BEBIANO M.

BAÑEZ, petitioner,
vs.
HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC., respondents.
G.R. No. 128024 May 9, 2000

GONZAGA-REYES, J.:

The orders of respondent judge dated June 20, 1996 and October 16, 1996,
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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 was the sales operations manager of private respondent in its branch
in Iligan City. In 1993, private respondent "indefinitely suspended" petitioner and
the latter filed a complaint for illegal dismissal with the National Labor Relations
Commission ("NLRC") in Iligan City. In a decision dated July 7, 1994, Labor
Arbiter Nicodemus G. Palangan found petitioner to have been illegally dismissed
and ordered the payment of separation pay in lieu of reinstatement, and of
backwages and attorney's fees. The decision was appealed to the NLRC, which
dismissed the same for having been filed out of time. Elevated by petition
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for certiorari before this Court, the case was dismissed on technical grounds ; 3

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, private respondent 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 the action for damages, having arisen from
an employer-employee relationship, was squarely 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 declaring 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.

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:

xxx xxx xxx

4. Claims for actual, moral, exemplary and other

forms of damages arising from the employer-
employee relations;

xxx xxx xxx

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. On May 1, 1979,
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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." This limitation in
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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"

Whereas this Court in a number of occasions had applied the jurisdictional

provisions of Article 217 to claims for damages filed by employees, we hold that
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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. To
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allow otherwise would be "to sanction split jurisdiction, which is prejudicial to the
orderly administration of justice." Thus, even after the enactment of the Labor
11

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 the 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. In other words, the issue of actual damages has been
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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 , or breach of contract, as when the claimant seeks to

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recover a debt from a former employee or seeks liquidated damages in

16

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. 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.

Respondent court clearly having 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.