Paulino Ungos III

Lawyer | Law Professor | Author

Tag: appeal bond

  • But My Motion to Reduce Bond was Impliedly Approved by the NLRC

    Pacific Royal Basic Foods, Inc. (Pacific Royal) is a company that makes, processes, and sells coconut goods for export. It hired Violeta and a few other people as coconut parers.

    Pacific Royal received complaints about a product contamination incident from some of its clients. In response to the complaints, Pacific Royal sent letters to Violeta and her group.

    Violeta and some of her co-employees said they had nothing to do with product contamination when they answered Pacific Royal’s letters.

    Pacific Royal still dismissed Violeta and her group from employment, which prompted the latter to file a complaint against Pacific Royal for illegal dismissal.

    The Office of the Labor Arbiter ruled that Violeta and her group were regular employees who were illegally dismissed from employment. According to the Office of the Labor Arbiter, Pacific Royal failed to establish specific circumstances of the infractions allegedly committed by Violeta and her group. The said Office also found that Violeta and her group were likewise not informed of, and given opportunity to, explain their alleged violation of company policies and regulations on quality control, poor work performance, and repeated defiance of lawful orders of their supervisors. The Office of the Labor Arbiter directed the reinstatement of Violeta and her group. They were also awarded backwages and attorney’s fees.

    Pacific Royal appealed the Decision of the Office of the Labor Arbiter.

    The National Labor Relations Commission reversed the ruling of the Office of the Labor Arbiter.

    Record showed that Pacific Royal filed a Motion to Reduce Bond before the National Labor Relations Commission. However, the Commission did not act on the same.

    The Commission, nonetheless, resolved Pacific Royal’s appeal and found that Violeta and her group failed to dispute the fact of product contamination and was unable to show any ill motive on Pacific Royal’s part in charging them with causing such contamination. The Commission considered the difficulties of a food product export industry, which demanded a higher degree of cooperation and concern from the employees. According to the Commission, Violeta and her group were indifferent to such difficulties of Pacific Royal. In fact, some of them did not even participate in the investigation when they opted not to respond to the letters sent to them. The Commission classified Violeta and her group’s conduct as gross negligence, as they were not new to their jobs and were expected to know fully well the consequences of food product contamination to the company, its employees, and public health.

    Violeta and her group filed a Petition for Certiorari before the Court of Appeals. They imputed grave abuse of discretion on the part of the Commission for entertaining Pacific Royal’s appeal. In addition to their assertion of illegality of their dismissal from employment, Violeta and her group pointed out that Pacific Royal failed to timely post the requisite appeal bond as the same was posted only almost a month after the appeal period had lapsed.

    The Court of Appeals granted the petition of Violeta and her group. It found that Pacific Royal did not find any proof of compliance with the required posting of an appeal bond. According to the Court of Appeals, Pacific Royal’s appeal before the Commission should have been deemed not perfected, and such Commission did not acquire jurisdiction over Pacific Royal’s appeal. The Court of Appeals stressed that Pacific Royal cannot rely on the presumption of regularity in the Commission’s performance of official duties.

    Pacific Royal filed before the Supreme Court its petition for review on certiorari to assail the decision of the Court of Appeals. Pacific Royal asserted, among others, that the inaction of the National Labor Relations Commission on its Motion to Reduce Bond, coupled with the Commission’s resolution of the case on all its substantial points, was tantamount to an implied affirmance of the perfection of the appeal.

    The Supreme Court was confronted with the issue of whether there is a need for the Commission to expressly rule on motions filed by the employer to reduce the appeal bond. Or could an implied approval of such motion to reduce bond by way of the disposal of the appeal by final decision, order, or resolution suffice as a grant of the employer’s motion to reduce bond?

    The Supreme Court in this case emphasized the need for an express ruling by the National Labor Relations Commission on the appellant’s motion to reduce bond.

    The Court reiterated established principles as follows:

    Appeals by an employer before the National Labor Relations Commission of decisions by the Office of the Labor Arbiter that involve monetary awards to an employee must be secured by a cash or surety bond in the full amount of the monetary award.

    By way of exception, the payment of this full amount may be excused if the appealing employer files a motion to reduce bond showing meritorious grounds, and upon posting of a bond in a reasonable amount.

    Mcburnie v. Ganzon1G.R. Nos. 178034, 178117 & 186984-85, October 17, 2013, 719 PHIL 680-728 has already set the “reasonable amount” of the provisional reduced bond at a percentage of 10% of the monetary award, excluding the amount of damages and attorney’s fees, if any.

    The Court stated that Mcburnie requires the concurrence of the following conditions before an aggrieved employer appealing before the National Labor Relations Commission may be allowed to post a bond in a reduced amount:

    • The employer-appellant files a motion to reduce bond;
    • The motion to reduce bond shall be based on meritorious grounds;
    • The employer-appellant posts the provisional percentage of at least 10% of the monetary award, excluding therefrom the award of damages and attorney’s fees;
    • The provisional bond must be posted within the reglementary period for appeal; and
    • If the National Labor Relations Commission eventually determines that a greater or the full amount of the bond shall be posted, the employer-appellant shall comply accordingly within ten (10) days from notice of the order issued by the Commission directing such posting of the increased or full amount of the bond.

    Once these are complied with, the aggrieved employer’s appeal of the Office of the Labor Arbiter’s decision before the National Labor Relations Commission shall be deemed perfected.

    The Court further noted that the requisites laid out by Mcburnie also presupposes a sixth requirement: that the National Labor Relations Commission issue an express ruling on the appellant’s motion to reduce bond.

    In the present case, the Supreme Court found that Pacific Royal’s Motion to Reduce Bond was never acted upon by the National Labor Relations Commission. Still, the Commission resolved Pacific Royal’s appeal of the Labor Arbiter’s Decision on the merits and issued its own resolutions thereon.

    However, the Court stressed that Section 6, Rule VI of the 2011 NLRC Rules of Procedure, as amended, provides that an appeal may be perfected by the appellant-employer only by the posting of a bond in the equivalent amount of the full monetary award granted to the appellee-employee. The Court then repeated that the perfection of an appeal in the manner and within the period set by law is not only mandatory but jurisdictional.2Boardwalk Business Ventures, Inc. v. Villareal, G.R. No. 181182, April 10, 2013, 708 PHIL 443-457

    Consequently, for the Court, there should be no implied approval of a jurisdictional requirement that has not been complied with. Otherwise, the Court said, the ground of lack of jurisdiction becomes a waivable defect in procedure. Whether the National Labor Relations Commission accepts or rejects the appellant’s motion to reduce bond, the ruling must be unequivocal, and such ruling must be issued before or at the time the Commission resolves the appeal by final judgment. Failure to do so shall render the National Labor Relations Commission liable for grave abuse of discretion for having ruled on an appeal without acquiring jurisdiction over the same, and the judgment it had issued shall be vacated as null and void.

    The Court further stated that Pacific Royal could not rely on the mere presumption of regularity in the performance of official duties in favor of the National Labor Relations Commission when the latter gave due course to its appeal; not when it is faced with a serious imputation of non-compliance from Violeta and her group. Considering that the requirements provided under the Labor Code of the Philippines and its Implementing Rules are mandatory for purposes of perfecting an appeal, the rule on presumption of regularity cannot apply.

    The Supreme Court affirmed the Decision of the Court of Appeals and explained that in setting aside the ruling of the National Labor Relations Commission, it is merely exercising prudence in applying the provisions of the law.

    Further reading:

    • Pacific Royal Basic Foods, Inc. v. Noche, G.R. No. 202392, October 4, 2021.

  • Just a Lessor; Not an Employer

    Albina and several persons alleged that Abelardo, Quirino, and Lucia employed them for various years, as lady keeper, waitress, receptionist, dispatcher, bus boy, DJ, entertainer, cook, and cashier in the latter’s restaurant.

    Albina and her group narrated that in June 2006, restaurant management began harassing them after they formed a union. Albina and her group further stated that on June 30, 2006, Lucia informed them of the termination of their employment since the restaurant will be closing due to bankruptcy.

    Aggrieved by the development, Albina and her group filed a complaint for unfair labor practice, illegal dismissal, and money claims against Abelardo, Quirino, and Lucia before the Office of the Labor Arbiter. Albina and her group asserted therein that the restaurant was financially stable and that the claim of serious business losses was merely a ruse to terminate their employment.

    On the other hand, Abelardo denied the existence of an employment relationship with Albina and her group. Abelardo argued that he was not the owner of the restaurant since he was merely the lessor of the building where the said restaurant operated.

    As supporting evidence, Abelardo submitted contracts of lease and tax returns showing that he earned income from rentals. Abelardo likewise presented the restaurant’s certificate of registration of business name, mayor’s permit, and certificate of registration with the Bureau of Internal Revenue which were all issued in Lucia’s name.

    The Office of the Labor Arbiter found that the presented contracts of lease were inconclusive to disavow any employment relationship between Abelardo and Albina and her group. Said Office ruled that Albina and her group were illegally dismissed from employment. Abelardo, Lucia, and Quirino were held solidarily liable to pay the awards in the total amount of Three Million Six Hundred Eighty Three Thousand Three Hundred Ninety Four Pesos and Forty Five Centavos (Php3,683,394.45). Record showed that the Decision of the Office of the Labor Arbiter was received by Abelardo on March 23, 2007.

    On March 30, 2007, or seven days after receiving the Office of the Labor Arbiter’s Decision, Abelardo filed his appeal with the National Labor Relations Commission. He posted a cash bond of Five Hundred Thousand Pesos (Php500,000.00). Abelardo also moved to reduce the bond.

    On April 2, 2007, or the last day within which to file his appeal, Abelardo posted a surety bond in the amount of Three Million One Hundred Thousand Pesos (Php3,100,000.00).

    Thereafter, Abelardo moved to substitute the cash bond earlier posted in the amount of Five Hundred Thousand Pesos (Php500,000.00) with a surety bond of the same amount. The National Labor Relations Commission granted the motion and ordered Abelardo to post the surety bond. Abelardo complied with the order.

    Later, the National Labor Relations Commission exonerated Abelardo from liability as it found no substantial evidence of employment relationship with Albina and her group.

    Albina and her group elevated the case to the Court of Appeals and asserted that the National Labor Relations Commission committed grave abuse of discretion in giving due course to Abelardo’s appeal despite his failure to post a bond equivalent to the monetary award.

    The Court of Appeals granted the petition. It ruled that Abelardo failed to perfect his Appeal to the National Labor Relations Commission, and it reinstated the decision of the Office of the Labor Arbiter. According to the Court of Appeals, only the amount of Five Hundred Thousand Pesos (Php500,000.00) was posted as bond when Abelardo filed his appeal. The Court of Appeals added that Abelardo’s Motion to Reduce Bond was deemed denied since the same was not acted upon by the National Labor Relations Commission and since no meritorious ground supported the same.

    For the Court of Appeals, the full amount of the appeal bond should have been posted by Abelardo when he filed his appeal. For failure to comply with the mandatory and jurisdictional appeal bond requirement and in the absence of substantial proof to the contrary, the Court of Appeals ruled that Abelardo’s appeal was never perfected and that the National Labor Relations Commission did not acquire jurisdiction over the case.

    Abelardo filed his petition with the Supreme Court and pointed out the following:

    • He posted a cash bond of Five Hundred Thousand Pesos (Php500,000.00) on March 30, 2007, within the period to file an Appeal;
    • Such cash bond was subsequently substituted by a surety bond of the same amount; and
    • He then posted a surety bond in the amount of Three Million One Hundred Thousand Pesos (Php3,100,000.00).

    Abelardo also insisted that Albina and her group failed to establish their employment relationship with him. Abelardo stressed that Albina and her group even alleged in their position paper that it was Lucia who dismissed them.

    In their comment, Albina and her group retorted with three points:

    • There was no evidence that Abelardo posted the appeal bond within the reglementary period;
    • The indemnity agreement between Abelardo and the bonding company did not provide the effectivity period and the amount of premium paid; and
    • Through the affidavit of the restaurant’s former manager, it was shown that Abelardo had the final authority in the hiring of employees and their work assignments.

    Was Abelardo’s appeal perfected?

    The Supreme Court ruled in the affirmative.

    The Court reiterated the principle that the right to appeal is a mere statutory privilege exercised only in the manner and in accordance with the requirements of the law.

    With regard to appeals to the National Labor Relations Commission from decisions, awards, or orders of the Office of the Labor Arbiter, the Supreme Court pointed to Article 229 of the Labor Code of the Philippines, which provides that in case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from.

    The Supreme Court also referred to Section 6 of Rule VI of the 2005 Revised Rules of Procedure of the NLRC, which was effective at the time Abelardo questioned the Office of the Labor Arbiter’s Decision. Relevant portion of the provision states:

    No motion to reduce bond shall be entertained except on meritorious grounds, and only upon the posting of a bond in a reasonable amount in relation to the monetary award.

    The mere filing of a motion to reduce bond without complying with the requisites in the preceding paragraphs shall not stop the running of the period to perfect an appeal.

    The Supreme Court explained that the purpose of the posting of cash or surety bond is to assure the employees that they will receive the monetary award granted them if they finally prevail in the case. The bond also serves to discourage employers from using the appeal to delay, or even evade, their obligation to satisfy the judgment. Notably, the Court added, the posting of appeal bond is not only mandatory but jurisdictional as well. Non-compliance with the bond requirement is fatal and has the effect of rendering the judgment final and executory.

    The Supreme Court clarified that in exceptional cases, however, the bond requirement may be relaxed, provided that:

    • There is substantial compliance with the rules;
    • Surrounding facts and circumstances constitute meritorious grounds to reduce the bond;
    • A liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits; or
    • The appellants, at the very least, exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.

    The Supreme Court continued that the reduction of the bond is not warranted when:

    • No meritorious ground is shown to justify the same;
    • The appellant absolutely failed to comply with the requirement of posting a bond, even if partial; or
    • When circumstances show the employer’s unwillingness to ensure the satisfaction of its workers’ valid claims.

    In the present case, the Supreme Court ruled that the Court of Appeals erred in dismissing Abelardo’s Appeal for non-perfection. The Supreme Court found that Abelardo received on March 23, 2007 the Office of the Labor Arbiter’s Decision and that he had until April 2, 2007 (or the tenth [10th] day from his receipt of such Decision) to file an appeal. On March 30, 2007, Abelardo appealed and moved to reduce the bond. At the same time, Abelardo deposited a cashier’s check in the amount of Five Hundred Thousand Pesos (Php500,000.00) in favor of Albina and her group. On April 2, 2007 (or the last day of the period to appeal) Abelardo posted a surety bond in the amount of Three Million One Hundred Thousand Pesos (Php3,100,000.00). Subsequently, with the approval of the National Labor Relations Commission, Abelardo replaced the Five Hundred Thousand Peso (Php500,000.00) check deposit with a surety bond of the same amount. For the Supreme Court, Abelardo posted a total of Three Million Six Hundred Thousand Pesos (Php3,600,000.00) within the reglementary period, which substantially covered the total monetary award of Three Million Six Hundred Eighty Three Thousand Three Hundred Ninety Four Pesos and Forty Five Centavos (Php3,683,394.45). The Supreme Court considered such amount as substantial compliance and the same demonstrated Abelardo’s willingness to abide with the rules on perfection of appeals.

    The Supreme Court found no merit to the assertions of Albina and her group regarding the failure of the indemnity agreement to indicate the effectivity period and the amount of premium paid. This is because such aspects do not affect the validity of the surety bond and since the Rules of Procedure of the National Labor Relations Commission does not require such formalities with respect to the contents of the indemnity agreement. The Court stressed that in any case, the rules are explicit that a cash or surety bond shall be valid and effective from the date of deposit or posting, until the case is finally decided, resolved or terminated, or the award satisfied. This condition shall be deemed incorporated in the terms and conditions of the surety bond and shall be binding on the appellants and the bonding company.

    The Supreme Court accordingly ruled that the Court of Appeals should have considered the merits of the case given that the labor adjudication system rests on the norm that rules of technicality must yield to the broader interest of substantial justice.

    In this regard, while the Supreme Court remarked that it could have remanded the case to the Court of Appeals for proper disposition on the merits, the Supreme Court deemed it more appropriate and practical to resolve the question of the existence of the employment relationship in order to avoid further delay.

    Did an employer-employee relationship exist between Abelardo and Albina and her group?

    For this issue, the Supreme Court ruled in the negative.

    The Supreme Court enumerated the four-fold test of employment relationship, namely:

    • Selection and engagement of the employee or the power to hire;
    • Payment of wages;
    • Power to dismiss; and
    • Power to control the employee.

    Applying such test, the Supreme Court declared that Abelardo was not the employer of Albina and her group. This was based on the following findings:

    First, there was no substantial evidence that Abelardo participated in the selection of the restaurant employees. Although the Supreme Court noted the affidavit of the restaurant’s former manager which was presented by Albina and her group, it ruled that the same was not substantial proof absent supporting evidence such as pre-employment records, appointment letters or engagement contracts indicating Abelardo’s involvement in the recruitment process.

    Second, Albina and her group did not present any payslip showing that they directly received their premiums and salaries from Abelardo.

    Third, as to the power to dismiss, Albina and her group admitted that it was Lucia who terminated their services. There was no evidence that Abelardo wielded such authority.

    Fourth, concerning the power of control, there was no proof that Abelardo issued orders and instructions to Albina and her group, or that he supervised and monitored the proper performance of their work.

    On the other hand, the Supreme Court found that Abelardo substantiated his claim that he was a mere lessor of the restaurant. Abelardo submitted contracts of lease and tax returns showing that he earned income solely from building rentals. Abelardo likewise presented the certificate of registration of business name, mayor’s permit, and certificate of registration with the Bureau of Internal Revenue which were all issued in Lucia’s name. The Supreme Court considered such certifications as executed in the performance of official duty of the government agencies concerned and can be relied upon as evidence of the facts stated therein. Furthermore, such documents enjoy the presumption of regularity unless the contrary is proved. The Supreme Court thus ruled that Albina and her group’s idle implication that Abelardo used these documents as subterfuge to evade liability deserved scant consideration.

    In sum, the Court reiterated that the quantum of proof in labor cases is substantial evidence or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The burden of proof rests upon the party who asserts the affirmative of an issue. In the present case, the Supreme Court found that Albina and her group utterly failed to establish with substantial evidence their supposed employment relationship with Abelardo. The Supreme Court concluded that their case for illegal dismissal cannot prosper absent employment relationship between the parties.

    The Supreme Court thus granted Abelardo’s petition and reinstated the Decision of the National Labor Relations Commission.

    Further reading:

    • Salazar v. Simbajon, G.R. No. 202374, June 30, 2021.

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  • Appeal Bonds and Insolvency Proceedings

    In March 2004, Miguel commenced his employment with Karj Global Marketing Network, Inc. (Karj Global) as Assistant General Manager. He alleged that Karj Global agreed to grant him 14th month bonus, a vehicle, and vehicle maintenance benefits.

    On July 6, 2006, Miguel instituted a complaint before the Office of the Labor Arbiter against Karj Global for non-payment of 14th month pay, refund of his expenditures for vehicle maintenance, damages and attorney’s fees.

    Karj Global denied Miguel’s entitlement to said claims. With regard to the claim of 14th month pay, Karj Global asserted that the same was discretionary in nature and that such gratuity was never part of the regular compensation of its employees.

    On October 16, 2006, the Office of the Labor Arbiter ruled in favor of Miguel and ordered not only the payment of 14th month pay benefit, but also the refund of car maintenance costs. Karj Global appealed the said decision to the National Labor Relations Commission.

    Record showed that prior to the issuance of the Office of the Labor Arbiter’s decision, certain creditors instituted before the Regional Trial Court of Parañaque City a Petition for Involuntary Insolvency against Karj Global. On October 2, 2006, the Regional Trial Court issued an Order enjoining Karj Global from disposing its property and from making any payments outside of necessary or legitimate expenses of its business or industry.

    Karj Global filed before the National Labor Relations Commission its Motion to Suspend Proceedings dated November 2, 2006 and alleged therein its receipt of the Office of the Labor Arbiter’s Decision on October 27, 2006, as well as its receipt the Order of the Regional Trial Court on October 9, 2006. Karj Global further stated in the said motion that it informed the Regional Trial Court of the pendency of Miguel’s labor case.

    Meanwhile, on November 28, 2008, the National Labor Relations Commission dismissed Karj Global’s appeal for non-perfection as the same was filed without the required bond.

    Karj Global filed a petition for certiorari with the Court of Appeals, which dismissed the same and affirmed the decision of the National Labor Relations Commission.

    Was the strict adherence to the appeal bond posting requirement correct?

    The Supreme Court ruled that the appeal bond requirement should have been liberally applied in the present case and that the National Labor Relations Commission, which was mandated to act with justice, reason and equity, should have allowed the appeal and ruled on the merits considering the circumstances of the case. Specifically, the Court found that the employees of Karj Global (including Miguel) had many layers of protection under law, despite Karj Globa’s insolvency proceedings. This is because the rule on a requirement of an appeal bond cannot operate in a vacuum. Said the Court: “[W]hen the law does not clearly provide a rule or norm for the tribunal to follow in deciding a question submitted, but leaves to the tribunal the discretion to determine the case in one way or another, the judge must decide the question in conformity with justice, reason and equity, in view of the circumstances of the case.”

    The Court started by discussing Article 2231Art. 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. x x x In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from. of the Labor Code of the Philippines which requires the posting of a cash or surety bond when the judgment appealed from involves a monetary award. The Court reiterated prevailing jurisprudence2Viron Garments Manufacturing, Co., Inc. v. National Labor Relations Commission, G.R. No. 97357, March 18, 1992. in that the posting of the bond is an indispensable requisite for the perfection of an appeal by the employer. The mandatory nature of the bond is clearly limned in the provision that an appeal by the employer may be perfected only upon the posting of a cash or surety bond. The Court stressed that the word ‘only’ makes it perfectly clear, that the lawmakers intended the posting of a cash or surety bond by the employer to be the exclusive means by which an employer’s appeal may be perfected.

    However, the Court also mentioned the following exceptional circumstances under jurisprudence:3Lepanto Consolidated Mining Corp. v. Icao, G.R. No. 196047, January 15, 2014.

    • The Court excused the failure of an appellant to post a bond in view of its counsel’s reliance on the notice of the decision in the case which stated the requirements of an appeal without any mention of the bond requirement. The Court found that the said counsel, as well as the opposing party, apparently had no knowledge of the amendments caused by Republic Act No. 6715 on the bond requirement, including the issuance of the NLRC Interim Rules requiring the posting of a bond on appeal.4Your Bus Lines v. NLRC, G.R. No. 93381, September 28, 1990.
    • An appellant was likewise excused from the requirement, when its failure to post a bond was partly caused by the Office of the Labor Arbiter’s failure to state the exact amount of monetary award due, which would have been the basis of the amount of the bond to be posted.5Blancaflor v. National Labor Relations Commission, G.R. No. 101013, February 2, 1993.
    • An appeal was given due course despite the failure of the appellant to post a bond, on account of its insolvency and poverty.6Cabalan Pastulan Negrito Labor Association v. National Labor Relations Commission, G.R. No. 106108, February 23, 1995.
    • Finally, the appellant was allowed to post a property bond in lieu of a cash or surety bond. The Court found that the assailed judgment involved more than P17 million and its execution could adversely affect the economic survival of the appellant, which was a medical center.7 UERM-Memorial Medical Center v. National Labor Relations Commission, G.R. No. 110419, [March 3, 1997.

    The Court stated that in determining whether to allow a liberal application of the rule on bonds, it is crucial to understand whether employees stand to lose such security provided by the appeal bond, which ensures that when employees prevail, they will receive the money judgment in their favor.

    In the present case, the Court deemed the existence of the insolvency proceedings as an exceptional circumstance that warranted the liberal application of the rules requiring an appeal bond. Said the Court: The failure to file an appeal bond did not contradict the need to ensure that the employee, if his claim is deemed valid, will receive the money judgment.

    At this point, the Court recognized the seeming absence of a rule or norm to follow on the requirement of an appeal bond when the appealing employer is subject of involuntary liquidation proceedings.

    The Court noted that under Article 2178Art. 217. Jurisdiction of the 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 (6) Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. (Emphasis supplied and underscoring supplied) of the Labor Code of the Philippines, money claims arising from an employer-employee relationship may only be filed and ruled upon by the Office of the Labor Arbiter. However, the Court also noted that when an employer is undergoing insolvency proceedings, Article 217 of the Labor Code of the Philippines has to be read together with Section 609SECTION 60. No creditor, proving his debt or claim, shall be allowed to maintain any suit therefor against the debtor, but shall be deemed to have waived all right of action and suit against him, and all proceedings already commenced, or any unsatisfied judgment already obtained thereon, shall be deemed to be discharged and surrendered thereby; and after the debtor’s discharge, upon proper application and proof to the court having jurisdiction, all such proceedings shall be dismissed, and such unsatisfied judgments satisfied of record: Provided, That no valid lien existing in good faith thereunder shall be thereby affected. A creditor proving his debt or claim shall not be held to have waived his right of action or suit against the debtor when a discharge has have been refused or the proceedings have been determined without a discharge. No creditor whose debt is provable under this Act shall be allowed, after the commencement of proceedings in insolvency, to prosecute to final judgment any action therefor against the debtor until the question of the debtor’s discharge shall have been determined, and any such suit or proceeding shall, upon the application of the debtor or of any creditor, or the assignee, be stayed to await the determination of the court on the question of discharge: Provided, That if the amount due the creditor is in dispute, the suit, by leave of the court in insolvency, may proceed to judgment for the purpose of ascertaining the amount due, which amount, when adjudged, may be allowed in the insolvency proceedings, but execution shall be stayed as aforesaid. of the Insolvency Law,10Act No. 1956, May 20, 1909. The Financial Rehabilitation and Insolvency Act (FRIA) of 2010, or Republic Act No. 10142, was signed into law on July 18, 2010. or the law in effect when the National Labor Relations Commission dismissed the appeal on November 28, 2008, which states that a creditor may be allowed to proceed with the suit to ascertain the amount due to it but the execution of which shall be stayed.

    The Court discussed that during the pendency of the insolvency proceedings, employees are afforded a measure of protection by having their claim considered as a contingent claim before the insolvent court following Section 5511 SECTION 55. In all cases of contingent debts and contingent liabilities, contracted by the debtor, and not herein otherwise provided for, the creditor may make claim therefor and have his claim allowed, with the right to share in the dividends, if the contingency shall happen before the order of the final dividend; or he may, at any time, apply to the court to have the present value of the debt or liability ascertained and liquidated, which shall be done in such manner as the court shall order, and it shall be allowed for the amount so ascertained. of the Insolvency Act. The Court stated that like any other contingent claim, employees may prosecute their case before the labor tribunals, and exhaust other remedies, until he or she obtains a final and executory judgment. Assuming the employees obtain a favorable money judgment, the execution will be stayed following Section 60 of the Insolvency Act because the insolvency proceedings is where all creditors of the employer may establish their claims.

    The Court added that assuming the insolvent corporation undergoes liquidation, the measure of protection given to employees is stated in Article 11012Art. 110. Worker Preference in Case of Bankruptcy. — In the event of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid. of the Labor Code of the Philippines, which prescribes not only the preference for unpaid wages and monetary claims even before the payment of claims of the government and other creditors, but also the only proper venue for the enforcement of such preferential right.13In Development Bank of the Phils. v. Secretary of Labor, G.R. No. 79351, November 28, 1989, the Court ruled: In this jurisdiction, bankruptcy, insolvency and general judicial liquidation proceedings provide the only proper venue for the enforcement of a creditor’s preferential right such as that established in Article 110 of the Labor Code, for these are in rem proceedings binding against the whole world where all persons having any interest in the assets of the debtor are given the opportunity to establish their respective credits. In other words, what Article 110 means in the context of an insolvent employer is “that during bankruptcy, insolvency or liquidation proceedings involving the existing properties of the employer, the employees have the advantage of having their unpaid wages satisfied ahead of certain claims which may be proved therein.”

    In sum, the Court ruled that employees of an employer who is undergoing insolvency proceedings has many layers of protection starting from being allowed to prosecute his claim, registering a contingent claim before the insolvency court, and finally, enjoying a preference in case the assets of the corporation are ordered liquidated to pay for its debts.

    Here, the Court found that Karj Global informed the National Labor Relations Commission and the Regional Trial Court of the pendency of the insolvency proceedings and of the labor case, respectively. The Court also noted that even as Karj Global wanted a suspension of the proceedings in the labor case, it still filed a Notice of Appeal and Memorandum of Appeal Ad Cautelam. For the Court, the National Labor Relations Commission erred in dismissing the appeal outright especially when the foregoing circumstances reveal that the law itself provides many measures of protection for the employee, such that an appeal before the Commission may be allowed to proceed despite the lack of an appeal bond.

    Further reading:

    • Karj Global Marketing Network, Inc. v. Mara, G.R. No. 190654, July 28, 2020.

  • Substantial Compliance with Appeal Bond Requirements

    The situation in this case was that the Office of the Labor Arbiter found that the employer had illegally dismissed three of its employees. This decision of the Office of the Labor Arbiter was affirmed by the National Labor Relations Commission. All parties then filed a Petition for Certiorari before the Court of Appeals.

    A portion of the Decision of the Court of Appeals related to its finding that the employer substantially complied with the requirement of an appeal bond despite it not appearing in the records of the surety company since the employer believed in good faith that the bond it secured was genuine.

    However, the employees argued that the Court of Appeals should have dismissed the Petition for Certiorari outright since the employer failed to post a genuine appeal bond before the National Labor Relations Commission. The petitioner-employees alleged that when the Sheriff of the Commission attempted to enforce the judgment award against the appeal bond, said Sheriff was informed that the appeal bond procured by the employer did not appear in the records of the bonding company. The petitioners-employees also claimed that the employer was notified by the National Labor Relations Commission that its appeal bond was not genuine, showing that the employer did exhibit good faith.

    On the other hand, the employer countered that procedural rules should liberally be applied to their case since it acted in good faith in posting their appeal bond. The employer further asserts that the issue should have already been considered moot since the employees were able to garnish and collect the amounts allegedly due to them.

    Did the employer perfect its appeal upon discovery of its forged appeal bond?

    Yes, because the Supreme Court found that the employer had substantially complied with the requirements on the posting of an appeal bond.

    The Court reiterated the principles that an appeal is not a matter of right. Courts and tribunals have the discretion whether to give due course to an appeal or to dismiss it outright. The perfection of an appeal is, thus, jurisdictional. Non-compliance with the manner in which to file an appeal renders the judgment final and executory. In labor cases, an appeal by an employer is perfected only by filing a bond equivalent to the monetary award.

    The Court further stated that the ruled of the National Labor Relations Commission require that the appeal bond filed be genuine. An appeal bond determined by the National Labor Relations Commission to be irregular or not genuine shall cause the immediate dismissal of the appeal. The Court also stated that while the procedural rules strictly require the employer to submit a genuine bond, an appeal could still be perfected if there was substantial compliance with the requirement.

    In this instance, the Court found that the National Labor Relations Commission certified that the employer was able to file a security deposit in the amount of more than 6.5 million pesos showing that the premium for the appeal bond was duly paid and that there was willingness to post it. The Court also noted that the employees likewise attached documents proving that Alpha Insurance was a legitimate and accredited bonding company.

    The Court stressed that despite the employees’ failure to collect on the appeal bond, the employees never denied that they were eventually able to garnish the amount from the employer’s bank deposits. For the Court, such situation fulfilled the purpose of the bond, which was, to guarantee the payment of valid and legal claims against the employer.

    The Court accordingly considered the employer to have substantially complied with the requirements on the posting of an appeal bond.

    Further reading:

    • Malcaba v. ProHealth Pharma Philippines, Inc., G.R. No. 209085 , June 6, 2018.