Title
Ace Navigation Co., Inc. vs. Ferdez
Case
G.R. No. 197309
Decision Date
Oct 10, 2012
Seafarer Fernandez filed a disability claim; petitioners contested jurisdiction, arguing CBA mandated arbitration. SC ruled voluntary arbitrators, not labor arbiter, had jurisdiction, emphasizing CBA terms and state policy favoring arbitration.
ace navigation co
fernandez
supreme court

Case Summary (G.R. No. 197309)

Factual Antecedents: The Complaint and the Motion to Dismiss

On October 9, 2008, Fernandez, assisted by his wife, filed with the NLRC a complaint for disability benefits. The complaint also sought moral and exemplary damages and attorneys’ fees against the petitioners.

The petitioners promptly moved to dismiss, asserting that the labor arbiter lacked jurisdiction. They argued that exclusive original jurisdiction belonged to the voluntary arbitrator or panel of voluntary arbitrators under Section 29 of the POEA Standard Employment Contract (POEA-SEC), because the parties were allegedly covered by a collective bargaining agreement (CBA) in the AMOSUP-TCC or AMOSUP-VELA setting, whose dispute settlement clause directed grievances to a grievance mechanism and then to mandatory voluntary arbitration.

Fernandez opposed the motion. He maintained that his claim involved a money claim, and that under the applicable law the labor arbiter had original and exclusive jurisdiction over money claims arising out of an employer-employee relationship or by virtue of law or contract.

The Compulsory Arbitration Ruling of the Labor Arbiter and the NLRC’s Treatment of the Motion

On December 9, 2008, Labor Arbiter Rioflorido denied petitioners’ motion to dismiss. She held that under Section 10 of R.A. No. 8042, the labor arbiter had original and exclusive jurisdiction over money claims arising out of an employer-employee relationship, even if there was a contrary provision of law.

Petitioners appealed to the NLRC. The NLRC denied the appeal. It agreed that the controversy involved a money claim and therefore fell within the labor arbiter’s jurisdiction pursuant to Section 10 of R.A. No. 8042. Additionally, the NLRC ruled that the denial of the motion to dismiss was an interlocutory order and was not appealable, and it remanded the case for further proceedings before the labor arbiter.

Resort to Certiorari and the CA’s Procedural Ruling on the Interlocutory Order

After denial of their motion for reconsideration by the NLRC, petitioners elevated the case to the CA through a petition for certiorari under Rule 65.

In its September 22, 2010 Decision, the CA denied the petition. Procedurally, the CA found that petitioners had taken the wrong route by attempting to challenge the labor arbiter’s denial of the motion to dismiss through an appeal to the NLRC. It emphasized that under the NLRC rules, an order denying a motion to dismiss was interlocutory and not subject to appeal.

The CA’s Substantive Ruling: Limits of Voluntary Arbitration and the Need for Unmistakable Agreement

On the merits, the CA ruled that petitioners’ position could not be sustained. It rejected the argument that the grievance and voluntary arbitration procedure in the CBA ousted the labor arbiter and the NLRC. The CA, consistent with the labor arbiter and NLRC, relied on Section 10 of R.A. No. 8042 for labor arbiter jurisdiction over Fernandez’s money claim.

The CA further addressed the interplay between voluntary arbitration and matters within labor arbiters’ original and exclusive jurisdiction. It acknowledged that the law allows parties to agree to voluntary arbitration even for disputes otherwise within labor arbiters’ jurisdiction, referencing Vivero v. Court of Appeals. However, the CA insisted that such submission must be in unequivocal language.

It found that the AMOSUP/TCC or AMOSUP-VELA CBA did not contain unequivocal wordings agreeing to submit money claims, and specifically claims for disability benefits, to voluntary arbitration. The CA also invoked Section 29 of the POEA-SEC, which provides that claims and disputes arising from a Filipino seafarer’s employment and arising under a CBA are to be submitted to the original and exclusive jurisdiction of the voluntary arbitrator. Still, the CA maintained that the POEA-SEC must be read together with the limitations recognized in Vivero, the Labor Code, and other governing jurisprudence.

In summary, the CA treated the jurisdiction of voluntary arbitrators as limited to seafarers’ claims that either fall outside the labor arbiter’s original and exclusive jurisdiction or, even when within it, are submitted to voluntary arbitration only through an agreement expressed in unmistakable terms.

Petitioners’ Grounds Before the Supreme Court

Petitioners sought reversal of the CA judgments on four principal grounds.

First, they argued that the CA disregarded the Omnibus Implementing Rules and Regulations (IRR) of R.A. No. 8042, as amended by R.A. No. 10022, which, according to petitioners, mandated voluntary arbitration for OFWs with collective bargaining agreements, in accordance with Articles 261 and 262 of the Labor Code. They also invoked procedural principles on jurisdiction and retroactivity, citing Municipality of Sta. Fe v. Municipality of Aritao, and they characterized the IRR as procedural law warranting retroactive application.

Second, they assailed the CA’s conclusion that the CBA contained no unequivocal language for mandatory referral of Fernandez’s disability claim to voluntary arbitration. They challenged the CA’s treatment of the CBA’s wording—particularly the use of the auxiliary verb “may”—as rendering referral permissive rather than mandatory. Petitioners insisted that, despite the word used, the parties unmistakably agreed to refer the disability claim to mandatory arbitration.

Third, petitioners argued that the CA ignored an NLRC memorandum prescribing action for complaints initially processed under the grievance machinery of existing CBAs. They claimed the NLRC directive required dismissal of such complaints and referral to the National Conciliation and Mediation Board (NCMB) for voluntary arbitration.

Fourth, petitioners urged reliance on a later Supreme Court ruling: Estate of Nelson R. Dulay, represented by his wife Merridy Jane P. Dulay v. Aboitiz Jebsen Maritime, Inc. and General Charterers, Inc., decided on June 13, 2012 in G.R. No. 172642, which—petitioners argued—upheld voluntary arbitrator jurisdiction over a seafarer’s money claim and should apply to the case for referral to the NCMB for voluntary arbitration.

Fernandez’s Response: Lack of Divestment and Absence of Unresolved Grievances

Fernandez filed a comment and sought dismissal of the petition. He argued that the amended IRR under R.A. No. 8042 and R.A. No. 10022 did not divest labor arbiters of original and exclusive jurisdiction over money claims arising from employment, because the IRR allegedly contained no express divestment.

He also contended that voluntary arbitrators did not have jurisdiction. He characterized his complaint as not involving any unresolved grievance arising from the interpretation or implementation of the CBA, nor from the interpretation or enforcement of company personnel policies. He added that he never referred the claim to the grievance machinery; therefore, he argued that no unresolved grievance existed that could be the basis for voluntary arbitration. He further argued that he was not within the category of disputes contemplated by Articles 261 and 262 and referenced doctrines in Sanyo Philippines Workers Union-PSSLU v. Canizares and Silva v. CA, asserting that only certain categories of disputes are proper for grievance machinery and voluntary arbitration.

Finally, Fernandez maintained that the CA correctly found no unequivocal CBA language for mandatory referral of his disability claim to a voluntary arbitrator.

Procedural Ruling by the Court: Denial of the Motion to Dismiss Was Interlocutory

The Supreme Court first addressed the procedural aspect concerning petitioners’ attempt to challenge the denial of their motion to dismiss. It relied on the 2005 Revised Rules of Procedure of the NLRC, Rule V, Section 6, which provided that an order denying a motion to dismiss (on jurisdictional grounds) or suspending resolution is not appealable. It also cited Rule VI, Section 10 on frivolous or dilatory appeals, which discouraged appeals from interlocutory orders.

The Court adopted the logic in Indiana Aerospace University v. Comm. on Higher Educ., holding that an order denying a motion to dismiss is interlocutory, and the correct remedy is to appeal after a decision is rendered. It thus confirmed that the CA correctly treated the denial of the motion to dismiss as interlocutory and not subject to appeal.

The Court nevertheless proceeded to consider the merits because the CA had done so.

The Central Issue: Whether the Labor Arbiter or the Voluntary Arbitrator Had Original and Exclusive Jurisdiction

The Court framed the focal question as the determination of who had original and exclusive jurisdiction over Fernandez’s disability claim. It contrasted jurisdictional rules under Section 10 of R.A. No. 8042 with the grievance and arbitration framework under the Labor Code, the Constitution’s preference for voluntary modes of dispute settlement, and the dispute-settlement mandate in Section 29 of the POEA-SEC.

Constitutional and Statutory Framework for Voluntary Arbitration

The Court invoked the constitutional labor relations policy in Section 3, Article XIII of the Constitution, which mandated the preferential use of voluntary modes of settling disputes, including conciliation, and enforced compliance to foster industrial peace.

It then cited Article 260 of the Labor Code on grievance machinery and voluntary arbitration, requiring CBAs to contain grievance adjustment and resolution provisions for disputes arising from the interpretation or implementation of the CBA and those arising from company personnel policies.

It further cited Article 261 of the Labor Code, granting voluntary arbitrators original and exclusive jurisdiction over unresolved grievances arising from the interpretation or implementation of the CBA and those arising from interpretation or enforcement of company personnel policies. Article 262 then allowed voluntary arbitrators, upon the parties’ agreement, to hear an

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