Ludo & Luym Corporation vs. Saornido

A voluntary arbitrator may award reliefs necessarily consequent to the issue submitted for arbitration—such as CBA benefits flowing from a determination of regularization—even if the submission agreement states only the date of regularization, because arbitration is the final resort for the adjudication of disputes. Money claims are not barred by prescription where the employer’s repeated assurances prevented the employees from asserting their claims and estopped the employer from raising prescription.

LUDO & LUYM CORPORATION is a domestic corporation engaged in the manufacture of coconut oil, corn starch, glucose and related products, operating a manufacturing plant in Cebu City and a wharf where raw materials and finished products are shipped out. It engaged Cresencio Lu Arrastre Services (CLAS) for loading and unloading its finished products at the wharf, and CLAS deployed arrastre workers for those services. The workers later became regular rank-and-file employees of LUDO and joined the LUDO Employees Union (LEU), the exclusive bargaining agent; LUDO and LEU concluded a CBA on April 13, 1992 granting benefits that varied according to length of service.

The dispute centered on the length of service of 214 LEU officers and members who had been deployed by CLAS to perform arrastre services for LUDO before they were hired as regular rank-and-file employees on different dates. After the April 13, 1992 CBA, LEU requested LUDO to include in its members’ period of service the time during which they rendered arrastre services to LUDO through CLAS so that they could receive higher CBA benefits. LUDO failed to act on the request. The matter was submitted for voluntary arbitration; the respondent employees’ case was filed in January 1995, and the parties executed a submission agreement raising the sole issue of the date of regularization of the workers.

In its decision dated April 18, 1997, the Voluntary Arbitrator ruled that the respondent employees were engaged in activities necessary and desirable to LUDO’s business and that CLAS was a labor-only contractor of LUDO. The Voluntary Arbitrator ordered that the 214 complainants listed in Annex A be considered regular employees of LUDO six months from the first day of service at CLAS; that they be awarded sick leave, vacation leave, and annual wage and salary increases during such period in the amount of P5,707,261.61 as computed in Annex A; that LUDO pay attorney’s fees of ten percent of the total award; and that interest of twelve percent per annum or one percent per month be imposed on the award from promulgation until fully paid. The Voluntary Arbitrator also ordered that all separation and/or retirement benefits be construed from the date of regularization, subject to appropriate government laws and other social legislation.

Before the Voluntary Arbitrator, LUDO raised prescription as a defense. The respondent employees maintained that the three-year period had not begun because LUDO merely promised to review the company records in response to their demand for adjustment of the regularization date and did not make a categorical statement of refusal. The Voluntary Arbitrator found that prescription had not set in because it took time for the respondent employees to ventilate their claims due to repeated assurances by LUDO that it would review the company records and determine the validity of the claims without expressing a categorical denial. The Voluntary Arbitrator noted that the parties continued negotiations even after the matter was raised before the Grievance Procedure and voluntary arbitration, and that LUDO had not refused to comply but merely wanted the complainants to present proofs. The Voluntary Arbitrator also noted that in an earlier voluntary arbitration case involving exactly the same issue and employees similarly situated as the complainants, the same defense was raised and dismissed by Voluntary Arbitrator Thelma Jordan.

The Voluntary Arbitrator further found that LUDO’s promise to correct the length of service and grant back CBA benefits if the complainants could prove entitlement rendered LUDO in estoppel, barring it from raising laches or prescription. LUDO filed a motion for reconsideration, which was denied, and then elevated the matter to the CA and eventually to the SC.

• Scope of Submission Agreement / Jurisdiction: LUDO contended that the CA gravely erred in upholding the award of benefits beyond the terms of the submission agreement; the arbitrator must confine adjudication to the issues submitted, which was solely the date of regularization, so the award of benefits was in excess of jurisdiction.
• Prescription: LUDO contended that the benefits consisting of salary increases, vacation leave, and sick leave for 1977 to 1987 were already barred by prescription when the private respondents filed their case in January 1995, considering the three-year period for monetary claims.

• Prescription: Respondent LEU averred that the three-year prescriptive period is reckoned only from the time the obligor declares refusal to comply with its obligation in clear and unequivocal terms; LUDO merely promised to review company records in response to the demand for adjustment of the regularization date without making a categorical statement of refusal.
• Scope of Voluntary Arbitrator’s Authority: Respondent LEU argued that the arbitrator is empowered to award the assailed benefits because, notwithstanding the sole issue of the date of regularization, standard companion issues on reliefs and remedies are deemed incorporated; otherwise the arbitration process would be purely academic and the law creating it inutile.

• Prescription: Whether benefits consisting of salary increases, vacation leave, and sick leave benefits for the years 1977 to 1987 are already barred by prescription when private respondents filed their case in January 1995.
• Scope of Voluntary Arbitrator’s Jurisdiction: Whether a voluntary arbitrator can award benefits not claimed in the submission agreement.

• Prescription: No. The SC upheld the Voluntary Arbitrator’s finding that prescription had not set in, because LUDO’s repeated assurances and the continued negotiations prevented the cause of action from accruing and estopped LUDO from raising prescription.
• Scope of Voluntary Arbitrator’s Jurisdiction: Yes. A voluntary arbitrator may award benefits necessarily consequent to the issue submitted; the submission agreement’s silence on reliefs did not bar the award of CBA benefits flowing from the regularization issue.

• Scope of Voluntary Arbitrator’s Jurisdiction: The Labor Code defines the jurisdiction of Labor Arbiters and Voluntary Arbitrators in Arts. 217, 261, and 262. In San Jose vs. NLRC, the SC held that jurisdiction over the cases enumerated in those articles can possibly include money claims in one form or another. Reformist Union of R.B. Liner, Inc. vs. NLRC defined compulsory arbitration as settlement of labor disputes by a government agency with authority to investigate and make an award binding on all parties, and as a mode where parties are compelled to accept the resolution through arbitration by a third party. A voluntary arbitrator is not part of the governmental unit or labor department’s personnel but renders arbitration services under labor laws. Generally, the arbitrator is expected to decide only those questions expressly delineated by the submission agreement. Nevertheless, the arbitrator can assume the necessary power to make a final settlement since arbitration is the final resort for adjudication of disputes. The CA reasoned that if the submission empowers the arbitrator to decide whether an employee was discharged for just cause, the arbitrator can reasonably assume powers beyond a yes-or-no answer and include reinstatement with or without back pay. The SC stressed that the Voluntary Arbitrator had plenary jurisdiction and authority to interpret the agreement to arbitrate and to determine the scope of his own authority, subject only to certiorari jurisdiction. The issue of regularization is two-tiered: while the submission agreement mentioned only the date of regularization, law and jurisprudence give the voluntary arbitrator enough leeway to accomplish speedy labor justice. The underlying reason for the case was to settle whether the employees were entitled to higher benefits; requiring another action for payment would undermine labor proceedings and contravene the constitutional mandate providing full protection to labor. Thus, the Voluntary Arbitrator did not exceed jurisdiction in awarding the CBA benefits.
• Prescription: The SC held LUDO’s prescription contention without merit. The determination of whether prescription had set in is a question of fact based on the evidence, oral and documentary, presented before the Voluntary Arbitrator. The Voluntary Arbitrator found that prescription had not set in, and findings of fact of administrative and quasi-judicial bodies with expertise because their jurisdiction is confined to specific matters are generally accorded great respect and even finality. The Voluntary Arbitrator received the evidence first-hand, and no compelling reason was shown to diverge from his findings, especially since the CA affirmed them. The finding was that it took time for the employees to ventilate their claims because of LUDO’s repeated assurances that it would review the company records and determine the validity of the claims without expressing a categorical denial. The controlling rule is that the cause of action accrues only when the party obligated refuses to comply with its duty; being warded off by promises, the workers had not decided to assert their rights, so their causes of action had not accrued. Since the parties continued negotiations even after the matter was raised before the Grievance Procedure and voluntary arbitration, LUDO had not refused to comply; it merely wanted the complainants to present proofs. In an earlier voluntary arbitration case involving exactly the same issue and employees similarly situated, the same defense was raised and dismissed by Voluntary Arbitrator Thelma Jordan. LUDO’s promise to correct the length of service and grant back CBA benefits if the complainants proved entitlement rendered it in estoppel, barring it from raising laches or prescription. The CA concluded that under the equitable principle of estoppel, it would be the height of injustice to brush aside the employees’ claims on a mere technicality when LUDO’s own action prevented them from interposing the claims within the prescribed period.

• Voluntary Arbitrator’s Authority to Determine Scope of Submission — Although an arbitrator is generally expected to decide only questions expressly delineated in the submission agreement, the arbitrator can assume the necessary power to make a final settlement because arbitration is the final resort for adjudication of disputes. The SC applied this by upholding the Voluntary Arbitrator’s award of CBA benefits even though the submission agreement mentioned only the date of regularization.
• Two-Tiered Regularization Issue — The issue of regularization is not limited to the date of regularization; it includes the consequential question of whether the employees are entitled to higher CBA benefits. Requiring a separate action for those benefits would undermine speedy labor justice and the constitutional mandate of full protection to labor. The SC applied this to sustain the award of sick leave, vacation leave, and salary increases.
• Findings of Fact of Administrative and Quasi-Judicial Bodies — Findings of fact of administrative and quasi-judicial bodies that have acquired expertise because their jurisdiction is confined to specific matters are generally accorded great respect and even finality. The SC applied this to uphold the Voluntary Arbitrator’s finding that prescription had not set in, especially since the CA affirmed it.
• Accrual of Cause of Action and Prescription — A cause of action accrues only when the party obligated refuses to comply with its duty; repeated promises and negotiations without a categorical denial prevent the cause of action from accruing. The SC applied this because LUDO repeatedly assured the employees that it would review company records and determine the validity of their claims.
• Estoppel — An employer that promises to correct the length of service and grant back CBA benefits if the employees prove entitlement is estopped from raising laches or prescription. The SC applied this to bar LUDO’s prescription defense, since LUDO’s own assurances prevented the employees from filing within the prescribed period.

• "Generally, the arbitrator is expected to decide only those questions expressly delineated by the submission agreement. Nevertheless, the arbitrator can assume that he has the necessary power to make a final settlement since arbitration is the final resort for the adjudication of disputes." — This states the scope of the voluntary arbitrator’s authority and supports the award despite the limited submission agreement.
• "By the same token, the issue of regularization should be viewed as two-tiered issue. While the submission agreement mentioned only the determination of the date or regularization, law and jurisprudence give the voluntary arbitrator enough leeway of authority as well as adequate prerogative to accomplish the reason for which the law on voluntary arbitration was created – speedy labor justice." — This is the CA’s reasoning quoted by the SC; it explains why the regularization issue carries the benefits award.
• "Such determination is a question of fact which must be ascertained based on the evidence, both oral and documentary, presented by the parties before the Voluntary Arbitrator." — This frames the prescription issue as factual and supports deference to the VA’s finding.
• "Indeed, as the Court of Appeals concluded, under the equitable principle of estoppel, it will be the height of injustice if we will brush aside the employees’ claims on a mere technicality, especially when it is petitioner’s own action that prevented them from interposing the claims within the prescribed period." — This states the estoppel rationale for rejecting prescription.

• San Jose vs. NLRC, 294 SCRA 336 (1998) — Followed; cited for the rule that the jurisdiction of Labor Arbiters and Voluntary Arbitrators over cases enumerated in Labor Code Arts. 217, 261, and 262 can possibly include money claims in one form or another.
• Reformist Union of R.B. Liner, Inc. vs. NLRC, 266 SCRA 713 (1997) — Followed; cited for the definition of compulsory arbitration as settlement by a government agency with authority to investigate and make a binding award, and as a mode where parties are compelled to accept resolution through arbitration by a third party.
• Sime Darby Pilipinas, Inc. vs. Magsalin, G.R. No. 90426, 180 SCRA 177, 183 (1989) — Cited in the SC’s discussion for the rule that a Voluntary Arbitrator has plenary jurisdiction and authority to interpret the agreement to arbitrate and determine the scope of his own authority, subject only to certiorari jurisdiction.
• Conti vs. NLRC, G.R. No. 119253, 271 SCRA 114, 122 (1997) — Cited for the rule that a cause of action accrues only when the party obligated refuses to comply with its duty; being warded off by promises, the workers’ causes of action had not accrued.

• Labor Code, Art. 217 — Defines jurisdiction of Labor Arbiters and the Commission over cases including unfair labor practice, termination disputes, wage and other terms and conditions claims with reinstatement, and damages arising from employer-employee relations. The SC read it with Arts. 261 and 262 in defining the jurisdiction of voluntary arbitrators and in holding that jurisdiction over enumerated cases can include money claims.
• Labor Code, Art. 261 — Grants Voluntary Arbitrators original and exclusive jurisdiction over unresolved grievances arising from the interpretation or implementation of the CBA and company personnel policies, and provides that the Commission, its Regional Offices, and Regional Directors shall not entertain disputes under that jurisdiction. Applied to support the Voluntary Arbitrator’s authority over the CBA benefits grievance.
• Labor Code, Art. 262 — Provides that Voluntary Arbitrators, upon agreement of the parties, shall hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks. Applied as part of the statutory basis for the Voluntary Arbitrator’s jurisdiction.
• Labor Code, Art. 291 — Requires all money claims arising from employer-employee relations accruing during the effectivity of the Code to be filed within three years from the time the cause of action accrues; otherwise forever barred. Applied to LUDO’s prescription defense, which the SC rejected because the cause of action had not accrued.
• Constitutional mandate providing full protection to labor — Invoked in the CA reasoning quoted by the SC to support the two-tiered treatment of the regularization issue and to avoid requiring another action for benefits.