The orders of respondent judge^[1] dated June 20, 1996 and October 16, 1996, taking jurisdiction over an action for damages filed by an employer against its dismissed employee, are assailed in this petition for certiorari under Rule 65 of the Rules of Court for having been issued in grave abuse of discretion.

Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In 1993, private respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal dismissal with the National Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July 7, 1994, Labor Arbiter Nicodemus G. Palangan found petitioner to have been illegally dismissed and ordered the payment of separation pay in lieu of reinstatement, and of backwages and attorney's fees. The decision was appealed to the NLRC, which dismissed the same for having been filed out of time.^[2] Elevated by petition for certiorari before this Court, the case was dismissed on technical grounds^[3]; however, the Court also pointed out that even if all the procedural requirements for the filing of the petition were met, it would still be dismissed for failure to show grave abuse of discretion on the part of the NLRC.

On November 13, 1995, private respondent filed a complaint for damages before the Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which prayed for the payment of the following:

a.	P709,217.97 plus 12% interest as loss of profit and/or unearned income of three years;
b.	P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties, space, etc. for three years;
c.	P5,000.00 as initial expenses of litigation; and
d.	P25,000.00 as attorney's fees.[4]

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He interposed in the court below that the action for damages, having arisen from an employer-employee relationship, was squarely under the exclusive original jurisdiction of the NLRC under Article 217(a), paragraph 4 of the Labor Code and is barred by reason of the final judgment in the labor case. He accused private respondent of splitting causes of action, stating that the latter could very well have included the instant claim for damages in its counterclaim before the Labor Arbiter. He also pointed out that the civil action of private respondent is an act of forum-shopping and was merely resorted to after a failure to obtain a favorable decision with the NLRC.

Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which summarized the basis for private respondent's action for damages in this manner:

Paragraph 5 of the complaint alleged that the defendant violated the plaintiff's policy re: His business in his branch at Iligan City wherein defendant was the Sales Operations Manager, and paragraph 7 of the same complaint briefly narrated the modus operandi of defendant, quoted herein: Defendant canvassed customers personally or through salesmen of plaintiff which were hired or recruited by him. If said customer decided to buy items from plaintiff on installment basis, defendant, without the knowledge of said customer and plaintiff, would buy the items on cash basis at ex-factory price, a privilege not given to customers, and thereafter required the customer to sign promissory notes and other documents using the name and property of plaintiff, purporting that said customer purchased the items from plaintiff on installment basis. Thereafter, defendant collected the installment payments either personally or through Venus Lozano, a Group Sales Manager of plaintiff but also utilized by him as secretary in his own business for collecting and receiving of installments, purportedly for the plaintiff but in reality on his own account or business. The collection and receipt of payments were made inside the Iligan City branch using plaintiff's facilities, property and manpower. That accordingly plaintiff's sales decreased and reduced to a considerable extent the profits which it would have earned.^[5]

In declaring itself as having jurisdiction over the subject matter of the instant controversy, respondent court stated:

A perusal of the complaint which is for damages does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages as redress for defendant's breach of his contractual obligation to plaintiff who was damaged and prejudiced. The Court believes such cause of action is within the realm of civil law, and jurisdiction over the controversy belongs to the regular courts.

While seemingly the cause of action arose from employer- employee relations, the employer's claim for damages is grounded on the nefarious activities of defendant causing damage and prejudice to plaintiff as alleged in paragraph 7 of the complaint. The Court believes that there was a breach of a contractual obligation, which is intrinsically a civil dispute. The averments in the complaint removed the controversy from the coverage of the Labor Code of the Philippines and brought it within the purview of civil law. (Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.) xxx^[6]

Petitioner's motion for reconsideration of the above Order was denied for lack of merit on October 16, 1996. Hence, this petition.

Acting on petitioner's prayer, the Second Division of this Court issued a Temporary Restraining Order ("TRO ") on March 5, 1997, enjoining respondents from further proceeding with Civil Case No. 95-554 until further orders from the Court.

By way of assignment of errors, the petition reiterates the grounds raised in the Motion to Dismiss dated January 30, 1996, namely, lack of jurisdiction over the subject matter of the action, res judicata, splitting of causes of action, and forum-shopping. The determining issue, however, is the issue of jurisdiction.

Article 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the filing of this case, reads:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. --- (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

xxx

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;

xxx

The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.") No. 6715, which took effect on March 21, 1989, and which put to rest the earlier confusion as to who between Labor Arbiters and regular courts had jurisdiction over claims for damages as between employers and employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including claims for damages, was originally lodged with the Labor Arbiters and the NLRC by Article 217 of the Labor Code.^[7] On May 1, 1979, however, Presidential Decree ("P.D.") No. 1367 amended said Article 217 to the effect that "Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages."^[8] This limitation in jurisdiction, however, lasted only briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code almost to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for all forms of damages "arising from the employer-employee relations".

Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for damages filed by employees,^[9] we hold that by the designating clause "arising from the employer-employee relations" Article 217 should apply with equal force to the claim of an employer for actual damages against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded by the Labor Code), jurisprudence was settled that where the plaintiff's cause of action for damages arose out of, or was necessarily intertwined with, an alleged unfair labor practice committed by the union, the jurisdiction is exclusively with the (now defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular courts over the same is a nullity.^[10] To allow otherwise would be "to sanction split jurisdiction, which is prejudicial to the orderly administration of justice."^[11] Thus, even after the enactment of the Labor Code, where the damages separately claimed by the employer were allegedly incurred as a consequence of strike or picketing of the union, such complaint for damages is deeply rooted from the labor dispute between the parties, and should be dismissed by ordinary courts for lack of jurisdiction. As held by this Court in National Federation of Labor vs. Eisma, 127 SCRA 419:

Certainly, the present Labor Code is even more committed to the view that on policy grounds, and equally so in the interest of greater promptness in the disposition of labor matters, a court is spared the often onerous task of determining what essentially is a factual matter, namely, the damages that may be incurred by either labor or management as a result of disputes or controversies arising from employer-employee relations.

There is no mistaking the fact that in the case before us, private respondent's claim against petitioner for actual damages arose from a prior employer-employee relationship. In the first place, private respondent would not have taken issue with petitioner's "doing business of his own" had the latter not been concurrently its employee. Thus, the damages alleged in the complaint below are: first, those amounting to lost profits and earnings due to petitioner's abandonment or neglect of his duties as sales manager, having been otherwise preoccupied by his unauthorized installment sale scheme; and second, those equivalent to the value of private respondent's property and supplies which petitioner used in conducting his "business ".

Second, and more importantly, to allow respondent court to proceed with the instant action for damages would be to open anew the factual issue of whether petitioner's installment sale scheme resulted in business losses and the dissipation of private respondent's property. This issue has been duly raised and ruled upon in the illegal dismissal case, where private respondent brought up as a defense the same allegations now embodied in his complaint, and presented evidence in support thereof. The Labor Arbiter, however, found to the contrary ---that no business losses may be attributed to petitioner as in fact, it was by reason of petitioner's installment plan that the sales of the Iligan branch of private respondent (where petitioner was employed) reached its highest record level to the extent that petitioner was awarded the 1989 Field Sales Achievement Award in recognition of his exceptional sales performance, and that the installment scheme was in fact with the knowledge of the management of the Iligan branch of private respondent.^[12] In other words, the issue of actual damages has been settled in the labor case, which is now final and executory.

Still on the prospect of re-opening factual issues already resolved by the labor court, it may help to refer to that period from 1979 to 1980 when jurisdiction over employment-predicated actions for damages vacillated from labor tribunals to regular courts, and back to labor tribunals. In Ebon vs. de Guzman, 113 SCRA 52,^[13] this Court discussed:

The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award moral and other forms of damages in labor cases could have assumed that the Labor Arbiters' position-paper procedure of ascertaining the facts in dispute might not be an adequate tool for arriving at a just and accurate assessment of damages, as distinguished from backwages and separation pay, and that the trial procedure in the Court of First Instance would be a more effective means of determining such damages. xxx

Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and the NLRC of the jurisdiction to award damages in labor cases because that setup would mean duplicity of suits, splitting the cause of action and possible conflicting findings and conclusions by two tribunals on one and the same claim.

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217 in its original form) nullified Presidential Decree No. 1367 and restored to the Labor Arbiter and the NLRC their jurisdiction to award all kinds of damages in cases arising from employer-employee relations. xxx (Underscoring supplied)

Clearly, respondent court's taking jurisdiction over the instant case would bring about precisely the harm that the lawmakers sought to avoid in amending the Labor Code to restore jurisdiction over claims for damages of this nature to the NLRC.

This is, of course, to distinguish from cases of actions for damages where the employer-employee relationship is merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of regular courts was upheld where the damages, claimed for were based on tort^[14], malicious prosecution^[15], or breach of contract, as when the claimant seeks to recover a debt from a former employee^[16] or seeks liquidated damages in enforcement of a prior employment contract. ^[17]

Neither can we uphold the reasoning of respondent court that because the resolution of the issues presented by the complaint does not entail application of the Labor Code or other labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for damages arising from employer-employee relations ---in other words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages governed by the Civil Code.^[18]

Thus, it is obvious that private respondent's remedy is not in the filing of this separate action for damages, but in properly perfecting an appeal from the Labor Arbiter's decision. Having lost the right to appeal on grounds of untimeliness, the decision in the labor case stands as a final judgment on the merits, and the instant action for damages cannot take the place of such lost appeal.

Respondent court clearly having no jurisdiction over private respondent's complaint for damages, we will no longer pass upon petitioner's other assignments of error.

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554 before Branch 39 of the Regional Trial Court of Misamis Oriental is hereby DISMISSED. No pronouncement as to costs.

SO ORDERED.

Melo, (Chairman), Vitug, and Panganiban, JJ., concur.

Purisima, J., abroad-no part.

---

^[1] Presiding over Branch 39 of the Regional Trial Court of Misamis Oriental.
^[2] NLRC Resolution dated August 4, 1995. Private respondent's motion for reconsideration of said resolution was denied per NLRC Resolution promulgated on September 26, 1995. Rollo, 66-70.
^[3] Failure to submit, in compliance with SC Circular 19-91, the requirements of: (1) proof of service of copy of petition to adverse parties, and (2) verified statement of the date when the assailed resolution was received. SC (Third Division) Resolution dated December 13, 1995; Rollo, 71-72.
^[4] Complaint, Annex "A" of Petition; Rollo, 42.
^[5] RTC Order dated June 20, 1996; Rollo, 81-83.
^[6] Ibid.
^[7] As applied in Garcia vs. Martinez, 84 SCRA 577; Bengzon vs. Inciong, 91 SCRA 248.
^[8] See Garcia vs. Martinez, 90 SCRA 331; Calderon vs. Court of Appeals, 100 SCRA 459; Abad vs. Philippine American General Insurance Co., 108 SCRA 717. In all three cases, it was declared that money claims arising from employer-employee relations by virtue of P.D. No. 1367 were cognizable by regular courts, labor arbiters being excluded from passing upon "claims for moral and other forms of damages."
^[9] See Polotan-Tuvera vs. Dayrit, 160 SCRA 423; Dizon vs. Court of Appeals, 210 SCRA 107; Pepsi-Cola Bottling Company of the Philippines vs. Martinez, 198 Phil. 296.
^[10] PLDT vs. Free Telephone Workers Union, 201 Phil. 611, citing Holganza vs. Apostol, 76 SCRA 191; Associated Labor Union vs. Cruz, 41 SCRA 12; Leoquenio vs. Canada Dry Bottling Co., 37 SCRA 535; Progressive Labor Association vs. Atlas Consolidated Mining and Development Corporation, 33 SCRA 349; Associated Labor Union vs. Gomez, 19 SCRA 304.
^[11] Flores vs. Filipino Hand Embroidery Co., Inc, 165 SCRA 30, citing PLDT vs. Free Telephone Workers Union, supra.
^[12] Decision of the Labor Arbiter; Rollo, 58-60.
^[13] Cited in Polotan-Tuvera vs. Dayrit, supra.
^[14] Ocheda vs. Court of Appeals, 214 SCRA 629.
^[15] Pepsi-Cola vs. Gallang, 201 SCRA 695.
^[16] Georg Grotjahn GMBH & Co. vs. Isnani, 235 SCRA 216.
^[17] Dai-ichi Electronics Manufacturing Corporation vs. Villarama, 238 SCRA 267. In this case, the Court held that the enforcement of a provision in the employment contract precluding plaintiff's former employee from accepting employment in an entity engaged in the same line of business as plaintiff for a period of two years from date of termination is a post-employment relations matter over which the RTC has jurisdiction.
^[18] See Suario vs. Bank of the Philippine Islands, 176 SCRA 688; Primero vs. Intermediate Appellate Court, 156 SCRA 435.