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 employees. The other parties to these cases are the Union officers

1 and their striking

members.2

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 Parte

3 with the National Labor Relations Commission (NLRC) to enjoin the strikers

from intimidating, threatening, molesting, and impeding by barricade the entry of non-striking 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 implementation possible. Meantime, the Union filed a petition

4 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 to declare the Unions strike illegal,

5 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,6 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 respect 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, the Company did not reinstate them. Both parties appealed

7the 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,8 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 certiorari9 with the CA, questioning the NLRC decision.

Finding merit in the petition, the CA rendered a decision on March 20, 2002,

10 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 a resolution dated November 21, 2002,

11 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 resolution12

to the NLRC. Initially, in its resolution dated April 30, 2003,

13 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 considering the Companys refusal to reinstate them pending appeal. On motion for reconsideration by both parties, however, the NLRC issued a resolution on August 29, 2003,

14 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 certiorari15

with the CA, questioning the NLRCs denial of the terminated Union members claim for separation pay, accrued wages, and

other benefits, the CA rendered a decision on February 24, 2005,16

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 Return of Service of Summons

17 indicated that 74 out of the 81

18 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 or conclusive arbitration clause.

19 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.

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 one-sided. 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 strike.

201avvphi1

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 Report

21 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 NLRC.

22

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 ruling23

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

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 by the NLRC on November 8, 1999,

24 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, consequences.

25 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 years of service prior to such breach.

26 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.

D E C I S I O N

PERALTA, J.:

Before us is a petition for review on certiorari seeking to reverse and set aside the Decision

1 dated July 31, 2006 and the Resolution

2 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 Damages

3 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 Refer Controversy to Voluntary Arbitration,

4 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 parties.

5

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 66 and 7

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,8 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 to file its answer within ten (10) days from receipt of a copy of this order.

9

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 Order

10 dated November 25, 1998.

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 of Gonzales v. Climax Mining Ltd.

11 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 Manifestation12

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

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 Ltd.

13 (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. Climax-Arimco 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 of certiorari.

14

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,15

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 accepted in our jurisdiction.

16 R.A. No. 876

17 authorizes arbitration of domestic

disputes. Foreign arbitration, as a system of settling commercial disputes of an international character, is likewise recognized.

18 The enactment of R.A. No. 9285 on

April 2, 2004 further institutionalized the use of alternative dispute resolution systems, including arbitration, in the settlement of disputes.

19

A contract is required for arbitration to take place and to be binding.20

Submission to arbitration is a contract

21and a clause in a contract providing that all matters in

dispute between the parties shall be referred to arbitration is a contract.22

The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of the contract and is itself a contract.

23

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

the claim to be meritorious, the parties may then be spared the rigors and expenses that arbitration in a foreign land would surely entail.

24

However, the Gonzales case,25

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 involving as it did judicial issues.

26

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 clause/agreement still remains valid and enforceable.

27

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.

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 No. 7942.

28

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 jurisprudence which is necessarily a judicial function.

29

In fact, We even clarified in our resolution on Gonzales motion for reconsideration 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.

D E C I S I O N

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision

1dated October 24, 2007 and the Resolution

2 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 and/or digging earthworks in petitioner corporations construction projects.

3 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 in other construction companies.

4 Sato, however, found difficulty in finding a job

because he had been blacklisted in other construction companies and was prevented from entering the project sites of petitioners.

5

Respondent Nilo Berdin (Berdin) was hired by petitioners in March 1991 as a steelman/laborer; respondent Anecito S. Parantar, Sr.

6 (Parantar) was hired in

February 1997 as a steelman; and respondent Romeo M. Lacida, Jr.7 (Lacida) was

hired in March 2001 as a laborer.8 At the start of their employment, they were

required by petitioners to sign several documents purporting to be employment contracts.

9 They immediately signed the documents without verifying their contents

for fear of forfeiting their employment.10

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 other tasks required of them by petitioners.

11

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 enter the work premises.

12

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 pay.

13

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 welcome, if they desire to work.

14

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 decision15

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, such as payrolls or vouchers.

16 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

2. Anecito Parantar - 120,944.00

3. Nilo Berdin - 152,144.00

4. Romeo M. Lacida, Jr. - 138,594.00

Total Award -

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

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 the Labor Arbiter in a decision

18 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 - P 3,180.00

2. Anecito Parantar - 2,520.00

3. Nilo Berdin - 2,700.00

4. Romeo Laceda - 2,520.00

Total - P 10,920.00

SO ORDERED.19

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 notice of dismissal,

20 and that respondents individual complaints opted for the

payment of separation pay instead of reinstatement.21

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 copies of payrolls, annexed to its memorandum on appeal.

22

Respondents filed a motion for reconsideration. However, the same was denied in a resolution

23 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:

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.

SO ORDERED.24

The CA ruled that respondents were illegally dismissed. A written notice of dismissal is not a pre-requisite for a finding of illegal dismissal.

25 Respondents did not abandon

their work. They were refused entry into the companys project sites.26

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 to refute the entries therein.

27

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 for a valid cause.

28

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 relationship manifested by some overt acts.

29 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 unequivocal intent on the part of the employee to discontinue his employment.

30

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.

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 does not necessarily constitute abandonment.

31 The intent to discontinue the

employment must be shown by clear proof that it was deliberate and unjustified.

32 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 non-payment, 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 the custody and absolute control of the employer.

33

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 the former's favor.

34

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 co-worker 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 by the Labor Arbiter for lack of merit in a Decision dated December 4, 1998.

1

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.2lavvphil.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 MISCONDUCT

3

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. NLRC,

4 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 employees moral character.

5

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 cause for termination, the misconduct must be serious.

6

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 breach of its discipline.

7 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 of their own character.

8

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 (SAMASAH-NUWHRAIN), Petitioner,

vs. HON. VOLUNTARY ARBITRATOR BUENAVENTURA C. MAGSALIN and HOTEL ENTERPRISES OF THE PHILIPPINES, INC., Respondents.

SAMAHAN NG MGA MANGGAGAWA SA HYATT (SAMASAH-NUWHRAIN), Petitioner,

vs. HOTEL ENTERPRISES OF THE PHILIPPINES, INC., Respondent.

D E C I S I O N

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 Resolutions dated October 3, 2003

1 and August 13, 2004

2 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, assails the Decision

3 dated December 16, 2005 and Resolution

4 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 Memorandum5 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 issued a Memorandum

6 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 another Memorandum

7 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 second offense.

8 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 sa 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 Memorandum9 requiring Caragdag to explain

his actions in the training room. Caragdag submitted his written explanation on February 25, 2001

10 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 Memorandum

11 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.

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 the explanation

12 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 immediate superior," and suspended him for three days.

13

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) should not be enforced against him.

14 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 said date to dismiss Caragdag for violation of OSDA 4.32.

15 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 Notice of Dismissal,

16 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 Arbitrator rendered a decision,

17 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 time-off 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 May 26, 2003.

18

On August 1, 2003, petitioner assailed the decision of the Voluntary Arbitrator before the CA in a petition for certiorari which was docketed as CA-G.R. SP No. 78364.

19 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 Rules.

20

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 review21

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.22

In deleting the award of financial assistance to Caragdag, the CA cited the case of Philippine Commercial International Bank v. Abad,

23 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

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 OF APPEAL.

24

In G.R. No. 172303

THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF FINANCIAL ASSISTANCE IN THE AMOUNT OFP100,000.00 TO ANGELITO CARAGDAG.

25

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 the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan,

26 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 appellat