G.R. No. L-81490 August 31, 1988
Hagonoy Water District, represented by its General Manager Celestino S. Vengco, petitioner, vs. The Hon. National Labor Relations Commission, Executive Labor Arbiter Vladimir P.L. Sampang, Deputy Sheriff Jose A. Cruz and Dante Villanueva, respondents.

FACTS

Private respondent Dante Villanueva, employed as a service foreman by petitioner Hagonoy Water District, was indefinitely suspended and later dismissed in 1985. He filed a complaint for illegal dismissal and underpayment of wages before the Ministry of Labor and Employment. Petitioner Hagonoy Water District moved to dismiss the complaint for lack of jurisdiction, asserting that as a government entity, its personnel are governed by the Civil Service Law and disputes fall under the Civil Service Commission’s jurisdiction. It cited a Social Security Commission resolution classifying local water districts as government instrumentalities.
The Labor Arbiter denied the motion and assumed jurisdiction, ruling in favor of Villanueva and ordering his reinstatement with backwages. The National Labor Relations Commission (NLRC) affirmed this decision. Petitioner sought reconsideration, but a writ of execution was issued, garnishing its bank deposits. Petitioner then filed this certiorari petition to annul the Labor Arbiter’s and NLRC’s decisions, reiterating the jurisdictional challenge.

ISSUE

Whether the Labor Arbiter and the NLRC had jurisdiction over the illegal dismissal complaint filed by an employee of the Hagonoy Water District.

RULING

The Supreme Court granted the petition, annulling the decisions of the Labor Arbiter and the NLRC. The legal logic centered on the applicable law at the time the Labor Arbiter rendered his decision on March 17, 1986. The Labor Arbiter based his assumption of jurisdiction on Section 25 of Presidential Decree No. 198 (the Provincial Water Utilities Act of 1973), which originally exempted water districts and their employees from the Civil Service Law, characterizing their function as proprietary.
However, the Court clarified that this exemption was repealed by Presidential Decree No. 1479, effective June 11, 1978, which deleted said Section 25. Consequently, at the time of the dispute, there was no statutory provision exempting water district employees from civil service coverage. The Court, citing its precedent in Baguio Water District vs. Trajano, held that local water districts created under P.D. No. 198 are government-owned or controlled corporations. Following the doctrine established in National Housing Corporation vs. Juco, government-owned or controlled corporations with original charters—which includes those created by special law like P.D. No. 198—fall under the Civil Service. Therefore, their employees are subject to Civil Service Law and rules, and labor disputes concerning them are within the jurisdiction of the Civil Service Commission, not the labor arbiters.
The Court further ruled that the subsequent effectivity of the 1987 Constitution , which expanded civil service coverage, did not operate retrospectively to validate the Labor Arbiter’s earlier decision, which was rendered without jurisdiction. A decision rendered without jurisdiction is a nullity. Thus, the Labor Arbiter and the NLRC had no authority to adjudicate the case. The Court set aside the assailed decisions but without prejudice to Villanueva refiling his complaint in the proper forum.