Title
Manila Hotel Corp. vs. National Labor Relations Commission
Case
G.R. No. 120077
Decision Date
Oct 13, 2000
Marcelo Santos, employed in China, sued MHC/MHICL for illegal dismissal. SC ruled NLRC lacked jurisdiction; no employer-employee relationship existed, annulling NLRC's decision.

Case Summary (G.R. No. 164195)

Key Dates and Procedural Posture

Santos’s recruitment and contracts: May–November 1988; termination and repatriation: September–October 1989. Complaint for illegal dismissal filed with the Labor Arbiter: February 20, 1990. Labor Arbiter decision (against petitioners): June 27, 1991. NLRC resolution declaring lack of jurisdiction and enjoining filing with POEA: August 28, 1992. NLRC reversed that resolution and assumed jurisdiction: May 31, 1993. NLRC decision awarding Santos contractual benefits and attorney’s fees: December 15, 1994. NLRC denied motion for reconsideration: March 30, 1995. Petition for certiorari to the Supreme Court challenging NLRC orders and decision was filed and ultimately granted.

Issue Presented

Whether the NLRC acted with jurisdiction and without grave abuse of discretion in assuming and exercising jurisdiction over Santos’s illegal dismissal complaint against MHC and MHICL (and in effect ordering monetary relief) where the employment relationship and the termination occurred abroad and the principal foreign employer and its officers were not before the labor tribunal.

Summary of Factual Background

Santos, a Filipino, accepted an employment offer from the Palace Hotel in Beijing and signed an employment contract dated June 4, 1988 (commencing September 1, 1988 for two years, US$900 net per month, payable 14 times a year). He reported for work in Beijing in November 1988, signed an amended agreement on November 5, 1988, and was terminated for alleged retrenchment due to political events (Tiananmen) with final repatriation to the Philippines on October 3, 1989. MHICL had a management agreement with the Palace Hotel and an MHICL officer signed the employment document under the word “noted.” Santos later filed an illegal dismissal complaint in the Philippines naming MHC, MHICL, the Palace Hotel, and Mr. Shmidt; the Palace Hotel and Mr. Shmidt were not served or involved in the NLRC proceedings.

Orders and Reliefs Challenged in the Petition

Petitioners sought annulment of three NLRC acts: (1) May 31, 1993 order reversing prior resolution and asserting NLRC jurisdiction; (2) December 15, 1994 decision directing MHC, MHICL and others to pay Santos US$19,800 (breakdown: US$12,600 unexpired salaries; US$3,600 extra four months; US$3,600 “14th month pay”) plus 10% attorney’s fees; and (3) March 30, 1995 denial of reconsideration.

Supreme Court’s Threshold Analysis — Forum Non Conveniens

The Court found the NLRC a seriously inconvenient forum because the recruitment, employment, and termination occurred outside the Philippines and the substantial contacts and evidentiary sources were foreign. The Court applied the forum non conveniens principle requiring (1) convenience of resort to the forum, (2) capacity to make an intelligent decision on law and facts, and (3) likelihood of effective enforcement. The NLRC failed each condition: (a) the Palace Hotel and key witnesses were non-residents and not amenable to process in the Philippines; (b) the contract and dismissal arose abroad invoking lex loci contractus considerations, so the NLRC was not positioned to determine the applicable substantive law or to assess factual matters like the impact of the Tiananmen events on hotel operations; and (c) any judgment would be ineffective as against the principal foreign employer since it was not served and Philippine agencies had no power to enforce against the foreign corporation.

Jurisdictional Framework for Labor Arbiters and the NLRC

The Court reiterated that labor arbiters and the NLRC derive jurisdiction from Article 217 of the Labor Code, which requires an employer-employee relationship as a jurisdictional prerequisite for the labor forum’s exclusive original jurisdiction over termination disputes and related claims. Jurisdiction must be apparent from the complaint’s allegations. The Court emphasized that failure by a labor arbiter to dismiss a case in which jurisdiction is lacking constitutes grave abuse of discretion.

Application: Lack of Jurisdiction over the Claim in the NLRC

Based on the pleadings and facts, the Court concluded the Labor Arbiter lacked jurisdiction because the necessary employer-employee relationship with the respondents before the tribunal (MHC and MHICL) was not established. The complaint allege[d] events and contractual formation overseas, named the Palace Hotel (a Chinese corporation) as principal employer (which was not served and did not participate), and identified MHICL only as having “noted” the contract or as a management contractor for the Palace Hotel. Because jurisdiction depends on whether the asserted employer-employee relationship exists as pleaded, the labor forum’s exercise of authority here amounted to grave abuse of discretion.

Analysis — MHC’s Liability and Corporate Separateness

Even assuming NLRC jurisdiction and MHICL liability, the Court held MHC could not be held liable merely because it was an incorporator and 50% stockholder of MHICL. The Court applied established doctrine that ownership alone is insufficient to pierce the corporate veil; piercing requires clear and convincing proof that (1) the alleged parent or stockholder controlled the subsidiary’s finances, policy and business practices to the extent the subsidiary had no separate mind or existence regarding the transaction; (2) such control was used to commit fraud or a wrong; and (3) the control proximately caused the injury. No such evidence existed to treat MHC and MHICL as one and the same.

Analysis — MHICL’s Liability and the Nature of the “Noted” Signat

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