G.R. No.

128024 May 9, 2000

BEBIANO M. BAÑEZ, petitioner,
vs.
HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC., respondents.

GONZAGA-REYES, J.:

The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking
jurisdiction over an action for damages filed by an employer against its dismissed
employee, are assailed in this petition for certiorari under Rule 65 of the Rules of Court
for having been issued in grave abuse of discretion.

Petitioner BEBIANO M. BAÑEZ was the sales operations manager of private

respondent ORO MARKETING, INC in its branch in Iligan City. In 1993, Allegedly,
private respondent "indefinitely suspended" petitioner and so 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, the Labor Arbiter Nicodemus G. Palangan found
decided in favour of petitioner. petitioner and found the latter to have been illegally
dismissed and ordered the payment of separation pay in lieu of reinstatement, and of
backwages and attorney's fees. The decision was appealed to the NLRC, which was
dismissed the same for having been filed out of time. 2 The case was elevated to the SC
but was dismissed. Elevated by petition for certiorari before this Court, the case was
dismissed on technical grounds3 ; however, the Court also pointed out that even if all the
procedural requirements for the filing of the petition were met, it would still be dismissed
for failure to show grave abuse of discretion on the part of the NLRC.

On November 13, 1995, The private respondent then filed a complaint for damages
before the Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil Case No.
95-554, which prayed for the payment of the following:

a. P709,217.97 plus 12% interest as loss of profit and/or

unearned income of three years;

b. P119,700.00 plus 12% interest as estimated cost of

supplies, facilities, properties, space, etc. for three years;

c. P5,000.00 as initial expenses of litigation; and

d. P25,000.00 as attorney's fees. 4

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He
interposed in the court below that because the action for damages, having arisen from
an employer-employee relationship, was squarely was supposed to be under the
exclusive original jurisdiction of the NLRC under Article 217(a), paragraph 4 of the
Labor Code and is barred by reason of the final judgment in the labor case. He accused
private respondent of splitting causes of action, stating that the latter could very well
have included the instant claim for damages in its counterclaim before the Labor Arbiter.
He also pointed out that the civil action of private respondent is an act of forum-
shopping and was merely resorted to after a failure to obtain a favorable decision with
the NLRC.

Ruling upon the motion to dismiss, respondent judge issued the herein questioned
Order, which summarized the basis for private respondent's action for damages in this
manner:

Paragraph 5 of the complaint alleged that the defendant violated the

plaintiff's policy re: His business in his branch at 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 installment basis, defendant, without the
knowledge of said customer and plaintiff, would buy the items on cash
basis at ex-factory price, a privilege not given to customers, and thereafter
required the customer to sign promissory notes 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 through
Venus Lozano, a Group Sales Manager of plaintiff but also utilized by him
as secretary in his own business for collecting and receiving of
installments, purportedly for the plaintiff but in reality on his own account
or business. The collection and receipt of payments were made inside the
Iligan City branch using plaintiff's facilities, property and manpower. That
accordingly plaintiff's sales decreased and reduced to a considerable
extent the profits which it would have earned. 5

In the respondent court declared itself as having jurisdiction over the subject matter of
the instant controversy, respondent court stated:

A perusal of the complaint which is for damages does not ask for any relief
under the Labor Code of the Philippines. It seeks to recover damages as
redress for defendant's breach of his contractual obligation to plaintiff who
was damaged and prejudiced. The Court believes such cause of action is
within the realm of civil law, and jurisdiction over the controversy belongs
to the regular courts.

While seemingly the cause of action arose from employer-employee

relations, the employer's claim for damages is grounded on the nefarious
activities of defendant causing damage and prejudice to plaintiff as alleged
 in paragraph 7 of the complaint. The Court believes that there was a
breach of a contractual obligation, which is intrinsically a civil dispute. The
averments in the complaint removed the controversy from the coverage of
the Labor Code of the Philippines and brought it within the purview of civil
law. (Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.) . . . 6

Petitioner's motion for reconsideration of the above Order was denied for lack of merit
on October 16, 1996. Hence, this petition.

Acting on petitioner's 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. 95-554 until further orders from the Court.

By way of assignment of errors, the petition reiterates the grounds raised in the Motion
to Dismiss dated January 30, 1996, namely, lack of jurisdiction over the subject matter
of the action, res judicata, splitting of causes of action, and forum-shopping. The
determining issue, however, is the issue of jurisdiction.

WON the trial court lacks jurisdiction over the subject matter of the action.

Art. 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of
the filing of this case, reads:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except

as otherwise provided under this Code the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-
agricultural:

x x x           x x x          x x x

4. Claims for actual, moral, exemplary and other forms of

damages arising from the employer-employee relations;

x x x           x x x          x x x

The above provisions are a result of the amendment by Section 9 of Republic Act
("R.A.") No. 6715, which took effect on March 21, 1989, and which put to rest the earlier
confusion as to who between Labor Arbiters and regular courts had jurisdiction over
claims for damages as between employers and employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of
workers, including claims for damages, was originally lodged with the Labor Arbiters
and the NLRC by Article 217 of the Labor Code. 7 On May 1, 1979, however,
Presidential Decree ("P.D.") No. 1367 amended said Article 217 to the effect that
"Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for
moral or other forms of damages." 8 This limitation in jurisdiction, however, lasted only
briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article
217 of the Labor Code almost to its original form. Presently, and as amended by R.A.
6715, the jurisdiction of Labor Arbiters and the NLRC in Article 217 is comprehensive
enough to include claims for all forms of damages "arising from the employer-employee
relations"

YES. In granting the petition, the court further held that

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 employer-employee 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, and should be entered as a counterclaim in the illegal dismissal
case.

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely
superseded by the Labor Code), jurisprudence was settled that where the plaintiff's
cause of action for damages arose out of, or was necessarily intertwined with, an
alleged unfair labor practice committed by the union, the jurisdiction is exclusively with
the (now defunct) Court of Industrial Relations, and the assumption of jurisdiction of
regular courts over the same is a nullity. 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
employer were allegedly incurred as a consequence of strike or picketing of the union,
such complaint for damages is deeply rooted from the labor dispute between the
parties, and should be dismissed by ordinary courts for lack of jurisdiction. As held by
this Court in National Federation of Labor vs. Eisma, 127 SCRA 419:

Certainly, the present Labor Code is even more committed to the view that
on policy grounds, and equally so in the 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 management as a result of disputes or
controversies arising from employer-employee relations.

There is no mistaking the fact that in this case before us, private respondent's claim
against petitioner for actual damages arose from a prior employer-employee
relationship. In the first place, private respondent would not have taken issue with
petitioner's "doing business of his own" had the latter not been concurrently its
employee. Thus, the damages alleged in the complaint below are: first, those amounting
to lost profits and earnings due to petitioner's 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 respondent's property and
supplies which petitioner used in conducting his "business ".

Second, and more importantly, to allow respondent court to proceed with the instant
action for damages would be to open anew the factual issue of whether petitioner's
installment sale scheme resulted in business losses and the dissipation of private
respondent's 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 presented evidence in support thereof. The Labor
Arbiter, however, found to the contrary — that no business losses may be attributed to
petitioner as in fact, it was by reason of petitioner's installment plan that the sales of the
Iligan branch of private respondent (where petitioner was employed) reached its highest
record level to the extent that petitioner was awarded the 1989 Field Sales Achievement
Award in recognition of his exceptional sales performance, and that the installment
scheme was in fact with the knowledge of the management of the Iligan branch of
private respondent. 12 In other words, the issue of actual damages has been settled in
the labor case, which is now final and executory.

Still on the prospect of re-opening factual issues already resolved by the labor court, it
may help to refer to that period from 1979 to 1980 when jurisdiction over employment-
predicated actions for damages vacillated from labor tribunals to regular courts, and
back to labor tribunals. In Ebon vs. de Guzman, 113 SCRA 52, 1 this Court discussed:

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' position-paper procedure of
ascertaining the facts in dispute might not be an adequate tool for arriving
at a just and accurate assessment of damages, as distinguished from
backwages and separation pay, and that the trial procedure in the Court of
First Instance would be a more effective means of determining such
damages. . . .

Evidently, the lawmaking authority had second thoughts about depriving

the Labor Arbiters and the NLRC of the jurisdiction to award damages in
labor cases because that setup would mean duplicity of suits, splitting the
cause of action and possible conflicting findings and conclusions by two
tribunals on one and the same claim.

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially

reenacted Article 217 in its original form) nullified Presidential Decree No.
1367 and restored to the Labor Arbiter and the NLRC their jurisdiction to
award all kinds of damages in cases arising from employer-employee
relations. . . . (Emphasis supplied).
Clearly, respondent court's taking jurisdiction over the instant case would bring about
precisely the harm that the lawmakers sought to avoid in amending the Labor Code to
restore jurisdiction over claims for damages of this nature to the NLRC.

This is, of course, to distinguish from cases of actions for damages where the employer-
employee 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 damages in enforcement of a prior employment contract. 17

Neither can we uphold the reasoning of respondent court that because the resolution of
the issues presented by the complaint does not entail application of the Labor Code or
other labor laws, the dispute is intrinsically civil. Furthermore, Article 217(a) of the Labor
Code, as amended, clearly bestows upon the Labor Arbiter original and exclusive
jurisdiction over claims for damages arising from employer-employee relations — in
other words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by
labor laws, but also damages governed by the Civil Code. 18

Thus, it is obvious that private respondent's remedy is not in the filing of this separate
action for damages, but in properly perfecting an appeal from the Labor Arbiter's
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 damages
cannot take the place of such lost appeal.

Hence, Respondent court clearly has no jurisdiction over private respondent's complaint
for damages, we will no longer pass upon petitioner's other assignments of error.

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554
before Branch 39 of the Regional Trial Court of Misamis Oriental is hereby DISMISSED.
No pronouncement as to costs.

SO ORDERED.