic demands. Whether such pressure was directed against the petitioners or the Secretary of Labor, or both, is of no moment.  All the elements of strike are evident in the Union-instigated mass actions.

          The right to strike, while constitutionally recognized, is not without legal constrictions.^[6][46]  Article 264 (a) of the Labor Code, as amended, provides:

Art. 264. Prohibited activities. –  (a) x x x

No strike or lockout shall be declared after assumption of jurisdiction by the President or the Secretary or after certification or submission of the dispute to compulsory or voluntary arbitration or during the pendency of cases involving the same grounds for the strike or lockout.

x x x x   (Emphasis supplied.)

          The Court has consistently ruled that once the Secretary of Labor assumes jurisdiction over a labor dispute, such jurisdiction should not be interfered with by the application of the coercive processes of a strike or lockout.^[7][47]  A strike that is undertaken despite the issuance by the Secretary of Labor of an assumption order and/or certification is a prohibited activity and thus illegal.^[8][48]

Article 264 (a) of the Labor Code, as amended, also considers it a prohibited activity to declare a strike “during the pendency of cases involving the same grounds for the same strike.”^[9][49]  There is no dispute that when respondents conducted their mass actions on April 3 to 6, 2000, the proceedings before the Secretary of Labor were still pending as both parties filed motions for reconsideration of the March 24, 2000 Order.  Clearly, respondents knowingly violated the aforesaid provision by holding a strike in the guise of mass demonstration simultaneous with concerted work abandonment/boycott. 

Notwithstanding the illegality of the strike, we cannot sanction petitioners’ act of indiscriminately terminating the services of individual respondents who admitted joining the mass actions and who have refused to comply with the offer of the management to report back to work on April 6, 2000.   The liabilities of individual respondents must be determined under Article 264 (a) of the Labor Code, as amended:

Art. 264.  Prohibited activities.— x x x

            x x x x

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to reinstatement with full back wages.  Any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status:  Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a replacement had been hired by the employer during such lawful strike.

x x x x

          The foregoing shows that the law makes a distinction between union officers and members. For knowingly participating in an illegal strike or participating in the commission of illegal acts during a strike, the law provides that a union officer may be terminated from employment.  The law grants the employer the option of declaring a union officer who participated in an illegal strike as having lost his employment. It possesses the right and prerogative to terminate the union officers from service.^[10][50] 

          However, a worker merely participating in an illegal strike may not be terminated from employment.  It is only when he commits illegal acts during a strike that he may be declared to have lost employment
status.^[11][51]  We have held that the responsibility of union officers, as main players in an illegal strike, is greater than that of the members and, therefore, limiting the penalty of dismissal only for the former for participation in an illegal strike is in order.^[12][52]   Hence, with respect to respondents who are union officers, the validity of their termination by petitioners cannot be questioned.  Being fully aware that  the proceedings before the Secretary of Labor were still pending as in fact they filed a motion for reconsideration of the March 24, 2000 Order, they cannot invoke good faith as a defense.^[13][53]

          For the rest of the individual respondents who are union members, the rule is that an ordinary striking worker cannot be terminated for mere participation in an illegal strike.  There must be proof that he or she committed illegal acts during a strike. In all cases, the striker must be identified.  But proof beyond reasonable doubt is not required. Substantial evidence available under the attendant circumstances, which may justify the imposition of the penalty of dismissal, may suffice.  Liability for prohibited acts is to be determined on an individual basis.^[14][54]

          Petitioners have not adduced evidence on such illegal acts committed by each of the individual respondents who are union members.  Instead, petitioners simply point to their admitted participation in the mass actions which they knew to be illegal, being in violation of the Secretary’s assumption order.  However, the acts which were held to be prohibited activities are the following:

… where the strikers shouted slanderous and scurrilous words against the owners of the vessels; where the strikers used unnecessary and obscene language or epithets to prevent other laborers to go to work, and circulated libelous statements against the employer which show actual malice; where the protestors used abusive and threatening language towards the patrons of a place of business or against co-employees, going beyond the mere attempt to persuade customers to withdraw their patronage; where the strikers formed a human cordon and blocked all the ways and approaches to the launches and vessels of the vicinity of the workplace and perpetrated acts of violence and coercion to prevent work from being performed; and where the strikers shook their fists and threatened non-striking employees with bodily harm if they persisted to proceed to the workplace. x x x^[15][55]

          The dismissal of herein respondent-union members are therefore unjustified in the absence of a clear showing that they committed specific illegal acts during the mass actions and concerted work boycott.

          Are these dismissed employees entitled to backwages and separation pay?

          The award of backwages is a legal consequence of a finding of illegal dismissal.  Assuming that respondent-union members have indeed reported back to work at the end of the concerted mass actions, but were soon terminated by petitioners who found their explanation unsatisfactory, they are not entitled to backwages in view of the illegality of the said strike. Thus, we held in G & S Transport Corporation v. Infante^[16][56]—

It can now therefore be concluded that the acts of respondents do not merit their dismissal from employment because it has not been substantially proven that they committed any illegal act while participating in the illegal strike. x x x

x  x  x x

With respect to backwages, the principle of a “fair day’s wage for a fair day’s labor” remains as the basic factor in determining the award thereof.  If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed or otherwise illegally prevented from working.  While it was found that respondents expressed their intention to report back to work, the latter exception cannot apply in this case.  In Philippine Marine Officers’ Guild v. Compañia Maritima, as affirmed in Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees Union, the Court stressed that for this exception to apply, it is required that the strike be legal, a situation that does not obtain in the case at bar. (Emphasis supplied.)

          Under the circumstances, respondents’ reinstatement without backwages suffices for the appropriate relief. But since reinstatement is no longer possible, given the lapse of considerable time from the occurrence of the strike, not to mention the fact that Solidbank had long ceased its banking operations, the award of separation pay of one (1) month salary for each year of service, in lieu of reinstatement, is in order.^[17][57]  For the twenty-one (21) individual respondents who executed quitclaims in favor of the petitioners, whatever amount they have already received from the employer shall be deducted from their respective separation pay.  

          Petitioners contended that in view of the blatant violation of the Secretary’s assumption order by the striking employees, the award of separation pay is unjust and unwarranted.  That respondent-members themselves knowingly participated in the illegal mass actions constitutes serious misconduct which is a just cause under Article 282 for terminating an employee.

          We are not persuaded.

          As we stated earlier, the Labor Code protects an ordinary, rank-and-file union member who participated in such a strike from losing his job, provided that he did not commit an illegal act during the strike.^[18][58]   Article 264 (e) of the Labor Code, as amended, provides for such acts which are generally prohibited during concerted actions such as picketing:

No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the employer’s premises for lawful purposes, or obstruct public thoroughfares. (Emphasis supplied.)

          Petitioners have not adduced substantial proof that respondent-union members perpetrated any act of violence, intimidation, coercion or obstruction of company premises and public thoroughfares.   It did not submit in evidence photographs, police reports, affidavits and other available evidence. 

As to the issue of solidary liability, we hold that Metrobank cannot be held solidarily liable with Solidbank for the claims of the latter’s dismissed employees.  There is no showing that Metrobank is the successor-in-interest of Solidbank.  Based on petitioners’ documentary evidence, Solidbank was merged with FMIC, with Solidbank as the surviving corporation, and was later renamed as FMIC. While indeed Solidbank’s banking operations had been integrated with Metrobank, there is no showing that FMIC has ceased business operations. FMIC as successor-in-interest of Solidbank remains solely liable for the sums herein adjudged against Solidbank.

Neither should individual petitioners Vistan and Mendoza be held solidarily liable for the claims adjudged against petitioner Solidbank.   Article 212 (e)^[19][59] does not state that corporate officers are personally liable for the unpaid salaries or separation pay of employees of the corporation.  The liability of corporate officers for corporate debts remains governed by Section 31^[20][60] of the Corporation Code.          

 It is basic that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related.  Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.^[21][61] In labor cases, in particular, the Court has held corporate directors and officers solidarily liable with the corporation for the termination of employment of corporate employees done with malice or in bad faith.^[22][62]  Bad faith is never presumed.^[23][63] Bad faith does not simply connote bad judgment or negligence — it imports a dishonest purpose or some moral obliquity and conscious doing of wrong.  It means a breach of a known duty through some motive or interest or ill-will that partakes of the nature of fraud.^[24][64]

Respondents have not satisfactorily proven that Vistan and Mendoza acted with malice, ill-will or bad faith. Hence, said individual petitioners are not liable for the separation pay of herein respondents-union members.

WHEREFORE, the petitions are PARTLY GRANTED.   The Decision dated March 10, 2003 of the Court of Appeals in CA-G.R. SP Nos. 67730 and 70820 is hereby SET ASIDE. Petitioner Solidbank Corporation (now FMIC) is hereby ORDERED to pay each of the above-named individual respondents, except union officers who are hereby declared validly dismissed, separation pay equivalent to one (1) month salary for every year of service.  Whatever sums already received from petitioners under any release, waiver or quitclaim shall be deducted from the total separation pay due to each of them.

The NLRC is hereby directed to determine who among the individual respondents are union members entitled to the separation pay herein awarded, and those union officers who were validly dismissed and hence excluded from the said award.

No costs.

SO ORDERED.

                                                MARTIN S. VILLARAMA, JR.

                                                               Associate Justice

A T T E S T A T I O N

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

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

THIS CASE IS ABOUT A BASIC DOCTRINE IN CIVIL LAW: THAT A PURE OBLIGATION IS DEMANDABLE AT ONCE.

READ THE FULL TEXT OF THE DECISION IN jabbulao.com under the category RECENT SUPREME COURT DECISIONS.

HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT PLAN VS. SPOUSES BEINVENIDO AND EDITHA BROQUEZA (G.R. NO. 178610, 17 NOVEMBER 2010).

DOCTRINE:  PURE OBLIGATION IS IMMEDIATELY DEMANDABLE.

DIGEST:

FACTS:

XYZ WAS AN EMPLOYEE OF ABC INC. XYZ OBTAINED CAR LOAN. LATER, XYZ WAS TERMINATED BY ABC INC. ABC INC DEMANDED PAYMENT OF THE BALANCE OF THE CAR LOAN. XYZ SAID THE LOAN IS NOT YET MATURE BECAUSE IT IS TO BE PAID BY INSTALLMENT. ABC INC. FILED COLLECTION CASE AT MTC. MTC RULED  XYZ MUST PAY IMMEDIATELY THE BALANCE BECAUSE SHE CAN NO LONGER AVAIL OF THE INSTALLMENT-PAYMENT BENEFIT FOR EMPLOYEES OF ABC INC. ON APPEAL RTC AFFIRMED MTC DECISION. HOWEVER, C.A.  REVERSED RTC DECISION ON THE GROUND THAT THE LOANS HAVE NOT YET MATURED AND THUS ABC INC HAS NO CAUSE OF ACTION.

ISSUE:     

WHETHER THE BALANCE OF THE LOAN IS IMMEDIATELY DEMANDABLE.

RULING:

THE OBLIGATION TO PAY THE CAR LOAN IS A PURE OBLIGATION BECAUSE THE PROMISSORY NOTE DOES NOT SPECIFY A PERIOD. WHEN XYZ  CEASED BEING AN EMPLOYEE OF ABC INC, SHE CAN NO LONGER AVAIL OF THE   BENEFIT OF PAYMENT BY INSTALLMENT. THEREFORE, ABC INC CAN DEMAND IMMEDIATE PMENT.

The full ruling of the Supreme Court reads:

^{The Court’s Ruling} 

                ^{The petition is meritorious.  We agree with the rulings of the MeTC and the RTC.} 

                ^{The Promissory Notes uniformly provide:}

^{PROMISSORY NOTE}

^{P_____                                                                             Makati, M.M. ____ 19__}

                ^{FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to THE HSBC RETIREMENT PLAN (hereinafter called the “PLAN”) at its office in the Municipality of Makati, Metro Manila, on or before until fully paid the sum of PESOS ___ (P___) Philippine Currency without discount, with interest from date hereof at the rate of Six per cent (6%) per annum, payable monthly.}

                ^{I/WE agree that the PLAN may, upon written notice, increase the interest rate stipulated in this note at any time depending on prevailing conditions.}

                ^{I/WE hereby expressly consent to any extensions or renewals hereof for a portion or whole of the principal without notice to the other(s), and in such a case our liability shall remain joint and several.}

                ^{In case collection is made by or through an attorney, I/WE jointly and severally agree to pay ten percent (10%) of the amount due on this note (but in no case less than P200.00) as and for attorney’s fees in addition to expenses and costs of suit.}

                ^{In case of judicial execution, I/WE hereby jointly and severally waive our rights under the provisions of Rule 39, Section 12 of the Rules of Court.[1][15]}

                ^{In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code:}

                ^{Art. 1179.  Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once.} 

                ^{x x x. (Emphasis supplied.)}

                ^{We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in the Promissory Notes.  The RTC is correct in ruling that since the Promissory Notes do not contain a period, HSBCL-SRP has the right to demand immediate payment.  Article 1179 of the Civil Code applies.  The spouses Broqueza’s obligation to pay HSBCL-SRP is a pure obligation.  The fact that HSBCL-SRP was content with the prior monthly check-off from Editha Broqueza’s salary is of no moment.  Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to enforce a pure obligation.}

                ^{In their Answer, the spouses Broqueza admitted that prior to Editha Broqueza’s dismissal from HSBC in December 1993, she “religiously paid the loan amortizations, which HSBC collected through payroll check-off.”[2][16]  A definite amount is paid to HSBCL-SRP on a specific date. Editha Broqueza authorized HSBCL-SRP to make deductions from her payroll until her loans are fully paid.  Editha Broqueza, however, defaulted in her monthly loan payment due to her dismissal.  Despite the spouses Broqueza’s protestations, the payroll deduction is merely a convenient mode of payment and not the sole source of payment for the loans.  HSBCL-SRP never agreed that the loans will be paid only through salary deductions.  Neither did HSBCL-SRP agree that if Editha Broqueza ceases to be an employee of HSBC, her obligation to pay the loans will be suspended.  HSBCL-SRP can immediately demand payment of the loans at anytime because the obligation to pay has no period.  Moreover, the spouses Broqueza have already incurred in default in paying the monthly installments.}

                ^{Finally, the enforcement of a loan agreement involves “debtor-creditor relations founded on contract and does not in any way concern employee relations.  As such it should be enforced  through a separate civil action in the regular courts and not before the Labor Arbiter.”[3][17]}

                WHEREFORE, we GRANT the petition.  The Decision of the Court of Appeals in CA-G.R. ^{SP No. 62685} promulgated on ^{30 March 2006} is REVERSED and SET ASIDE.  The decision of Branch 139 of the Regional Trial Court of Makati City in Civil Case No. 00-787, as well as the decision of ^{Branch 61 of the Metropolitan Trial Court of Makati City in Civil Case No. 52400} against the spouses Bienvenido and Editha Broqueza, are AFFIRMED.  ^{Costs against respondents.}

          SO ORDERED.

                                      ANTONIO T. CARPIO

                                            Associate Justice

WE CONCUR:

                           ANTONIO EDUARDO B. NACHURA            

          Associate Justice

DIOSDADO M. PERALTA                           ROBERTO A. ABAD             

         Associate Justice                                        Associate Justice            

                                           JOSE C. MENDOZA      

                                                Associate Justice                                                             

ATTESTATION

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

                                                     ANTONIO T. CARPIO

                                                                    Associate Justice

                              Chairperson

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution, and the Division  Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                   RENATO C. CORONA

                                                                          Chief Justice

IF YOU HANDLE LABOR CASES, THIS IS ANOTHER VERY INTERESTING CASE FOR YOU. THIS INVOLVES A LABOR CASE WHERE RESPONDENTS, INSTEAD OF FILING A POSITION PAPER THEY FILED A MOTION TO DISMISS.  WHEN DENIED, THEY WENT UP TO C.A. ON CERTIORARI. IS THIS THE CORRECT PROCEDURE? PETITIONER WAS THE CHAIRMAN AND EVP/TREASURER OF RESPONDENT COMPANY AND HE FILED A CASE FOR ILLEGAL DISMISSAL. DOES NLRC HAVE JURISDICTION OVER HIS CASE?

READ THE FULL TEXT OF THE DECISION IN jabbulao.com under the category RECENT SUPREME COURT DECISIONS.

ARSENIO Z. LOCSIN VS. NISSAN CAR LEASE PHILS. INC. AND LUIS BANSON (G.R. NO. 185567, 20 OCTOBER 2010)

DOCTRINES: 1. RE TECHNICAL RULE MUST BE SET ASIDE FOR THE SAKE OF JUSTICE; 2. A PERSON HOLDING THE POSITION OF CHAIRMAN AND EVP/TREASURER IS A CORPORATE OFFICER AND THUS NOT UNDER THE JURISDICTION OF NLRC.

DIGEST

FACTS:

ABC WAS ELECTED CHAIRMAN OF XYZ CORP. HE WAS ALSO APPOINTED EVP/TREASURER REPORTING EVERYDAY, RECEIVING SALARY AND BEING DEDUCTED SSS CONTRIBUTION, WITHHOLDING TAX, ETC., JUST AS OTHER EMPLOYEES. DURING A BOARD MEETING OF XYZ CORP., HE WAS NOT APPOINTED TO ANY OF THESE POSITIONS. HE FILED A CASE FOR ILLEGAL DISMISSAL, REINSTATEMENT, DAMAGES AND ATTORNEY’S FEES  AT NLRC. RESPONDENTS, INSTEAD OF FILING POSITION PAPER FILED A MOTION TO DISMISS FOR LACK OF JURISDICTION. THE LABOR ARBITER DENIED THE MOTION TO DISMISS AND RULED THAT HE HAS JURISDICTION OVER THECASE. RESPONDENTS FILED PETITION FOR CERTIORARI AT C.A.. THE LATER GRANTED THE PETITION AND REVERSED THE RULING OF THE LABOR ARBITER ON THE GROUND THAT ABC WAS A CORPORATE OFFICER AND THUS NLRC HAS NO JURISDICTION. ABC FILED PETITION FOR REVIEW AT S.C.

ISSUES:

WHETHER OR NOT IT WAS PROPER FOR RESPONDENTS TO FILE MOTION TO DISMISS AND WHEN DENIED TO ELEVATE THE MATTER TO THE C.A.?

WHETHER OR NOT ABC WHO IS CHAIRMAN AND EVP/TREASURER IS A CORPORATE OFFICER?

RULING:

THE PROCEDURE FOLLOWED BY RESPONDENTS WAS WRONG. IN STEAD OF FILING A MOTION TO DISMISS, THEY SHOULD HAVE FILED A POSITION PAPER STATING THEREIN THEIR GROUND FOR DISMISSAL. ALSO, THEIR FILING OF PETITION FOR CERTIORARI AT C.A. ON THE DENIAL OF THEIR MOTION TO DISMISS WAS WRONG. THE ORDER OF THE LABOR ARBITER IS INTERLOCUTORY AND THEREFORE INAPPEALABLE TO C.A.. THEY SHOULD HAVE FILED AN APPEAL WITH THE COMMISSION, NOT C.A. PER NLRC RULES. BUT S.C. SAID THEY WOULD HAVE TO DISREGARD THIS PROCEDURAL LAPSE. FOR TO DO SO WOULD RESULT TO INJUSTICE. WHY? BECAUSE IF THEY FOLLOW STRICTLY THE RULES, THEN THEY HAVE TO DISREGARD THE C.A. DECISION FOR LACK OF JURISDICTION AND THUS THE RULING OF THE LABOR ARBITER WOULD BE UPHELD WHICH IS A WRONG RULING.

ABC WHO WAS ELECTED CHAIRMAN AND EVP/TREASURER IS A CORPORATE OFFICER BECAUSE THE POSITION OF EVP/TREASURER IS PROVIDED FOR IN THE BY-LAWS OF XYZ CORP. HE WAS ELECTED BY THE BOARD OF XYZ CORP TO SUCH POSITION ACCORDING TO THE BY-LAWS OF SAID CORPORATION. THEREFORE, NLRC HAS NO JURISDICTION OVER HIS CASE.

SAID THE COURT:

          We resolve to deny the petition for lack of merit.

At the outset, we stress that there are two (2) important considerations in the final determination of this case.  On the one hand, Locsin raises a procedural issue that, if proven correct, will require the Court to dismiss the instant petition for using an improper remedy.  On the other hand, there is the substantive issue that will be disregarded if a strict implementation of the rules of procedure is upheld.  

          Prefatorily, we agree with Locsin’s submission that the NCLPI incorrectly elevated the Labor Arbiter’s denial of the Motion to Dismiss to the CA.  Locsin is correct in positing that the denial of a motion to dismiss is unappealable. As a general rule, an aggrieved party’s proper recourse to the denial is to file his position paper, interpose the grounds relied upon in the motion to dismiss before the labor arbiter, and actively participate in the proceedings. Thereafter, the labor arbiter’s decision can be appealed to the NLRC, not to the CA.   

As a rule, we strictly adhere to the rules of procedure and do everything we can, to the point of penalizing violators, to encourage respect for these rules.  We take exception to this general rule, however, when a strict implementation of these rules would cause substantial injustice to the parties. 

We see it appropriate to apply the exception to this case for the reasons discussed below; hence, we are compelled to go beyond procedure and rule on the merits of the case.  In the context of this case, we see sufficient justification to rule on the employer-employee relationship issue raised by NCLPI, even though the Labor Arbiter’s interlocutory order was incorrectly brought to the CA under Rule 65.

The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss is not appealable because the denial is merely an interlocutory order.

In Metro Drug v. Metro Drug Employees,^[1][27] we definitively stated that the denial of a motion to dismiss by a labor arbiter is not immediately appealable.^[2][28]

We similarly ruled in Texon Manufacturing v. Millena,^[3][29] in Sime Darby Employees Association v. National Labor Relations Commission^[4][30] and in Westmont Pharmaceuticals v. Samaniego.^[5][31]  In Texon, we specifically said:

The Order of the Labor Arbiter denying petitioners’ motion to dismiss is interlocutory.  It is well-settled that a denial of a motion to dismiss a complaint is an interlocutory order and hence, cannot be appealed, until a final judgment on the merits of the case is rendered. [Emphasis supplied.]^[6][32]

and indicated the appropriate recourse in Metro Drug, as follows:^[7][33]

x x x The NLRC rule proscribing appeal from a denial of a motion to dismiss is similar to the general rule observed in civil procedure that an order denying a motion to dismiss is interlocutory and, hence, not appealable until final judgment or order is rendered [1 Feria and Noche, Civil Procedure Annotated 453 (2001 ed.)]. The remedy of the aggrieved party in case of denial of the motion to dismiss is to file an answer and interpose, as a defense or defenses, the ground or grounds relied upon in the motion to dismiss, proceed to trial and, in case of adverse judgment, to elevate the entire case by appeal in due course [Mendoza v. Court of Appeals, G.R. No. 81909, September 5, 1991, 201 SCRA 343].  In order to avail of the extraordinary writ of certiorari, it is incumbent upon petitioner to establish that the denial of the motion to dismiss was tainted with grave abuse of discretion. [Macawiwili Gold Mining and Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998, 297 SCRA 602]

          In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of the Rules of Court, which specifically enumerates interlocutory orders as one of the court actions that cannot be appealed.  In the same rule, as amended by A.M. No. 07-7-12-SC, the aggrieved party is allowed to file an appropriate special civil action under Rule 65.  The latter rule, however, also contains limitations for its application, clearly outlined in its Section 1 which provides:  

Section 1. Petition for certiorari.
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

In the labor law setting, a plain, speedy and adequate remedy is still open to the aggrieved party when a labor arbiter denies a motion to dismiss. This is Article 223 of Presidential Decree No. 442, as amended (Labor Code), ^[8][34] which states:

ART. 223. APPEAL

            Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders.  Such appeal may be entertained only on any of the following grounds:

(a)               If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; x  x  x [Emphasis supplied.]

Pursuant to this Article, we held in Metro Drug (citing Air Services Cooperative, et al. v. Court of Appeals^[9][35]) that the NLRC is clothed with sufficient authority to correct any claimed “erroneous assumption of jurisdiction” by labor arbiters:

In Air Services Cooperative, et al. v. The Court of Appeals, et al., a case where the jurisdiction of the labor arbiter was put in issue and was assailed through a petition for certiorari, prohibition and annulment of judgment before a regional trial court, this Court had the opportunity to expound on the nature of appeal as embodied in Article 223 of the Labor Code, thus:

            x  x  x  Also, while the title of the Article 223 seems to provide only for the remedy of appeal as that term is understood in procedural law and as distinguished from the office of certiorari, nonetheless, a closer reading thereof reveals that it is not as limited as understood by the petitioners  x  x  x.

Abuse of discretion is admittedly within the ambit of certiorari and its grant of review thereof to the NLRC indicates the lawmakers’ intention to broaden the meaning of appeal as that term is used in the Code.  For this reason, petitioners cannot argue now that the NLRC is devoid of any corrective power to rectify a supposed erroneous assumption of jurisdiction by the Labor Arbiter x  x  x.  [Air Services Cooperative, et al. v. The Court of Appeals, et al. G.R. No. 118693, 23 July 1998, 293 SCRA 101]

          Since the legislature had clothed the NLRC with the appellate authority to correct a claimed “erroneous assumption of jurisdiction” on the part of the labor arbiter – a case of grave abuse of discretion – the remedy availed of by petitioner in this case is patently erroneous as recourse in this case is lodged, under the law, with the NLRC.

          In Metro Drug, as in the present case, the defect imputed through the NLCPI Motion to Dismiss is the labor arbiter’s lack of jurisdiction since Locsin is alleged to be a corporate officer, not an employee. Parallelisms between the two cases is undeniable, as they are similar on the following points: (1) in Metro Drug, as in this case, the Labor Arbiter issued an Order denying the Motion to Dismiss by one of the parties; (2) the basis of the Motion to Dismiss is also the alleged lack of jurisdiction by the Labor Arbiter to settle the dispute; and (3) dissatisfied with the Order of the Labor Arbiter, the aggrieved party likewise elevated the case to the CA via Rule 65.

The similarities end there, however.  Unlike in the present case, the CA denied the petition for certiorari and the subsequent Motion for Reconsideration in Metro Drug; the CA correctly found that the proper appellate mechanism was an appeal to the NLRC and not a petition for certiorari under Rule 65.  In the present case, the CA took a different position despite our clear ruling in Metro Drug, and allowed, not only the use of Rule 65, but also ruled on the merits. 

From this perspective, the CA clearly erred in the application of the procedural rules by disregarding the relevant provisions of the NLRC Rules, as well as the requirements for a petition for certiorari under the Rules of Court.  To reiterate, the proper action of an aggrieved party faced with the labor arbiter’s denial of his motion to dismiss is to submit his position paper and raise therein the supposed lack of jurisdiction.  The aggrieved party cannot immediately appeal the denial since it is an interlocutory order; the appropriate remedial recourse is the procedure outlined in Article 223 of the Labor Code, not a petition for certiorari under Rule 65.  

A strict implementation of the NLRC Rules and the Rules of Court would cause injustice to the parties because the Labor Arbiter clearly has no jurisdiction over the present intra-corporate dispute.

Our ruling in Mejillano v. Lucillo^[10][36] stands for the proposition that we should strictly apply the rules of procedure.  We said:

Time and again, we have ruled that procedural rules do not exist for the convenience of the litigants.  Rules of Procedure exist for a purpose, and to disregard such rules in the guise of liberal construction would be to defeat such purpose.  Procedural rules were established primarily to provide order to and enhance the efficiency of our judicial system. [Emphasis supplied.]

An exception to this rule is our ruling in Lazaro v. Court of Appeals^[11][37] where we held that the strict enforcement of the rules of procedure may be relaxed in exceptionally meritorious cases: 

x x x Procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a party’s substantive rights. Like all rules, they are required to be followed except only for the most persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. The Court reiterates that rules of procedure, especially those prescribing the time within which certain acts must be done, “have oft been held as absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of business.  x  x  x  The reason for rules of this nature is because the dispatch of business by courts would be impossible, and intolerable delays would result, without rules governing practice x  x  x. Such rules are a necessary incident to the proper, efficient and orderly discharge of judicial functions.” Indeed, in no uncertain terms, the Court held that the said rules may be relaxed only in exceptionally meritorious cases. [Emphasis supplied.]

Whether a case involves an exceptionally meritorious circumstance can be tested under the guidelines we established in Sanchez v. Court of Appeals,^[12][38] as follows: 

Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most mandatory character and an examination and review by the appellate court of the lower court’s findings of fact, the other elements that should be considered are the following: (a) the existence of special or compelling circumstances, (b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced thereby. [Emphasis supplied.]

Under these standards, we hold that exceptional circumstances exist in the present case to merit the relaxation of the applicable rules of procedure. 

Due to existing exceptional circumstances, the ruling on the merits that Locsin is an officer and not an employee of Nissan must take precedence over procedural considerations.

          We arrived at the conclusion that we should go beyond the procedural rules and immediately take a look at the intrinsic merits of the case based on several considerations.

          First, the parties have sufficiently ventilated their positions on the disputed employer-employee relationship and have, in fact, submitted the matter for the CA’s consideration.

Second, the CA correctly ruled that no employer-employee relationship exists between Locsin and Nissan. 

          Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board pursuant to its By-laws.^[13][39] As such, he was a corporate officer, not an employee.  The CA reached this conclusion by relying on the submitted facts and on Presidential Decree 902-A, which defines corporate officers as “those officers of a corporation who are given that character either by the Corporation Code or by the corporation’s by-laws.” Likewise, Section 25 of Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation Code) provides that corporate officers are the president, secretary, treasurer and such other officers as may be provided for in the by-laws.

          Third.  Even as Executive Vice-President/Treasurer, Locsin already acted as a corporate officer because the position of Executive Vice-President/Treasurer is provided for in Nissan’s By-Laws.   Article IV, Section 4 of these By-Laws specifically provides for this position, as follows:

ARTICLE IV

Officers

Section 1. Election and Appointment – The Board of Directors at their first meeting, annually thereafter, shall elect as officers of the Corporation a Chairman of the Board, a President, an Executive Vice-President/Treasurer, a Vice-President/General Manager and a Corporate Secretary.  The other Senior Operating Officers of the Corporation shall be appointed by the Board upon the recommendation of the President.

x  x  x  x

Section 4. Executive Vice-President/Treasurer – The Executive Vice-President/Treasurer shall have such powers and perform such duties as are prescribed by these By-Laws, and as may be required of him by the Board of Directors.  As the concurrent Treasurer of the Corporation, he shall have the charge of the funds, securities, receipts, and disbursements of the Corporation.  He shall deposit, or cause to be deposited, the credit of the Corporation in such banks or trust companies, or with such banks of other depositories, as the Board of Directors may from time to time designate.  He shall tender to the President or to the Board of Directors whenever required an account of the financial condition of the corporation and of all his transactions as Treasurer.  As soon as practicable after the close of each fiscal year, he shall make and submit to the Board of Directors a like report of such fiscal year.  He shall keep correct books of account of all the business and transactions of the Corporation.

          In Okol v. Slimmers World International,^[14][40] citing Tabang v. National Labor Relations Commission,^[15][41] we held that –

x  x  x  an “office” is created by the charter of the corporation and the officer is elected by the directors or stockholders.  On the other hand, an “employee” usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. [Emphasis supplied.]

In this case, Locsin was elected by the NCLPI Board, in accordance with the Amended By-Laws of the corporation.  The following factual determination by the CA is elucidating:

More important, private respondent failed to state any such “circumstance” by which the petitioner corporation “engaged his services” as corporate officer that would make him an employee.  In the first place, the Vice-President/Treasurer was elected on an annual basis as provided in the By-Laws, and no duties and responsibilities were stated by private respondent which he discharged while occupying said position other than those specifically set forth in the By-Laws or required of him by the Board of Directors.  The unrebutted fact remains that private respondent held the position of Executive Vice-President/Treasurer of petitioner corporation, a position provided for in the latter’s by-laws, by virtue of election by the Board of Directors, and has functioned as such Executive Vice-President/Treasurer pursuant to the provisions of the said By-Laws.  Private respondent knew very well that he was simply not re-elected to the said position during the August 5, 2005 board meeting, but he had objected to the election of a new set of officers held at the time upon the advice of his lawyer that he cannot be “terminated” or replaced as Executive Vice-President/Treasurer as he had attained tenurial security.^[16][42]

We fully agree with this factual determination which we find to be sufficiently supported by evidence.  We likewise rule, based on law and established jurisprudence, that Locsin, at the time of his severance from NCLPI, was the latter’s corporate officer.

a.  The Question of Jurisdiction

Given Locsin’s status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to hear the legality of the termination of his relationship with Nissan.  As we also held in Okol, a corporate officer’s dismissal from service is an intra-corporate dispute:

In a number of cases [Estrada v. National Labor Relations Commission, G.R. No. 106722, 4 October 1996, 262 SCRA 709; Lozon v.  National Labor Relations Commission, 310 Phil. 1 (1995); Espino v. National Labor Relations Commission, 310 Phil. 61 (1995); Fortune Cement Corporation v. National Labor Relations Commission, G.R. No. 79762, 24 January 1991, 193 SCRA 258], we have held that a corporate officer’s dismissal is always a corporate act, or an intra-corporate controversy which arises between a stockholder and a corporation.^[17][43] [Emphasis supplied.]

so that the RTC should exercise jurisdiction based on the following legal reasoning: 

Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided that intra-corporate disputes fall within the jurisdiction of the Securities and Exchange Commission (SEC):

            Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

x  x  x  x

            c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.

Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000, transferred to regional trial courts the SEC’s jurisdiction over all cases listed in Section 5 of PD 902-A:

            5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court. [Emphasis supplied.]

b.     Precedence of Substantive Merits;

Primacy of Element of Jurisdiction

Based on the above jurisdictional considerations, we would be forced to remand the case to the Labor Arbiter for further proceedings if we were to dismiss the petition outright due to the wrongful use of Rule 65.^[18][44]  We cannot close our eyes, however, to the factual and legal reality, established by evidence already on record, that Locsin is a corporate officer whose termination of relationship is outside a labor arbiter’s jurisdiction to rule upon.

Under these circumstances, we have to give precedence to the merits of the case, and primacy to the element of jurisdiction. Jurisdiction is the power to hear and rule on a case and is the threshold element that must exist before any quasi-judicial officer can act.  In the context of the present case, the Labor Arbiter does not have jurisdiction over the termination dispute Locsin brought, and should not be allowed to continue to act on the case after the absence of jurisdiction has become obvious, based on the records and the law.  In more practical terms, a contrary ruling will only cause substantial delay and inconvenience as well as unnecessary expenses, to the point of injustice, to the parties. This conclusion, of course, does not go into the merits of termination of relationship and is without prejudice to the filing of an intra-corporate dispute on this point before the appropriate RTC.   

WHEREFORE, we DISMISS the petitioner’s petition for review on certiorari, and AFFIRM the Decision of the Court of Appeals, in CA-G.R. SP No. 103720, promulgated on August 28, 2008, as well as its Resolution of December 9, 2008, which reversed and set aside the March 10, 2008 Order of Labor Arbiter Concepcion in NLRC NCR Case No. 00-06-06165-07.  This Decision is without prejudice to petitioner Locsin’s available recourse for relief through the appropriate remedy in the proper forum. 

No pronouncement as to costs.

SO ORDERED.

  ARTURO D. BRION

  Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

MARIA LOURDES P.A. SERENO

Associate Justice

ATTESTATION

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

                                                           ARTURO D. BRION

                                                                Associate Justice

                                                              Acting Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Acting Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                          RENATO C. CORONA

                                                                    Chief Justice