PNOC-Energy Development Corporation vs. NLRC

A government-owned or controlled corporation created under the general corporation law, not by a special charter, is subject to the jurisdiction of labor tribunals under the Labor Code, not the Civil Service Law. Consequently, its employees' termination disputes are cognizable by the Labor Arbiter and the NLRC.

Danilo Mercado was employed by PNOC-EDC from 1979 until his dismissal on June 30, 1985. The company cited several grounds for termination: dishonesty involving the misappropriation of company funds from two small transactions (P680.00 from a nipa shingles purchase and P8.66 from a rubber stamp fabrication) and violations of company rules regarding unauthorized absences. Mercado subsequently filed a complaint for illegal dismissal and monetary claims before the NLRC Regional Arbitration Branch.

• Nature of the Action: The case originated from a complaint for illegal dismissal and monetary claims filed by private respondent Danilo Mercado against petitioner PNOC-EDC.
• Employment and Dismissal: Mercado was employed by PNOC-EDC from August 13, 1979, until his dismissal on June 30, 1985. His last position was shipping clerk at the Palimpinon, Dumaguete site.
• Grounds for Dismissal: PNOC-EDC alleged serious dishonesty (misappropriating P680.00 and P8.66 from company transactions) and violations of company rules (unauthorized absences on June 5 and June 15, 1985).
• Labor Arbiter's Findings: The Labor Arbiter found the accusations unsupported by evidence. The supplier's affidavit confirmed the full payment for nipa shingles, and no evidence substantiated the alleged discount or the P8.66 misappropriation. The alleged unauthorized absences were satisfactorily explained by Mercado.
• PNOC-EDC's Jurisdictional Defense: PNOC-EDC argued that as a government-owned and controlled corporation, it was governed by the Civil Service Law under the 1973 Constitution, depriving the Labor Arbiter and NLRC of jurisdiction.

• Jurisdiction: Petitioner maintained that as a government-owned and controlled corporation (a subsidiary of the Philippine National Oil Company created under P.D. No. 334), it was governed by the Civil Service Law pursuant to the 1973 Constitution. Therefore, the Labor Arbiter and NLRC had no jurisdiction over the case, rendering the decision void.
• Due Process and Sufficiency of Evidence: Petitioner argued that the Labor Arbiter's decision based solely on position papers violated due process. It further contended that the findings of fact regarding the alleged dishonesty were incorrect and that loss of trust and confidence was a valid ground for dismissal.

• Jurisdiction: Respondent countered that PNOC-EDC was incorporated under the general corporation law, not by a special charter. Under the 1987 Constitution, such corporations fall under the Labor Code, not the Civil Service Law. The NLRC decision, promulgated in 1987, was governed by the new Constitution.
• Due Process and Evidence: Respondent argued that petitioner had full opportunity to be heard through the submission of position papers and a motion for reconsideration, satisfying due process requirements. The factual findings of the Labor Arbiter, which were affirmed by the NLRC, were final and binding, as petitioner failed to present evidence to substantiate the charges of dishonesty.

• Jurisdiction: Whether the Labor Arbiter and the NLRC had jurisdiction over the illegal dismissal case filed against PNOC-EDC, a government-owned or controlled corporation.
• Validity of Dismissal and Awards: Whether the dismissal of Danilo Mercado was legal and whether the awards of reinstatement, backwages, damages, and attorney's fees were justified.

• Jurisdiction: The Labor Arbiter and NLRC had jurisdiction. The controlling law at the time of the NLRC decision (1987) was the 1987 Constitution, which provides that the Civil Service covers government-owned or controlled corporations with original charters. PNOC-EDC, incorporated under the general corporation law, does not have an original charter and is thus governed by the Labor Code. The ruling in PNOC-EDC v. Leogardo and NASECO v. NLRC was applied.
• Validity of Dismissal and Awards: The dismissal was illegal. The accusations of dishonesty and violation of company rules were not supported by evidence. The supplier's affidavit negated the claim of misappropriation, and no evidence was presented for the other allegations. Loss of trust and confidence must have some basis, which was absent here. The awards of reinstatement with backwages and damages were therefore proper, though the amounts of moral and exemplary damages were reduced.

• Jurisdictional Test for Government-Owned or Controlled Corporations — Under the 1987 Constitution (Art. IX-B, Sec. 2(1)), the Civil Service embraces government-owned or controlled corporations with original charters. Corporations created under the general corporation law, even if government-owned or controlled, are not covered by the Civil Service Law and are instead governed by the Labor Code. Their employment disputes fall under the jurisdiction of labor tribunals (Labor Arbiter, NLRC).
• Basis for Loss of Trust and Confidence — While loss of trust and confidence is a just cause for dismissal, it must be based on some basis or evidence. A mere allegation, unsubstantiated by proof, cannot sustain a valid dismissal on this ground.

• "The doctrine that employees of government-owned and/or controlled corporations, whether created by special law or formed as subsidiaries under the General Corporation Law are governed by the Civil Service Law and not by the Labor Code, has been supplanted by the present Constitution."
• "What the fundamental law abhors is not the absence of previous notice but rather the absolute lack of opportunity to ventilate a party's side. There is no denial of due process where the party submitted its position paper and filed its motion for reconsideration."
• "While it is true that loss of trust or breach of confidence is a valid ground for dismissing an employee, such loss or breach of trust must have some basis."

• PNOC-EDC v. Leogardo, 175 SCRA 26 (1989) — Controlling precedent. Involved the same petitioner and the same jurisdictional issue. The Court therein established that PNOC-EDC, incorporated under the general corporation law, is covered by the Labor Code.
• NASECO v. NLRC, G.R. No. 69870, 168 SCRA 122 (1988) — Applied. Held that the 1987 Constitution governs jurisdictional questions even if the employment dispute arose under the 1973 Constitution, provided the decision is rendered under the new charter.
• Odin Security Agency v. De la Serna, 182 SCRA 472 (1990) and T.H. Valderama and Sons, Inc. v. Drilon, 181 SCRA 308 (1990) — Cited to support the finding that due process was satisfied through the submission of position papers and a motion for reconsideration.

• 1987 Constitution, Article IX-B, Section 2(1) — Provides that the Civil Service includes "government-owned or controlled corporations with original charters." This provision was used to determine that PNOC-EDC, lacking an original charter, was outside the civil service and within the coverage of the Labor Code.
• Presidential Decree No. 442, as amended (Labor Code) — The governing statute for labor standards and relations applicable to employees of private corporations and, per the Court's ruling, to employees of government corporations incorporated under the general law.

• Justice Ameurfina Melencio-Herrera (Chairperson)
• Justice Teodoro R. Padilla
• Justice Florenz D. Regalado

• N/A — The decision was unanimous. Justice Sarmiento was on leave.