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Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 80774 May 31, 1988

SAN MIGUEL CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and RUSTICO
VEGA, respondents.

Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner.

The Solicitor General for public respondent.

FELICIANO, J.:

In line with an Innovation Program sponsored by petitioner San Miguel

Corporation ("Corporation;" "SMC") and under which management undertook
to grant cash awards to "all SMC employees ... except [ED-HO staff, Division
Managers and higher-ranked personnel" who submit to the Corporation Ideas
and suggestions found to be beneficial to the Corporation, private respondent
Rustico Vega submitted on 23 September 1980 an innovation proposal. Mr.
Vega's proposal was entitled "Modified Grande Pasteurization Process," and
was supposed to eliminate certain alleged defects in the quality and taste of
the product "San Miguel Beer Grande:"

Title of Proposal

Modified Grande Pasteurization Process

Present Condition or Procedure

At the early stage of beer grande production, several cases

 of beer grande full goods were received by MB as returned
beer fulls (RBF). The RBF's were found to have sediments
and their contents were hazy. These effects are usually
caused by underpasteurization time and the pasteurzation
units for beer grande were almost similar to those of the
steinie.

Proposed lnnovation (Attach necessary information)

In order to minimize if not elienate underpasteurization of

beer grande, reduce the speed of the beer grande
pasteurizer thereby, increasing the pasteurization time and
the pasteurization acts for grande beer. In this way, the self-
life (sic) of beer grande will also be increased. 1

Mr. Vega at that time had been in the employ of petitioner Corporation for
thirteen (1 3) years and was then holding the position of "mechanic in the
Bottling Department of the SMC Plant Brewery situated in Tipolo, Mandaue
City.

Petitioner Corporation, however, did not find the aforequoted proposal

acceptable and consequently refused Mr. Vega's subsequent demands for a
cash award under the Innovation Program. On 22 February 1983., a
Complaint 2 (docketed as Case No. RAB-VII-0170-83) was filed against
petitioner Corporation with Regional Arbitration Branch No. VII (Cebu City) of
the then.", Ministry of Labor and Employment. Frivate respondent Vega
alleged there that his proposal "[had] been accepted by the methods analyst
and implemented by the Corporation [in] October 1980," and that the same
"ultimately and finally solved the problem of the Corporation in the production
of Beer Grande." Private respondent thus claimed entitlement to a cash prize
of P60,000.00 (the maximum award per proposal offered under the
Innovation Program) and attorney's fees.

In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation

alleged that private respondent had no cause of action. It denied ever having
approved or adopted Mr. Vega's proposal as part of the Corporation's
brewing procedure in the production of San Miguel Beer Grande. Among
other things, petitioner stated that Mr. Vega's proposal was tumed down by
the company "for lack of originality" and that the same, "even if implemented
[could not] achieve the desired result." Petitioner further alleged that the
Labor Arbiter had no jurisdiction, Mr. Vega having improperly bypassed the
grievance machinery procedure prescribed under a then existing collective
bargaining agreement between management and employees, and available
administrative remedies provided under the rules of the Innovation Program.
A counterclaim for moral and exemplary damages, attorney's fees, and
litigation expenses closed out petitioner's pleading.

In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money
claim of complainant Vega in this case is "not a necessary incident of his
employment" and that said claim is not among those mentioned in Article 217
of the Labor Code, dismissed the complaint for lack of jurisdiction. However,
in a gesture of "compassion and to show the government's concern for the
workingman," the Labor Arbiter also directed petitioner to pay Mr. Vega the
sum of P2,000.00 as "financial assistance."

The Labor Arbiter's order was subsequently appealed by both parties, private
respondent Vega assailing the dismissal of his complaint for lack of
jurisdiction and petitioner Corporation questioning the propriety of the award
of "financial assistance" to Mr. Vega. Acting on the appeals, the public
respondent National Labor Relations Commission, on 4 September 1987,
rendered a Decision, 5 the dispositive portion of which reads:

WHEREFORE, the appealed Order is hereby set aside and

another udgment entered, order the respondent to pay the
complainant the amount of P60,000.00 as explained above.

SO ORDERED.

In the present Petition for certiorari filed on 4 December 1987, petitioner

Corporation, invoking Article 217 of the Labor Code, seeks to annul the
Decision of public respondent Commission in Case No. RAB-VII-01 70-83
upon the ground that the Labor Arbiter and the Commission have no
jurisdiction over the subject matter of the case.

The jurisdiction of Labor Arbiters and the National Labor Relations

Commission is outlined in Article 217 of the Labor Code, as last amended by
Batas Pambansa Blg. 227 which took effect on 1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the
commission. (a) The Labor Arbiters shall have the original
and exclusive jurisdiction to hear and decide within thirty
(30) working days after submission of the case by the
parties for decision, the following cases involving are
workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that workers may file involving wages,

hours of work and other terms and conditions of
employment;

3. All money claims of workers, including those

based on non-payment or underpayment of
wages, overtime compensation, separation pay
and other benefits provided by law or
appropriate agreement, except claims for
employees' compensation, social security,
medicare and maternity benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265

of this; Code, including questions involving the
 legality of strikes and lockouts.

(b) The Commission shall have exclusive appellate

jurisdiction over all cases decided by Labor Arbiters.
(Emphasis supplied)

While paragraph 3 above refers to "all money claims of workers," it is not

necessary to suppose that the entire universe of money claims that might be
asserted by workers against their employers has been absorbed into the
original and exclusive jurisdiction of Labor Arbiters. In the first place,
paragraph 3 should be read not in isolation from but rather within the context
formed by paragraph 1 related to unfair labor practices), paragraph 2
(relating to claims concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a particular species of
employer-employee relations), and paragraph 5 (relating to certain activities
prohibited to employees or to employers).<äre||anº•1àw> It is evident that
there is a unifying element which runs through paragraphs 1 to 5 and that is,
that they all refer to cases or disputes arising out of or in connection with an
employer-employee relationship. This is, in other words, a situation where the
rule of noscitur a sociis may be usefully invoked in clarifying the scope of
paragraph 3, and any other paragraph of Article 217 of the Labor Code, as
amended. We reach the above conclusion from an examination of the terms
themselves of Article 217, as last amended by B.P. Blg. 227, and even
though earlier versions of Article 217 of the Labor Code expressly brought
within the jurisdiction of the Labor Arbiters and the NLRC "cases arising from
employer employee relations," 6 which clause was not expressly carried over,
in printer's ink, in Article 217 as it exists today. For it cannot be presumed
that money claims of workers which do not arise out of or in connection with
their employer-employee relationship, and which would therefore fall within
the general jurisdiction of the regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and
lodged with Labor Arbiters on an exclusive basis. The Court, therefore,
believes and so holds that the money claims of workers" referred to in
paragraph 3 of Article 217 embraces money claims which arise out of or in
connection with the employer-employee relationship, or some aspect or
incident of such relationship. Put a little differently, that money claims of
workers which now fall within the original and exclusive jurisdiction of Labor
Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship.

Applying the foregoing reading to the present case, we note that petitioner's
Innovation Program is an employee incentive scheme offered and open only
to employees of petitioner Corporation, more specifically to employees below
the rank of manager. Without the existing employer-employee relationship
between the parties here, there would have been no occasion to consider the
petitioner's Innovation Program or the submission by Mr. Vega of his
proposal concerning beer grande; without that relationship, private
respondent Vega's suit against petitioner Corporation would never have
arisen. The money claim of private respondent Vega in this case, therefore,
arose out of or in connection with his employment relationship with petitioner.

The next issue that must logically be confronted is whether the fact that the
money claim of private respondent Vega arose out of or in connection with
his employment relation" with petitioner Corporation, is enough to bring such
money claim within the original and exclusive jurisdiction of Labor Arbiters.

In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation

engaged in the sale and repair of motor vehicles, while private respondent
was the sales Manager of petitioner. Petitioner had sued private respondent
for non-payment of accounts which had arisen from private respondent's own
purchases of vehicles and parts, repair jobs on cars personally owned by
him, and cash advances from the corporation. At the pre-trial in the lower
court, private respondent raised the question of lack of jurisdiction of the
court, stating that because petitioner's complaint arose out of the employer-
employee relationship, it fell outside the jurisdiction of the court and
consequently should be dismissed. Respondent Judge did dismiss the case,
holding that the sum of money and damages sued for by the employer arose
from the employer-employee relationship and, hence, fell within the
jurisdiction of the Labor Arbiter and the NLRC. In reversing the order of
dismissal and requiring respondent Judge to take cognizance of the case
below, this Court, speaking through Mme. Justice Melencio-Herrera, said:

Before the enactment of BP Blg. 227 on June 1, 1982,

Labor Arbiters, under paragraph 5 of Article 217 of the
Labor Code had jurisdiction over" all other cases arising
from employer-employee relation, unless, expressly
excluded by this Code." Even then, the principle followed by
this Court was that, although a controversy is between an
employer and an employee, the Labor Arbiters have no
jurisdiction if the Labor Code is not involved. In Medina vs.
Castro-Bartolome, 11 SCRA 597, 604, in negating
jurisdiction of the Labor Arbiter, although the parties were
an employer and two employees, Mr. Justice Abad Santos
stated:

The pivotal question to Our mind is whether or

not the Labor Code has any relevance to the
reliefs sought by the plaintiffs. For if the Labor
Code has no relevance, any discussion
concerning the statutes amending it and
whether or not they have retroactive effect is
unnecessary.

It is obvious from the complaint that the plaintiffs

have not alleged any unfair labor
practice. Theirs is a simple action for damages
for tortious acts allegedly committed by the
defendants. Such being the case, the governing
statute is the Civil Code and not the Labor
Code. It results that the orders under review are
based on a wrong premise.

And in Singapore Airlines Limited v. Paño, 122 SCRA 671,

 677, the following was said:

Stated differently, petitioner seeks protection

under the civil laws and claims no benefits
under the Labor Code. The primary relief sought
is for liquidated damages for breach of a
contractual obligation. The other items
demanded are not labor benefits demanded by
workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime
compensation or separation pay. The items
claimed are the natural consequences flowing
from breach of an obligation, intrinsically a civil
dispute.

In the case below, PLAINTIFF had sued for monies loaned

to DEFENDANT, the cost of repair jobs made on his
personal cars, and for the purchase price of vehicles and
parts sold to him. Those accounts have no relevance to the
Labor Code. The cause of action was one under the civil
laws, and it does not breach any provision of the Labor
Code or the contract of employment of DEFENDANT.
Hence the civil courts, not the Labor Arbiters and the NLRC
should have jurisdiction. 8

It seems worth noting that Medina v. Castro-Bartolome, referred to in the

above excerpt, involved a claim for damages by two (2) employees against
the employer company and the General Manager thereof, arising from the
use of slanderous language on the occasion when the General Manager fired
the two (2) employees (the Plant General Manager and the Plant
Comptroller). The Court treated the claim for damages as "a simple action for
damages for tortious acts" allegedly committed by private respondents,
clearly if impliedly suggesting that the claim for damages did not necessarily
arise out of or in connection with the employer-employee
relationship. Singapore Airlines Limited v. Paño, also cited in Molave,
involved a claim for liquidated damages not by a worker but by the employer
company, unlike Medina. The important principle that runs through these
three (3) cases is that where the claim to the principal relief sought 9 is to be
resolved not by reference to the Labor Code or other labor relations statute
or a collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and not to
the Labor Arbiter and the NLRC. In such situations, resolution of the dispute
requires expertise, not in labor management relations nor in wage structures
and other terms and conditions of employment, but rather in the application
of the general civil law. Clearly, such claims fall outside the area of
competence or expertise ordinarily ascribed to Labor Arbiters and the NLRC
and the rationale for granting jurisdiction over such claims to these agencies
disappears.

Applying the foregoing to the instant case, the Court notes that the SMC
Innovation Program was essentially an invitation from petitioner Corporation
to its employees to submit innovation proposals, and that petitioner
Corporation undertook to grant cash awards to employees who accept such
invitation and whose innovation suggestions, in the judgment of the
Corporation's officials, satisfied the standards and requirements of the
Innovation Program 10 and which, therefore, could be translated into some
substantial benefit to the Corporation. Such undertaking, though unilateral in
origin, could nonetheless ripen into an enforceable contractual (facio ut
des) 11 obligation on the part of petitioner Corporation under certain
circumstances. Thus, whether or not an enforceable contract, albeit implied
arid innominate, had arisen between petitioner Corporation and private
respondent Vega in the circumstances of this case, and if so, whether or not
it had been breached, are preeminently legal questions, questions not to be
resolved by referring to labor legislation and having nothing to do with wages
or other terms and conditions of employment, but rather having recourse to
our law on contracts.

WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4

September 1987 of public respondent National Labor Relations Commission
is SET ASIDE and the complaint in Case No. RAB-VII-0170-83 is hereby
DISMISSED, without prejudice to the right of private respondent Vega to file
a suit before the proper court, if he so desires. No pronouncement as to
costs.

SO ORDERED.

Fernan, Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Footnotes

1 NLRC Records, Vol. I, p. 105.

2 Rollo, pp. 19-20, Annex "A" of Petition.

3 Id., pp. 21-24, Annex "B" of Petition.

4 Id., pp. 30-32, Annex "D" of Petition.

5 Id., pp. 44- 50, Annex "G" of Petition.

6 Article 217 of the Labor Code as it existed prior to 1 May

1978, provided as follows:

Art. 217. Jurisdiction of Labor Arbiters and the

Commission.- (a) The Labor Arbiters shall have
exclusive jurisdiction to hear and decide the
following cases involving all workers, whether
agricultural or non-agricultural:

(1) Unfair labor practice cases;

(2) Unresolved issues in collective bargaining

including those which involve wages, hours of
 work, and other terms and conditions of
employment duly indorsed by the Bureau in
accordance within the provisions of this Code;

(3) All money claims of workers involving non-

payment or underpayment of wages, overtime
or premium compensation, maternity or service
incentive leave, separation pay and other
money claims arising from employer-employee
relation, except claims for employee's
compensation, social security and medicare
benefits and as otherwise provided in Article
128 of this Code;

(4) Cases involving household services; and

(5) All other cases arising from employer-

employee relation unless expressly excluded by
this Code.

(b) The Commission shall have exclusive appellant

jurisdiction over all cases decided by Labor Arbiters,
compulsory arbitrators, and voluntary arbitrators in
appropriate cases provided in Article 263 of this Code.
(Emphasis supplied)
On 1 May 1978, Article 217 was amended by P.D. No. 1367
in the following manner-.

Section 1. Paragraph (a) of Art. 217 of the Labor Code as

amended is hereby further amended to read as follows:

(a) The Labor Arbiters shall have exclusive jurisdiction to

hear and decide the following cases involving all workers,
whether agricultural or non-agricultural:

1) Under labor practice cases;

2) Unresolved issues in collective bargaining, including

those which involve wages, hours of work, and other terms
and conditions of employment; and

3) All other cases arising from employer-employeerelations

duly indorsed by the Regional Directors in accordance with
the provisions of this Code; Provided, that the Regional
Directors shall not indorse and Labor Arbiters shall not
entertain claims for moral or other forms of damages.
(Emphasis supplied)

On 1 May 1980, Article 217 was once more amended by

P.D. No. 1691, which amendment reads as follows:
"Article 217, Jurisdiction of Labor Arbiters and the
Commission. — a) The Labor Arbiters shall have the
original and exclusive jurisdiction to hear and decide the
following cases involving all workers, whether agricultural or
non-agricultural:

(1) Under labor practice cases;

(2) Unresolved issues in collective bargaining, including

those that involve wages, hours of work, and other terms
and conditions of employment;

(3) All money claims of workers, including non-payment or

underpayment of wages, overtime compensation,
separation pay and other benefits provided by law or
appropriate agreement, except claims for employees
compensation, social security, medicare and maternity
benefits;

(4) Cases involving household services; and

(5) All other claim arising from employer-employee

relations, unless expressly excluded by this Code.

(b) The Commission shall have exclusive appellate

jurisdiction over all cases decided by Labor Arbiters,
compulsory arbitrators, and voluntary arbitrators in
appropriate cases provided in Article 263 of this Code.
(Emphasis supplied)

In other words, P.D. No. 1691 deleted the proviso winch

had been inserted by P.D. No. 1367, which proviso
excluded from the jurisdiction of the Labor Arbiter claims for
moral and other forms of damages. Under P.D. No. 1691,
therefore, Labor Arbiters could once more take cognizance
of claims for moral and other forms of damages which are
incidental to or necessarily bound up with money claims of
workers which are otherwise clearly within the jurisdiction of
Labor Arbiters. (Sagmit v. Sibulo, 133 SCRA 359 [1984];
National Federation of Labor v. Eisma, 127 SCRA 419 F-
I9841; Sentinel Insurance Co., Inc. v. Bautista, 127 SCRA
623 [1984], Getz Corporation, Phils. Inc, vs. Court of
Appeals, 116 SCRA 86 [1982]; Ebon v. de Guzman, 113
SCRA 52 [1982]; Aguda v. Vallejos, 113 SCRA 69 [1982];
and Pepsi-Cola Bottling Co. v. Martinez, 112 SCRA 579
[1982]. See also Cardinal Industries, Inc. vs. Vallejos, 114
SCRA 472 [1982].)

B.P. Blg. 130, which took effect on 21 August 1981,

introduced amendments to Article 217 which are not,
however, relevant for present purposes.
7 129 SCRA 485 (1984).

8 129 SCRA at 488-489; emphasis supplied.

9 It is the character of the principal relief sought that

appears essential, in this connection. Where such principal
relief is to be granted under labor legislation or a collective
bargaining agreement, the case should fall within the
jurisdiction of the Labor Arbiter and the NLRC, even though
a claim for damages might be asserted as an incident to
such claim. In such situations, the need to avoid splitting of
jurisdiction arises. (Filipinas Life Assurance Co., Inc. v.
Bleza, 139 SCRA 565 [1985]; Sentinel Insurance Co., Inc.
v. Bautista, supra; Agusan del Norte Electric Cooperative,
Inc. v. Suarez, 125 SCRA 437 [1983]; Getz Corporation,
Phils., Inc. v. Court of Appeals, supra; Aguda v. Vallejos,
supra; Pepsi-Cola Bottling Co. v. Martinez, supra; and
Calderon, Sr. v. Court of Appeals, 100 SCRA 459 [1980]
(discussion at 463-466). See also Bengzon v. Inciong, 91
SCRA 248 [19791; and Quisaba v. Sta. Ines-Melale Veneer
& Plywood, Inc., 58 SCRA 771 [1974].)

10 Innovation proposals, to qualify for an award under the

Innovation Program of petitioner Corporation, had to satisfy
certain requirements, i.e.: a proposal should be "specific
and deliberate," new to San Miguel Corporation," "legal,"
 "feasible" and "[capable of] achieving the company's
obective more effectively." NLRC Records, Vol. 2, pp. 75-
76.

11 See Corpus vs. Court of Appeals, et al., 98 SCRA 424,

439 (1980).<äre||anº•1àw>

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