PHILIPPINE AIRLINES, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND ARMANDO DOLINA, RESPONDENTS.

Petitioner impugns in this petition for certiorari that
part of the public respondent National
Labor Relations Commission’s (NLRC) decision in NLRC Case No. RB-IV-9319-77 which ordered
petitioner to restore private respondent Dolina to
its payroll, and to pay his salaries from 1 April 1979 “until this case is finally resolved”
[Rollo, p. 33.]
Petitioner contends that public respondent NLRC gravely abused its discretion considering that in the
same decision public respondent
affirmed the decision of the Labor Arbiter in toto granting respondent’s application for clearance to dismiss the
private respondent.

The pertinent facts are as follows:

Private respondent Dolina was admitted
to the Philippine Airlines (PAL) aviation
School for training as a pilot
beginning 16 January 1973.  The training agreement bound PAL to provide
regular and permanent employment to Dolina upon
completion of the training course.  On 25 January 1974, Dolina
completed the course, and undertook an equipment qualification course up to 4 October 1974.  On 9
October 1974, the Civil Aeronautics Administration issued him a
license as Commercial Pilot and PAL then extended him a temporary appointment
for six (6) months as Limited First Officer. 
When his appointment was due to expire on 30 April 1975, Dolina had only logged eighty four (84) hours and fifty five
(55) minutes flying time, short of the minimum 500 flying hours required for
regularization as First Officer.  To
enable him to complete the requirement, his employment was extended for another six months which appointment was described as “permanent.” On 31 October 1975,
when his appointment was again due to expire, he was still short of the minimum
flying time requirement such that his appointment was again extended up to 30
April 1976.  During this third extension
of his appointment, Dolina completed the 500 flying
hours requirement, and thus on 31 March 1976 he applied for regularization as
First Officer.  Pending his physical
examination by the chief Flight Surgeon, his appointment was again extended to 31 October 1976.  On 17
August 1976, Dolina took a psychological
examination wherein his “Adaptability Rating” was found to be
“unacceptable” [Annex “L” to the Petition, p. 8; Rollo, p. 116.] On 23
September 1976, complainant was again subjected to an examination
and interview by the Pilot Acceptance Qualifications Board as part of the regularization
process, which examination revealed the following:

*   *   *

b. Armando Dolina – After thorough evaluation of the
candidate’s past records, his performance and the result of his medical
examination as submitted by the Medical Sub?Department, the Board finds Mr. A. Dolina
not qualified for regular employment in the Company.

*   *   *

[NLRC Decision, pp. 3-4; Rollo, pp. 25-26.]

Conformably, the Board recommended the termination of the
complainant pursuant to which PAL filed a clearance application [Rollo, p. 34] for Dolina’s
termination.  In the meantime Dolina was placed
under preventive suspension effective 1
October 1976.  Dolina countered with a complaint for illegal dismissal on 6 October 1976 [Rollo,
p. 35.] On 26 January 1977 the
Officer-in-Charge of the Department of Labor Regional Office No. IV
lifted the preventive suspension, and ordered petitioner to reinstate Dolina to his former position with full backwages
from 1 October 1976 up to
actual reinstatement.  The issue of
termination and damages was referred to the Executive Labor Arbiter for
compulsory arbitration [Rollo, p. 71.]

Petitioner appealed the order lifting Dolina’s
suspension to the Secretary of Labor. 
However, on 2 March 1977, pending the
resolution of petitioner’s appeal, the parties signed an agreement before the
Undersecretary of Labor, the terms of which are as follows:

AGREEMENT

The undersigned parties hereby agree to the following:

1.       While pending final
resolution of the complaint of Mr. Armando Dolina
against the Philippine Airlines, he shall be considered in the payroll
effective 1 October 1976.

2.       The order of Regional
Director Vicente Leogardo for the reinstatement with backwages of Mr. Dolina is hereby
rendered moot and academic.

3.       The parties shall consider this arrangement
pending final resolution of the case by arbitration.

*   *   *

Subsequently, on 30 May 1977, the Acting
Secretary of Labor issued an order finding that the propriety of the suspension
had been rendered moot and academic by the above agreement and referred the
case for compulsory arbitration to the Executive Labor Arbiter [Annex
“J” to the Petition; Rollo, p. 85.] On 23 March 1979, the Labor Arbiter
rendered its decision, the dispositive portion of
which reads as follows:

IN VIEW OF ALL THE FOREGOING, it is our considered opinion that
there is merit on the application for clearance, and therefore, the same should
be as it is hereby
GRANTED.  Consequently, the oppositor’s TERMINATION IS IN ORDER.

Since the termination is upheld, perforce the claim for moral
damages is denied.  Besides pursuant to
P.D. No. 1367 dated May 1, 1978,
this office is devoid of jurisdiction to entertain said claim.

SO ORDERED.  [Decision of Labor Arbiter, p. 12; Rollo,
p. 97.]

By virtue of the above decision, PAL removed Dolina
from its payroll effective 1 April 1979.  Dolina then
appealed the Labor Arbiter’s decision to the public respondent NLRC on 29 April 1979 and there filed a
motion praying that PAL be ordered to return him to PAL’s
payroll, contending that the Labor Arbiter’s decision was not yet final because
of his timely appeal.  PAL opposed the motion claiming that it was no
longer obliged to return Dolina to its payroll since
the decision of the Labor Arbiter dated 23 March 1979 in its favor was a final
resolution of the case by arbitration [Annex “N” to the Petition, p.
1; Rollo, p. 137.]

On 8 February 1980,
public respondent NLRC rendered its decision containing the assailed portion to
wit:

*   *   *

In fine it is our considered view that the respondent’s application
for clearance to dismiss the complainant has sufficiently surmounted the test
of validity.

Be that as it may, we are not in accord with the discontinuation of
the payment of complainant’s salaries. 
The agreement of the parties stipulated in no uncertain terms that the
complainant [Dolina] is to be carried in respondent’s
payroll until this case is finally resolved. 
As things stand, the main issue is still being litigated.  The complainant, therefore, must be restored
to the payroll and paid for his salaries from 1 April 1979, the date he was dropped from the
respondent’s payroll.

WHEREFORE, the Decision appealed from should be as it is hereby
affirmed in toto.  However the respondent is ordered to restore
the complainant to its payroll and to pay his salaries from 1 April 1979 until this case is
finally resolved.

SO ORDERED.  [NLRC Decision, pp. 10-11; Rollo, pp. 32-33;
Underscoring supplied.]

Hence, this petition, with a prayer for a
temporary restraining order.  The
Court issued a temporary restraining order on 10 October 1980. 
Private respondent Dolina failed to file his
comment and the Solicitor General submitted his own Comment supporting the
stand of petitioner.  Due to the adverse
stand of the Solicitor General, public respondent NLRC submitted its own
Comment.

The issue before the Court is whether or not the NLRC committed
grave abuse of discretion in holding that private respondent Dolina was entitled to his salaries from 1 April 1979 “until this case is
finally resolved.”

PAL contends that inasmuch as the respondent Commission acting en
banc had affirmed in toto the
decision of the Labor Arbiter granting petitioner the clearance for the
dismissal of private respondent Dolina, it is an act
of grave abuse of discretion amounting to lack of jurisdiction on its part to
order petitioner to pay private respondent’s salaries from 1 April 1979 until
the case is finally terminated.  PAL
contends that said stipulation refers only to the resolution of the case by
arbitration and said arbitration of the case was terminated when the Labor
Arbiter rendered its decision dated 23
March 1979.  PAL argues that
the arbitration of the case is limited to and comprises merely the proceedings
before the Labor Arbiter such that when the latter renders a decision,
arbitration of the dispute is terminated.

Public respondent NLRC on the other hand contends that
arbitration is a continuing process from the time the case is referred by the
Secretary of Labor to the Arbitration Branch until the final judgment is had on
appeal.  Since the Labor Arbiter’s
decision in favor of petitioner did not finally resolve the case in view of the
timely appeal by private respondent from said decision, the case was not yet
finally terminated by arbitration and Dolina is
entitled to be placed in petitioner’s payroll until the complaint is finally
resolved.

The above contentions call for the proper interpretation of the
agreement between the parties, specifically the third stipulation containing
the clause “pending final resolution of the case by arbitration.”

It is a basic rule in interpretation of contracts that the
circumstances under which an instrument was made, including the situation of the subject thereof and
the parties to it, may be considered so that the intention of the contracting parties may be judged
correctly [Art. 1371, Civil Code of the Philippines; Section 11, Rule 130,
Rules of Court; Lim v. Court of Appeals, G.R. No. L-40258, September 11, 1980, 99 SCRA 668.] In the instant case, the stipulation in the 2 March 1977 agreement that Dolina shall be included in the payroll of PAL until final
resolution of the case by arbitration was intended to supersede the order of
the Regional Director which, by stipulation of the parties, was rendered moot
and academic.  In lieu of reinstatement
and the payment of his backwages, private respondent
was included in petitioner’s payroll, effective from
the time he was preventively suspended until final resolution of the case by
arbitration, without having to perform any work for the petitioner.  In entering into the agreement, the parties
could not have intended to include in the clause “final resolution of the
case by arbitration” the whole adjudicatory process, including
appeal.  For if it were so, even
proceedings on certiorari before this Court would be embraced by the
term “arbitration” and private respondent will continue to receive
monthly salary without rendering any service to the petitioner regardless of
the outcome of the proceedings before the Labor Arbiter, for as long as one of
the parties appeal to the NLRC and until the case is finally resolved by this
Court.  This is clearly an absurdity
which could not have been contemplated by the parties.

Neither can proceedings on appeal before the NLRC en banc
be considered as part of the
arbitration proceeding.  In its broad
sense, arbitration is the reference of a dispute to an impartial third person,
chosen by the parties or appointed by statutory authority to hear and decide
the case in controversy [Chan Linte v. Law Union and
Rock, Ins. Co., 42 Phil. 548 (1921).] When the consent of one of the parties is
enforced by statutory provisions, the proceeding is referred to as compulsory
arbitration.  In labor cases, compulsory
arbitration is the process of settlement of labor disputes by a government
agency which has the authority to investigate and to make an award which is
binding on all the parties [See Wood v. Seattle, 23 Wash. 1, 62 P 135,
52 LRA 369 (1920); Amalgamated Association v. Wisconsin Employees’ Relations
Board, 340 U.S. 383-410, 95 L. Ed. 381 (1951).] Under the Labor Code, it is the
Labor Arbiter who is clothed with the authority to conduct compulsory
arbitration on cases involving termination disputes [Article 217, Pres. Decree
No. 442, as amended.] When the Labor Arbiter renders his decision, compulsory
arbitration is deemed terminated because by then the hearing and determination
of the controversy has ended.  Any appeal
raised by an aggrieved party from the Labor Arbiter’s decision is already
beyond the scope of arbitration since in the appeal stage,
the NLRC en banc merely reviews the Labor Arbiter’s decision for
errors of fact or law and no longer duplicates the proceedings before the Labor
Arbiter.  Thus, the clause “pending
final resolution of the case by arbitration” should be understood to be
limited only to the proceedings before the Labor Arbiter, such that when the latter
rendered his decision, the case was finally resolved by arbitration.

More important, however, is the fact that the NLRC’s
order for the continued payment of Dolina’s salaries
is inconsistent with its affirmance of the Labor
Arbiter’s decision upholding the validity of Dolina’s
dismissal.  In affirming the Labor
Arbiter’s decision granting the termination clearance, the NLRC held that:

With respect to the issue of whether or not the complainant’s [Dolina] dismissal was sufficiently grounded, we are not
persuaded that the respondent [herein petitioner PAL] is under obligation to
employ him as regular employee simply because he was certified physically fit
and technically proficient by the CAA.

This is understandable for it concerns the safety of its
properties, and above all, the safety of the lives and properties of its
passengers, which by law it is committed to transport safely.  In the absence, therefore, of any showing
that its standards are unreasonable and discriminatory, which we do not find
here, We cannot disturb them.  We can only say that for exercising
extraordinary diligence in the selection of its pilots, We
join the public in commending it.

*   *   *

In fine, it is Our considered view that
the respondent’s application for clearance to dismiss the complainant has
sufficiently surmounted the test of validity.

In view of the above finding of valid dismissal, the NLRC had no
authority to order the continued payment of Dolina’s
salaries from 1 April 1979
until the case is finally resolved.  The NLRC’s order would result in compensating Dolina for services no longer rendered and when he is no
longer in PAL’s employ.  This is contrary to the age-old rule of
“a fair day’s wage for a fair
day’s labor” which continues to govern the relation between labor
and capital and remains a basic
factor in determining employees’ wages [Durabilt
Recapping Plant & Co. v. National Labor Relations Commission, G.R. No.
76746, July 27, 1987, 152 SCRA 328.] So that, if there is no work performed by
the employee there can be no wage or pay unless the laborer was able, willing
and ready to work but was prevented by management or was illegally locked out,
suspended or dismissed.  Where the
employee’s dismissal was for a just
cause, it would neither be fair nor just to allow the employee to recover
something he has not earned and could not have earned [Santos v. National Labor
Relations Commission, G.R. No. 76721, September 21, 1987, 154 SCRA 166.]

Moreover, in ordering the continued payment of Dolina’s salaries from 1 April 1979 until the case is finally resolved, the NLRC
in effect ordered the payment of backwages to Dolina notwithstanding its finding of a valid dismissal.

This is clearly untenable.

In the first place, backwages in
general are granted on grounds of equity for earnings which a worker or
employee has lost due to his illegal dismissal [New Manila Candy Workers Union
(NACONWA-PAFLU) v. Court of Industrial Relations, G.R. No. L-29728, October 30,
1978, 86 SCRA 37; Durabilt Recapping Plant & Co.
v. National Labor Relations Commission, supra; Chong Guan Trading v. National Labor Relations Commission,
G.R. No. 81471, April 26, 1989; Santos v. National Labor Relations Commission, supra.] Where, as in this case, the dismissal was for a just cause, there is no factual or
legal basis for ordering the payment of backwages.  The order of the NLRC for the continued
payment of Dolina’s salaries would allow the latter
to unjustly enrich himself at the expense of the petitioner.  This Court has reiterated time and again that
the law, in protecting the rights of the laborer, authorizes neither oppression
nor self-destruction of the employer [Colgate Palmolive Philippines, Inc. v. Ople, G.R. No. 73681, June 30, 1988, 163 SCRA 323.] In this
case, the NLRC chose not to adhere with fidelity to this doctrine.

Secondly, NLRC’s order for continued
payment of Dolina’s salary from 1 April 1979 up to
the final resolution of the case would place Dolina
in a better position than those workers who were found to have been illegally
dismissed by their employer.  For in the
latter case, the backwages that can be recovered by
the worker is limited to three years [Mercury Drug Co., Inc. v. Court of
Industrial Relations, G.R. No. L-23357, April 30, 1974, 56 SCRA 694; Philippine
Airlines, Inc. v. National Labor Relations Commission, G.R. No. 64809, November
29, 1983, 126 SCRA 223; Madrigal & Co., Inc. v. Zamora, G.R. No. L-48237, Madrigal & Co., Inc. v. Minister of Labor, G.R. No.
L-49023, June 30, 1987] while Dolina, whose dismissal
was found to be valid, can recover approximately ten years backwages,
which corresponds to the period from 1 April 1979 until “final
resolution” of the instant case.

Considering the foregoing, the Court holds that respondent NLRC’s order for the continued payment of Dolina’s salaries from “1 April 1979 until the case is
finally resolved” is contrary to law and established jurisprudence and the
NLRC acted in excess of its jurisdiction in issuing the assailed order.  In the recent case of Llora
Motors, Inc. v. Drilon, G.R. No. 82895, November 7,
1989 the Court held as an act without or in excess of jurisdiction the portion
of the Labor Arbiter’s award, which required the employer to pay to its
employee an amount equivalent to a half month’s pay for every year of service
as retirement benefits, for being without basis either in law or contract.  Similarly, there is in this case an excess of
jurisdiction on the part of the NLRC in ordering the continued payment of Dolina’s salaries “from 1 April 1979 until the case is finally resolved.”

WHEREFORE, that part of the dispositive
portion of the decision of the National Labor Relations Commission in NLRC CASE
NO. RB-IV-9319-77 requiring petitioner to restore private respondent to its
payroll and ordering the payment of his salaries from 1 April 1979 until the
case is finally resolved is hereby declared NULL and VOID and SET ASIDE.  The temporary Restraining Order issued by the
Court on 10 October 1980
is made PERMANENT.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr.,
Feliciano, and Bidin,
JJ., concur.