Metro Drug Distribution, Inc. vs. Metro Drug Corporation Employees Association – Federation of Free Workers

A Labor Arbiter’s order denying a motion to dismiss is interlocutory and not appealable; the aggrieved party must raise the jurisdictional objection in its position paper, proceed before the Labor Arbiter, and appeal an adverse judgment to the NLRC under Article 223 of the Labor Code. Direct certiorari to the CA is improper because the NLRC has appellate authority to correct the Labor Arbiter’s alleged erroneous assumption of jurisdiction.

Petitioner Metro Drug Distribution, Inc. distributes consumer products, while respondent Metro Drug Corporation Employees Association – Federation of Free Workers is the recognized collective bargaining representative of its rank-and-file employees. Their CBA contains a grievance machinery that culminates in voluntary arbitration for disputes not settled through the grievance steps, except termination, dismissal, suspension, and unfair labor practice cases which are referred to compulsory arbitration unless the parties agree otherwise. The Labor Code provisions on grievance machinery and voluntary arbitration, particularly Articles 217, 260, and 261, form the statutory backdrop invoked by the parties.

Petitioner Metro Drug Distribution, Inc. is a corporation engaged in distributing consumer products, and respondent Metro Drug Corporation Employees Association – Federation of Free Workers is the recognized collective bargaining representative of petitioner’s rank-and-file employees. On 11 February 1997, petitioner and respondent union entered into a Collective Bargaining Agreement (CBA) containing Article XIX on Grievance Machinery, which defines a grievance, sets preliminary steps and three grievance steps, provides for voluntary arbitration of disputes not settled through the grievance procedure, and excepts termination, dismissal, suspension, and unfair labor practice cases, which are referred to compulsory arbitration unless otherwise agreed.

In a letter dated 08 July 1997, respondent union’s president requested a discussion of particular grievable issues, including the health insurance provider and the amendment to the salesmen’s incentive scheme implemented by petitioner. Grievance meetings were conducted on 29, 30 July, 01 and 06 August 1997, but the parties did not reach an agreement. According to respondent union, it expressed its desire to submit the issues to voluntary arbitration and submitted the names of three voluntary arbitrators as provided in the CBA. Petitioner failed to submit its own nominees, prompting respondent union to protest the inaction through a letter dated 23 July 1997.

Respondent union then instituted a complaint for unfair labor practice before the arbitration branch of the NLRC. It charged petitioner with gross violation of the CBA’s economic provisions arising from the unilateral changes in the salesmen’s incentive scheme and health insurance provider, violations of the duty to bargain, and non-observance of the CBA provision on grievance machinery. Petitioner filed a motion to dismiss on the sole ground of lack of jurisdiction over the subject matter, insisting that the issues raised—the salesmen’s incentive scheme and the health insurance provider—were exclusively cognizable by the voluntary arbitrator under Articles 217, 260, and 261 of the Labor Code.

Respondent union opposed the motion, arguing that petitioner’s non-compliance with the CBA grievance procedure was itself raised as an issue before the Labor Arbiter, so dismissing the case for lack of jurisdiction would be premature; that resort to the Labor Arbiter was permitted if recourse to the grievance machinery would be futile; and that because petitioner obstinately refused to comply with its CBA responsibility, substantive justice required the Labor Arbiter’s intervention. In its order dated 19 March 1998, Labor Arbiter Jose G. De Vera denied petitioner’s motion to dismiss and required both parties to file their respective position papers not later than 28 April 1998.

Petitioner then elevated the matter to the CA through a petition for certiorari under Rule 65, claiming that the Labor Arbiter committed grave abuse of discretion in ruling that the complaint was within his jurisdiction, contrary to the policy promoting free collective bargaining and voluntary arbitration.

• Remedy of Certiorari: Petitioner maintained that under Section 15, Rule V of the New Rules of Procedure of the NLRC, an order denying a motion to dismiss is not appealable, and no motion for reconsideration is permitted; hence it had no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law, making certiorari under Rule 65 before the CA proper.
• Grave Abuse of Discretion / Jurisdiction: Petitioner argued that the Labor Arbiter acted with grave abuse of discretion in denying the motion to dismiss because the issues raised by respondent union—the salesmen’s incentive scheme and health insurance provider—pertain to company personnel policies and are exclusively cognizable by the voluntary arbitrator under Article 261 of the Labor Code.
• Labor Code Provisions: Petitioner invoked Articles 217, 260, and 261 of the Labor Code to support its position that unresolved grievances arising from the CBA and company personnel policies are within the original and exclusive jurisdiction of the voluntary arbitrator.

• Exhaustion and NLRC Appeal: Respondent union asserted that while the NLRC rules do not provide for a motion for reconsideration of a denial of a motion to dismiss, petitioner should have submitted the issue of jurisdiction in its position paper before the Labor Arbiter and, in the event of an adverse ruling, appealed the Labor Arbiter’s decision to the NLRC; direct certiorari violated the doctrine of exhaustion of administrative remedies and denied the labor tribunal its primary jurisdiction over labor cases.
• Labor Arbiter Jurisdiction over ULP: Respondent union argued that the case below was for unfair labor practice arising from petitioner’s refusal to comply with the grievance procedure in the CBA, so jurisdiction was properly lodged with the Labor Arbiter.
• Futility and Substantive Justice: Respondent union opposed the motion to dismiss on the ground that petitioner’s non-compliance with the CBA grievance procedure was raised before the Labor Arbiter, making dismissal for lack of jurisdiction premature; resort to the Labor Arbiter was permitted if recourse to the grievance machinery would be futile, and petitioner’s obstinate refusal to comply with its CBA responsibility required the Labor Arbiter’s intervention in the interest of substantive justice.

• Remedy from Denial of Motion to Dismiss: Whether a petition for certiorari under Rule 65 filed directly with the CA is the proper remedy from a Labor Arbiter’s order denying a motion to dismiss on the ground of lack of jurisdiction, considering that the NLRC rules do not allow an appeal from such denial.

• Remedy from Denial of Motion to Dismiss: No. The denial of a motion to dismiss is interlocutory and not appealable; the remedy is to file a position paper, raise jurisdiction as a defense, proceed before the Labor Arbiter, and appeal an adverse judgment to the NLRC under Article 223 of the Labor Code. Direct certiorari to the CA was improper.

• Remedy from Denial of Motion to Dismiss: Rule 65 requires (a) a tribunal, board, or officer exercising judicial functions acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction, and (b) no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law. The NLRC rules prohibit an appeal from an order denying a motion to dismiss, and this rule is similar to the general civil procedure rule that an order denying a motion to dismiss is interlocutory and not appealable until final judgment or order. The remedy of the aggrieved party is to file an answer and interpose the grounds relied upon in the motion to dismiss, proceed to trial, and, in case of adverse judgment, elevate the entire case by appeal in due course. To avail of certiorari, petitioner had to establish that the denial was tainted with grave abuse of discretion. Article 223 of the Labor Code provides that decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission within ten calendar days from receipt, and such appeal may be entertained on prima facie evidence of abuse of discretion on the part of the Labor Arbiter. In Air Services Cooperative, et al. vs. The Court of Appeals, et al., the SC explained that Article 223 broadens the meaning of appeal to include certiorari and that the NLRC has appellate authority to correct a claimed erroneous assumption of jurisdiction by the Labor Arbiter, a case of grave abuse of discretion. Since the legislature clothed the NLRC with that appellate authority, petitioner’s recourse was to the NLRC, not the CA. The SC also applied the doctrine of exhaustion of administrative remedies: before a party may seek court intervention, it must avail of all administrative processes afforded, and premature invocation of judicial intervention is fatal to one’s cause of action. The rationale is that the administrative agency, if given a complete chance, will decide correctly; the administrative process is intended to provide less expensive and more speedy solutions; and where the enabling statute provides a system of administrative appeal, courts will not entertain a case unless available administrative remedies have been resorted to. Petitioner should have submitted its position paper, raised lack of jurisdiction, and, if the judgment was unfavorable, appealed to the NLRC on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction.

• Interlocutory Order; Denial of Motion to Dismiss — An order denying a motion to dismiss is interlocutory and not appealable until final judgment or order; the aggrieved party must file an answer or position paper, raise the grounds in the motion to dismiss as defenses, proceed to trial, and appeal an adverse judgment. The SC applied this to the Labor Arbiter’s denial of petitioner’s motion to dismiss.
• Certiorari Requisites — Certiorari under Rule 65 requires concurrence of (a) a tribunal, board, or officer exercising judicial functions acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction, and (b) no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law. The SC held petitioner failed because the NLRC appeal was available.
• Exhaustion of Administrative Remedies — Before a party may seek court intervention, it must avail of all administrative processes afforded; if a remedy within the administrative machinery can still be resorted to, it must be exhausted first, and premature invocation of judicial intervention is fatal to one’s cause of action. The SC applied this by requiring petitioner to raise jurisdiction before the Labor Arbiter and appeal an adverse ruling to the NLRC.
• Article 223 Appeal as Broad Remedy — Under Article 223 of the Labor Code, Labor Arbiter orders are final unless appealed to the NLRC within ten calendar days, and appeal may be entertained on prima facie evidence of abuse of discretion; this appeal includes correction of an erroneous assumption of jurisdiction. The SC used this to hold that the NLRC, not the CA, was the proper forum.

• "The remedy of the aggrieved party in case of denial of the motion to dismiss is to file an answer and interpose, as a defense or defenses, the ground or grounds relied upon in the motion to dismiss, proceed to trial and, in case of adverse judgment, to elevate the entire case by appeal in due course." — The SC states the ordinary remedy after an interlocutory denial, which petitioner skipped by filing certiorari.
• "In order to avail of the extraordinary writ of certiorari, it is incumbent upon petitioner to establish that the denial of the motion to dismiss was tainted with grave abuse of discretion." — The SC places the burden on petitioner to show grave abuse, not merely a disputed jurisdictional claim.
• "Since the legislature had clothed the NLRC with the appellate authority to correct a claimed "erroneous assumption of jurisdiction" on the part of the labor arbiter – a case of grave abuse of discretion - the remedy availed of by petitioner in this case is patently erroneous as recourse in this case is lodged, under the law, with the NLRC." — The SC locates the corrective power in the NLRC and rejects direct CA certiorari.
• "The premature invocation of court’s judicial intervention is fatal to one’s cause of action." — The SC applies exhaustion of administrative remedies against petitioner’s direct resort to the CA.

• Air Services Cooperative, et al. vs. The Court of Appeals, et al., G.R. No. 118693, 23 July 1998, 293 SCRA 101 — Relied on for the holding that Article 223 broadens appeal to include certiorari and that the NLRC has appellate authority to correct an erroneous assumption of jurisdiction by the Labor Arbiter.
• Suntay vs. Cojuangco-Suntay, G.R. No. 132524, 29 December 1998, 300 SCRA 760 — Cited for the requisites of certiorari under Rule 65.
• Mendoza vs. Court of Appeals, G.R. No. 81909, 05 September 1991, 201 SCRA 343 — Cited for the remedy of filing an answer and raising the grounds in the motion to dismiss, then appealing an adverse judgment.
• Macawiwili Gold Mining and Development Co., Inc. vs. Court of Appeals, G.R. No. 115104, 12 October 1998, 297 SCRA 602 — Cited for the requirement that the denial of the motion to dismiss be tainted with grave abuse of discretion for certiorari.
• Ambil, Jr. vs. Commission on Elections, G.R. No. 143398, 25 October 2000, 344 SCRA 372 — Cited for the rule that premature invocation of judicial intervention is fatal to one’s cause of action.
• Union Bank of the Philippines vs. Court of Appeals, G.R. No. 131729, 19 May 1998, 290 SCRA 198, 219-220 — Cited for the rationale behind exhaustion of administrative remedies.

• Rule 65, Revised Rules of Civil Procedure — Certiorari requires grave abuse of discretion or lack/excess of jurisdiction and no appeal or plain, speedy, adequate remedy; the SC applied it to hold petitioner’s direct CA petition improper because NLRC appeal was available.
• Article 223, Labor Code (P.D. No. 442, as amended) — Labor Arbiter decisions, awards, or orders are final unless appealed to the NLRC within ten calendar days, and appeal may be entertained on prima facie evidence of abuse of discretion; the SC applied it to locate the corrective authority in the NLRC.
• Section 15, Rule V, New Rules of Procedure of the NLRC — An order denying a motion to dismiss is not appealable; the SC applied it to treat the Labor Arbiter’s denial as interlocutory and to require petitioner to proceed before the Labor Arbiter and appeal an adverse judgment.