G.R. No. L-64152 and G.R. No. L-64249, December 29, 1983
Pantranco North Express, Inc. vs. National Labor Relations Commission, Francisco Costales, and Pantranco Employees Association PTGWO; Francisco Costales and Pantranco Employees Association PTGWO vs. National Labor Relations Commission and Pantranco North Express, Inc.

FACTS

Francisco Costales, a bus driver for Pantranco, was suspended for 14 days in October 1980 for violating company rules. After serving his suspension, he was reassigned from driving an air-conditioned bus to a regular bus, resulting in lower earnings. Costales filed a complaint for illegal suspension and demotion. Labor Arbiter Cornelio Linsangan dismissed this complaint, finding the penalty just. Costales appealed to the NLRC, which on December 28, 1982, set aside the appeal and referred the case to the grievance machinery under the Collective Bargaining Agreement (CBA), as that step had been bypassed.
Subsequently, on August 6, 1982, Costales and the union filed a new complaint for illegal dismissal, alleging he was effectively terminated. In this second case, Labor Arbiter Teodorico Dogelio ordered Pantranco to reinstate Costales to his former air-conditioned bus assignment with back wages and benefits, plus moral and actual damages. The NLRC affirmed the reinstatement and back wages but deleted the damages award. Pantranco challenged the NLRC ruling, arguing res judicata, as the first case involved the same incident and had been disposed of. Costales, in a separate petition, challenged the deletion of the damages.

ISSUE

The primary issues were: (1) whether the principle of res judicata barred the second complaint for illegal dismissal; and (2) whether the award of back wages and the deletion of damages were proper.

RULING

The Supreme Court ruled that res judicata did not apply. For res judicata to bar a subsequent action, the prior judgment must be final and on the merits. The NLRC’s order in the first case remanding it to the CBA grievance machinery was not a final judgment on the merits; it was a procedural directive to exhaust contractual remedies. The causes of action in the two complaints also differed. The first addressed suspension and demotion, while the second was based on alleged illegal dismissal, a distinct claim that ripened after the first filing. Therefore, the second complaint was not barred.
On the merits, the Court found Pantranco was accorded due process in the second case but was negligent in failing to submit its position paper, leading to a decision based on the evidence on record. However, equitable considerations modified the back wage award. The Court noted Costales was not entirely without fault, as the first Labor Arbiter had found substantial evidence of his infractions. Pantranco’s failure to follow the CBA grievance procedure was a procedural error, not an act of bad faith. Consequently, the Court modified the NLRC decision, limiting back wages to one year instead of the period from November 1980, computed based on his 1980 earnings. The dismissal of the petition seeking reinstatement of the moral and actual damages was affirmed, as no malice or arbitrary action by Pantranco was proven.