G.R. No. L-56566 April 15, 1985
DE LA SALLE UNIVERSITY, BROTHER DANIEL ORTIZ, FSC and DEAN PATRICIO CEBALLOS, petitioners, vs. LOLITA U. LAO and COURT OF APPEALS, respondents.

FACTS

Respondent Lolita U. Lao was appointed as a non-tenured, probationary assistant professor at De La Salle University (DLSU) in October 1974. In June 1975, she was given a contract for full-time faculty status for the 1975-76 school year, which she signed. However, the university president never signed this contract because the department chairman, Frank Tajanan, did not forward it. Lao taught during the first semester. In August 1975, she was informed that her probationary status would be terminated at the end of that semester, and her services were subsequently ended on October 15, 1975.
Lao filed a petition in the Court of First Instance (CFI) to restrain her dismissal and to claim damages. She later amended her petition, limiting her action solely to the recovery of P99,000 in damages. The CFI ruled in her favor, awarding damages, and the Court of Appeals affirmed. DLSU and its officials appealed to the Supreme Court, contending that the labor tribunals, not the regular courts, had jurisdiction over the case and that Lao had no cause of action.

ISSUE

1. Whether the regular courts or the National Labor Relations Commission (NLRC) had jurisdiction over Lao’s action for damages arising from her dismissal.
2. Whether Lao had a cause of action for damages against the petitioners.

RULING

The Supreme Court reversed the appellate decision and dismissed Lao’s complaint. On jurisdiction, the Court held that the regular courts had proper jurisdiction. While the Labor Code grants Labor Arbiters exclusive jurisdiction over cases arising from employer-employee relations, this presupposes that the existence of such a relationship is undisputed. Here, a fundamental issue was whether Lao had attained permanent employment status after her probationary period, which required a judicial determination of whether an employer-employee relationship existed under the claimed permanent contract. This substantive legal question was more competently determined by the regular courts after a full trial rather than through the summary position-paper procedure of the Labor Arbiter.
On the merits, the Court ruled that Lao had no cause of action for damages. The contract for permanent employment was never perfected because it lacked the signature of the university president, a requisite for its validity. It was legally withdrawn by the university before it became effective and was never delivered to Lao. Consequently, she remained a probationary employee, and the university acted within its prerogative in terminating her probationary employment at the end of its term. Since no perfected permanent contract was violated, there was no legal basis for an award of damages, though the Court noted Lao filed her case in good faith.