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G.R. No. 128024 May 9, 2000 - BEBIANO M. BAEZ v. DOWNEY C. VALDEVILLA, ET AL. : MAY 2000 - PHILIPPINE SUPREME COURT JUR

THIRDDIVISION
[G.R.No.128024.May9,2000.]
BEBIANOM.BAEZ,Petitioner,v.HON.DOWNEYC.VALDEVILLAandOROMARKETING,
INC.,Respondents.
DECISION

GONZAGAREYES,J.:

Theordersofrespondentjudge1datedJune20,1996andOctober16,1996,takingjurisdictionoveranactionfor
damagesfiledbyanemployeragainstitsdismissedemployee,areassailedinthispetitionforcertiorariunderRule65
oftheRulesofCourtforhavingbeenissuedingraveabuseofdiscretion.
Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In 1993, private
respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal dismissal with the National
Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July 7, 1994, Labor Arbiter Nicodemus G.
Palangan found petitioner to have been illegally dismissed and ordered the payment of separation pay in lieu of
reinstatement,andofbackwagesandattorneysfees.ThedecisionwasappealedtotheNLRC,whichdismissedthe
sameforhavingbeenfiledoutoftime.2ElevatedbypetitionforcertioraribeforethisCourt,thecasewasdismissed
ontechnicalgrounds3however,theCourtalsopointedoutthatevenifalltheproceduralrequirementsforthefiling
ofthepetitionweremet,itwouldstillbedismissedforfailuretoshowgraveabuseofdiscretiononthepartofthe
NLRC.
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OnNovember13,1995,privaterespondentfiledacomplaintfordamagesbeforetheRegionalTrialCourt("RTC")of
MisamisOriental,docketedasCivilCaseNo.95554,whichprayedforthepaymentofthefollowing:
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a.P709,217.97plus12%interestaslossofprofitand/orunearnedincomeofthreeyears
b.P119,700.00plus12%interestasestimatedcostofsupplies,facilities,properties,space,etc.forthreeyears
c.P5,000.00asinitialexpensesoflitigationand
d.P25,000.00asattorneysfees.4
OnJanuary30,1996,petitionerfiledamotiontodismisstheabovecomplaint.Heinterposedinthecourtbelowthat
the action for damages, having arisen from an employeremployee relationship, was squarely under the exclusive
originaljurisdictionoftheNLRCunderArticle217(a),paragraph4oftheLaborCodeandisbarredbyreasonofthe
finaljudgmentinthelaborcase.Heaccusedprivaterespondentofsplittingcausesofaction,statingthatthelatter
could very well have included the instant claim for damages in its counterclaim before the Labor Arbiter. He also
pointedoutthatthecivilactionofprivaterespondentisanactofforumshoppingandwasmerelyresortedtoaftera
failuretoobtainafavorabledecisionwiththeNLRC.
Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which summarized the
basisforprivaterespondentsactionfordamagesinthismanner:
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Paragraph5ofthecomplaintallegedthatthedefendantviolatedtheplaintiffspolicyre:Hisbusinessinhisbranchat
Iligan City wherein defendant was the Sales Operations Manager, and paragraph 7 of the same complaint briefly
narrated the modus operandi of defendant, quoted herein: Defendant canvassed customers personally or through
salesmen of plaintiff which were hired or recruited by him. If said customer decided to buy items from plaintiff on
installmentbasis,defendant,withouttheknowledgeofsaidcustomerandplaintiff,wouldbuytheitemsoncashbasis
atexfactoryprice,aprivilegenotgiventocustomers,andthereafterrequiredthecustomertosignpromissorynotes
and other documents using the name and property of plaintiff, purporting that said customer purchased the items
from plaintiff on installment basis. Thereafter, defendant collected the installment payments either personally or
throughVenusLozano,aGroupSalesManagerofplaintiffbutalsoutilizedbyhimassecretaryinhisownbusinessfor
collectingandreceivingofinstallments,purportedlyfortheplaintiffbutinrealityonhisownaccountorbusiness.The
collection and receipt of payments were made inside the Iligan City branch using plaintiffs facilities, property and
manpower.Thataccordinglyplaintiffssalesdecreasedandreducedtoaconsiderableextenttheprofitswhichitwould
haveearned.5
Indeclaringitselfashavingjurisdictionoverthesubjectmatteroftheinstantcontroversy,respondentcourtstated:

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AperusalofthecomplaintwhichisfordamagesdoesnotaskforanyreliefundertheLaborCodeofthePhilippines.It
seeks to recover damages as redress for defendants breach of his contractual obligation to plaintiff who was
damagedandprejudiced.TheCourtbelievessuchcauseofactioniswithintherealmofcivillaw,andjurisdictionover
thecontroversybelongstotheregularcourts.
Whileseeminglythecauseofactionarosefromemployeremployeerelations,theemployersclaimfordamagesis
groundedonthenefariousactivitiesofdefendantcausingdamageandprejudicetoplaintiffasallegedinparagraph7
ofthecomplaint.TheCourtbelievesthattherewasabreachofacontractualobligation,whichisintrinsicallyacivil
dispute. The averments in the complaint removed the controversy from the coverage of the Labor Code of the
Philippinesandbroughtitwithinthepurviewofcivillaw.(SingaporeAirlines,Ltd.Vs.Pao,122SCRA671.)...6
PetitionersmotionforreconsiderationoftheaboveOrderwasdeniedforlackofmeritonOctober16,1996.Hence,
thispetition.
Acting on petitioners prayer, the Second Division of this Court issued a Temporary Restraining Order ("TRO") on
March 5, 1997, enjoining respondents from further proceeding with Civil Case No. 95554 until further orders from
theCourt.
Bywayofassignmentoferrors,thepetitionreiteratesthegroundsraisedintheMotiontoDismissdatedJanuary30,
1996,namely,lackofjurisdictionoverthesubjectmatteroftheaction,resjudicata,splittingofcausesofaction,and
forumshopping.Thedeterminingissue,however,istheissueofjurisdiction.
Article 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the filing of this case,
reads:
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ARTICLE217.JurisdictionofLaborArbitersandtheCommission.(a)ExceptasotherwiseprovidedunderthisCode,
theLaborArbitersshallhaveoriginalandexclusivejurisdictiontohearanddecide,withinthirty(30)calendardays
after the submission of the case by the parties for decision without extension, even in the absence of stenographic
notes,thefollowingcasesinvolvingallworkers,whetheragriculturalornonagricultural:
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xxx
4.Claimsforactual,moral,exemplaryandotherformsofdamagesarisingfromtheemployeremployeerelations
xxx
TheaboveprovisionsarearesultoftheamendmentbySection9ofRepublicAct("R.A.")No.6715,whichtookeffect
onMarch21,1989,andwhichputtoresttheearlierconfusionastowhobetweenLaborArbitersandregularcourts
hadjurisdictionoverclaimsfordamagesasbetweenemployersandemployees.
It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including claims for
damages,wasoriginallylodgedwiththeLaborArbitersandtheNLRCbyArticle217oftheLaborCode.7OnMay1,
1979,however,PresidentialDecree("P.D.")No.1367amendedsaidArticle217totheeffectthat"RegionalDirectors
shallnotindorseandLaborArbitersshallnotentertainclaimsformoralorotherformsofdamages."8Thislimitation
injurisdiction,however,lastedonlybrieflysinceonMay1,1980,P.D.No.1691nullifiedP.D.No.1367andrestored
Article217oftheLaborCodealmosttoitsoriginalform.Presently,andasamendedbyR.A.6715,thejurisdictionof
Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for all forms of damages
"arisingfromtheemployeremployeerelations".
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for
damages filed by employees, 9 we hold that by the designating clause "arising from the employeremployee
relations" Article 217 should apply with equal force to the claim of an employer for actual damages against its
dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact of
termination,andshouldbeenteredasacounterclaimintheillegaldismissalcase.
Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded by the Labor Code),
jurisprudence was settled that where the plaintiffs cause of action for damages arose out of, or was necessarily
intertwinedwith,anallegedunfairlaborpracticecommittedbytheunion,thejurisdictionisexclusivelywiththe(now
defunct)CourtofIndustrialRelations,andtheassumptionofjurisdictionofregularcourtsoverthesameisanullity.
10 To allow otherwise would be "to sanction split jurisdiction, which is prejudicial to the orderly administration of
justice." 11 Thus, even after the enactment of the Labor Code, where the damages separately claimed by the
employerwereallegedlyincurredasaconsequenceofstrikeorpicketingoftheunion,suchcomplaintfordamagesis
deeply rooted from the labor dispute between the parties, and should be dismissed by ordinary courts for lack of
jurisdiction.AsheldbythisCourtinNationalFederationofLaborv.Eisma,127SCRA419:
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Certainly,thepresentLaborCodeisevenmorecommittedtotheviewthatonpolicygrounds,andequallysointhe
interest of greater promptness in the disposition of labor matters, a court is spared the often onerous task of
determining what essentially is a factual matter, namely, the damages that may be incurred by either labor or
managementasaresultofdisputesorcontroversiesarisingfromemployeremployeerelations.
There is no mistaking the fact that in the case before us, private respondents claim against petitioner for actual
damages arose from a prior employeremployee relationship. In the first place, private respondent would not have
takenissuewithpetitioners"doingbusinessofhisown"hadthelatternotbeenconcurrentlyitsemployee.Thus,the
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damages alleged in the complaint below are: first, those amounting to lost profits and earnings due to petitioners
abandonment or neglect of his duties as sales manager, having been otherwise preoccupied by his unauthorized
installment sale scheme and second, those equivalent to the value of private respondents property and supplies
whichpetitionerusedinconductinghis"business".
Second,andmoreimportantly,toallowrespondentcourttoproceedwiththeinstantactionfordamageswouldbeto
open anew the factual issue of whether petitioners installment sale scheme resulted in business losses and the
dissipation of private respondents property. This issue has been duly raised and ruled upon in the illegal dismissal
case, where private respondent brought up as a defense the same allegations now embodied in his complaint, and
presentedevidenceinsupportthereof.TheLaborArbiter,however,foundtothecontrarythatnobusinesslosses
maybeattributedtopetitionerasinfact,itwasbyreasonofpetitionersinstallmentplanthatthesalesoftheIligan
branch of private respondent (where petitioner was employed) reached its highest record level to the extent that
petitionerwasawardedthe1989FieldSalesAchievementAwardinrecognitionofhisexceptionalsalesperformance,
and that the installment scheme was in fact with the knowledge of the management of the Iligan branch of
privateRespondent.12Inotherwords,theissueofactualdamageshasbeensettledinthelaborcase,whichisnow
finalandexecutory.
Still on the prospect of reopening factual issues already resolved by the labor court, it may help to refer to that
period from 1979 to 1980 when jurisdiction over employmentpredicated actions for damages vacillated from labor
tribunals to regular courts, and back to labor tribunals. In Ebon v. de Guzman, 113 SCRA 52, 13 this Court
discussed:
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The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award moral and other forms of
damages in labor cases could have assumed that the Labor Arbiters positionpaper procedure of ascertaining the
facts in dispute might not be an adequate tool for arriving at a just and accurate assessment of damages, as
distinguishedfrombackwagesandseparationpay,andthatthetrialprocedureintheCourtofFirstInstancewouldbe
amoreeffectivemeansofdeterminingsuchdamages...
Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and the NLRC of the
jurisdictiontoawarddamagesinlaborcasesbecausethatsetupwouldmeanduplicityofsuits,splittingthecauseof
actionandpossibleconflictingfindingsandconclusionsbytwotribunalsononeandthesameclaim.
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So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217 in its original form)
nullifiedPresidentialDecreeNo.1367andrestoredtotheLaborArbiterandtheNLRCtheirjurisdictiontoawardall
kindsofdamagesincasesarisingfromemployeremployeerelations...(Emphasissupplied)
Clearly, respondent courts taking jurisdiction over the instant case would bring about precisely the harm that the
lawmakerssoughttoavoidinamendingtheLaborCodetorestorejurisdictionoverclaimsfordamagesofthisnature
totheNLRC.
This is, of course, to distinguish from cases of actions for damages where the employeremployee relationship is
merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of
regular courts was upheld where the damages, claimed for were based on tort 14 , malicious prosecution 15 , or
breach of contract, as when the claimant seeks to recover a debt from a former employee 16 or seeks liquidated
damagesinenforcementofaprioremploymentcontract.17
Neithercanweupholdthereasoningofrespondentcourtthatbecausetheresolutionoftheissuespresentedbythe
complaint does not entail application of the Labor Code or other labor laws, the dispute is intrinsically civil. Article
217(a)oftheLaborCode,asamended,clearlybestowsupontheLaborArbiteroriginalandexclusivejurisdictionover
claimsfordamagesarisingfromemployeremployeerelationsinotherwords,theLaborArbiterhasjurisdictionto
awardnotonlythereliefsprovidedbylaborlaws,butalsodamagesgovernedbytheCivilCode.18
Thus, it is obvious that private respondents remedy is not in the filing of this separate action for damages, but in
properly perfecting an appeal from the Labor Arbiters decision. Having lost the right to appeal on grounds of
untimeliness, the decision in the labor case stands as a final judgment on the merits, and the instant action for
damagescannottaketheplaceofsuchlostappeal.
Respondent court clearly having no jurisdiction over private respondents complaint for damages, we will no longer
passuponpetitionersotherassignmentsoferror.
WHEREFORE,thePetitionisGRANTED,andthecomplaintinCivilCaseNo.95554beforeBranch39oftheRegional
TrialCourtofMisamisOrientalisherebyDISMISSED.Nopronouncementastocosts.
SOORDERED.

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Melo,VitugandPanganiban,JJ.,concur.
Purisima,J.,abroadtooknopart.
Endnotes:

1.PresidingoverBranch39oftheRegionalTrialCourtofMisamisOriental.
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2. NLRC Resolution dated August 4, 1995. Private respondents motion for reconsideration of said
resolutionwasdeniedperNLRCResolutionpromulgatedonSeptember26,1995.Rollo,6670.
3.Failuretosubmit,incompliancewithSCCircular1991,therequirementsof:(1)proofofserviceof
copyofpetitiontoadverseparties,and(2)verifiedstatementofthedatewhentheassailedresolution
wasreceived.SC(ThirdDivision)ResolutiondatedDecember13,1995Rollo,7172.
4.Complaint,Annex"A"ofPetitionRollo,42.
5.RTCOrderdatedJune20,1996Rollo,8183.
6.Ibid.
7.AsappliedinGarciav.Martinez,84SCRA577Bengzonv.Inciong,91SCRA248.
8. See Garcia v. Martinez, 90 SCRA 331 Calderon v. Court of Appeals, 100 SCRA 459 Abad v.
Philippine American General Insurance Co., 108 SCRA 717. In all three cases, it was declared that
moneyclaimsarisingfromemployeremployeerelationsbyvirtueofP.D.No.1367werecognizableby
regular courts, labor arbiters being excluded from passing upon "claims for moral and other forms of
damages."
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9.SeePolotanTuverav.Dayrit,160SCRA423Dizonv.CourtofAppeals,210SCRA107PepsiCola
BottlingCompanyofthePhilippinesv.Martinez,198Phil.296.
10. PLDT v. Free Telephone Workers Union, 201 Phil. 611, citing Holganza v. Apostol, 76 SCRA 191
Associated Labor Union v. Cruz, 41 SCRA 12 Leoquenio v. Canada Dry Bottling Co., 37 SCRA 535
Progressive Labor Association v. Atlas Consolidated Mining and Development Corporation, 33 SCRA
349AssociatedLaborUnionv.Gomez,19SCRA304.
11.Floresv.FilipinoHandEmbroideryCo.,Inc,165SCRA30,citingPLDTv.FreeTelephoneWorkers
Union,supra.
12.DecisionoftheLaborArbiterRollo,5860.
13.CitedinPolotanTuverav.Dayrit,supra.
14.Ochedav.CourtofAppeals,214SCRA629.
15.PepsiColav.Gallang,201SCRA695.
16.GeorgGrotjahnGMBH&Co.v.Isnani,235SCRA216.
17.DaiichiElectronicsManufacturingCorporationv.Villarama,238SCRA267.Inthiscase,theCourt
held that the enforcement of a provision in the employment contract precluding plaintiffs former
employeefromacceptingemploymentinanentityengagedinthesamelineofbusinessasplaintifffor
aperiodoftwoyearsfromdateofterminationisapostemploymentrelationsmatteroverwhichthe
RTChasjurisdiction.
18. See Suario v. Bank of the Philippine Islands, 176 SCRA 688 Primero v. Intermediate Appellate
Court,156SCRA435.

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