Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 85985 August 13, 1993

PHILIPPINE AIRLINES, INC. (PAL), petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA
and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents.

Solon Garcia for petitioner.

Adolpho M. Guerzon for respondent PALEA.

MELO, J.:

In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation
of a Code of Discipline among employees is a shared responsibility of the employer and the
employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of
Discipline. The Code was circulated among the employees and was immediately implemented, and
some employees were forthwith subjected to the disciplinary measures embodied therein.

Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint
before the National Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-
2051-85) with the following remarks: "ULP with arbitrary implementation of PAL's Code of Discipline
without notice and prior discussion with Union by Management" (Rollo, p. 41). In its position paper,
PALEA contended that PAL, by its unilateral implementation of the Code, was guilty of unfair labor
practice, specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA
alleged that copies of the Code had been circulated in limited numbers; that being penal in nature
the Code must conform with the requirements of sufficient publication, and that the Code was
arbitrary, oppressive, and prejudicial to the rights of the employees. It prayed that implementation of
the Code be held in abeyance; that PAL should discuss the substance of the Code with PALEA; that
employees dismissed under the Code be reinstated and their cases subjected to further hearing; and
that PAL be declared guilty of unfair labor practice and be ordered to pay damages (pp. 7-14,
Record.)

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe
rules and regulations regarding employess' conduct in carrying out their duties and functions, and
alleging that by implementing the Code, it had not violated the collective bargaining agreement
(CBA) or any provision of the Labor Code. Assailing the complaint as unsupported by evidence, PAL
maintained that Article 253 of the Labor Code cited by PALEA reffered to the requirements for
negotiating a CBA which was inapplicable as indeed the current CBA had been negotiated.
In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was
violated when PAL unilaterally implemented the Code, and cited provisions of Articles IV and I of
Chapter II of the Code as defective for, respectively, running counter to the construction of penal
laws and making punishable any offense within PAL's contemplation. These provisions are the
following:

Sec. 2. Non-exclusivity. — This Code does not contain the entirety of the rules and
regulations of the company. Every employee is bound to comply with all applicable
rules, regulations, policies, procedures and standards, including standards of quality,
productivity and behaviour, as issued and promulgated by the company through its
duly authorized officials. Any violations thereof shall be punishable with a penalty to
be determined by the gravity and/or frequency of the offense.

Sec. 7. Cumulative Record. — An employee's record of offenses shall be cumulative.

The penalty for an offense shall be determined on the basis of his past record of
offenses of any nature or the absence thereof. The more habitual an offender has
been, the greater shall be the penalty for the latest offense. Thus, an employee may
be dismissed if the number of his past offenses warrants such penalty in the
judgment of management even if each offense considered separately may not
warrant dismissal. Habitual offenders or recidivists have no place in PAL. On the
other hand, due regard shall be given to the length of time between commission of
individual offenses to determine whether the employee's conduct may indicate
occasional lapses (which may nevertheless require sterner disciplinary action) or a
pattern of incorrigibility.

Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed
to appear at the scheduled date. Interpreting such failure as a waiver of the parties' right to present
evidence, the labor arbiter considered the case submitted for decision. On November 7, 1986, a
decision was rendered finding no bad faith on the part of PAL in adopting the Code and ruling that
no unfair labor practice had been committed. However, the arbiter held that PAL was "not totally fault
free" considering that while the issuance of rules and regulations governing the conduct of
employees is a "legitimate management prerogative" such rules and regulations must meet the test
of "reasonableness, propriety and fairness." She found Section 1 of the Code aforequoted as "an all
embracing and all encompassing provision that makes punishable any offense one can think of in
the company"; while Section 7, likewise quoted above, is "objectionable for it violates the rule against
double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp. 38-
39, Rollo.)

The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated."
Noting that PAL's assertion that it had furnished all its employees copies of the Code is unsupported
by documentary evidence, she stated that such "failure" on the part of PAL resulted in the imposition
of penalties on employees who thought all the while that the 1966 Code was still being followed.
Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses no one from compliance
. . . finds application only after it has been conclusively shown that the law was circulated to all the
parties concerned and efforts to disseminate information regarding the new law have been exerted.
(p. 39, Rollo.) She thereupon disposed:

WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:

1. Furnish all employees with the new Code of Discipline;

 2. Reconsider the cases of employees meted with penalties under the New Code of
Discipline and remand the same for further hearing; and

3. Discuss with PALEA the objectionable provisions specifically tackled in the body of
the decision.

All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.

SO ORDERED. (p. 40, Rollo.)

PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion,
with Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no
evidence of unfair labor practice committed by PAL and affirmed the dismissal of PALEA's charge.
Nonetheless, the NLRC made the following observations:

Indeed, failure of management to discuss the provisions of a contemplated code of

discipline which shall govern the conduct of its employees would result in the erosion
and deterioration of an otherwise harmonious and smooth relationship between them
as did happen in the instant case. There is no dispute that adoption of rules of
conduct or discipline is a prerogative of management and is imperative and essential
if an industry, has to survive in a competitive world. But labor climate has
progressed, too. In the Philippine scene, at no time in our contemporary history is the
need for a cooperative, supportive and smooth relationship between labor and
management more keenly felt if we are to survive economically. Management can no
longer exclude labor in the deliberation and adoption of rules and regulations that will
affect them.

The complainant union in this case has the right to feel isolated in the adoption of the
New Code of Discipline. The Code of Discipline involves security of tenure and loss
of employment — a property right! It is time that management realizes that to attain
effectiveness in its conduct rules, there should be candidness and openness by
Management and participation by the union, representing its members. In fact, our
Constitution has recognized the principle of "shared responsibility" between
employers and workers and has likewise recognized the right of workers to
participate in "policy and decision-making process affecting their rights . . ." The latter
provision was interpreted by the Constitutional Commissioners to mean participation
in "management"' (Record of the Constitutional Commission, Vol. II).

In a sense, participation by the union in the adoption of the code if conduct could
have accelerated and enhanced their feelings of belonging and would have resulted
in cooperation rather than resistance to the Code. In fact, labor-management
cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.)

Respondent Commission thereupon disposed:

WHEREFORE, premises considered, we modify the appealed decision in the sense

that the New Code of Discipline should be reviewed and discussed with complainant
union, particularly the disputed provisions [.] (T)hereafter, respondent is directed to
furnish each employee with a copy of the appealed Code of Discipline. The pending
cases adverted to in the appealed decision if still in the arbitral level, should be
reconsidered by the respondent Philippine Air Lines. Other dispositions of the Labor
Arbiter are sustained.
 SO ORDERED. (p. 5, NLRC Decision.)

PAL then filed the instant petition for certiorari charging public respondents with grave abuse of
discretion in: (a) directing PAL "to share its management prerogative of formulating a Code of
Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative with
the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to reconsider
pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.)

As stated above, the Principal issue submitted for resolution in the instant petition is whether
management may be compelled to share with the union or its employees its prerogative of
formulating a code of discipline.

PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the
sharing of responsibility therefor between employer and employee.

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article
211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure the
participation of workers in decision and policy-making processes affecting the rights, duties and
welfare." However, even in the absence of said clear provision of law, the exercise of management
prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it
was held that management's prerogatives must be without abuse of discretion.

In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the
company's right to implement a new system of distributing its products, but gave the following
caveat:

So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them.
(at p. 28.)

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a collective bargaining agreement, or the general
principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]).
Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be duly
established that the prerogative being invoked is clearly a managerial one.

A close scrutiny of the objectionable provisions of the Code reveals that they are not purely
business-oriented nor do they concern the management aspect of the business of the company as in
the San Miguel case. The provisions of the Code clearly have repercusions on the employee's right
to security of tenure. The implementation of the provisions may result in the deprivation of an
employee's means of livelihood which, as correctly pointed out by the NLRC, is a property right
(Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case
which border on infringement of constitutional rights, we must uphold the constitutional requirements
for the protection of labor and the promotion of social justice, for these factors, according to Justice
Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the worker" (Employees
Association of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991]
635).

Verily, a line must be drawn between management prerogatives regarding business operations per
se and those which affect the rights of the employees. In treating the latter, management should see
to it that its employees are at least properly informed of its decisions or modes action. PAL asserts
that all its employees have been furnished copies of the Code. Public respondents found to the
contrary, which finding, to say the least is entitled to great respect.

PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27,
1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules and
regulations to carry out the functions of management without having to discuss the same with
PALEA and much less, obtain the latter's conformity thereto" (pp. 11-12, Petitioner's Memorandum;
pp 180-181, Rollo.) Petitioner's view is based on the following provision of the agreement:

The Association recognizes the right of the Company to determine matters of

management it policy and Company operations and to direct its manpower.
Management of the Company includes the right to organize, plan, direct and control
operations, to hire, assign employees to work, transfer employees from one
department, to another, to promote, demote, discipline, suspend or discharge
employees for just cause; to lay-off employees for valid and legal causes, to
introduce new or improved methods or facilities or to change existing methods or
facilities and the right to make and enforce Company rules and regulations to carry
out the functions of management.

The exercise by management of its prerogative shall be done in a just reasonable,

humane and/or lawful manner.

Such provision in the collective bargaining agreement may not be interpreted as cession of
employees' rights to participate in the deliberation of matters which may affect their rights and the
formulation of policies relative thereto. And one such mater is the formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just participation in
the discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D.
442) was amended by Republic Act No. 6715, it was already declared a policy of the State, "(d) To
promote the enlightenment of workers concerning their rights and obligations . . . as employees."
This was, of course, amplified by Republic Act No 6715 when it decreed the "participation of workers
in decision and policy making processes affecting their rights, duties and welfare." PAL's position
that it cannot be saddled with the "obligation" of sharing management prerogatives as during the
formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner's
Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such "obligation" was not yet
founded in law when the Code was formulated, the attainment of a harmonious labor-management
relationship and the then already existing state policy of enlightening workers concerning their rights
as employees demand no less than the observance of transparency in managerial moves affecting
employees' rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the
nature of its business cannot be overemphasized. In fact, its being a local monopoly in the business
demands the most stringent of measures to attain safe travel for its patrons. Nonetheless, whatever
disciplinary measures are adopted cannot be properly implemented in the absence of full
cooperation of the employees. Such cooperation cannot be attained if the employees are restive on
account, of their being left out in the determination of cardinal and fundamental matters affecting
their employment.

WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special
pronouncement is made as to costs.
SO ORDERED

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 147590 April 2, 2007

ANTONIO C. CARAG, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ISABEL G. PANGANIBAN-ORTIGUERRA, as
Executive Labor Arbiter, NAFLU, and MARIVELES APPAREL CORPORATION LABOR
UNION, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari1 assailing the Decision dated 29 February 20002 and the
Resolution dated 27 March 20013 of the Court of Appeals (appellate court) in CA-G.R. SP Nos.
54404-06. The appellate court affirmed the decision dated 17 June 19944 of Labor Arbiter Isabel
Panganiban-Ortiguerra (Arbiter Ortiguerra) in RAB-III-08-5198-93 and the resolution dated 5 January
19955 of the National Labor Relations Commission (NLRC) in NLRC CA No. L-007731-94.

Arbiter Ortiguerra held that Mariveles Apparel Corporation (MAC), MAC's Chairman of the Board
Antonio Carag (Carag), and MAC's President Armando David (David) (collectively, respondents) are
guilty of illegal closure and are solidarily liable for the separation pay of MAC's rank and file
employees. The NLRC denied the motion to reduce bond filed by MAC and Carag.

The Facts

National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union
(MACLU) (collectively, complainants), on behalf of all of MAC's rank and file employees, filed a
complaint against MAC for illegal dismissal brought about by its illegal closure of business. In their
complaint dated 12 August 1993, complainants alleged the following:

2. Complainant NAFLU is the sole and exclusive bargaining agent representing all rank and
file employees of [MAC]. That there is an existing valid Collective Bargaining Agreement
(CBA) executed by the parties and that at the time of the cause of action herein below
discussed happened there was no labor dispute between the Union and Management except
cases pending in courts filed by one against the other.

3. That on July 8, 1993, without notice of any kind filed in accordance with pertinent
provisions of the Labor Code, [MAC], for reasons known only by herself [sic] ceased
operations with the intention of completely closing its shop or factory. Such intentions [sic]
 was manifested in a letter, allegedly claimed by [MAC] as its notice filed only on the same
day that the operations closed.

4. That at the time of closure, employees who have rendered one to two weeks work were
not paid their corresponding salaries/wages, which remain unpaid until time [sic] of this
writing.

5. That there are other benefits than those above-mentioned which have been unpaid by
[MAC] at the time it decided to cease operations, benefits gained by the workers both by and
under the CBA and by operations [sic] of law.

6. That the closure made by [MAC] in the manner and style done is perce [sic] illegal, and
had caused tremendous prejudice to all of the employees, who suffered both mental and
financial anguish and who in view thereof merits [sic] award of all damages (actual,
exemplary and moral), [illegible] to set [an] example to firms who in the future will [illegible]
the idea of simply prematurely closing without complying [with] the basic requirement of
Notice of Closure.6 (Emphasis supplied)

Upon receipt of the records of the case, Arbiter Ortiguerra summoned the parties to explore options
for possible settlement. The non-appearance of respondents prompted Arbiter Ortiguerra to declare
the case submitted for resolution "based on the extant pleadings."

In their position paper dated 3 January 1994, complainants moved to implead Carag and David, as
follows:

x x x x In the present case, it is unfortunate for respondents that the records and evidence clearly
demonstrate that the individual complainants are entitled to the reliefs prayed for in their complaint.
However, any favorable judgment the Honorable Labor Arbiter may render in favor of herein
complainants will go to naught should the Office fails [sic] to appreciate the glaring fact that the
respondents [sic] corporation is no longer existing as it suddenly stopped business operation since
[sic] 8 July 1993. Under this given circumstance, the complainants have no option left but to implead
Atty. ANTONIO CARAG, in his official capacity as Chairman of the Board along with MR. ARMANDO
DAVID as President. Both are also owners of the respondent corporation with office address at 10th
Floor, Gamon Centre, Alfaro Street, Salcedo Village[,] Makati[,] Metro Manila although they may be
collectively served with summons and other legal processes through counsel of record Atty. Joshua
Pastores of 8th Floor, Hanston Bldg., Emerald Avenue, Ortigas[,] Pasig, Metro Manila. This inclusion
of individual respondents as party respondents in the present case is to guarantee the satisfaction of
any judgment award on the basis of Article 212(c) of the Philippine Labor Code, as amended, which
says:

"Employer includes any person acting in the interest of an employer, directly or indirectly. It does not,
however, include any labor organization or any of its officers or agents except when acting as
employer."

The provision was culled from Section 2, Republic Act 602, the Minimum Wage Act. If the employer
is an artificial person, it must have an officer who can be presumed to be the employer, being "the
person acting in the interest of the employer." The corporation is the employer, only in the technical
sense. (A.C. Ransom Labor Union CCLU VS. NLRC, G.R. 69494, June 10, 1986). Where the
employer-corporation, AS IN THE PRESENT CASE, is no longer existing and unable to satisfy the
judgment in favor of the employee, the officer should be held liable for acting on behalf of the
corporation. (Gudez vs. NLRC, G.R. 83023, March 22, 1990). Also in the recent celebrated case of
Camelcraft Corporation vs. NLRC, G.R. 90634-35 (June 6, 1990), Carmen contends that she is not
liable for the acts of the company, assuming it had [acted] illegally, because Camelcraft in a distinct
and separate entity with a legal personality of its own. She claims that she is only an agent of the
company carrying out the decisions of its board of directors, "We do not agree," said the Supreme
Court. "She is, in fact and legal effect, the corporation, being not only its president and general
manager but also its owner." The responsible officer of an employer can be held personally liable not
to say even criminally liable for nonpayment of backwages. This is the policy of the law. If it were
otherwise, corporate employers would have devious ways to evade paying backwages. (A.C.
Ransom Labor Union-CCLU V. NLRC, G.R. 69494, June 10, 1986). If no definite proof exists as to
who is the responsible officer, the president of the corporation who can be deemed to be its chief
operation officer shall be presumed to be the responsible officer. In Republic Act 602, for example,
criminal responsibility is with the "manager" or in his default, the person acting as such
(Ibid.)7 (Emphasis supplied)

Atty. Joshua L. Pastores (Atty. Pastores), as counsel for respondents, submitted a position paper
dated 21 February 1994 and stated that complainants should not have impleaded Carag and David
because MAC is actually owned by a consortium of banks. Carag and David own shares in MAC
only to qualify them to serve as MAC's officers.

Without any further proceedings, Arbiter Ortiguerra rendered her Decision dated 17 June 1994
granting the motion to implead Carag and David. In the same Decision, Arbiter Ortiguerra declared
Carag and David solidarily liable with MAC to complainants.

The Ruling of the Labor Arbiter

In her Decision dated 17 June 1994, Arbiter Ortiguerra ruled as follows:

This is a complaint for illegal dismissal brought about by the illegal closure and cessation of business
filed by NAFLU and Mariveles Apparel Corporation Labor Union for and in behalf of all rank and file
employees against respondents Mariveles Apparel Corporation, Antonio Carag and Armando David
[who are] its owners, Chairman of the Board and President, respectively.

This case was originally raffled to the sala of Labor Arbiter Adolfo V. Creencia. When the latter went
on sick leave, his cases were re-raffled and the instant case was assigned to the sala of the
undersigned. Upon receipt of the record of the case, the parties were summoned for them to be able
to explore options for settlement. The respondents however did not appear prompting this Office to
submit the case for resolution based on extant pleadings, thus this decision.

The complainants claim that on July 8, 1993 without notice of any kind the company ceased its
operation as a prelude to a final closing of the firm. The complainants allege that up to the present
the company has remained closed.

The complainants bewail that at the time of the closure, employees who have rendered one to two
weeks of work were not given their salaries and the same have remained unpaid.

The complainants aver that respondent company prior to its closure did not even bother to serve
written notice to employees and to the Department of Labor and Employment at least one month
before the intended date of closure. The respondents did not even establish that its closure was
done in good faith. Moreover, the respondents did not pay the affected employees separation pay,
the amount of which is provided in the existing Collective Bargaining Agreement between the
complainants and the respondents.
The complainants pray that they be allowed to implead Atty. Antonio Carag and Mr. Armando
David[,] owners and responsible officer[s] of respondent company to assure the satisfaction of the
judgment, should a decision favorable to them be rendered. In support of their claims, the
complainants invoked the ruling laid down by the Supreme Court in the case of A.C. Ransom Labor
Union CCLU vs. NLRC, G.R. No. 69494, June 10, 1986 where it was held that [a] corporate officer
can be held liable for acting on behalf of the corporation when the latter is no longer in existence and
there are valid claims of workers that must be satisfied.

The complainants pray for the declaration of the illegality of the closure of respondents' business.
Consequently, their reinstatement must be ordered and their backwages must be paid. Should
reinstatement be not feasible, the complainants pray that they be paid their separation pay in
accordance with the computation provided for in the CBA. Computations of separation pay due to
individual complainants were adduced in evidence (Annexes "C" to "C-44", Complainants' Position
Paper). The complainants also pray for the award to them of attorney's fee[s].

The respondents on the other hand by way of controversion maintain that the present complaint was
filed prematurely. The respondents deny having totally closed and insist that respondent company is
only on a temporary shut-down occasioned by the pending labor unrest. There being no permanent
closure any claim for separation pay must not be given due course.

Respondents opposed the impleader of Atty. Antonio C. Carag and Mr. Armando David saying that
they are not the owners of Mariveles Apparel Corporation and they are only minority stockholders
holding qualifying shares. Piercing the veil of corporate fiction cannot be done in the present case for
such remedy can only be availed of in case of closed or family owned corporations.

Respondents pray for the dismissal of the present complaint and the denial of complainants' motion
to implead Atty. Antonio C. Carag and Mr. Armando David as party respondents.

This Office is now called upon to resolve the following issues:

1. Whether or not the respondents are guilty of illegal closure;

2. Whether or not individual respondents could be held personally liable; and

3. Whether or not the complainants are entitled to an award of attorney's fees.

After a judicious and impartial consideration of the record, this Office is of the firm belief that the
complainants must prevail.

The respondents described the cessation of operations in its premises as a temporary shut-down.
While such posturing may have been initially true, it is not so anymore. The cessation of operations
has clearly exceeded the six months period fixed in Article 286 of the Labor Code. The temporary
shutdown has ripened into a closure or cessation of operations for causes not due to serious
business losses or financial reverses. Consequently, the respondents must pay the displaced
employees separation pay in accordance with the computation prescribed in the CBA, to wit, one
month pay for every year of service. It must be stressed that respondents did not controvert the
verity of the CBA provided computation.

The complainants claim that Atty. Antonio Carag and Mr. Armando David should be held jointly and
severally liable with respondent corporation. This bid is premised on the belief that the impleader of
the aforesaid officers will guarantee payment of whatever may be adjudged in complainants' favor by
virtue of this case. It is a basic principle in law that corporations have personality distinct and
separate from the stockholders. This concept is known as corporate fiction. Normally, officers acting
for and in behalf of a corporation are not held personally liable for the obligation of the corporation. In
instances where corporate officers dismissed employees in bad faith or wantonly violate labor
standard laws or when the company had already ceased operations and there is no way by which a
judgment in favor of employees could be satisfied, corporate officers can be held jointly and
severally liable with the company. This Office after a careful consideration of the factual backdrop of
the case is inclined to grant complainants' prayer for the impleader of Atty. Antonio Carag and Mr.
Armando David, to assure that valid claims of employees would not be defeated by the closure of
respondent company.

The complainants pray for the award to them of moral and exemplary damages, suffice it to state
that they failed to establish their entitlement to aforesaid reliefs when they did not adduce persuasive
evidence on the matter.

The claim for attorney's fee[s] will be as it is hereby resolved in complainants' favor. As a
consequence of the illegal closure of respondent company, the complainants were compelled to
litigate to secure benefits due them under pertinent laws. For this purpose, they secured the services
of a counsel to assist them in the course of the litigation. It is but just and proper to order the
respondents who are responsible for the closure and subsequent filing of the case to pay attorney's
fee[s].

WHEREFORE, premises considered, judgment is hereby rendered declaring respondents jointly and
severally guilty of illegal closure and they are hereby ordered as follows:

1. To pay complainants separation pay computed on the basis of one (1) month for every
year of service, a fraction of six (6) months to be considered as one (1) year in the total
amount of ₱49,101,621.00; and

2. To pay complainants attorney's fee in an amount equivalent to 10% of the judgment

award.

The claims for moral, actual and exemplary damages are dismissed for lack of evidence.

SO ORDERED.8 (Emphasis supplied)

MAC, Carag, and David, through Atty. Pastores, filed their Memorandum before the NLRC on 26
August 1994. Carag, through a separate counsel, filed an appeal dated 30 August 1994 before the
NLRC. Carag reiterated the arguments in respondents' position paper filed before Arbiter Ortiguerra,
stating that:

2.1 While Atty. Antonio C. Carag is the Chairman of the Board of MAC and Mr. Armando
David is the President, they are not the owners of MAC;

2.2 MAC is owned by a consortium of banks, as stockholders, and Atty. Antonio C. Carag
and Mr. Armando David are only minority stockholders of the corporation, owning only
qualifying shares;

2.3 MAC is not a family[-]owned corporation, that in case of a close [sic] corporation, piercing
the corporate veil its [sic] possible to hold the stockholders liable for the corporation's
liabilities;
 2.4 MAC is a corporation with a distinct and separate personality from that of the
stockholders; piercing the corporate veil to hold the stockholders liable for corporate liabilities
is only true [for] close corporations (family corporations); this is not the prevailing situation in
MAC;

2.5 Atty. Antonio Carag and Mr. Armando David are professional managers and the
extension of shares to them are just qualifying shares to enable them to occupy subject
position.9

Respondents also filed separate motions to reduce bond.

The Ruling of the NLRC

In a Resolution promulgated on 5 January 1995, the NLRC Third Division denied the motions to
reduce bond. The NLRC stated that to grant a reduction of bond on the ground that the appeal is
meritorious would be tantamount to ruling on the merits of the appeal. The dispositive portion of the
Resolution of the NLRC Third Division reads, thus:

PREMISES CONSIDERED, Motions to Reduce Bond for both respondents are hereby DISMISSED
for lack of merit. Respondents are directed to post cash or surety bond in the amount of forty eight
million one hundred one thousand six hundred twenty one pesos (₱48,101,621.00) within an
unextendible period of fifteen (15) days from receipt hereof.

No further Motions for Reconsideration shall be entertained.

SO ORDERED.10

Respondents filed separate petitions for certiorari before this Court under Rule 65 of the 1964 Rules
of Court. Carag filed his petition, docketed as G.R. No. 118820, on 13 February 1995. In the
meantime, we granted MAC's prayer for the issuance of a temporary restraining order to enjoin the
NLRC from enforcing Arbiter Ortiguerra's Decision. On 31 May 1995, we granted complainants'
motion for consolidation of G.R. No. 118820 with G.R. No. 118839 (MAC v. NLRC, et al.) and G.R.
No. 118880 (David v. Arbiter Ortiguerra, et al.). On 12 July 1999, after all the parties had filed their
memoranda, we referred the consolidated cases to the appellate court in accordance with our
decision in St. Martin Funeral Home v. NLRC.11 Respondents filed separate petitions before the
appellate court.

The Ruling of the Appellate Court

On 29 February 2000, the appellate court issued a joint decision on the separate petitions. The
appellate court identified two issues as essential: (1) whether Arbiter Ortiguerra properly held Carag
and David, in their capacities as corporate officers, jointly and severally liable with MAC for the
money claims of the employees; and (2) whether the NLRC abused its discretion in denying the
separate motions to reduce bond filed by MAC and Carag.

The appellate court held that the absence of a formal hearing before the Labor Arbiter is not a cause
for Carag and David to impute grave abuse of discretion. The appellate court found that Carag and
David, as the most ranking officers of MAC, had a direct hand at the time in the illegal dismissal of
MAC's employees. The failure of Carag and David to observe the notice requirement in closing the
company shows malice and bad faith, which justifies their solidary liability with MAC. The appellate
court also found that the circumstances of the present case do not warrant a reduction of the appeal
bond. Thus:

IN VIEW WHEREOF, the petitions are DISMISSED. The decision of Labor Arbiter Isabel
Panganiban-Ortiguerra dated June 17, 1994, and the Resolution dated January 5, 1995, issued by
the National Labor Relations Commission are hereby AFFIRMED. As a consequence of dismissal,
the temporary restraining order issued on March 2, 1995, by the Third Division of the Supreme Court
is LIFTED. Costs against petitioners.

SO ORDERED.12 (Emphasis in the original)

The appellate court denied respondents' separate motions for reconsideration.13

In a resolution dated 20 June 2001, this Court's First Division denied the petition for Carag's failure
to show sufficiently that the appellate court committed any reversible error to warrant the exercise of
our discretionary appellate jurisdiction. Carag filed a motion for reconsideration of our resolution
denying his petition. In a resolution dated 13 August 2001, this Court's First Division denied Carag's
reconsideration with finality.

Despite our 13 August 2001 resolution, Carag filed a second motion for reconsideration with an
omnibus motion for leave to file a second motion for reconsideration. This Court's First Division
referred the motion to the Court En Banc. In a resolution dated 25 June 2002, the Court En Banc
resolved to grant the omnibus motion for leave to file a second motion for reconsideration, reinstated
the petition, and required respondents to comment on the petition. On 25 November 2003, the Court
En Banc resolved to suspend the rules to allow the second motion for reconsideration. This Court's
First Division referred the petition to the Court En Banc on 14 July 2004, and the Court En Banc
accepted the referral on 15 March 2005.

The Issues

Carag questions the appellate court's decision of 29 February 2000 by raising the following issues
before this Court:

1. Has petitioner Carag's right to due process been blatantly violated by holding him
personally liable for over ₱50 million of the corporation's liability, merely as board chairman
and solely on the basis of the motion to implead him in midstream of the proceedings as
additional respondent, without affording him the right to present evidence and in violation of
the accepted procedure prescribed by Rule V of the NLRC Rules of Procedure, as to render
the ruling null and void?

2. Assuming, arguendo, that he had been accorded due process, is the decision holding him
solidarily liable supported by evidence when the only pleadings (not evidence) before the
Labor Arbiter and that of the Court of Appeals are the labor union's motion to implead him as
respondent and his opposition thereto, without position papers, without evidence submitted,
and without hearing on the issue of personal liability, and even when bad faith or malice, as
the only legal basis for personal liability, was expressly found absent and wanting by [the]
Labor Arbiter, as to render said decision null and void?

3. Did the NLRC commit grave abuse of discretion in denying petitioner's motion to reduce
appeal bond?14
 The Ruling of the Court

We find the petition meritorious.

On Denial of Due Process to Carag and David

Carag asserts that Arbiter Ortiguerra rendered her Decision of 17 June 1994 without issuing
summons on him, without requiring him to submit his position paper, without setting any hearing,
without giving him notice to present his evidence, and without informing him that the case had been
submitted for decision - in violation of Sections 2,15 3,16 4,17 5(b),18 and 11(c) 19 of Rule V of The New
Rules of Procedure of the NLRC.20

It is clear from the narration in Arbiter Ortiguerra's Decision that she only summoned complainants
and MAC, and not Carag, to a conference for possible settlement. In her Decision, Arbiter Ortiguerra
stated that she scheduled the conference "upon receipt of the record of the case." At the time of the
conference, complainants had not yet submitted their position paper which contained the motion to
implead Carag. Complainants could not have submitted their position paper before the conference
since procedurally the Arbiter directs the submission of position papers only after the
conference.21 Complainants submitted their position paper only on 10 January 1994, five months
after filing the complaint. In short, at the time of the conference, Carag was not yet a party to the
case. Thus, Arbiter Ortiguerra could not have possibly summoned Carag to the conference.

Carag vigorously denied receiving summons to the conference, and complainants have not
produced any order of Arbiter Ortiguerra summoning Carag to the conference. A thorough search of
the records of this case fails to show any order of Arbiter Ortiguerra directing Carag to attend the
conference. Clearly, Arbiter Ortiguerra did not summon Carag to the conference.

When MAC failed to appear at the conference, Arbiter Ortiguerra declared the case submitted for
resolution. In her Decision, Arbiter Ortiguerra granted complainants' motion to implead Carag and at
the same time, in the same Decision, found Carag personally liable for the debts of MAC consisting
of ₱49,101,621 in separation pay to complainants. Arbiter Ortiguerra never issued summons to
Carag, never called him to a conference for possible settlement, never required him to submit a
position paper, never set the case for hearing, never notified him to present his evidence, and never
informed him that the case was submitted for decision - all in violation of Sections 2, 3, 4, 5(b), and
11(c) of Rule V of The New Rules of Procedure of the NLRC.

Indisputably, there was utter absence of due process to Carag at the arbitration level. The procedure
adopted by Arbiter Ortiguerra completely prevented Carag from explaining his side and presenting
his evidence. This alone renders Arbiter Ortiguerra's Decision a nullity insofar as Carag is
concerned. While labor arbiters are not required to conduct a formal hearing or trial, they have no
license to dispense with the basic requirements of due process such as affording respondents the
opportunity to be heard. In Habana v. NLRC,22 we held:

The sole issue to be resolved is whether private respondents OMANFIL and HYUNDAI were denied
due process when the Labor Arbiter decided the case solely on the basis of the position paper and
supporting documents submitted in evidence by Habana and De Guzman.

We rule in the affirmative. The manner in which this case was decided by the Labor Arbiter left much
to be desired in terms of respect for the right of private respondents to due process -
 First, there was only one conciliatory conference held in this case. This was on 10 May 1996.
During the conference, the parties did not discuss at all the possibility of amicable settlement
due to petitioner's stubborn insistence that private respondents be declared in default.

Second, the parties agreed to submit their respective motions - petitioner's motion to declare
respondents in default and private respondents' motion for bill of particulars - for the
consideration of the Labor Arbiter. The Labor Arbitration Associate, one Ms. Gloria Vivar,
then informed the parties that they would be notified of the action of the Labor Arbiter on the
pending motions.

xxx

Third, since the conference on 10 May 1996 no order or notice as to what action was taken
by the Labor Arbiter in disposing the pending motions was ever received by private
respondents. They were not declared in default by the Labor Arbiter nor was petitioner
required to submit a bill of particulars.

Fourth, neither was there any order or notice requiring private respondents to file their
position paper, nor an order informing the parties that the case was already submitted for
decision. What private respondents received was the assailed decision adverse to them.

It is clear from the foregoing that there was an utter absence of opportunity to be heard at the
arbitration level, as the procedure adopted by the Labor Arbiter virtually prevented private
respondents from explaining matters fully and presenting their side of the controversy. They had no
chance whatsoever to at least acquaint the Labor Arbiter with whatever defenses they might have to
the charge that they illegally dismissed petitioner. In fact, private respondents presented their
position paper and documentary evidence only for the first time on appeal to the NLRC.

The essence of due process is that a party be afforded a reasonable opportunity to be heard and to
submit any evidence he may have in support of his defense. Where, as in this case, sufficient
opportunity to be heard either through oral arguments or position paper and other pleadings is not
accorded a party to a case, there is undoubtedly a denial of due process.

It is true that Labor Arbiters are not bound by strict rules of evidence and of procedure. The manner
by which Arbiters dispose of cases before them is concededly a matter of discretion. However, that
discretion must be exercised regularly, legally and within the confines of due process. They are
mandated to use every reasonable means to ascertain the facts of each case, speedily, objectively
and without regard to technicalities of law or procedure, all in the interest of justice and for the
purpose of accuracy and correctness in adjudicating the monetary awards.

In this case, Carag was in a far worse situation. Here, Carag was not issued summons, not accorded
a conciliatory conference, not ordered to submit a position paper, not accorded a hearing, not given
an opportunity to present his evidence, and not notified that the case was submitted for resolution.
Thus, we hold that Arbiter Ortiguerra's Decision is void as against Carag for utter absence of due
process. It was error for the NLRC and the Court of Appeals to uphold Arbiter Ortiguerra's decision
as against Carag.

On the Liability of Directors for Corporate Debts

This case also raises this issue: when is a director personally liable for the debts of the corporation?
The rule is that a director is not personally liable for the debts of the corporation, which has a
separate legal personality of its own. Section 31 of the Corporation Code lays down the exceptions
to the rule, as follows:

Liability of directors, trustees or officers. - Directors or trustees who wilfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith
in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with
their duty as such directors or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.

xxxx

Section 31 makes a director personally liable for corporate debts if he wilfully and knowingly votes
for or assents to patently unlawful acts of the corporation. Section 31 also makes a director
personally liable if he is guilty of gross negligence or bad faith in directing the affairs of the
corporation.

Complainants did not allege in their complaint that Carag wilfully and knowingly voted for or
assented to any patently unlawful act of MAC. Complainants did not present any evidence showing
that Carag wilfully and knowingly voted for or assented to any patently unlawful act of MAC. Neither
did Arbiter Ortiguerra make any finding to this effect in her Decision.

Complainants did not also allege that Carag is guilty of gross negligence or bad faith in directing the
affairs of MAC. Complainants did not present any evidence showing that Carag is guilty of gross
negligence or bad faith in directing the affairs of MAC. Neither did Arbiter Ortiguerra make any
finding to this effect in her Decision.

Arbiter Ortiguerra stated in her Decision that:

In instances where corporate officers dismissed employees in bad faith or wantonly violate labor
standard laws or when the company had already ceased operations and there is no way by which a
judgment in favor of employees could be satisfied, corporate officers can be held jointly and
severally liable with the company.23

After stating what she believed is the law on the matter, Arbiter Ortiguerra stopped there and did not
make any finding that Carag is guilty of bad faith or of wanton violation of labor standard laws.
Arbiter Ortiguerra did not specify what act of bad faith Carag committed, or what particular labor
standard laws he violated.

To hold a director personally liable for debts of the corporation, and thus pierce the veil of corporate
fiction, the bad faith or wrongdoing of the director must be established clearly and
convincingly.24 Bad faith is never presumed.25 Bad faith does not connote bad judgment or
negligence. Bad faith imports a dishonest purpose. Bad faith means breach of a known duty through
some ill motive or interest. Bad faith partakes of the nature of fraud.26In Businessday Information
Systems and Services, Inc. v. NLRC,27 we held:

There is merit in the contention of petitioner Raul Locsin that the complaint against him should be
dismissed. A corporate officer is not personally liable for the money claims of discharged corporate
employees unless he acted with evident malice and bad faith in terminating their employment. There
is no evidence in this case that Locsin acted in bad faith or with malice in carrying out the
retrenchment and eventual closure of the company (Garcia vs. NLRC, 153 SCRA 640), hence, he
may not be held personally and solidarily liable with the company for the satisfaction of the judgment
in favor of the retrenched employees.
Neither does bad faith arise automatically just because a corporation fails to comply with the notice
requirement of labor laws on company closure or dismissal of employees. The failure to give notice
is not an unlawful act because the law does not define such failure as unlawful. Such failure to give
notice is a violation of procedural due process but does not amount to an unlawful or criminal act.
Such procedural defect is called illegal dismissal because it fails to comply with mandatory
procedural requirements, but it is not illegal in the sense that it constitutes an unlawful or criminal
act.

For a wrongdoing to make a director personally liable for debts of the corporation, the wrongdoing
approved or assented to by the director must be a patently unlawful act. Mere failure to comply with
the notice requirement of labor laws on company closure or dismissal of employees does not
amount to a patently unlawful act. Patently unlawful acts are those declared unlawful by law which
imposes penalties for commission of such unlawful acts. There must be a law declaring the act
unlawful and penalizing the act.

An example of a patently unlawful act is violation of Article 287 of the Labor Code, which states that
"[V]iolation of this provision is hereby declared unlawful and subject to the penal provisions provided
under Article 288 of this Code." Likewise, Article 288 of the Labor Code on Penal Provisions and
Liabilities, provides that "any violation of the provision of this Code declared unlawful or penal in
nature shall be punished with a fine of not less than One Thousand Pesos (₱1,000.00) nor more
than Ten Thousand Pesos (₱10,000.00), or imprisonment of not less than three months nor more
than three years, or both such fine and imprisonment at the discretion of the court."

In this case, Article 28328 of the Labor Code, requiring a one-month prior notice to employees and
the Department of Labor and Employment before any permanent closure of a company, does not
state that non-compliance with the notice is an unlawful act punishable under the Code. There is no
provision in any other Article of the Labor Code declaring failure to give such notice an unlawful act
and providing for its penalty.

Complainants did not allege or prove, and Arbiter Ortiguerra did not make any finding, that Carag
approved or assented to any patently unlawful act to which the law attaches a penalty for its
commission. On this score alone, Carag cannot be held personally liable for the separation pay of
complainants.

This leaves us with Arbiter Ortiguerra's assertion that "when the company had already ceased
operations and there is no way by which a judgment in favor of employees could be satisfied,
corporate officers can be held jointly and severally liable with the company." This assertion echoes
the complainants' claim that Carag is personally liable for MAC's debts to complainants "on the basis
of Article 212(e) of the Labor Code, as amended," which says:

'Employer' includes any person acting in the interest of an employer, directly or indirectly. The term
shall not include any labor organization or any of its officers or agents except when acting as
employer. (Emphasis supplied)

Indeed, complainants seek to hold Carag personally liable for the debts of MAC based solely on
Article 212(e) of the Labor Code. This is the specific legal ground cited by complainants, and used
by Arbiter Ortiguerra, in holding Carag personally liable for the debts of MAC.

We have already ruled in McLeod v. NLRC29 and Spouses Santos v. NLRC30 that Article 212(e) of
the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the
corporation. The governing law on personal liability of directors for debts of the corporation is still
Section 31 of the Corporation Code. Thus, we explained in McLeod:
Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to a
patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in
directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons; (2) they consent to the issuance of watered down stocks or when,
having knowledge of such issuance, do not forthwith file with the corporate secretary their written
objection; (3) they agree to hold themselves personally and solidarily liable with the corporation; or
(4) they are made by specific provision of law personally answerable for their corporate action.
http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2007.zip
%3E9,df%7C2007/jan2007/146667.htm -

xxx

The ruling in A.C. Ransom Labor Union-CCLU v.

NLRC,http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan20
07.zip%3E9,df%7C2007/jan2007/146667.htm - which the Court of Appeals cited, does not apply to
this case. We quote pertinent portions of the ruling, thus:

(a) Article 265 of the Labor Code, in part, expressly provides:

"Any worker whose employment has been terminated as a consequence of an unlawful lockout shall
be entitled to reinstatement with full backwages."

Article 273 of the Code provides that:

"Any person violating any of the provisions of Article 265 of this Code shall be punished by a fine
of not exceeding five hundred pesos and/or imprisonment for not less than one (1) day nor
more than six (6) months."

(b) How can the foregoing provisions be implemented when the employer is a corporation? The
answer is found in Article 212 (c) of the Labor Code which provides:

"(c) 'Employer' includes any person acting in the interest of an employer, directly or indirectly. The
term shall not include any labor organization or any of its officers or agents except when acting as
employer."

The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since RANSOM is an
artificial person, it must have an officer who can be presumed to be the employer, being the "person
acting in the interest of (the) employer" RANSOM. The corporation, only in the technical sense, is
the employer.

The responsible officer of an employer corporation can be held personally, not to say even
criminally, liable for non-payment of back wages. That is the policy of the law.

xxxx

(c) If the policy of the law were otherwise, the corporation employer can have devious ways for
evading payment of back wages. In the instant case, it would appear that RANSOM, in 1969,
foreseeing the possibility or probability of payment of back wages to the 22 strikers,
organized ROSARIO to replace RANSOM, with the latter to be eventually phased out if the 22
strikers win their case. RANSOM actually ceased operations on May 1, 1973, after the December
19, 1972 Decision of the Court of Industrial Relations was promulgated against RANSOM.
http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2007.zip
%3E9,df%7C2007/jan2007/146667.htm - (Emphasis supplied)

Clearly, in A.C. Ransom, RANSOM, through its President, organized ROSARIO to evade payment of
backwages to the 22 strikers. This situation, or anything similar showing malice or bad faith on the
part of Patricio, does not obtain in the present case. In Santos v. NLRC,
http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2007.zip
%3E9,df%7C2007/jan2007/146667.htm - the Court held, thus:

It is true, there were various cases when corporate officers were themselves held by the Court to be
personally accountable for the payment of wages and money claims to its employees. In A.C.
Ransom Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under the Minimum Wage
Law, the responsible officer of an employer corporation could be held personally liable for
nonpayment of backwages for "(i)f the policy of the law were otherwise, the corporation employer
(would) have devious ways for evading payment of backwages." In the absence of a clear
identification of the officer directly responsible for failure to pay the backwages, the Court considered
the President of the corporation as such officer. The case was cited in Chua vs. NLRC in holding
personally liable the vice-president of the company, being the highest and most ranking official of the
corporation next to the President who was dismissed for the latter's claim for unpaid wages.

A review of the above exceptional cases would readily disclose the attendance of facts and
circumstances that could rightly sanction personal liability on the part of the company officer. In A.C.
Ransom, the corporate entity was a family corporation and execution against it could not be
implemented because of the disposition posthaste of its leviable assets evidently in order to
evade its just and due obligations. The doctrine of "piercing the veil of corporate fiction" was
thus clearly appropriate. Chua likewise involved another family corporation, and this time the
conflict was between two brothers occupying the highest ranking positions in the company. There
were incontrovertible facts which pointed to extreme personal animosity that resulted, evidently in
bad faith, in the easing out from the company of one of the brothers by the other.

The basic rule is still that which can be deduced from the Court's pronouncement in Sunio vs.
National Labor Relations Commission, thus:

We come now to the personal liability of petitioner, Sunio, who was made jointly and severally
responsible with petitioner company and CIPI for the payment of the backwages of private
respondents. This is reversible error. The Assistant Regional Director's Decision failed to disclose
the reason why he was made personally liable. Respondents, however, alleged as grounds thereof,
his being the owner of one-half (½) interest of said corporation, and his alleged arbitrary dismissal of
private respondents.

Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of petitioner
corporation. There appears to be no evidence on record that he acted maliciously or in bad faith in
terminating the services of private respondents. His act, therefore, was within the scope of his
authority and was a corporate act.

It is basic that a corporation is invested by law with a personality separate and distinct from those of
the persons composing it as well as from that of any other legal entity to which it may be related.
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the separate corporate
personality. Petitioner Sunio, therefore, should not have been made personally answerable for the
payment of private respondents' back
salaries.http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2
007.zip%3E9,df%7C2007/jan2007/146667.htm -

Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. In the
absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such
corporate officer cannot be made personally liable for corporate liabilities. Neither Article 212[e] nor
Article 273 (now 272) of the Labor Code expressly makes any corporate officer personally liable for
the debts of the corporation. As this Court ruled in H.L. Carlos Construction, Inc. v. Marina
Properties
Corporation:http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/
jan2007.zip%3E9,df%7C2007/jan2007/146667.htm -

We concur with the CA that these two respondents are not liable. Section 31 of the Corporation
Code (Batas Pambansa Blg. 68) provides:

"Section 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith ... shall be liable jointly and severally for all damages resulting therefrom
suffered by the corporation, its stockholders and other persons."

The personal liability of corporate officers validly attaches only when (a) they assent to a patently
unlawful act of the corporation; or (b) they are guilty of bad faith or gross negligence in directing its
affairs; or (c) they incur conflict of interest, resulting in damages to the corporation, its stockholders
or other persons.31 (Boldfacing in the original; boldfacing with underscoring supplied)

Thus, it was error for Arbiter Ortiguerra, the NLRC, and the Court of Appeals to hold Carag
personally liable for the separation pay owed by MAC to complainants based alone on Article 212(e)
of the Labor Code. Article 212(e) does not state that corporate officers are personally liable for the
unpaid salaries or separation pay of employees of the corporation. The liability of corporate officers
for corporate debts remains governed by Section 31 of the Corporation Code.

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 29 February 2000 and
the Resolution dated 27 March 2001 of the Court of Appeals in CA-G.R. SP Nos. 54404-06 insofar
as petitioner Antonio Carag is concerned.

SO ORDERED

G.R. No. 119467. February 1, 2000

SAMAHAN NG MANGGAGAWA SA MOLDEX PRODUCTS, INC.,

ALEGRIA AQUINO AND 62 OTHERS AS APPEARING IN ANNEX
"A", Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION, LABOR ARBITER EDGARDO MADRIAGA,
MOLDEX PRODUCTS, INC. AND MR. JACINTO
UY, Respondents.
 DECISION

PURISIMA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court

seeking to annul the Resolution,1dated November 29, 1994, and
Resolution, dated January 30, 1995, of the National Labor Relations
Commission in NLRC NCR CA No.6622-94.

The facts that matter are as follows:

In the earlier part of 1993, petitioners and private respondents

negotiated for the renewal of their Collective Bargaining Agreement
("CBA"). Due to some economic differences, the negotiations ended
in a deadlock.

On April 2, 1993, petitioners filed a notice of strike with the National

Conciliation and Mediation Board ("NCMB"). The series of
conferences proved unavailing.

On April 24, 1993, petitioner Union conducted a strike vote among

its members, and the results of the voting were thereafter conveyed
to the Alliance of Nationalist and Genuine Labor Organization
("ANGLO") for submission to the NCMB, but for some unknown
reason, the same was not made.

On May 5, 1993, petitioners went on strike without the report of the

strike vote submitted to the NCMB.

On June 17, 1993, private respondents filed a "Petition to Declare

Strike Illegal and Authorize Dismissal of the Officers and Other
Employees for Illegal Acts"2 with the National Labor Relations
Commission ("NLRC"). The petition alleged that the petitioners
barricaded the three gates of private respondent (Moldex) and
committed acts of violence, threats and coercion. Docketed as
NLRC-NCR Case No. 00-06-04019-93, the petition was raffled to
Labor Arbiter Edgardo M. Madriaga ("LA Madriaga"). A Temporary
Restraining Order ("TRO") was later issued.
After efforts to reach an amicable settlement failed, trial on the
merits was conducted, with the private respondents presenting their
own witnesses and evidence. Petitioners did not present any witness
but instead, relied on their Memorandum, contending that the
private respondents' pieces of evidence are inadmissible, for being
hearsay, and that the pictures presented were neither identified nor
authenticated by the photographer or an eyewitness.

On March 7, 1994, Labor Arbiter Madriaga came out with a

Decision,3 disposing thus:

"WHEREFORE, premises considered, the strike staged by

respondents is hereby declared illegal for the aforementioned
reasons, as a result of which the union officers, to wit:

Peter Nudalo President

David Pastor Vice-President
Alejandro Cabatingan Secretary
Cipriano Selerio Auditor
Wilfredo Uy Treasurer
Jose Matining P.R.O.
Clemente Ramos Chairman of the Board
Rico Subion Member of the Board
Maximino Villaverde Member of the Board
Generoso Calalo Member of the Board
Peter Lito Semillano Member of the Board
Stephen Landong Member of the Board
Henry Calero Shop Steward
Nestor Obado Shop Steward
Igmedio Espesor Shop Steward
Eduardo Pastoril Shop Steward
Ronaldo Nerbiol Shop Steward
Nestor Samantilla Shop Steward
Arceslo Barcelona Shop Steward
Celso Rodriguez Shop Steward

and individual respondents who committed prohibited acts in the

course of the strike, to wit: A. Mararac, W. Guzman, R. Corpuz, N.
Flores, E. Rambaoa, O. Martinez, J. Casim, S. Bergonia, L. Aquino,
M. Munoz, M. Legaspi, A. Ebrado, E. Caballero, J. Aguilar, B. Blace,
P. Candado, C. Burato, V. dela Pena, L. Gaurino, J. Pacaldo, L.
Daleon, G. Francisco, E. Blace, M. Jacobo, L. Dumaguin, J.
Lumaban, F. Mendoza, R. Canones, R. Dumlao, J. Siccuan, L.
Dumlao, L. Mararac, A. Labitan, D. Laguit, C. Villaviza, E. Viray, W.
Dimailig, R. Ang, B. Llanos, F. Basilan, M. Tugadi, L. Villanueva and
J. Mansion are hereby declared to have validly forfeited their
employment status.

The rest of the striking workers, including those who were identified
in petitioner's affidavits and/or photographs, but were not formally
impleaded as party respondents are hereby ordered reinstated
without backwages.

Respondents are hereby ordered to remove all obstructions barring

free ingress to and egress from company premises.

SO ORDERED."

Petitioners appealed to the NLRC which, in its

Resolution4 promulgated on November 22, 1994, held:

"We remand.

From our perusal of the records, it has dawned on Us that both

parties were not able, for reasons and/or causes known only to
them, to submit crucial evidence in support of their respective
contentions. On the part of the petitioner, no evidence is there to
support its claim that the individual respondents were sent notices.
Considering the impact of a declaration of illegality of strike, the
forfeiture of employment, extra caution must be taken by the Labor
Arbiter in this regard.

As it appears that respondents are insistent in their posture that a

strike vote had been conducted and and [sic] the same is in the
custody of the federation, We are inclined to the view that, in
keeping with the principles of fair play and equity, respondents be
extended a final opportunity to produce the strike vote and the
results thereof in evidence before the Labor Arbiter of origin. This,
to Us, is the equitable measure to take under the circumstances.

Pending resolution, complainant-appellee filed a Motion to Delete

Names. Let the same incident be remand [sic] for appropriate
action.

WHEREFORE, the decision appealed from is hereby vacated and set

aside, and the case remanded to the Labor Arbiter for further
proceedings.

SO ORDERED."

Petitioners presented a Motion for Reconsideration of the aforesaid

Resolution on the grounds that a full-blown trial was already
conducted and that a remand will only delay the case, but the NLRC
denied the same. Forthwith, petitioners found their way to this
Court via the present petition, anchored on the grounds that:

"THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION
IN RESOLVING TO REMAND THE CASE TO THE ARBITER OF ORIGIN
AS THE REQUIREMENTS OF PROCEDURAL DUE PROCESS HAD BEEN
COMPLIED WITH.

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION
IN RESOLVING TO REMAND THE CASE FOR FURTHER PROCEEDINGS
AS THERE ARE NO CONFLICTING VERSIONS OF FACTUAL
MATTERS."
The Solicitor General, for his part, raised the additional issue of:

"WHETHER OR NOT THE STRIKE CONDUCTED BY PETITIONERS

WAS ILLEGAL."

After a studied review of the attendant facts and study of the

applicable law in the case, the Court is of the opinion, and so holds,
that the public respondent committed grave abuse of discretion in
remanding the case to the labor arbiter of origin for further
reception of evidence. Reception of evidence would be a futile
exercise considering that the facts are already clear and complete,
and would not alter the outcome of the case.

It has been shown that the results of the strike-vote were never
forwarded to the NCMB, as admitted by petitioners themselves and
as attested to by a Certification of Non-Submission of Strike Vote
issued by the NCMB.5 There is thus no need for additional evidence
on the matter, as it would not change the fact that the results of the
strike-vote were not submitted to the NCMB. Without the
submission of the results of the strike-vote, the strike was illegal,
pursuant to Article 264 of the Labor Code, which reads:

"ART. 264. Prohibited activities. -- (a) No labor organization or

employer shall declare a strike or lockout without first having
bargained collectively in accordance with Title VII of this Book or
without first having filed the notice required in the preceding Article
or without the necessary strike or lockout vote first having been
obtained and reported to the Ministry.

xxx

Any worker whose employment has been terminated as a

consequence of an unlawful lockout shall be entitled to
reinstatement with full back wages. Any union officer who knowingly
participates in a illegal strike and any worker or union officer who
knowingly participates in the commission of illegal acts during a
strike may be declared to have lost his employment status:
Provided, That mere participation of a worker in a lawful strike shall
not constitute sufficient ground for termination of his employment,
even if a replacement had been hired by the employer during such
lawful strike."

Neither is there any need to remand the case to determine whether

petitioners were sent notices or copies of the petition and whether
the service of a copy of private respondent's (Moldex) formal offer
of evidence with the federation, ANGLO, instead of petitioners'
counsel, was valid. In their Memorandum (paragraph 31),
petitioners deny ever making such a claim. And if ever they made
such claim, they are now waiving such irregularity, dispensing with
the need of resolving the same.

It is therefore established that the result of the strike-vote was not

submitted to the NCMB making the strike staged by petitioners
illegal, in accordance with Article 264 of the Labor Code.

The requirements of procedural due process had been complied

with. Petitioners and private respondents were allowed to present
their witnesses and evidence. Private respondents presented their
witnesses, while petitioners did not, opting instead to file a
Memorandum, challenging the admissibility of private respondents'
pieces of evidence. So long as a party is given an opportunity to be
heard and to submit his evidence, the requirements of procedural
due process are complied with.6 Anent the Solicitor General's stance
that the strike conducted by petitioners was illegal, the records of
the case and the proceedings before Labor Arbiter Madriaga confirm
the same. Aside from not submitting the result of the strike-vote to
the NCMB, petitioners also committed acts of violence, threats,
coercion and intimidation during the strike. As found by Labor
Arbiter Madriaga:

"But even going into the merits of the case, petitioner has
established by substantial evidence on record that respondents
totally blocked free ingress to and egress from petitioner's premises
and committed illegal acts of violence, threats, coercion and
intimidation in the course of their strike.

The affidavits of the witnesses of respondents which they offered

during trial are as follows:
Edwin Bayan averred in his Affidavit that on June 11, 1993 he saw
A. Mararac holding a Molotov; that W. Guzman, R. Corpuz, N.
Flores, D. Rombaoa, O. Martinez and J. Casim threw stones at
company vehicles containing employees who wanted to report for
work; and that on June 11 and June 14, 1993 the following
employees formed a human barricade which prevented employees
who wished to work from entering the premises, to wit: S.
Bergonia, L. Aquino, M. Munoz, R. Corpuz, one Mararac, N. Flores,
M. Legaspi, J. Matining, A. Ebrado, E. Caballero, R. Subion, J.
Aguilar, I. Espesor, B. Blace, P. Candado, C. Burato, V. dela Pea, P.
Nudalo, L. Gaurino, L. Dumlao, J. Pacaldo, L. Daleon, one Francisco,
D. Pastor, E. Blace, O. Martinez, M. Jacobo, L. Dumaguin, J.
Lumaban, F. Mendoza, R. Canones, H. Calero, M. Villaverde, R.
Dumlao, J. Siccuan, E. Rombaoa, L. Mararac, S. Landong, W.
Guzman, A. Mararac, S. Bergonia, C. Rodriguez, A. Labitan, J.
Casim, N. Obado, D. Laguit and C. Villaviza.

Mr. Libio B. Cruz, Jr. in his sworn affidavit alleged that on June 15,
1993, Emmanuel Viray, Cristito Burato, Pascual Capangpangan and
Maximino Villaverde threw stones at the Injection and Films &
Sheets Building breaking the window panes and resulting in the
filing of criminal cases before the Prosecutor's Office at Valenzuela;
and that Engineering Supervisor Fidel Santiago was threatened by
Peter Nudalo, Francisco Basilan, David Pastor and Leonardo Gaurino
resulting in the filing of a criminal complaint for Grave Threats
before the Prosecutor's Office at Valenzuela. Court

Guillermo Tadeo Banag averred in his affidavit that he was coerced

by Union President Pedro Nudalo to stop working and that Jaime
Mansion switched off the circuit breaker to render company
machines inoperable.

Oliver Salamera and Juancho Sacro alleged in their Joint Affidavit on

May 5, 1993 that Union Officers Nudalo, Landong, Ramos,
Semillano, Subion and Cabatingan coerced them to stop working,
barricaded the gates and prohibited them from returning to work.

Nicolas Bauto and Joselito Custodio in their Joint Affidavit alleged

that they were threatened with bodily harm by union officers and
members forcing them to leave the plant for fear of bodily harm.
The sworn allegations of the foregoing affidavits who all took the
witness stands were corroborated by the photographs submitted by
petitioner in evidence and which were not rebutted by respondents,
to wit:

Exhibit '1' is a blow-up photograph showing wooden planks and tent

obstructing the company gate and Maysan Road leading to the
company premises.

Exhibits '2' and '3' show that hollow blocks were stacked and tents
built across the gate.

Exhibits '4' to '9' show security guards dismantling obstructions built

by respondents across the company gates, pursuant to the TRO
issued by the Commission in the Injunction case filed by petitioner.

Exhibits '10' to '16' show a human blockade barring a bus carrying

other employees who wanted to report for work from entering
company premises.

In picture No. 21 of Exhibit '11' and pictures 26 to 29 of Exhibits

'12' to '15', those strikers who prevented the bus from carrying
workers who wanted to report for work were identified in the Formal
Offer of Evidence as Jerry Lumaban, Celso Rodriguez, Bernard
Llanos, Cristito Burato, Jerry Aguilar, Rico Subion, Rufino Ang, Pete
Lito Semillano, Sonny Bergonia, Jaime Mansion, Edwin Almonte,
Margarito Legaspi, Reynaldo Corpuz, Wilfredo Dimailig, David
Pastor, Clemente Ramos, Leonardo Gaurino, Leonardo Villanueva,
Edmund Arcena, Stephen Landong, Willy Guzman, Maximino
Villaverde, Generoso Calalo, Igmedio Espesor, Diomar Serafica,
John Nero Pacaldo, Joselito Munoz, Cristopher Lias and Antonio
Awalay.

Exhibit '17' shows two strikers about to throw stones, identified in

the Formal Offer of Evidence as Stephen Landong and Jimmy Casim.

Exhibit '18' shows a flat tire of the bus caused by strikers, and
Exhibits '19', '20' and '21' show the broken windows of the bus
which was barred by strikers from entering company premises.
Exhibits '22' to '30' showed that the strikers used a human
blockade, wooden posts and threw big stones and rocks to bar a bus
from entering the company premises.

Picture No. 14 of Exhibit '22', picture No. 5 of Exhibit '23' reveal

that the strikers who prevented a bus carrying employees who
wanted to report for work on June 14, 1993 are Stephen Landong,
Emerson Rombada, George Francisco, Nicasio Flores, Julieto
Albania, Arnel John Santos, Willy Guzman, Elvira Caballero, Alfredo
Viernes, Elecito Blanco, Vicleo dela Pea, Cesario Villaviza, Leonardo
Villanueva, Loreto Mararac, Celestino del Rosario, Alegria Aquino
and Leonardo de Leon.

Exhibits '31' to '34' show that the strikers used big stones, rocks,
wooden materials and GI sheets along Maysan Road leading to the
company gates which made the road impassable.

All the foregoing evidence undoubtedly prove that indeed

respondents blocked free ingress to and egress from the company
premises by way of physical obstructions, human blockades, acts of
violence, coercion, threats and intimidation."7
cräläwvirtua lib räry

It bears stressing that factual findings of labor officials are

conclusive and binding on the Supreme Court when. supported by
substantial evidence.8 After going over the records on hand, the
Court discerns no ground for disturbing the above-quoted findings
of Labor Arbiter Madriaga as the same are basically supported by
substantial evidence and his conclusion accords with law.

With respect to petitioners' allegation that the testimonies of the

private respondents' witnesses were hearsay and that the pictures
presented during trial were not authenticated or identified, the same
is without merit. Techniules of procedure are not binding in labor
cases.9 The application of techniules of procedure may be relaxed to
serve the demands of substantial justice.10 In fine, the Court holds
that there is no need to remand this case to the Labor Arbiter for
further proceedings, as the facts are clear and complete on the
basis of which a decision can be made. Furthermore, the decision of
Labor Arbiter Madriaga is supported by substantial evidence and is
in accordance with law.
WHEREFORE, the assailed Resolutions, dated November 29, 1994
and January 30, 1995, respectively, of the Second Division of the
National Labor Relations Commission in NLRC NCR CA No. 6622-94
are SET ASIDE; and the strike staged by petitioners declared
ILLEGAL, with the FORFEITURE of the employment status of the
petitioners, Peter Nudalo, David Pastor, Alejandro Cabatingan,
Cipriano Selerio, Wilfredo Uy, Jose Matining, Clemente Ramos, Rico
Subion, Maximino Villaverde, Generoso Calalo, Peter Lito Semillano,
Stephen Landong, Henry Calero, Nestor Obado, Igmedio Espesor,
Eduardo Pastoril, Ronaldo Nerbiol, Nestor Samantilla, Arceslo
Barcelona, Celso Rodriguez, A. Mararac, W. Guzman, R. Corpus, N.
Flores, E. Rambaoa, O. Martinez, J. Casim, S. Bergonia, L. Aquino,
M. Munoz, M. Legaspi, A. Ebrado, E. Caballero, J. Aguilar, B. Blace,
P. Candado, C. Burato, V. dela Pena, L. Gaurino, J. Pacaldo, L.
Daleon, G. Francisco, E. Blace, M. Jacobo, L. Dumaguin, J.
Lumaban, F. Mendoza, R. Cannes, R. Dumlao, J. Siccuan, L.
Dumlao, L. Mararac, A. Labitan, D. Laguit, C. Villaviza, E. Viray, W.
Dimailig, R. Ang, B. Llanos, F. Basilan, M. Tugadi and, L.
Villanueva UPHELD. No pronouncement as to costs.

SO ORDERED

FIRST DIVISION

[G.R. No. 116172. October 10, 1996.]

SAN MIGUEL FOODS, INC.-CEBU B-MEG FEED PLANT, Petitioner, v. HON.

BIENVENIDO E. LAGUESMA, Undersecretary of DOLE and ILAW AT BUKLOD
NG MANGGAGAWA (IBM), Respondents.

DECISION

HERMOSISIMA, JR., J.:

This is a petition for certiorari under Rule 65 to review and set aside two
Resolutions of Mediator-Arbiter Achilles V. Manit, dated January 5, 1994 and April
6, 1994, and the affirmation Order on appeal of the public respondent,
Undersecretary Bienvenido E. Laguesma of the Department of Labor and
Employment. The petition below was entitled: "In Re: Petition for Direct
Certification as the Sole and Exclusive Bargaining Agent of All Monthly Paid
Employees of SMFI-Cebu B-Meg Feeds Plant," docketed as OS-MA-A-3-51-94
(R0700-9309-RU-036).

The essential facts are not disputed.

On September 24, 1993, a petition for certification election among the monthly-
paid employees of the San Miguel Foods, Inc.-Cebu B-Meg Feeds Plant was filed by
private respondent labor federation Ilaw at Buklod ng Manggagawa(IBM, for
brevity) before Med-Arbiter Achilles V. Manit, alleging, inter alia, that it is a
legitimate labor organization duly registered with the Department of Labor and
Employment (DOLE) under Registration Certificate No. 5369-IP. SMFI-Cebu B-Meg
Feeds Plant (SMFI, for brevity), herein petitioner, is a business entity duly
organized and existing under the laws of the Philippines which employs roughly
seventy five (75) monthly paid employees, almost all of whom support the present
petition. It was submitted in said petition that there has been no certification
election conducted in SMFI to determine the sole and exclusive bargaining agent
thereat for the past two years and that the proposed bargaining unit? which is
SMFI’s monthly paid employees, is an unorganized one. It was also stated therein
that petitioner IBM (herein private respondent) has already complied with the
mandatory requirements for the creation of its local or affiliate in SMFI’s
establishment.

On October 25, 1993, herein petitioner SMFI filed a Motion to Dismiss the
aforementioned petition dated September 24, 1993 on the ground that a similar
petition remains pending between the same parties for the same cause of action
before Med-Arbiter Achilles V. Manit.

SMFI was referring to an evidently earlier petition, docketed as CE CASE NO R0700-

9304- RU-016, filed on April 28, 1993 before the office of Med-Arbiter Manit.
Indeed, both petitions involved the same parties, cause of action and relief being
prayed for, which is the issuance of an order by the Med-Arbiter allowing the
conduct of a certification election in SMFI’s establishment. The contention is that
the judgment that may be rendered in the first petition would be determinative of
the outcome of the second petition, dated September 24, 1993.

On December 2, 1993, private respondent IBM filed its Opposition to SMFI’s Motion
to Dismiss contending, among others, that the case referred to by SMFI had already
been resolved by Med-Arbiter Manit in his Resolution and Order dated July 26, 1993
1 and September 2, 1993 2 respectively, wherein IBM’s first petition for certification
election was denied mainly due to IBM’s failure to comply with certain mandatory
requirements of the law. This denial was affirmed by the Med-Arbiter in another
Order dated November 12, 1993 3 wherein the Resolutions dated July 26, 1993 and
September 2, 1993 were made to stand. Thus, IBM argues that there having been
no similar petition pending before Med-Arbiter Manit, another petition for
certification election may be refiled as soon as the said requirements are met.
These requirements were finally satisfied before the second petition for certification
election was brought on September 24, 1993.

On January 5, 1994, Med-Arbiter Manit, this time, granted the second petition for
certification election of private respondent IBM in this wise: jgc:chan roble s.com.p h

"Let, therefore, a certification election be conducted among the monthly paid rank
and file employees of SMFI-CEBU B-MEG FEEDS PLANT at Lo-oc, Mandaue City. The
choices shall be: YES — for IBM AT SMFI-CEBU B-MEG; and NO —for No Union.

The parties are hereby notified of the pre-election conference which will take place
on January 17, 1994 at 3:00 o’clock in the afternoon to set the date and time of the
election and to thresh out the mechanics thereof. On said date and time the
respondent is directed to submit the payroll of its monthly paid rank and file
employees for the month of June 1993 which shall be the basis for the list of the
eligible voters. The petitioner is directed to be ready to submit a list of the monthly
paid rank and file employees of SMFI-CEBU B-MEG FEEDS PLANT when the
respondent fails to submit the required payroll.

SO ORDERED." 4

Petitioner SMFI appealed the foregoing Order to the Secretary of Labor and
Employment alleging that the Med-Arbiter erred in directing the conduct of
certification election considering that the local or chapter of IBM at SMFI is still not
a legitimate labor organization with a right to be certified as the exclusive
bargaining agent in petitioner’s establishment based on two grounds (1) the
authenticity and due execution of the Charter Certificate submitted IBM in favor of
its local at SMFI cannot yet be ascertained as it is still not known who is the
legitimate and authorized representative of the IBM Federation who may validly
issue said Charter Certificate; and (2) a group of workers or a local union shall
acquire legal personality only upon the issuance of a Certificate of Registration by
the Bureau of Labor Relations under Article 234 of the Labor Code, which IBM at
SMFI did not possess.

In a resolution dated April 6, 1994, public respondent Undersecretary Bienvenido

Laguesma, by authority of the Secretary of Labor and Employment, denied
petitioner’s appeal, viz.:
jgc:chan roble s.com.p h

"WHEREFORE, the appeal is hereby denied for lack of merit and the Order of the
Med-Arbiter is hereby affirmed.

Let the records of this case be forwarded to the Regional Office of origin for the
immediate conduct of certification election subject to the usual pre-election
conference.

SO RESOLVED." 5

Thereafter, a Motion for Reconsideration was filed which was also denied by the
public respondent in his Order dated May 24, 1994. 6

Hence, the instant petition interposing the following justifications: jgc:chanro bles.c om.ph

"1) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA GRAVELY

ABUSED HIS DISCRETION WHEN HE ARBITRARILY RULED THAT ‘A LOCAL OR
CHAPTER OF A LABOR FEDERATION, LIKE RESPONDENT IBM, NEED NOT OBTAIN A
CERTIFICATE OF REGISTRATION FROM THE BUREAU OF LABOR RELATIONS TO
ACQUIRE LEGAL PERSONALITY,’ WHEN ARTICLE 234 OF THE LABOR CODE OF THE
PHILIPPINES AND SECTION 3 OF RULE II OF BOOK V OF THE RULES
IMPLEMENTING THE LABOR CODE, AS AMENDED, CLEARLY PROVIDES THAT A
GROUP OF WORKERS OR A LOCAL UNION SHALL ACQUIRE LEGAL PERSONALITY
ONLY UPON THE ISSUANCE OF THE CERTIFICATE OF REGISTRATION BY THE
BUREAU OF LABOR RELATIONS. AND,

2) THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA GRAVELY

ABUSED HIS DISCRETION WHEN HE PREMATURELY AND ARBITRARILY RULED THAT
RESPONDENT IBM IS A LEGITIMATE LABOR ORGANIZATION WHEN THE
AUTHENTICITY AND DUE EXECUTION OF THE CHARTER CERTIFICATE SUBMITTED
BY RESPONDENT IBM CANNOT YET BE ASCERTAINED BECAUSE IT IS STILL NOT
KNOWN WHO ARE THE LEGITIMATE OFFICERS OF THE IBM FEDERATION WHO MAY
VALIDLY ISSUE SAID CHARTER CERTIFICATE AS THE CASE FILED TO RESOLVE THE
ISSUE ON WHO ARE THE LEGITIMATE OFFICERS OF THE IBM FEDERATION IS STILL
PENDING RESOLUTION BEFORE THIS HONORABLE SUPREME COURT." 7

The petition has no merit.

Petitioner asserts that IBM at SMFI is not a legitimate labor organization

notwithstanding the fact that it is a local or chapter of the IBM Federation. This is
so because under Article 234 of the Labor Code, any labor organization shall
acquire legal personality only upon the issuance of the Certificate of Registration by
the Bureau of Labor Relations.

We do not agree.

I
Article 212(h) of the Labor Code defines a legitimate labor organization as "any
labor organization duly registered with the Department of Labor and Employment,
and includes any branch or local thereof." c ralaw virtua1aw l ibra ry

It is important to determine whether or not a particular labor organization is

legitimate since legitimate labor organizations have exclusive rights under the law
which cannot be exercised by non-legitimate unions, one of which is the right to be
certified as the exclusive representative of all the employees in an appropriate
collective bargaining unit for purposes of collective bargaining. These rights are
found under Article 242 of the Labor Code, to wit: jgc:chan roble s.com.p h

"ART. 242. Rights of legitimate labor organizations. — A legitimate labor

organization shall have the right:
c hanro b1es vi rt ual 1aw li bra ry

(a) To act as the representative of its members for the purpose of collective
bargaining;

(b) To be certified as the exclusive representative of all the employees in an

appropriate collective bargaining unit for purposes of collective bargaining;

(c) To be furnished by the employer, upon written request, with his annual audited
financial statements, including the balance sheet and the profit and loss statement,
within thirty (30) calendar days from the date of receipt of the request, after the
union has been duly recognized by the employer or certified as the sole and
exclusive bargaining representative of the employees in the bargaining unit, or
within sixty (60) calendar days before the expiration of the existing collective
bargaining agreement, or during the collective bargaining negotiation;

(d) To own property, real or personal, for the use and benefit of the labor
organization and its members;

(e) To sue and be sued in its registered name; and

(f) To undertake all other activities designed to benefit the organization and its
members, including cooperative, housing welfare and other projects not contrary to
law.

x x x"

The pertinent question, therefore, must be asked: When does a labor organization
acquire legitimacy?
Ordinarily, a labor organization attains the status of legitimacy only upon the
issuance in its name of a Certificate of Registration by the Bureau of Labor
Relations pursuant to Articles 234 and 235 of the Labor Code, viz.: jgc:chan robles. com.ph

"ART. 234. Requirements of registration. — Any applicant labor organization,

association or group of unions or workers shall acquire legal personality and shall
be entitled to the rights and privileges granted by law to legitimate labor
organizations upon issuance of the certificate of registration based on the following
requirements: chan rob1es v irt ual 1aw li bra ry

(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor
organization, the minutes of the organizational meetings and the list of the workers
who participated in such meetings;

(c) The names of all its members comprising at least twenty percent (20 %) of all
the employees in the bargaining unit where it seeks to operate;

(d) If the applicant union has been in existence for one or more years, copies of its
annual financial reports; and

(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes
of its adoption or ratification, and the list of the members who participated in it.

ART. 235. Action of application. — The Bureau shall act on all applications for
registration within thirty (30) days from filing.

All requisite documents and papers shall be certified under oath by the secretary or
the treasurer of the organization, as the case may be, and attested to by its
president."c ralaw vi rtua 1aw lib rary

The foregoing procedure is not the only way by which a labor union may become
legitimate, however. When an unregistered union becomes a branch, local or
chapter of a federation, some of the aforementioned requirements for registration
are no longer required. 8 Section 3, Rule II, Book V of the Implementing Rules of
the Labor Code governs the procedure for union affiliation, the relevant portion of
which provide: jgc:chanrobles. com.ph

"Sec. 3. Union Affiliation: Direct Membership with National Union. — An affiliate of a

labor federation or national union may be a local or chapter thereof or an
independently registered union.

(a) The labor federation or national union concerned shall issue a charter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.

(b) An independently registered union shall be considered an affiliate of a labor

federation or national union after submission to the Bureau of the contract or
agreement of affiliation within thirty (30) days after its execution.

x x x

(e) The local or chapter of a labor federation or national union shall have and
maintain a constitution and by-laws, set of officers and books of accounts. For
reporting purposes, the procedure governing the reporting of independently
registered unions, federations or national unions shall be observed." cralaw vi rtua 1aw lib rary

Paragraph (a) refers to a local or chapter of a federation which did not undergo the
rudiments of registration while paragraph (b) refers to an independently registered
union which affiliated with a federation. Implicit in the foregoing differentiation is
the fact that a local or chapter need not be independently registered. By force of
law (in this case, Article 212 [h], such local or chapter becomes a legitimate labor
organization upon compliance with the aforementioned provisions of Section 3 9 (a)
and (e), without having to be issued a Certificate of Registration in its favor by the
BLR.

The cases of Lopez Sugar Corporation v. Secretary of Labor and Employment, 10

Phoenix Iron and Steel Corporation v. Secretary of Labor and Employment, 11 and
Protection Technology, Inc. v. Secretary, Department of Labor and Employment 12
all going back to our landmark holding in Progressive Development Corporation v.
Secretary, Department of Labor and Employment, 13 unequivocably laid down the
rule, thus:
jgc:chan roble s.com.p h

"A local or chapter therefore becomes a legitimate labor organization only upon
submission of the following to the BLR: chan rob1e s virtual 1aw lib rary

1) A charter certificate, within 30 days from its issuance by the labor federation or
national union, and

2) The constitution and by-laws, a statement on the set of officers, and the books
of accounts all of which are certified under oath by the secretary or treasurer, as
the case may be, of such local or chapter, and attested to by its president.

Absent compliance with these mandatory requirements, the local or chapter does
not become a legitimate labor organization." cra law virt ua1aw li bra ry
Corollarily, the satisfaction of all these requirements by the local or chapter shall
vest upon it the status of legitimacy with all its concomitant statutory privileges,
one of which is the right to be certified as the exclusive representative of all the
employees in an appropriate bargaining unit.

In the case at bench, public respondent Bienvenido E. Laguesma, in affirming the

finding of the Med-Arbiter that IBM at SMFI is a legitimate labor organization 14
made the following material pronouncements amply supported by the records: jgc:chanroble s.com.p h

" [t]he resolution of the issue raised by the respondent on whether or not petitioner
is a legitimate labor organization will depend on the documents submitted by the
petitioner in the second petition.

A close scrutiny of the records shows that at the time of the filing of the subject
petition on 24 September 1993 by the petitioner Ilaw at Buklod ng Manggagawa,
for and in behalf of its local affiliate IBM at SMFI-CEBU B-MEG, the latter has been
clothed with the status and/or character of a legitimate labor organization. This is
so, because on 19 July 1993, petitioner submitted to the Bureau of Labor Relations
(BLR), this Department, the following documents: charter certificate, constitution
and by-laws, names and addresses of the union officers and a certification of the
union’s secretary on the non-availability of the union’s Books of Accounts. Said
documents (except the charter certificate) are certified under oath and attested to
by the local union’s secretary and President, respectively." 15

Petitioner SMFI does not dispute the fact that IBM at SMFI has complied with the
second set of requirements, i.e., constitution, by-laws, et. al. What is controverted
is the non-compliance with the requirement as to the charter certificate which must
be submitted to the BLR within thirty (30) days from its issuance by the labor
federation. While the presence of a charter certificate is conceded, petitioner
maintains that the validity and authenticity of the same cannot yet be ascertained
as it is still not known who is the legitimate and authorized representative of the
IBM Federation who may validly issue said charter certificate in favor of its local,
IBM at SMFI. According to petitioner, there are two (2) contending sets of officers
of the IBM Federation at the time the charter certificate was issued in favor of IBM
at SMFI, the faction of Mr. Severino O. Meron and that of Mr. Edilberto B. Galvez.

On this point, public respondent, in upholding the legitimate status of IBM at SMFI,
backed up by the Solicitor General, had this to say: jgc:chanro bles. com.ph

"The contention of the respondent that unless and until the issue on who is the
legitimate national president, of the Ilaw at Buklod ng Manggagawa is resolved, the
petitioner cannot claim that it has a valid charter certificate necessary for it to
acquire legal personality is untenable. We wish to stress that the resolution of the
said issue will not in any way affect the validity of the charter certificate issued by
the IBM in favor of the local union. It must be borne in mind that the said charter
certificate was issued by the IBM in its capacity as a labor organization, a juridical
entity which has a separate and distinct legal personality from its members. When
as in this case, there is no showing that the Federation acting as a separate entity
is questioning the legality of the issuance of the said charter certificate, the legality
of the issuance of the same in favor of the local union is presumed. This,
notwithstanding the alleged controversy on the leadership of the federation." 16

We agree with this position of the public respondent and the Solicitor General. In
addition, private respondent’s Comment to this petition indicates that in the
election of officers held to determine the representatives of IBM, the faction of Mr.
Meron lost to the group of Mr. Edilberto Galvez, and the latter was acknowledged as
the duly elected IBM National President. 17 Thus, the authority of Mr. Galvez to
sign the charter certificate of IBM at SMFI, as President of the IBM Federation, 18
can no longer be successfully questioned. A punctilious examination of the records
presents no evidence to the contrary and petitioner, instead of squarely refuting
this point, skirted the issue by insisting that the mere presence of two contending
factions in the IBM prevents the issuance of a valid and authentic charter certificate
in favor of IBM at SMFI. This averment of petitioner simply does not deserve any
merit.

II

In any case, this Court notes that it is petitioner, the employer, which has offered
the most tenacious resistance to the holding of a certification election among its
monthly-paid rank-and-file employees. This must not be so, for the choice of a
collective bargaining agent is the sole concern of the employees. 19 The only
exception to this rule is where the employer has to file the petition for certification
election pursuant to Article 258 20 of the Labor Code because it was requested to
bargain collectively, 21 which exception finds no application in the case before us.
Its role in a certification election has aptly been described in Trade Unions of the
Philippines and Allied Services (TUPAS) v. Trajano, 22 as that of mere by-stander,
It has no legal standing in a certification election as it cannot oppose the petition or
appeal the Med-Arbiter’s orders related thereto. An employer that involves itself in
a certification election lends suspicion to the fact that it wants to create a company
union. 23 This Court should be the last agency to lend support to such an attempt
at interference with a purely internal affair of labor. 24

While employers may rightfully be notified or informed of petitions of such nature,

they should not., however, be considered parties thereto with the concomitant right
to oppose it. Sound policy dictates that they should maintain a strictly hands-off
policy.25c ralaw:re d

It bears stressing that no obstacle must be placed to the holding of certification

elections, 26 for it is a statutory policy that should not be circumvented. 27 The
certification election is the most democratic and expeditious method by which the
laborers can freely determine the union that shall act as their representative in their
dealings with the establishment where they are working. 28 It is the appropriate
means whereby controversies and disputes on representation may be laid to rest,
by the unequivocal vote of the employees themselves. 29 Indeed, it is the keystone
of industrial democracy. 30

III

Petitioner next asseverates that the Charter Certificate submitted by the private
respondent was defective in that it was not certified under oath and attested to by
the organization’s secretary and President.

Petitioner is grasping at straws. Under our ruling in the Progressive Development

Corporation 31 case, what is required to be certified under oath by the secretary or
treasurer and attested to by the local’s president are the "constitution and by-laws,
a statement on the set of officers, and the books of accounts" of the organization.
The charter certificate issued by the mother union need not be certified under oath
by the secretary or treasurer and attested to by the local’s president.

IV

Petitioner, in its Reply to public respondent’s Comment, nevertheless calls the

attention of this court to the fact that, contrary to the assertion of private
respondent IBM that it is a legitimate labor federation and therefore has the
capacity and authority to create a local or chapter at SMFI, the Chief of the Labor
Organizations Division of the Bureau of Labor Relations — Manila had allegedly
issued a certification last January 17, 1995 to the effect that private respondent is
not a legitimate labor federation. 32

This is a factual issue which petitioner should have raised before the Med-Arbiter so
as to allow the private respondent ample opportunity to present evidence to the
contrary; This Court is definitely not the proper venue to consider this matter for it
is not a trier of facts. It is noteworthy that petitioner did not challenge the legal
personality of the federation in the proceedings before the Med-Arbiter. Nor was
this issue raised in petitioner’s appeal to the Office of the Secretary of Labor and
Employment. This matter is being raised for the first time in this petition. An issue
which was neither alleged in the pleadings nor raised during the proceedings below
cannot be ventilated for the first time before this Court. It would be offensive to the
basic rule of fair play, justice and due process. 33 Certiorari is a remedy narrow in
its scope and inflexible in character. It is not a general utility tool in the legal
workshop. 34 Factual issues are not a proper subject for certiorari, as the power of
the Supreme Court to review labor cases is limited to the issue of jurisdiction and
grave abuse of discretion. 35 It is simply unthinkable for the public respondent
Undersecretary of Labor to have committed grave abuse of discretion in this regard
when the issue as to the legal personality of the private respondent IBM Federation
was never interposed in the appeal before said forum.

Finally, the certification election sought to be stopped by petitioner is, as of now,

fait accompli. The monthly paid rank-and-file employees of SMFI have already
articulated their choice as to who their collective bargaining agent should be. In the
certification election held on August 20, 1994, 36 the SMFI workers chose IBM at
SMFI to be their sole and exclusive bargaining agent. This democratic decision
deserves utmost respect. Again, it bears stressing that labor legislation seeks in the
main to protect the interest of the members of the working class. It should never
be used to subvert their will. 37

WHEREFORE, the petition is DENIED. Costs against petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 159460 November 15, 2010

SOLIDBANK CORPORATION (now known as FIRST METRO INVESTMENT

CORPORATION), Petitioner,
vs.
ERNESTO U. GAMIER, ELENA R. CONDEVILLAMAR, JANICE L. ARRIOLA and OPHELIA C.
DE GUZMAN,Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 159461

SOLIDBANK CORPORATION and/or its successor-in-interest, FIRST METRO INVESTMENT

CORPORATION, DEOGRACIAS N. VISTAN AND EDGARDO MENDOZA, JR., Petitioners,
vs.
SOLIDBANK UNION AND ITS DISMISSED OFFICERS AND MEMBERS, namely: EVANGELINE
J. GABRIEL, TERESITA C. LUALHATI, ISAGANI P. MAKISIG, REY S. PASCUA, EVELYN A. SIA,
MA. VICTORIA M. VIDALLON, AUREY A. ALJIBE, REY ANTHONY M. AMPARADO, JOSE A.
ANTENOR, AUGUSTO D. ARANDIA, JR., JANICE L. ARRIOLA, RUTH SHEILA MA.
BAGADIONG, STEVE D. BERING, ALAN ROY I. BUYCO, MANALO T. CABRERA, RACHE M.
CASTILLO, VICTOR O. CHUA, VIRGILIO Y. CO, JR., LEOPOLDO S. DABAY, ARMAND V.
DAYANG-HIRANG, HUBERT V. DIMAGIBA, MA. LOURDES CECILIA B. EMPARADOR, FELIX D.
ESTACIO, JR., JULIETA T. ESTRADA, MARICEL G. EVALLA, JOSE G. GUISADIO, JOSE
RAINARIO C. LAOANG, ALEXANDER A. MARTINEZ, JUAN ALEX C. NAMBONG, JOSEPHINE
M. ONG, ARMANDO B. OROZCO, ARLENE R. RODRIGUEZ, NICOMEDES P. RUIZO, JR., DON
A. SANTANA, ERNESTO R. SANTOS, JR., EDNA M. SARONG, GREGORIO S. SECRETARIO,
ELLEN M. SORIANO, ROSIE C. UY, ARVIN D. VALENCIA, FERMIN JOSSEPH B. VENTURA,
JR., EMMANUEL C. YAPTANCO, ERNESTO C. ZUNIGA, ARIEL S. ABENDAN, EMMA R.
ABENDAN, PAULA AGNES A. ANGELES, JACQUILINE B. BAQUIRAN, JENNIFER S.
BARCENAS, ALVIN E. BARICANOSA, GEORGE MAXIMO P. BARQUEZ, MA. ELENA G.
BELLO, RODERICK M. BELLO, MICHAEL MATTHEW B. BILLENA, LEOPE L. CABENIAN,
NEPTALI A. CADDARAO, FERDINAND MEL S. CAPULING, MARGARETTE B. CORDOVA, MA.
EDNA V. DATOR, RANIEL C. DAYAO, RAGCY L. DE GUZMAN, LUIS E. DELOS SANTOS,
CARMINA M. DEGALA, EPHRAIM RALPH A. DELFIN, KAREN M. DEOCERA, CAROLINA C.
DIZON, MARCHEL S. ESQUEJJO, JOCELYN I. ESTROBO, MINERVA S. FALLARME, HERNANE
C. FERMOCIL, RACHEL B. FETIZANAN, SAMUEL A. FLORENTINO, MENCHIE R. FRANCISCO,
ERNESTO U. GAMIER, MACARIO RODOLFO N. GARCIA, JOEL S. GARMINO, LESTER MARK
Z. GATCHALIAN, MA. JINKY P. GELERA, MA. TERESA G. GONZALES, GONZALO G. GUINIT,
EMILY H. GUINO-O, FERDINAND S. HABIJAN, JUN G. HERNANDEZ, LOURDES D. IBEAS, MA.
ANGELA L. JALANDONI, JULIE T. JORNACION, MANUEL C. LIM, MA. LOURDES A. LIM,
EMERSON V. LUNA, NOLASCO B. MACATANGAY, NORMAN C. MANACO, CHERRY LOU B.
MANGROBANG, MARASIGAN G. EDMUNDO, ALLEN M. MARTINEZ, EMELITA C. MONTANO,
ARLENE P. NOBLE, SHIRLEY A. ONG, LOTIZ E. ORTIZ LUIS, PABLITO M. PALO, MARY JAINE
D. PATINO, GEOFFREY T. PRADO, OMEGA MELANIE M. QUINTANO, ANES A. RAMIREZ,
RICARDO D. RAMIREZ, DANIEL O. RAQUEL, RAMON B. REYES, SALVACION N. ROGADO,
ELMOR R. ROMANA, JR., LOURDES U. SALVADOR, ELMER S. SAYLON, BENHARD E.
SIMBULAN, MA. TERESA S. SOLIS, MA. LOURDES ROCEL E. SOLIVEN, EMILY C. SUY AT,
EDGAR ALLAN P. TACSUAN, RAYMOND N. TANAY, JOCELYN Y. TAN, CANDIDO G. TISON,
MA. THERESA O. TISON, EVELYN T. UYLANGCO, CION E. YAP, MA. OPHELIA C. DE
GUZMAN, MA. HIDELISA P. IRA, RAYMUND MARTIN A. ANGELES, MERVIN S. BAUTISTA,
ELENA R. CONDEVILLAMAR, CHERRY T. CO, LEOPOLDO V. DE LA ROSA, DOROTEO S.
FROILAN, EMMANUEL B. GLORIA, JULIETEL JUBAC AND ROSEMARIE L.
TANG, Respondents.

DECISION

VILLARAMA, JR., J.:

The consolidated petitions before us seek to reverse and set aside the Decision1 dated March 10,
2003 of the Court of Appeals (CA) in CA-G.R. SP Nos. 67730 and 70820 which denied the petitions
for certiorari filed by Solidbank Corporation (Solidbank) and ordered the reinstatement of the above-
named individual respondents to their former positions.

The Antecedents

Sometime in October 1999, petitioner Solidbank and respondent Solidbank Employees’ Union
(Union) were set to renegotiate the economic provisions of their 1997-2001 Collective Bargaining
Agreement (CBA) to cover the remaining two years thereof. Negotiations commenced on November
17, 1999 but seeing that an agreement was unlikely, the Union declared a deadlock on December
22, 1999 and filed a Notice of Strike on December 29, 1999.2During the collective bargaining
negotiations, some Union members staged a series of mass actions. In view of the impending actual
strike, then Secretary of Labor and Employment Bienvenido E. Laguesma assumed jurisdiction over
the labor dispute, pursuant to Article 263 (g) of the Labor Code, as amended. The assumption order
dated January 18, 2000 directed the parties "to cease and desist from committing any and all acts
that might exacerbate the situation."3

In his Order4 dated March 24, 2000, Secretary Laguesma resolved all economic and non-economic
issues submitted by the parties, as follows:

WHEREFORE, premises considered, judgment is hereby issued:

a. Directing Solidbank Corporation and Solidbank Union to conclude their Collective

Bargaining Agreement for the years 2000 and 2001, incorporating the dispositions above set
forth;

b. Dismissing the unfair labor practice charge against Solidbank Corporation;

c. Directing Solidbank to deduct or check-off from the employees’ lump sum payment an
amount equivalent to seven percent (7%) of their economic benefits for the first (1st) year,
inclusive of signing bonuses, and to remit or turn over the said sum to the Union’s authorized
representative, subject to the requirements of check-off;

d. Directing Solidbank to recall the show-cause memos issued to employees who

participated in the mass actions if such memos were in fact issued.

SO ORDERED.5

Dissatisfied with the Secretary’s ruling, the Union officers and members decided to protest the same
by holding a rally infront of the Office of the Secretary of Labor and Employment in Intramuros,
Manila, simultaneous with the filing of their motion for reconsideration of the March 24, 2000 Order.
Thus, on April 3, 2000, an overwhelming majority of employees, including the individual
respondents, joined the "mass leave" and "protest action" at the Department of Labor and
Employment (DOLE) office while the bank’s provincial branches in Cebu, Iloilo, Bacolod and Naga
followed suit and "boycotted regular work."6 The union members also picketed the bank’s Head
Office in Binondo on April 6, 2000, and Paseo de Roxas branch on April 7, 2000.

As a result of the employees’ concerted actions, Solidbank’s business operations were paralyzed.
On the same day, then President of Solidbank, Deogracias N. Vistan, issued a
memorandum7 addressed to all employees calling their absence from work and demonstration
infront of the DOLE office as an illegal act, and reminding them that they have put their jobs at risk
as they will be asked to show cause why they should not be terminated for participating in the union-
instigated concerted action. The employees’ work abandonment/boycott lasted for three days, from
April 3 to 5, 2000.

On the third day of the concerted work boycott (April 5, 2000), Vistan issued another
memorandum,8 this time declaring that the bank is prepared to take back employees who will report
for work starting April 6, 2000 "provided these employees were/are not part of those who led or
instigated or coerced their co-employees into participating in this illegal act." Out of the 712
employees who took part in the three-day work boycott, a total of 513 returned to work and were
accepted by the bank. The remaining 199 employees insisted on defying Vistan’s directive, which
included herein respondents Ernesto U. Gamier, Elena R. Condevillamar, Janice L. Arriola and
Ophelia C. De Guzman. For their failure to return to work, the said 199 employees were each issued
a show-cause memo directing them to submit a written explanation within twenty-four (24) hours why
they should not be dismissed for the "illegal strike x x x in defiance of x x x the Assumption Order of
the Secretary of Labor x x x resulting [to] grave and irreparable damage to the Bank", and placing
them under preventive suspension.9

The herein 129 individual respondents were among the 199 employees who were terminated for
their participation in the three-day work boycott and protest action. On various dates in June 2000,
twenty-one (21) of the individual respondents executed Release, Waiver and Quitclaim in favor of
Solidbank.10

On May 8, 2000, Secretary Laguesma denied the motions for reconsideration filed by Solidbank and
the Union.11

The Union filed on May 11, 2000 a Motion for Clarification of certain portions of the Order dated
March 24, 2000, and on May 19, 2000 it filed a Motion to Resolve the Supervening Issue of
Termination of 129 Striking Employees. On May 26, 2000, Secretary Laguesma granted the first
motion by clarifying that the contract-signing bonus awarded in the new CBA should likewise be
based on the adjusted pay. However, the Union’s second motion was denied,12 as follows:

This Office cannot give due course to the Union’s second motion. The labor dispute arising from the
termination of the Bank employees is an issue that ought to be entertained in a separate case. The
assumption order of January 18, 2000 covered only the bargaining deadlock between the parties
and the alleged violation of the CBA provision on regularization. We have already resolved both the
deadlock and the CBA violation issues. The only motion pending before us is the motion for
clarification, which we have earlier disposed of in this Order. Thus, the only option left is for the
Union to file a separate case on the matter.13

In the meantime, the Monetary Board on July 28, 2000 approved the request of Metropolitan Bank
and Trust Company (Metrobank) to acquire the existing non-real estate assets of Solidbank in
consideration of assumption by Metrobank of the liabilities of Solidbank, and to integrate the banking
operations of Solidbank with Metrobank. Subsequently, Solidbank was merged with First Metro
Investment Corporation, and Solidbank, the surviving corporation, was renamed the First Metro
Investment Corporation (FMIC).14 By August 31, 2000, Solidbank ceased banking operations after
surrendering its expanded banking license to the Bangko Sentral ng Pilipinas. Petitioners duly filed a
Termination Report with the DOLE and granted separation benefits to the bank’s employees.15

Respondents Gamier, Condevillamar, Arriola and De Guzman filed separate complaints for illegal
dismissal, moral and exemplary damages and attorney’s fees on April 28, May 15 and May 29,
2000, respectively (NLRC NCR Case Nos. [S]30-04-01891-00, 30-05-03002-00 and 30-05-02253-
00). The cases were consolidated before Labor Arbiter Potenciano S. Cañizares, Jr. Respondent
Union joined by the 129 dismissed employees filed a separate suit against petitioners for illegal
dismissal, unfair labor practice and damages (NLRC NCR Case No. 30-07-02920-00 assigned to
Labor Arbiter Luis D. Flores).

Labor Arbiters’ Rulings

In his Decision dated November 14, 2000, Labor Arbiter Potenciano S. Cañizares, Jr. dismissed the
complaints of Gamier, Condevillamar, Arriola and De Guzman. It was held that their participation in
the illegal strike violated the Secretary of Labor’s return to work order upon the latter’s assumption of
the labor dispute and after directing the parties to execute their new CBA.16
On March 16, 2001, Labor Arbiter Luis D. Flores rendered a decision17 in favor of respondents Union
and employees, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants’

dismissal as illegal and unjustified and ordering the respondents Solidbank Corporation and/or its
successor-in-interest First Metro Investment Corporation and/or Metropolitan Bank and Trust
Company and/or Deogracias Vistan and/or Edgardo Mendoza to reinstate complainants to their
former positions. Concomitantly, said respondents are hereby ordered to jointly and severally pay
the complainants their full backwages and other employee’s benefits from the time of their dismissal
up to the date of their actual reinstatement; payment of ten (10%) percent attorney’s fees; payment
of ONE HUNDRED FIFTY THOUSAND PESOS (₱150,000.00) each as moral damages and ONE
HUNDRED THOUSAND PESOS (₱100,000.00) each as exemplary damages which are computed,
at the date of this decision in the amount of THIRTY THREE MILLION SEVEN HUNDRED NINETY
FOUR THOUSAND TWO HUNDRED TWENTY TWO PESOS and 80/100 (₱33,794,222.80), by the
Computation and Examination Unit of this branch and becomes an integral part of this Decision.

SO ORDERED. 18

Respondents Gamier, Condevillamar, Arriola and De Guzman appealed the decision of Labor
Arbiter Cañizares, Jr. to the National Labor Relations Commission (NLRC NCR CA No 027342-01).
Petitioners likewise appealed from the decision of Labor Arbiter Flores (NLRC NCR CA No. 028510-
01).

Rulings of the NLRC

On July 23, 2001, the NLRC’s Second Division rendered a Decision19 reversing the decision of Labor
Arbiter Flores, as follows:

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby VACATED and SET
ASIDE and a new one entered dismissing the complaint for illegal dismissal and unfair labor practice
for lack of merit. As equitable relief, respondents are hereby ordered to pay complainants separation
benefits as provided under the CBA at least one (1) month pay for every year of service whichever is
higher.

SO ORDERED.20

The Second Division ruled that the mass action held by the bank employees on April 3, 2000 infront
of the Office of the Secretary of Labor was not a legitimate exercise of the employees’ freedom of
speech and assembly. Such was a strike as defined under Article 212 (o) of the Labor Code, as
amended, which does not distinguish as to whom the action of the employees is directed against,
nor the place/location where the concerted action of the employees took place. Complainants
Gamier, Condevillamar, Arriola and De Guzman did not report for work and picketed the DOLE
premises on April 3, 2000; they continuously refused to report back to work until April 7, 2000 when
they were issued a Notice of Termination. It was stressed that the mass action of the bank
employees was an incident of a labor dispute, and hence the concerted work abandonment was a
prohibited activity contemplated under Article 264 (a) of the Labor Code, as amended, upon
assumption of jurisdiction by the Secretary of Labor. Citing this Court’s ruling in the case of
Telefunken Semiconductors Employees Union-FFW v. Court of Appeals,21 the Second Division
found there was just and valid cause for the dismissal of complainants.22

On the charge of forum shopping with respect to twenty-one (21) individual complainants who have
voluntarily settled their claims against Solidbank, the said cases not having been dismissed by the
Labor Arbiter despite proper motion,23 the Second Division found that complainants admitted in their
Answer that the said employees preferred to pursue their own independent action against the bank
and their names were stricken out from the original complaint; hence, the Labor Arbiter erred in
granting relief to said employees. Nevertheless, it held that the complaint will not be dismissed on
this ground as the issue of forum shopping should have been raised in the proceedings before the
Labor Arbiter.24

Respondents filed a motion for reconsideration while the petitioners filed a partial motion for
reconsideration. Both motions were denied under Resolution25 dated September 28, 2001.

As to respondents’ appeal, the NLRC’s Third Division by Decision26 dated January 31, 2002,
reversed the decision of Labor Arbiter Cañizares, Jr., as follows:

WHEREFORE, the decision appealed from is hereby SET ASIDE and a new one entered finding the
respondent Solidbank Corporation liable for the illegal dismissal of complainants Ernesto U. Gamier,
Elena P. Condevillamar, Janice L. Arriola and Maria Ophelia C. de Guzman, and ordering the
respondent bank to reinstate the complainants to their former positions without loss of seniority
rights and to pay full backwages reckoned from the time of their illegal dismissal up to the time of
their actual/payroll reinstatement. Should reinstatement not be feasible, respondent bank is further
ordered to pay complainants their separation pay in accordance with the provisions of the subsisting
Collective Bargaining Agreement.

All other claims are DISMISSED for lack of merit.

SO ORDERED.27

The Third Division held that the protest action staged by the bank’s employees before the DOLE did
not amount to a strike but rather an exercise of their right to express frustration and dissatisfaction
over the decision rendered by the Secretary of Labor. Hence, it cannot be concluded that the activity
is per se illegal or violative of the assumption order considering that at the time, both parties had
pending motions for reconsideration of the Secretary’s decision. Moreover, it was found that Gamier,
Condevillamar, Arriola and De Guzman were not fully investigated on the charge that they had
instigated or actively participated in an illegal activity; neither was it shown that the explanations
submitted by them were considered by the management. Since said employees had presented
evidence of plausible and acceptable reasons for their absence at the workplace at the time of the
protest action, their termination based on such alleged participation in the protest action was
unjustified.28

Respondents filed a "partial motion" while the petitioners filed a motion for reconsideration of the
Decision dated January 31, 2002. Both motions were denied under Resolution29 dated March 8,
2002.

On November 20, 2001, petitioners filed a petition for certiorari before the CA assailing the July 23,
2001 Decision and Resolution dated September 28, 2001 of the NLRC’s Second Division insofar as
it ordered the payment of separation benefits to the 129 terminated employees of Solidbank who
participated in the mass action/strike (CA-G.R. SP No. 67730).30

On May 23, 2002, petitioners filed a separate petition in the CA (CA-G.R. SP No. 70820) seeking the
reversal of the January 31, 2002 Decision and Resolution dated March 8, 2002 of the NLRC’s Third
Division and praying for the following reliefs: (1) immediate issuance of a TRO and writ of preliminary
injunction to restrain/enjoin the NLRC from issuing a writ of execution in NLRC CA No. 027342-01;
(2) the petition be consolidated with CA-G.R. SP No. 67730 before the Thirteenth Division and CA-
G.R. SP No. 68054 before the Third Division, or if consolidation is no longer possible, that the
petition be resolved independently of the aforesaid cases; and (3) granting the petition by annulling
and setting aside the January 31, 2002 Decision of the NLRC, and reinstating the November 14,
2000 Decision of Labor Arbiter Cañizares, Jr.31

On August 9, 2002, petitioners filed a Manifestation before the Fifteenth Division (CA-G.R. SP No.
67730) attaching thereto a copy of the Decision32 (dated July 26, 2002) rendered by the CA’s Special
Third Division in CA-G.R. SP No. 68998, a petition for certiorari separately filed by Metrobank which
also sought to annul and set aside the July 23, 2001 Decision of the NLRC’s Second Division insofar
as it ordered the payment of separation benefits to the dismissed employees of Solidbank. In the
said decision, the CA’s Fourteenth Division gave due course to the petition of Metrobank and
affirmed the July 23, 2001 decision of the NLRC but reversed and set aside the portion of the
decision ordering the payment of separation benefits.33

On September 11, 2002, respondents filed an Omnibus Motion and Counter-Manifestation arguing
that petitioners’ Manifestation constitutes a judicial admission that Metrobank engaged in forum
shopping; it was thus prayed that CA-G.R. SP No. 68998 be consolidated with CA-G.R. SP No.
67730, the latter having a lower case number. Further, respondents attached a copy of the
Decision34 dated August 29, 2002 rendered by the CA’s Second Division in CA-G.R. SP No. 68054,
the petition separately filed by the Union and the 129 terminated employees of Solidbank from the
July 23, 2001 Decision of the NLRC’s Second Division. The CA’s Second Division granted the
petition in CA-G.R. SP No. 68054 and reinstated the March 16, 2001 Decision of Labor Arbiter
Flores.

CA-G.R. SP Nos. 67730 and 70820 were consolidated before the Twelfth Division.

Court of Appeals’ Ruling

On March 10, 2003, the CA rendered its Decision35 the dispositive portion of which reads:

WHEREFORE, the twin petitions are hereby DENIED. The dismissal of private respondents are
hereby declared to be illegal. Consequently, petitioner is ordered to reinstate private respondents to
their former position, consonant with the Decision of this Court in CA-G.R. SP No. 68054.

SO ORDERED.36

First, on the issue of forum shopping, the CA found that while there were indeed two cases filed
respecting the same matter of illegality of the dismissal of certain employees of Solidbank, it appears
that the individual complainants have no hand in initiating the case before the Labor Arbiter for which
the Union filed the complaint in behalf of its members. Hence, the individual complainants cannot be
said to have deliberately or consciously sought two different fora for the same issues and causes of
action. Petitioners, moreover, failed to call the attention of the Labor Arbiter as to the fact of filing of
similar complaints by four employees.

As to the nature of the mass action resorted to by the employees of Solidbank, the CA ruled that it
was a legitimate exercise of their right to free expression, and not a strike proscribed when the
Secretary of Labor assumed jurisdiction over the impassé between Solidbank and the Union in the
collective bargaining negotiations. The CA thus reasoned:

… while conceding that the aggregated acts of the private respondents may have resulted in a
stoppage of work, such was the necessary result of the exercise of a Constitutional right. It is beyond
cavil that the mass action was done, not to exert any undue pressure on the petitioner with regard to
wages or other economic demands, but to express dissatisfaction over the decision of the Labor
Secretary subsequent to his assumption of jurisdiction. Surely, this is one course of action that is not
enjoined even when a labor dispute is placed under the assumption of the said Labor Secretary. To
allow an act of the Labor Secretary – one man in the Executive Department – to whittle down a
freedom guaranteed by the Bill of Rights would be to place upon that freedom a limitation never
intended by the several framers of our Constitution. In effect, it would make a right enshrined in the
Fundamental Law that was ratified by the Sovereign People, subordinate to a prerogative granted by
the Labor Code, a statutory enactment made by mere representatives of the People. This anomaly
We cannot allow.

xxxx

Was private respondents’ act of massing in front of the DOLE Building calculated by them to cause
work stoppage, or were they merely airing their grievance over the ruling of the Labor Secretary in
exercise of their civil liberties? Who can divine the motives of their hearts? But when two different
interpretations are possible, the courts must lean towards that which gives meaning and vitality to
the Bill of Rights. x x x37 (Emphasis supplied.)

On April 2, 2003, petitioners filed a motion for reconsideration but this was denied by the CA in its
Resolution38dated August 7, 2003.

The Petitions

G.R. No. 159460

Petitioners argued that the CA erred in holding that the mass action of April 3, 2000 infront of the
Office of the Secretary of Labor was not a strike considering that it had all the elements of a strike
and the respondents judicially admitted that it was a strike. The CA deemed the mass action as an
exercise of the respondents’ freedom of expression but such constitutional right is not absolute and
subject to certain well-defined exceptions. Moreover, a mass action of this nature is considered a
strike and not an exercise of one’s freedom of expression, considering further that the Secretary’s
Order dated January 18, 2000 is a valid exercise of police power.

Petitioners assail the CA in not considering the damage and prejudice caused to the bank and its
clients by respondents’ illegal acts. Respondents’ mass actions crippled banking operations. Over-
the-counter transactions were greatly undermined. Checks for clearing were significantly delayed.
On-line transactions were greatly hampered, causing inestimable damage to the nationwide network
of automated teller machines. Respondent Union’s actions clearly belie its allegation that its mass
action was merely intended to protest and express their dissatisfaction with the Secretary’s Order
dated March 24, 2000.

In view of the illegal strike conducted in violation of the Secretary’s assumption order, petitioners
maintain that the dismissal of respondents was not illegal, as consistently ruled by this Court in many
cases. Even granting arguendo that their termination was illegal, the CA erred in ordering the
reinstatement of respondents and holding that Solidbank, FMIC and Metrobank are solidarily liable
to the respondents. Lastly, the CA erred in not finding that respondents were guilty of forum
shopping as respondents’ claim that they did not know the Union had filed a complaint was
unbelievable under the circumstances.39

G.R. No. 159461

Petitioners contend that the CA erred in ruling that the dismissal of respondents Gamier,
Condevillamar, Arriola and De Guzman was illegal, considering that this was not an issue raised in
the petition for certiorari before the appellate court. What was raised by petitioners was only the
propriety of the award of separation pay by the NLRC which in fact declared their dismissal to be
valid and legal.

Petitioners maintain that respondents are not entitled to separation pay even if the dismissal was
valid because they committed serious misconduct and/or illegal act in defying the Secretary’s
assumption order. Moreover, the CA also erred in disregarding the Release, Waiver and Quitclaim
executed by twenty-one (21) individual respondents who entered into a compromise agreement with
Solidbank.40

Issues

The fundamental issues to be resolved in this controversy are: (1) whether the protest rally and
concerted work abandonment/boycott staged by the respondents violated the Order dated January
18, 2000 of the Secretary of Labor; (2) whether the respondents were validly terminated; and (3)
whether the respondents are entitled to separation pay or financial assistance.

Our Ruling

Article 212 of the Labor Code, as amended, defines strike as any temporary stoppage of work by the
concerted action of employees as a result of an industrial or labor dispute. A labor dispute includes
any controversy or matter concerning terms and conditions of employment or the association or
representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and
conditions of employment, regardless of whether or not the disputants stand in the proximate relation
of employers and employees.41 The term "strike" shall comprise not only concerted work stoppages,
but also slowdowns, mass leaves, sitdowns, attempts to damage, destroy or sabotage plant
equipment and facilities and similar activities.42 Thus, the fact that the conventional term "strike" was
not used by the striking employees to describe their common course of action is inconsequential,
since the substance of the situation, and not its appearance, will be deemed to be controlling.43

After a thorough review of the records, we hold that the CA patently erred in concluding that the
concerted mass actions staged by respondents cannot be considered a strike but a legitimate
exercise of the respondents’ right to express their dissatisfaction with the Secretary’s resolution of
the economic issues in the deadlocked CBA negotiations with petitioners. It must be stressed that
the concerted action of the respondents was not limited to the protest rally infront of the DOLE Office
on April 3, 2000. Respondent Union had also picketed the Head Office and Paseo de Roxas Branch.
About 712 employees, including those in the provincial branches, boycotted and absented
themselves from work in a concerted fashion for three continuous days that virtually paralyzed the
employer’s banking operations. Considering that these mass actions stemmed from a bargaining
deadlock and an order of assumption of jurisdiction had already been issued by the Secretary of
Labor to avert an impending strike, there is no doubt that the concerted work abandonment/boycott
was the result of a labor dispute.

In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations
Commission,44 petitioners union and members held similar protest rallies infront of the offices of BLR
and DOLE Secretary and at the company plants. We declared that said mass actions constituted
illegal strikes:

Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are not
within the ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their
right to peaceably assemble and petition the government for redress of grievances. Mainly relying on
the doctrine laid down in the case of Philippine Blooming Mills Employees Organization v. Philippine
Blooming Mills Co., Inc., it argues that the protest was not directed at Toyota but towards the
Government (DOLE and BLR). It explains that the protest is not a strike as contemplated in the
Labor Code. The Union points out that in Philippine Blooming Mills Employees Organization, the
mass action staged in Malacañang to petition the Chief Executive against the abusive behavior of
some police officers was a proper exercise of the employees’ right to speak out and to peaceably
gather and ask government for redress of their grievances.

The Union’s position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some respects to
that of the present case, the Union fails to realize one major difference: there was no labor dispute
in Philippine Blooming Mills Employees Organization. In the present case, there was an on-going
labor dispute arising from Toyota’s refusal to recognize and negotiate with the Union, which was the
subject of the notice of strike filed by the Union on January 16, 2001. Thus, the Union’s reliance
on Philippine Blooming Mills Employees Organization is misplaced, as it cannot be considered a
precedent to the case at bar.

xxxx

Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by
the Union officials and members on February 21 to 23, 2001 are not valid and proper exercises of
their right to assemble and ask government for redress of their complaints, but are illegal strikes in
breach of the Labor Code. The Union’s position is weakened by the lack of permit from the City of
Manila to hold "rallies." Shrouded as demonstrations, they were in reality temporary stoppages of
work perpetrated through the concerted action of the employees who deliberately failed to report for
work on the convenient excuse that they will hold a rally at the BLR and DOLE offices in Intramuros,
Manila, on February 21 to 23, 2001. x x x (Emphasis supplied.)

Moreover, it is explicit from the directive of the Secretary in his January 18, 2000 Order that the
Union and its members shall refrain from committing "any and all acts that might exacerbate the
situation,"45 which certainly includes concerted actions. For all intents and purposes, therefore, the
respondents staged a strike ultimately aimed at realizing their economic demands. Whether such
pressure was directed against the petitioners or the Secretary of Labor, or both, is of no moment. All
the elements of strike are evident in the Union-instigated mass actions.

The right to strike, while constitutionally recognized, is not without legal constrictions.46 Article 264
(a) of the Labor Code, as amended, provides:

Art. 264. Prohibited activities. – (a) x x x

No strike or lockout shall be declared after assumption of jurisdiction by the President or the
Secretary or after certification or submission of the dispute to compulsory or voluntary arbitration or
during the pendency of cases involving the same grounds for the strike or lockout.

x x x x (Emphasis supplied.)

The Court has consistently ruled that once the Secretary of Labor assumes jurisdiction over a labor
dispute, such jurisdiction should not be interfered with by the application of the coercive processes of
a strike or lockout.47 A strike that is undertaken despite the issuance by the Secretary of Labor of an
assumption order and/or certification is a prohibited activity and thus illegal.48
Article 264 (a) of the Labor Code, as amended, also considers it a prohibited activity to declare a
strike "during the pendency of cases involving the same grounds for the same strike."49 There is no
dispute that when respondents conducted their mass actions on April 3 to 6, 2000, the proceedings
before the Secretary of Labor were still pending as both parties filed motions for reconsideration of
the March 24, 2000 Order. Clearly, respondents knowingly violated the aforesaid provision by
holding a strike in the guise of mass demonstration simultaneous with concerted work
abandonment/boycott.

Notwithstanding the illegality of the strike, we cannot sanction petitioners’ act of indiscriminately
terminating the services of individual respondents who admitted joining the mass actions and who
have refused to comply with the offer of the management to report back to work on April 6, 2000.
The liabilities of individual respondents must be determined under Article 264 (a) of the Labor Code,
as amended:

Art. 264. Prohibited activities.— x x x

xxxx

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall
be entitled to reinstatement with full back wages. Any union officer who knowingly participates in an
illegal strike and any worker or union officer who knowingly participates in the commission of illegal
acts during a strike may be declared to have lost his employment status: Provided, That mere
participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his
employment, even if a replacement had been hired by the employer during such lawful strike.

xxxx

The foregoing shows that the law makes a distinction between union officers and members. For
knowingly participating in an illegal strike or participating in the commission of illegal acts during a
strike, the law provides that a union officer may be terminated from employment. The law grants the
employer the option of declaring a union officer who participated in an illegal strike as having lost his
employment. It possesses the right and prerogative to terminate the union officers from service.50

However, a worker merely participating in an illegal strike may not be terminated from employment.
It is only when he commits illegal acts during a strike that he may be declared to have lost
employment status.51 We have held that the responsibility of union officers, as main players in an
illegal strike, is greater than that of the members and, therefore, limiting the penalty of dismissal only
for the former for participation in an illegal strike is in order.52Hence, with respect to respondents who
are union officers, the validity of their termination by petitioners cannot be questioned. Being fully
aware that the proceedings before the Secretary of Labor were still pending as in fact they filed a
motion for reconsideration of the March 24, 2000 Order, they cannot invoke good faith as a
defense.53

For the rest of the individual respondents who are union members, the rule is that an ordinary
striking worker cannot be terminated for mere participation in an illegal strike. There must be proof
that he or she committed illegal acts during a strike. In all cases, the striker must be identified. But
proof beyond reasonable doubt is not required. Substantial evidence available under the attendant
circumstances, which may justify the imposition of the penalty of dismissal, may suffice. Liability for
prohibited acts is to be determined on an individual basis.54

Petitioners have not adduced evidence on such illegal acts committed by each of the individual
respondents who are union members. Instead, petitioners simply point to their admitted participation
in the mass actions which they knew to be illegal, being in violation of the Secretary’s assumption
order. However, the acts which were held to be prohibited activities are the following:

… where the strikers shouted slanderous and scurrilous words against the owners of the vessels;
where the strikers used unnecessary and obscene language or epithets to prevent other laborers to
go to work, and circulated libelous statements against the employer which show actual malice;
where the protestors used abusive and threatening language towards the patrons of a place of
business or against co-employees, going beyond the mere attempt to persuade customers to
withdraw their patronage; where the strikers formed a human cordon and blocked all the ways and
approaches to the launches and vessels of the vicinity of the workplace and perpetrated acts of
violence and coercion to prevent work from being performed; and where the strikers shook their fists
and threatened non-striking employees with bodily harm if they persisted to proceed to the
workplace. x x x55

The dismissal of herein respondent-union members are therefore unjustified in the absence of a
clear showing that they committed specific illegal acts during the mass actions and concerted work
boycott.1avv phi 1

Are these dismissed employees entitled to backwages and separation pay?

The award of backwages is a legal consequence of a finding of illegal dismissal. Assuming that
respondent-union members have indeed reported back to work at the end of the concerted mass
actions, but were soon terminated by petitioners who found their explanation unsatisfactory, they are
not entitled to backwages in view of the illegality of the said strike. Thus, we held in G & S Transport
Corporation v. Infante56--

It can now therefore be concluded that the acts of respondents do not merit their dismissal from
employment because it has not been substantially proven that they committed any illegal act while
participating in the illegal strike. x x x

xxxx

With respect to backwages, the principle of a "fair day’s wage for a fair day’s labor" remains as the
basic factor in determining the award thereof. If there is no work performed by the employee there
can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was
illegally locked out, suspended or dismissed or otherwise illegally prevented from working. While it
was found that respondents expressed their intention to report back to work, the latter exception
cannot apply in this case. In Philippine Marine Officers’ Guild v. Compañia Maritima, as affirmed in
Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees Union, the Court stressed
that for this exception to apply, it is required that the strike be legal, a situation that does not obtain
in the case at bar. (Emphasis supplied.)

Under the circumstances, respondents’ reinstatement without backwages suffices for the appropriate
relief. But since reinstatement is no longer possible, given the lapse of considerable time from the
occurrence of the strike, not to mention the fact that Solidbank had long ceased its banking
operations, the award of separation pay of one (1) month salary for each year of service, in lieu of
reinstatement, is in order.57 For the twenty-one (21) individual respondents who executed quitclaims
in favor of the petitioners, whatever amount they have already received from the employer shall be
deducted from their respective separation pay.

Petitioners contended that in view of the blatant violation of the Secretary’s assumption order by the
striking employees, the award of separation pay is unjust and unwarranted. That respondent-
members themselves knowingly participated in the illegal mass actions constitutes serious
misconduct which is a just cause under Article 282 for terminating an employee.

We are not persuaded.

As we stated earlier, the Labor Code protects an ordinary, rank-and-file union member who
participated in such a strike from losing his job, provided that he did not commit an illegal act during
the strike.58 Article 264 (e) of the Labor Code, as amended, provides for such acts which are
generally prohibited during concerted actions such as picketing:

No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct
the free ingress to or egress from the employer’s premises for lawful purposes, or obstruct public
thoroughfares. (Emphasis supplied.)

Petitioners have not adduced substantial proof that respondent-union members perpetrated any act
of violence, intimidation, coercion or obstruction of company premises and public thoroughfares. It
did not submit in evidence photographs, police reports, affidavits and other available evidence.

As to the issue of solidary liability, we hold that Metrobank cannot be held solidarily liable with
Solidbank for the claims of the latter’s dismissed employees. There is no showing that Metrobank is
the successor-in-interest of Solidbank. Based on petitioners’ documentary evidence, Solidbank was
merged with FMIC, with Solidbank as the surviving corporation, and was later renamed as FMIC.
While indeed Solidbank’s banking operations had been integrated with Metrobank, there is no
showing that FMIC has ceased business operations. FMIC as successor-in-interest of Solidbank
remains solely liable for the sums herein adjudged against Solidbank.

Neither should individual petitioners Vistan and Mendoza be held solidarily liable for the claims
adjudged against petitioner Solidbank. Article 212 (e)59 does not state that corporate officers are
personally liable for the unpaid salaries or separation pay of employees of the corporation. The
liability of corporate officers for corporate debts remains governed by Section 3160 of the Corporation
Code.

It is basic that a corporation is invested by law with a personality separate and distinct from those of
the persons composing it as well as from that of any other legal entity to which it may be related.
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the separate corporate
personality.61 In labor cases, in particular, the Court has held corporate directors and officers
solidarily liable with the corporation for the termination of employment of corporate employees done
with malice or in bad faith.62 Bad faith is never presumed.63 Bad faith does not simply connote bad
judgment or negligence -- it imports a dishonest purpose or some moral obliquity and conscious
doing of wrong. It means a breach of a known duty through some motive or interest or ill-will that
partakes of the nature of fraud.64

Respondents have not satisfactorily proven that Vistan and Mendoza acted with malice, ill-will or bad
faith. Hence, said individual petitioners are not liable for the separation pay of herein respondents-
union members.

WHEREFORE, the petitions are PARTLY GRANTED. The Decision dated March 10, 2003 of the
Court of Appeals in CA-G.R. SP Nos. 67730 and 70820 is hereby SET ASIDE. Petitioner Solidbank
Corporation (now FMIC) is hereby ORDERED to pay each of the above-named individual
respondents, except union officers who are hereby declared validly dismissed, separation pay
equivalent to one (1) month salary for every year of service. Whatever sums already received from
petitioners under any release, waiver or quitclaim shall be deducted from the total separation pay
due to each of them.

The NLRC is hereby directed to determine who among the individual respondents are union
members entitled to the separation pay herein awarded, and those union officers who were validly
dismissed and hence excluded from the said award.

No costs.

SO ORDERED.

FIRST DIVISION

[G.R. No. 121315. July 19, 1999.]

COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION (CEEA) represented by

its union president CECILIA TALAVERA, GEORGE ARSOLA, MARIO DIAGO
AND SOCORRO BONCAYAO, Petitioners, v. THE NATIONAL LABOR
RELATIONS COMMISSION, COMPLEX ELECTRONICS CORPORATION, IONICS
CIRCUIT, INC., LAWRENCE QUA, REMEDIOS DE JESUS, MANUEL GONZAGA,
ROMY DELA ROSA, TERESITA ANDINO, ARMAN CABACUNGAN, GERRY
GABANA, EUSEBIA MARANAN and BERNADETH GACAD, Respondents.

[G.R. No. 122136. July 19, 1999.]

COMPLEX ELECTRONICS CORPORATION, Petitioner, v. NATIONAL LABOR

RELATIONS COMMISSION, COMPLEX ELECTRONICS EMPLOYEES
ASSOCIATION (CEEA), represented by Union President, CECILIA
TALAVERA, Respondents.

DECISION

KAPUNAN, J.:

These consolidated cases filed by Complex Electronics Employees Association (G.R.

No. 121315) and Complex Electronics Corporation (G.R. No. 122136) assail the
Decision of the NLRC dated March 10, 1995 which set aside the Decision of the
Labor Arbiter dated April 30, 1993. chan roble svirtualawl ibra ry

The antecedents of the present petitions are as follows: chan rob1es v irt ual 1aw l ibra ry
Complex Electronics Corporation (Complex) was engaged in the manufacture of
electronic products. It was actually a subcontractor of electronic products where its
customers gave their job orders, sent their own materials and consigned their
equipment to it. The customers were foreign-based companies with different
product lines and specifications requiring the employment of workers with specific
skills for each product line. Thus, there was the AMS Line for the Adaptive Micro
System, Inc., the Heril Line for Heril Co., Ltd., the Lite-On Line for the Lite-On
Philippines Electronics Co., etc.

The rank and file workers of Complex were organized into a union known as the
Complex Electronics Employees Association, herein referred to as the Union.

On March 4, 1992, Complex received a facsimile message from Lite-On Philippines

Electronics Co., requiring it to lower its price by 10%. The full text reads as
follows:chan rob1e s virtual 1aw l ibra ry

This is to inform your office that Taiwan required you to reduce your assembly cost
since it is higher by 50 % and no longer competitive with that of mainland China. It
is further instructed that Complex Price be patterned with that of other sources,
which is 10% lower.

Please consider and give us your revised rates soon. 1

Consequently, on March 9, 1992, a meeting was held between Complex and the
personnel of the Lite-On Production Line. Complex informed its Lite-On personnel
that such request of lowering their selling price by 10% was not feasible as they
were already incurring losses at the present prices of their products. Under such
circumstances, Complex regretfully informed the employees that it was left with no
alternative but to close down the operations of the Lite-On Line. The company,
however, promised that: chanro bles vi rtua l lawlib ra ry

1) Complex will follow the law by giving the people to be retrenched the necessary
1 month notice. Hence, retrenchment will not take place until after 1 month from
March 09, 1992.

2) The Company will try to prolong the work for as many people as possible for as
long as it can by looking for job slots for them in another line if workload so allows
and if their skills are compatible with the line requirement.

3) The company will give the employees to be retrenched a retrenchment pay as

provided for by law i.e. half a month for every year of service in accordance with
Article 283 of the Labor Code of Philippines. 2
The Union, on the other hand, pushed for a retrenchment pay equivalent to one (1)
month salary for every year of service, which Complex refused.

On March 13, 1992, Complex filed a notice of closure of the Lite-On Line with the
Department of Labor and Employment (DOLE) and the retrenchment of the ninety-
seven (97) affected employees. 3

On March 25, 1993, the Union filed a notice of strike with the National Conciliation
and Mediation Board (NCMB).

Two days thereafter, or on March 27, 1993, the Union conducted a strike vote
which resulted in a "yes" vote.chanrob les lawl ibra ry : redna d

In the evening of April 6, 1992, the machinery, equipment and materials being
used for production at Complex were pulled-out from the company premises and
transferred to the premises of Ionics Circuit, Inc. (Ionics) at Cabuyao, Laguna. The
following day, a total closure of company operation was effected at Complex.

A complaint was, thereafter, filed with the Labor Arbitration Branch of the NLRC for
unfair labor practice, illegal closure/illegal lockout, money claims for vacation leave,
sick leave, unpaid wages, 13th month pay, damages and attorney’s fees. The Union
alleged that the pull-out of the machinery, equipment and materials from the
company premises, which resulted to the sudden closure of the company was in
violation of Section 3 and 8, Rule XIII, Book V of the Labor Code of the Philippines 4
and the existing CBA. Ionics was impleaded as a party defendant because the
officers and management personnel of Complex were also holding office at Ionics
with Lawrence Qua as the President of both companies.

Complex, on the other hand, averred that since the time the Union filed its notice of
strike, there was a significant decline in the quantity and quality of the products in
all of the production lines. The delivery schedules were not met prompting the
customers to lodge complaints against them. Fearful that the machinery, equipment
and materials would be rendered inoperative and unproductive due to the
impending strike of the workers, the customers ordered their pull-out and transfer
to Ionics. Thus, Complex was compelled to cease operations.

Ionics contended that it was an entity separate and distinct from Complex and had
been in existence since July 5, 1984 or eight (8) years before the labor dispute
arose at Complex. Like Complex, it was also engaged in the semi-conductor
business where the machinery, equipment and materials were consigned to them
by their customers. While admitting that Lawrence Qua, the President of Complex
was also the President of Ionics, the latter denied having Qua as their owner since
he had no recorded subscription of P1,200,000.00 in Ionics as claimed by the
Union. Ionics further argued that the hiring of some displaced workers of Complex
was an exercise of management prerogatives. Likewise, the transfer of the
machinery, equipment and materials from Complex was the decision of the owners
who were common customers of Complex and Ionics. cha nrob lesvi rtua lawlib rary

On April 30, 1993, the Labor Arbiter rendered a decision the dispositive portion of
which reads:chan rob1e s vi rtual 1aw lib rary

WHEREFORE, all the foregoing premises being considered, judgment is hereby

rendered ordering the respondent Complex Electronics Corporation and/or Ionics
Circuit Incorporated and/or Lawrence Qua, to reinstate the 531 above-listed
employees to their former position with all the rights, privileges and benefits
appertaining thereto, and to pay said complainants-employees the aggregate
backwages amounting P26,949,891.80 as of April 6, 1993 and to such further
backwages until their actual reinstatement. In the event reinstatement is no longer
feasible for reasons not attributable to the complainants, said respondents are also
liable to pay complainants-employees their separation pay to be computed at the
rate of one (1) month pay for every year of service, a fraction of at least six (6)
months to be considered as one whole year.

Further, the aforenamed three (3) respondents are hereby ordered to pay jointly
and solidarily the complainants-employees an aggregate moral damages in the
amount of P1,062,000.00 and exemplary damages in the aggregate sum of
P531,000.00.

And finally, said respondents are ordered to pay attorney’s fees equivalent to ten
percent (10%) of whatever has been adjudicated herein in favor of the
complainants.

The charge of slowdown strike filed by respondent Complex against the union is
hereby dismissed for lack of merit.

SO ORDERED. 5

Separate appeals were filed by Complex, Ionics and Lawrence Qua before the
respondent NLRC which rendered the questioned decision on March 10, 1995, the
decretal portion of which states: chan rob1e s virtual 1aw l ibra ry

WHEREFORE, premises considered, the assailed decision is hereby ordered vacated

and set aside, and a new one entered ordering respondent Complex Electronics
Corporation to pay 531 complainants equivalent to one month pay in lieu of notice
and separation pay equivalent to one month pay for every year of service and a
fraction of six months considered as one whole year.

Respondents Ionics Circuit Incorporated and Lawrence Qua are hereby ordered
excluded as parties solidarily liable with Complex Electronics Corporation.

The award of moral damages is likewise deleted for lack of merit.

Respondent Complex, however, is hereby ordered to pay attorney’s fees equivalent

to ten (10%) percent of the total amount of award granted the complainants. c hanro bles vi rt uallawl ibra ry

SO ORDERED. 6

Complex, Ionics and the Union filed their motions for reconsideration of the above
decision which were denied by the respondent NLRC in an Order dated July 11,
1995. 7

Hence these petitions.

In G.R. No. 121315, petitioner Complex Electronics Employees Association

asseverates that the respondent NLRC erred when it: chan rob1es v irt ual 1aw l ibra ry

SET ASIDE THE DECISION DATED APRIL 30, 1993 ISSUED BY THE HON. LABOR
ARBITER JOSE DE VERA.

II

EXCLUDED PRIVATE RESPONDENTS IONICS CIRCUITS, INCORPORATED AND

LAWRENCE QUA AS PARTIES SOLIDARILY LIABLE WITH COMPLEX ELECTRONICS
CORPORATION.

III

FOUND THAT COMPLEX ELECTRONICS CORPORATION WAS NOT GUILTY OF

ILLEGAL CLOSURE AND ILLEGAL DISMISSAL OF THE PETITIONERS.

IV

REMOVED THE AWARD FOR BACKWAGES, REINSTATEMENT AND DAMAGES IN THE

DECISION DATED APRIL 30, 1993 ISSUED BY THE HON. LABOR ARBITER JOSE DE
VERA. 8 chanro blesvi rt ual|awlib rary
On the other hand, in G.R. No. 122136, petitioner Complex Electronics Corporation
raised the following issues, to wit: cha nrob 1es vi rtua l 1aw lib rary

PUBLIC RESPONDENT NLRC ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF OR IN EXCESS OF JURISDICTION IN PROMULGATING ITS DECISION
AND ORDER DATED 10 MARCH 1995, AND 11 JULY 1995, RESPECTIVELY, THE
SAME BEING IN CONTRAVENTION OF THE EXPRESS MANDATE OF THE LAW
GOVERNING THE PAYMENT OF ONE MONTH PAY IN LIEU OF NOTICE, SEPARATION
PAY AND ATTORNEY’S FEES.

II

THERE IS NO APPEAL, NOR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE
ORDINARY COURSE OF LAW. 9

On December 23, 1996, the Union filed a motion for consolidation of G.R. No.
122136 with G.R. No. 121315. 10 The motion was granted by this Court in a
Resolution dated June 23, 1997. 11

On November 10, 1997, the Union presented additional documentary evidence

which consisted of a newspaper clipping in the Manila Bulletin, dated August 18,
1997 bearing the picture of Lawrence Qua with the following inscription: cha nrob 1es vi rtua l 1aw lib rary

RECERTIFICATION. The Cabuyao (Laguna) operation of Ionic Circuits, Inc.

consisting of plants 2, 3, 4 and 5 was recertified to ISO 9002 as electronics contract
manufacturer by the TUV, a rating firm with headquarters in Munich, Germany.
Lawrence Qua, Ionics president and chief executive officer, holds the plaque of
recertification presented by Gunther Theisz (3rd from left), regional manager of
TUV Products Services Asia during ceremonies held at Sta. Elena Golf Club. This is
the first of its kind in the country that four plants were certified at the same time.
12

The Union claimed that the said clipping showed that both corporations, Ionics and
Complex are one and the same. chanro bles vi rtua lawlib rary chan roble s.com:c hanro bles. com.ph

In answer to this allegation, Ionics explained that the photo which appeared at the
Manila Bulletin issue of August 18, 1997 pertained only to respondent Ionics’
recertification of ISO 9002. There was no mention about Complex Electronics
Corporation. Ionics claimed that a mere photo is insufficient to conclude that Ionics
and Complex are one and the same. 13
We shall first delve on the issues raised by the petitioner Union.

The Union anchors its position on the fact that Lawrence Qua is both the president
of Complex and Ionics and that both companies have the same set of Board of
Directors. It claims that business has not ceased at Complex but was merely
transferred to Ionics, a runaway shop. To prove that Ionics was just a runaway
shop, petitioner asserts that out of the 80,000 shares comprising the increased
capital stock of Ionics, it was Complex that owns majority of said shares with
P1,200,000.00 as its capital subscription and P448,000.00 as its paid up
investment, compared to P800,000.00 subscription and P324,560.00 paid-up owing
to the other stockholders, combined. Thus, according to the Union, there is a clear
ground to pierce the veil of corporate fiction.

The Union further posits that there was an illegal lockout/illegal dismissal
considering that as of March 11, 1992, the company had a gross sales of
P61,967,559 from a capitalization of P1,500,000.00. It even ranked number thirty
among the top fifty corporations in Muntinlupa. Complex, therefore, cannot claim
that it was losing in its business which necessitated its closure.

With regards to Lawrence Qua, petitioner maintains that he should be made

personally liable to the Union since he was the principal player in the closure of the
company, not to mention the clandestine and surreptitious manner in which such
closure was carried out, without regard to their right to due process.

The Union’s contentions are untenable.

A "runaway shop" is defined as an industrial plant moved by its owners from one
location to another to escape union labor regulations or state laws, but the term is
also used to describe a plant removed to a new location in order to discriminate
against employees at the old plant because of their union activities. 14 It is one
wherein the employer moves its business to another location or it temporarily
closes its business for anti-union purposes. 15 A "runaway shop" in this sense, is a
relocation motivated by anti-union animus rather than for business reasons. In this
case, however, Ionics was not set up merely for the purpose of transferring the
business of Complex. At the time the labor dispute arose at Complex, Ionics was
already existing as an independent company. As earlier mentioned, it has been in
existence since July 5, 1984. It cannot, therefore, be said that the temporary
closure in Complex and its subsequent transfer of business to Ionics was for anti-
union purposes. The Union failed to show that the primary reason for the closure of
the establishment was due to the union activities of the employees. chanrob les vi rtua l lawlib rary

The mere fact that one or more corporations are owned or controlled by the same
or single stockholder is not a sufficient ground for disregarding separate corporate
personalities. Thus, in Indophil Textile Mill Workers Union v. Calica, 16 we ruled
that: chanro b1es vi rt ual 1aw li bra ry

[I]n the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic,
alleging that the creation of the corporation is a devise to evade the application of
the CBA between petitioner Union and private respondent company. While we do
not discount the possibility of the similarities of the businesses of private
respondent and Acrylic, neither are we inclined to apply the doctrine invoked by
petitioner in granting the relief sought. The fact that the businesses of private
respondent and Acrylic are related, that some of the employees of the private
respondent are the same persons manning and providing for auxiliary services to
the units of Acrylic, and that the physical plants, offices and facilities are situated in
the same compound, it is our considered opinion that these facts are not sufficient
to justify the piercing of the corporate veil of Acrylic.

Likewise, in Del Rosario v. National Labor Relations Commission, 17 the Court

stated that substantial identity of the incorporators of two corporations does not
necessarily imply that there was fraud committed to justify piercing the veil of
corporate fiction.

In the recent case of Santos v. National Labor Relations Commission, 18 we also

ruled that: chan rob1e s virt ual 1aw l ibra ry

The basic rule is still that which can be deduced from the Court’s pronouncement in
Sunio v. National Labor Relations Commission, thus: chanro b1es vi rtu al 1aw li bra ry

. . . . Mere ownership by a single stockholder or by another corporation of all or

nearly all of the capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personality.

Ionics may be engaged in the same business as that of Complex, but this fact alone
is not enough reason to pierce the veil of corporate fiction of the corporation. Well-
settled is the rule that a corporation has a personality separate and distinct from
that of its officers and stockholders. This fiction of corporate entity can only be
disregarded in certain cases such as when it is used to defeat public convenience,
justify wrong, protect fraud, or defend crime. 19 To disregard said separate juridical
personality of a corporation, the wrongdoing must be clearly and convincingly
established. 20

As to the additional documentary evidence which consisted of a newspaper clipping

filed by petitioner Union, we agree with respondent Ionics that the
photo/newspaper clipping itself does not prove that Ionics and Complex are one
and the same entity. The photo/newspaper clipping merely showed that some
plants of Ionics were recertified to ISO 9002 and does not show that there is a
relation between Complex and Ionics except for the fact that Lawrence Qua was
also the president of Ionics. However, as we have stated above, the mere fact that
both of the corporations have the same president is not in itself sufficient to pierce
the veil of corporate fiction of the two corporations. chan roble svirtuallaw lib rary:re d

We, likewise, disagree with the Union that there was in this case an illegal
lockout/illegal dismissal. Lockout is the temporary refusal of employer to furnish
work as a result of an industrial or labor dispute. 21 It may be manifested by the
employer’s act of excluding employees who are union members. 22 In the present
case, there was a complete cessation of the business operations at Complex not
because of the labor dispute. It should be recalled that, before the labor dispute,
Complex had already informed the employees that they would be closing the Lite-
On Line. The employees, however, demanded for a separation pay equivalent to
one (1) month salary for every year of service which Complex refused to give.
When Complex filed a notice of closure of its Lite-On Line, the employees filed a
notice of strike which greatly alarmed the customers of Complex and this led to the
pull-out of their equipment, machinery and materials from Complex. Thus, without
the much needed equipment, Complex was unable to continue its business. It was
left with no other choice except to shut down the entire business. The closure,
therefore, was not motivated by the union activities of the employees, but rather by
necessity since it can no longer engage in production without the much needed
materials, equipment and machinery. We quote with approval the findings of the
respondent NLRC on this matter: chanrob1es vi rt ual 1aw li bra ry

At first glance after reading the decision a quo, it would seem that the closure of
respondent’s operation is not justified. However, a deeper examination of the
records along with the evidence, would show that the closure, although it was done
abruptly as there was no compliance with the 30-day prior notice requirement, said
closure was not intended to circumvent the provisions of the Labor Code on
termination of employment. The closure of operation by Complex on April 7, 1992
was not without valid reasons. Customers of respondent alarmed by the pending
labor dispute and the imminent strike to be foisted by the union, as shown by their
strike vote, directed respondent Complex to pull-out its equipment, machinery and
materials to other safe bonded warehouse. Respondent being mere consignees of
the equipment, machinery and materials were without any recourse but to oblige
the customers’ directive. The pull-out was effected on April 6, 1992. We can see
here that Complex’s action, standing alone, will not result in illegal closure that
would cause the illegal dismissal of the complainant workers. Hence, the Labor
Arbiter’s conclusion that since there were only two (2) of respondent’s customers
who have expressed pull-out of business from respondent Complex while most of
the customer’s have not and, therefore, it is not justified to close operation cannot
be upheld. The determination to cease operation is a prerogative of management
that is usually not interfered with by the State as no employer can be required to
continue operating at a loss simply to maintain the workers in employment. That
would be taking of property without due process of law which the employer has the
right to resist. (Columbia Development Corp. v. Minister of Labor and Employment,
146 SCRA 42)

As to the claim of petitioner Union that Complex was gaining profit, the financial
statements for the years 1990, 1991 and 1992 issued by the auditing and
accounting firm Sycip, Gorres and Velayo readily show that Complex was indeed
continuously experiencing deficit and losses. 23 Nonetheless, whether or not
Complex was incurring great losses, it is still one of the management’s prerogative
to close down its business as long as it is done in good faith. Thus, in Catatista Et.
Al., v. NLRC and Victorias Milling Co., Inc. 24 we ruled:chanrob1es vi rt ual 1aw li bra ry

In any case, Article 283 of the Labor Code is clear that an employer may close or
cease his business operations or undertaking even if he is not suffering from serious
business losses or financial reverses, as long as he pays his employees their
termination pay in the amount corresponding to their length of service. It would
indeed, be stretching the intent and spirit of the law if we were to unjustly interfere
in management’s prerogative to close or cease its business operations just because
said business operations or undertaking is not suffering from any loss. chan roblesv irtual|awlib ra ry

Going now to the issue of personal liability of Lawrence Qua, it is settled that in the
absence of malice or bad faith, a stockholder or an officer of a corporation cannot
be made personally liable for corporate liabilities. 25 In the present case, while it
may be true that the equipment, materials and machinery were pulled-out of
Complex and transferred to Ionics during the night, their action was sufficiently
explained by Lawrence Qua in his Comment to the petition filed by the Union. We
quote:chanrob1es v irt ual 1aw l ibra ry

The fact that the pull-out of the machinery, equipment and materials was effected
during nighttime is not per se an indicia of bad faith on the part of respondent Qua
since he had no other recourse, and the same was dictated by the prevailing mood
of unrest as the laborers were already vandalizing the equipment, bent on picketing
the company premises and threats to lock out the company officers were being
made. Such acts of respondent Qua were, in fact, made pursuant to the demands
of Complex’s customers who were already alarmed by the pending labor dispute
and imminent strike to be stage by the laborers, to have their equipment,
machinery and materials pull out of Complex. As such, these acts were merely done
pursuant to his official functions and were not, in any way, made with evident bad
faith. 26

We perceive no intention on the part of Lawrence Qua and the other officers of
Complex to defraud the employees and the Union. They were compelled to act upon
the instructions of their customers who were the real owners of the equipment,
materials and machinery. The prevailing labor unrest permeating within the
premises of Complex left the officers with no other choice but to pull them out of
Complex at night to prevent their destruction. Thus, we see no reason to declare
Lawrence Qua personally liable to the Union.

Anent the award of damages, we are inclined to agree with the NLRC that there is
no basis for such award. We again quote the respondent NLRC with favor: chan roble svirtual|awli bra ry

By and large, we cannot hold respondents guilty of unfair labor practice as found by
the Labor Arbiter since the closure of operation of Complex was not established by
strong evidence that the purpose of said closure was to interfere with the
employees’ right to self-organization and collective bargaining. As very clearly
established, the closure was triggered by the customers’ pull-out of their
equipment, machinery and materials, who were alarmed by the pending labor
dispute and the imminent strike by the union, and as a protection to their interest
pulled-out of business from Complex who had no recourse but to cease operation to
prevent further losses. The indiscretion committed by the Union in filing the notice
of strike, which to our mind is not the proper remedy to question the amount of
benefits due the complainants who will be retrenched at the closure of the Lite-On
Line, gave a wrong signal to customers of Complex, which consequently resulted in
the loss of employment of not only a few but to all the of the workers. It may be
worth saying that the right to strike should only be a remedy of last resort and
must not be used as a show of force against the employer. 27

We shall now go to the issues raised by Complex in G.R. No. 122136.

Complex claims that the respondent NLRC erred in ordering them to pay the Union
one (1) month pay as indemnity for failure to give notice to its employees at least
thirty (30) days before such closure since it was quite clear that the employees
were notified of the impending closure of the Lite-On Line as early as March 9,
1992. Moreover, the abrupt cessation of operations was brought about by the
sudden pull-out of the customers which rendered it impossible for Complex to
observe the required thirty (30) days notice.

Article 283 of the Labor Code provides that: chanrob 1es vi rtual 1aw lib rary

ARTICLE 283. Closure of establishment and reduction of personnel. — The employer

may also terminate the employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. . . . . (Emphasis ours.)

The purpose of the notice requirement is to enable the proper authorities to

determine after hearing whether such closure is being done in good faith, i.e., for
bona fide business reasons, or whether, to the contrary, the closure is being
resorted to as a means of evading compliance with the just obligations of the
employer to the employees affected. 28

While the law acknowledges the management prerogative of closing the business, it
does not, however, allow the business establishment to disregard the requirements
of the law. The case of Magnolia Dairy Products v. NLRC 29 is quite emphatic about
this:
cha nrob 1es vi rtua l 1aw lib rary

The law authorizes an employer, like the herein petitioners, to terminate the
employment of any employee due to the installation of labor saving devices. The
installation of these devices is a management prerogative, and the courts will not
interfere with its exercise in the absence of abuse of discretion, arbitrariness, or
maliciousness on the part of management, as in this case. Nonetheless, this did not
excuse petitioner from complying with the required written notice to the employee
and to the Department of Labor and Employment (DOLE) at least one month before
the intended date of termination. This procedure enables an employee to contest
the reality or good faith character of the asserted ground for the termination of his
services before the DOLE. chan roble svi rtual|awl ibra ry

The failure of petitioner to serve the written notice to private respondent and to the
DOLE, however, does not ipso facto make private respondent’s termination from
service illegal so as to entitle her to reinstatement and payment of backwages. If at
all, her termination from service is merely defective because it was not tainted with
bad faith or arbitrariness and was due to a valid cause.

The well settled rule is that the employer shall be sanctioned for non-compliance
with the requirements of, or for failure to observe due process in terminating from
service its employee. In Wenphil Corp. v. NLRC, we sanctioned the employer for
this failure by ordering it to indemnify the employee the amount of P1,000.00.
Similarly, we imposed the same amount as indemnification in Rubberworld (Phils.),
Inc. v. NLRC, and, Aurelio v. NLRC and Alhambra Industries, Inc. v. NLRC.
Subsequently, the sum of P5,000.00 was awarded to an employee in Worldwide
Papermills, Inc. v. NLRC, and P2,000.00 in Sebuguero, Et Al., v. NLRC, Et. Al.
Recently, the sum of P5,000.00 was again imposed as indemnify against the
employer. We see no valid and cogent reason why petitioner should not be likewise
sanctioned for its failure to serve the mandatory written notice. Under the
attendant facts, we find the amount of P5,000.00, to be just and reasonable.

We, therefore, find no grave abuse of discretion on the part of the NLRC in ordering
Complex to pay one (1) month salary by way of indemnity. It must be borne in
mind that what is at stake is the means of livelihood of the workers so they are at
least entitled to be formally informed of the management decisions regarding their
employment. 30
Complex, likewise, maintains that it is not liable for the payment of separation pay
since Article 283 of the Labor Code awards separation pay only in cases of closure
not due to serious business reversals. In this case, the closure of Complex was
brought about by the losses being suffered by the corporation. chan roble s virtual lawl ib rary

We disagree.

Article 283 further provides: chan rob1es v irt ual 1aw l ibra ry

. . . . In case of termination due to the installation of labor saving devices or

redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent
losses and in case of cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.

It is settled that in case of closures or cessation of operation of business

establishments not due to serious business losses or financial reverses, 31 the
employees are always given separation benefits.

In the instant case, notwithstanding the financial losses suffered by Complex, such
was, however, not the main reason for its closure. Complex admitted in its petition
that the main reason for the cessation of the operations was the pull-out of the
materials, equipment and machinery from the premises of the corporation as
dictated by its customers. It was actually still capable of continuing the business
but opted to close down to prevent further losses. Under the facts and
circumstances of the case, we find no grave abuse of discretion on the part of the
public respondent in awarding the employees one (1) month pay for every year of
service as termination pay. c hanrobles. com : virtual law l ibra ry

WHEREFORE, premises considered, the assailed decision of the NLRC is AFFIRMED.

SO ORDERED.

[G.R. No. 162943, December 06 : 2010]

EMPLOYEES UNION OF BAYER PHILS., FFW AND JUANITO S. FACUNDO, IN

HIS CAPACITY AS PRESIDENT, PETITIONERS, VS. BAYER PHILIPPINES,
INC., DIETER J. LONISHEN (PRESIDENT), ASUNCION AMISTOSO (HRD
 MANAGER), AVELINA REMIGIO AND ANASTACIA VILLAREAL,
RESPONDENTS.

DECISION

VILLARAMA, JR., J.:

This petition for review on certiorari assails the Decision[1] dated December 15,
2003 and Resolution[2] dated March 23, 2004 of the Court of Appeals (CA) in CA-
G.R. SP No. 73813.

Petitioner Employees Union of Bayer Philippines[3] (EUBP) is the exclusive

bargaining agent of all rank-and-file employees of Bayer Philippines (Bayer), and is
an affiliate of the Federation of Free Workers (FFW). In 1997, EUBP, headed by its
president Juanito S. Facundo (Facundo), negotiated with Bayer for the signing of a
collective bargaining agreement (CBA). During the negotiations, EUBP rejected
Bayer's 9.9% wage-increase proposal resulting in a bargaining deadlock.
Subsequently, EUBP staged a strike, prompting the Secretary of the Department of
Labor and Employment (DOLE) to assume jurisdiction over the dispute.

In November 1997, pending the resolution of the dispute, respondent Avelina

Remigio (Remigio) and 27 other union members, without any authority from their
union leaders, accepted Bayer's wage-increase proposal. EUBP's grievance
committee questioned Remigio's action and reprimanded Remigio and her
allies. On January 7, 1998, the DOLE Secretary issued an arbitral award ordering
EUBP and Bayer to execute a CBA retroactive to January 1, 1997 and to be made
effective until December 31, 2001. The said CBA[4] was registered on July 8, 1998
with the Industrial Relations Division of the DOLE-National Capital Region (NCR).[5]

Meanwhile, the rift between Facundo's leadership and Remigio's group

broadened. On August 3, 1998, barely six months from the signing of the new
CBA, during a company-sponsored seminar,[6] Remigio solicited signatures from
union members in support of a resolution containing the decision of the signatories
to: (1) disaffiliate from FFW, (2) rename the union as Reformed Employees Union
of Bayer Philippines (REUBP), (3) adopt a new constitution and by-laws for the
union, (4) abolish all existing officer positions in the union and elect a new set of
interim officers, and (5) authorize REUBP to administer the CBA between EUBP and
Bayer.[7] The said resolution was signed by 147 of the 257 local union members. A
subsequent resolution was also issued affirming the first resolution.[8]

A tug-of-war then ensued between the two rival groups, with both seeking
recognition from Bayer and demanding remittance of the union dues collected from
its rank-and-file members. On September 8, 1998, Remigio's splinter group wrote
Facundo, FFW and Bayer informing them of the decision of the majority of the
union members to disaffiliate from FFW.[9] This was followed by another letter
informing Facundo, FFW and Bayer that an interim set of REUBP executive officers
and board of directors had been appointed, and demanding the remittance of all
union dues to REUBP. Remigio also asked Bayer to desist from further transacting
with EUBP. Facundo, meanwhile, sent similar requests to Bayer[10] requesting for
the remittance of union dues in favor of EUBP and accusing the company of
interfering with purely union matters.[11] Bayer responded by deciding not to deal
with either of the two groups, and by placing the union dues collected in a trust
account until the conflict between the two groups is resolved.[12]

On September 15, 1998, EUBP filed a complaint for unfair labor practice (first ULP
complaint) against Bayer for non-remittance of union dues. The case was docketed
as NLRC-NCR-Case No. 00-09-07564-98.[13]

EUBP later sent a letter dated November 5, 1998 to Bayer asking for a grievance
conference.[14] The meeting was conducted by the management on November 11,
1998, with all REUBP officers including their lawyers present. Facundo did not
attend the meeting, but sent two EUBP officers to inform REUBP and the
management that a preventive mediation conference between the two groups has
been scheduled on November 12, 1998 before the National Conciliation and
Mediation Board (NCMB).[15]

Apparently, the two groups failed to settle their issues as Facundo again sent
respondent Dieter J. Lonishen two more letters, dated January 14, 1999[16] and
September 2, 1999,[17] asking for a grievance meeting with the management to
discuss the failure of the latter to comply with the terms of their CBA. Both requests
remained unheeded.

On February 9, 1999, while the first ULP case was still pending and despite EUBP's
repeated request for a grievance conference, Bayer decided to turn over the
collected union dues amounting to P254,857.15 to respondent Anastacia Villareal,
Treasurer of REUBP.

Aggrieved by the said development, EUBP lodged a complaint[18] on March 4, 1999

against Remigio's group before the Industrial Relations Division of the DOLE praying
for their expulsion from EUBP for commission of "acts that threaten the life of the
union."

On June 18, 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. dismissed the first ULP
complaint for lack of jurisdiction.[19] The Arbiter explained that the root cause for
Bayer's failure to remit the collected union dues can be traced to the intra-union
conflict between EUBP and Remigio's group[20] and that the charges imputed against
Bayer should have been submitted instead to voluntary arbitration.[21] EUBP did not
appeal the said decision.[22]

On December 14, 1999, petitioners filed a second ULP complaint against herein
respondents docketed as NLRC-RAB-IV Case No. 12-11813-99-L. Three days later,
petitioners amended the complaint charging the respondents with unfair labor
practice committed by organizing a company union, gross violation of the CBA and
violation of their duty to bargain.[23] Petitioners complained that Bayer refused to
remit the collected union dues to EUBP despite several demands sent to the
management.[24] They also alleged that notwithstanding the requests sent to Bayer
for a renegotiation of the last two years of the 1997-2001 CBA between EUBP and
Bayer, the latter opted to negotiate instead with Remigio's group.[25]

On even date, REUBP and Bayer agreed to sign a new CBA. Remigio immediately
informed her allies of the management's decision.[26]

In response, petitioners immediately filed an urgent motion for the issuance of a

restraining order/injunction[27] before the National Labor Relations Commission
(NLRC) and the Labor Arbiter against respondents. Petitioners asserted their
authority as the exclusive bargaining representative of all rank-and-file employees
of Bayer and asked that a temporary restraining order be issued against Remigio's
group and Bayer to prevent the employees from ratifying the new CBA. Later,
petitioners filed a second amended complaint[28] to include in its complaint the issue
of gross violation of the CBA for violation of the contract bar rule following Bayer's
decision to negotiate and sign a new CBA with Remigio's group.

Meanwhile, on January 26, 2000, the Regional Director of the Industrial Relations
Division of DOLE issued a decision dismissing the issue on expulsion filed by EUBP
against Remigio and her allies for failure to exhaust reliefs within the union and
ordering the conduct of a referendum to determine which of the two groups should
be recognized as union officers.[29] EUBP seasonably appealed the said decision to
the Bureau of Labor Relations (BLR).[30] On June 16, 2000, the BLR reversed the
Regional Director's ruling and ordered the management of Bayer to respect the
authority of the duly-elected officers of EUBP in the administration of the prevailing
CBA.[31]

Unfortunately, the said BLR ruling came late since Bayer had already signed a new
CBA[32]with REUBP on February 21, 2000. The said CBA was eventually ratified by
majority of the bargaining unit.[33]

On June 2, 2000, Labor Arbiter Waldo Emerson R. Gan dismissed EUBP's second
ULP complaint for lack of jurisdiction.[34] The Labor Arbiter explained the dismissal
as follows:
 All told, were it not for the fact that there were two (2) [groups] of
employees, the Union led by its President Juanito Facundo and the
members who decided to disaffiliate led by Ms. Avelina Remigio,
claiming to be the rightful representative of the rank and file
employees, the Company would not have acted the way it did and the
Union would not have filed the instant case.

Clearly then, as the case involves intra-union disputes, this Office is

bereft of any jurisdiction pursuant to Article 226 of the Labor Code, as
amended, which provides pertinently in part, thus:

"Bureau of Labor Relations - The Bureau of Labor

Relations and the Labor Relations Divisions in the regional
offices of the Department of Labor and Employment shall
have original and exclusive authority to act, at their own
initiative or upon request of either or both parties, on all
inter-union and intra-union conflicts, and all disputes,
grievances or problems arising from or affecting labor-
management relations in all workplaces whether
agricultural or non-agricultural, except those arising from
the implementation or interpretation of collective
bargaining agreements which shall be the subject of
grievance procedure and/or voluntary arbitration."

Specifically, with respect to the union dues, the authority is the case of
Cebu Seamen's Association[,] Inc. vs. Ferrer-Calleja, (212 SCRA 51),
where the Supreme Court held that when the issue calls for the
determination of which between the two groups within a union is
entitled to the union dues, the same cannot be taken cognizance of by
the NLRC.

xxxx

WHEREFORE, premises considered, the instant complaint is hereby

DISMISSED on the ground of lack of jurisdiction.

SO ORDERED.[35]

On June 28, 2000, the NLRC resolved to dismiss[36] petitioners' motion for a
restraining order and/or injunction stating that the subject matter involved an
intra-union dispute, over which the said Commission has no jurisdiction.[37]

Aggrieved by the Labor Arbiter's decision to dismiss the second ULP complaint,
petitioners appealed the said decision, but the NLRC denied the appeal.[38] EUBP's
motion for reconsideration was likewise denied.[39]

Thus, petitioners filed a Rule 65 petition to the CA. On December 15, 2003, the CA
sustained both the Labor Arbiter and the NLRC's rulings. The appellate court
explained,

A cursory reading of the three pleadings, to wit: the Complaint (Vol. I,

Rollo, p[p]. 166-167); the Amended Complaint (Vol. I, Rollo[,] pp.
168-172) and the Second Amended Complaintdated March 8, 2000
(Vol. II, Rollo, pp. 219-225) will readily show that the instant case was
brought about by the action of the Group of REM[I]GIO to disaffiliate
from FFW and to organized (sic) REUBP under the tutelage of
REM[I]GIO and VILLAREAL. At first glance of the case at bar, it
involves purely an (sic) inter-union and intra-union conflicts or
disputes between EUBP-FFW and REUBP which issue should have been
resolved by the Bureau of Labor Relations under Article 226 of the
Labor Code. However, since no less than petitioners who admitted that
respondents committed gross violations of the CBA, then the BLR is
divested of jurisdiction over the case and the issue should have been
referred to the Grievance Machinery and Voluntary Arbitrator and not
to the Labor Arbiter as what petitioners did in the case at bar. x x x

xxxx

Furthermore, the CBA entered between BAYER and EUBP-FFW [has] a

life span of only five years and after the said period, the employees
have all the right to change their bargaining unit who will represent
them. If there exist[s] two opposing unions in the same company, the
remedy is not to declare that such act is considered unfair labor
practice but rather they should conduct a certification election
provided [that] it should be conducted within 60 days of the so[-
]called freedom period before the expiration of the CBA.

WHEREFORE, premises considered, this Petition is DENIED and the

assailed Decision dated September 27, 2001 as well as the Order
dated June 21, 2002, denying the motion for reconsideration, by the
National Labor Relations Commission, First Division, in NLRC Case
No. RAB-IV-12-11813-99-L, are hereby AFFIRMED in toto. Costs
against petitioners.

SO ORDERED.[40]

Undaunted, petitioners filed this Rule 45petition before this Court. Initially, the said
petition was denied for having been filed out of time and for failure to comply with
the requirements provided in the 1997 Rules of Civil Procedure, as
amended.[41] Upon petitioners' motion, however, we decided to reinstate their
appeal.

The following are the issues raised by petitioners, to wit:

I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS, IN

ARRIVING AT THE DECISION PROMULGATED ON 15 DECEMBER
2003 AND RESOLUTION PROMULGATED ON 23 MARCH 2004,
DECIDED THE CASE IN ACCORDANCE WITH LAW AND
JURISPRUDENCE; AND

II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS, IN

ARRIVING AT THE DECISION PROMULGATED ON 15 DECEMBER
2003 AND RESOLUTION PROMULGATED ON 23 MARCH 2004,
GRAVELY ABUSE[D] ITS DISCRETION IN ITS FINDINGS AND
CONCLUSION THAT:

THE ACTS OF ABETTING OR ASSISTING IN THE

CREATION OF ANOTHER UNION, NEGOTIATING OR
BARGAINING WITH SUCH UNION, WHICH IS NOT
THE SOLE AND EXCLUSIVE BARGAINING AGENT,
VIOLATING THE DUTY TO BARGAIN COLLECTIVELY,
REFUSAL TO PROCESS GRIEVABLE ISSUES IN THE
GRIEVANCE MACHINERY AND/OR REFUSAL TO
DEAL WITH THE SOLE AND EXCLUSIVE
BARGAINING AGENT ARE ACTS CONSTITUTING OR
TANTAMOUNT TO UNFAIR LABOR PRACTICE.[42]

Respondents Bayer, Lonishen and Amistoso, meanwhile, identify the issues as

follows:

I. WHETHER OR NOT THE UNIFORM FINDINGS OF THE COURT OF

APPEALS, THE NLRC AND THE LABOR ARBITER ARE BINDING
ON THIS HONORABLE COURT;

II. WHETHER OR NOT THE LABOR ARBITER AND THE NLRC HAVE
JURISDICTION OVER THE INSTANT CASE;

III. WHETHER OR NOT THE INSTANT CASE INVOLVES AN INTRA-

UNION DISPUTE;

IV. WHETHER OR NOT RESPONDENTS COMPANY, LONISHEN AND

AMISTOSO COMMITTED AN ACT OF UNFAIR LABOR PRACTICE;
AND
 V. WHETHER OR NOT THE INSTANT CASE HAS BECOME MOOT AND
ACADEMIC.[43]

Essentially, the issue in this petition is whether the act of the management of Bayer
in dealing and negotiating with Remigio's splinter group despite its validly existing
CBA with EUBP can be considered unfair labor practice and, if so, whether EUBP is
entitled to any relief.

Petitioners argue that the subject matter of their complaint, as well as the
subsequent amendments thereto, pertain to the unfair labor practice act of
respondents Bayer, Lonishen and Amistoso in dealing with Remigio's splinter union.
They contend that (1) the acts of abetting or assisting in the creation of another
union is among those considered by the Labor Code, as amended, specifically under
Article 248 (d)[44] thereof, as unfair labor practice; (2) the act of negotiating with
such union constitutes a violation of Bayer's duty to bargain collectively; and (3)
Bayer's unjustified refusal to process EUBP's grievances and to recognize the said
union as the sole and exclusive bargaining agent are tantamount to unfair labor
practice.[45]

Respondents Bayer, Lonishen and Amistoso, on the other hand, contend that there
can be no unfair labor practice on their part since the requisites for unfair labor
practice - i.e., that the violation of the CBA should be gross, and that it should
involve violation in the economic provisions of the CBA - were not
satisfied. Moreover, they cite the ruling of the Labor Arbiter that the issues raised
in the complaint should have been ventilated and threshed out before the voluntary
arbitrators as provided in Article 261 of the Labor Code, as
amended.[46] Respondents Remigio and Villareal, meanwhile, point out that the case
should be dismissed as against them since they are not real parties in interest in
the ULP complaint against Bayer,[47] and since there are no specific or material acts
imputed against them in the complaint.[48]

The petition is partly meritorious.

An intra-union dispute refers to any conflict between and among union members,
including grievances arising from any violation of the rights and conditions of
membership, violation of or disagreement over any provision of the union's
constitution and by-laws, or disputes arising from chartering or disaffiliation of the
union.[49]Sections 1 and 2, Rule XI of Department Order No. 40-03, Series of 2003
of the DOLE enumerate the following circumstances as inter/intra-union
disputes, viz:

RULE XI
INTER/INTRA-UNION DISPUTES AND
OTHER RELATED LABOR RELATIONS DISPUTES
Section 1. Coverage. - Inter/intra-union disputes shall include:

(a) cancellation of registration of a labor organization filed

by its members or by another labor organization;

(b) conduct of election of union and workers' association

officers/nullification of election of union and workers'
association officers;

(c) audit/accounts examination of union or workers'

association funds;

(d) deregistration of collective bargaining agreements;

(e) validity/invalidity of union affiliation or disaffiliation;

(f) validity/invalidity of acceptance/non-acceptance for

union membership;

(g) validity/invalidity of impeachment/expulsion of union

and workers' association officers and members;

(h) validity/invalidity of voluntary recognition;

(i) opposition to application for union and CBA

registration;

(j) violations of or disagreements over any provision in a

union or workers' association constitution and by-laws;

(k) disagreements over chartering or registration of labor

organizations and collective bargaining agreements;

(l) violations of the rights and conditions of union or

workers' association membership;

(m) violations of the rights of legitimate labor

organizations, except interpretation of collective
bargaining agreements;

(n) such other disputes or conflicts involving the rights to

self-organization, union membership and collective
bargaining -
 (1) between and among legitimate labor
organizations;
(2) between and among members of a union
or workers' association.

Section 2. Coverage. - Other related labor relations disputes shall

include any conflict between a labor union and the employer or any
individual, entity or group that is not a labor organization or workers'
association. This includes: (1) cancellation of registration of unions and
workers' associations; and (2) a petition for interpleader.

It is clear from the foregoing that the issues raised by petitioners do not fall under
any of the aforementioned circumstances constituting an intra-union dispute. More
importantly, the petitioners do not seek a determination of whether it is the
Facundo group (EUBP) or the Remigio group (REUBP) which is the true set of union
officers. Instead, the issue raised pertained only to the validity of the acts of
management in light of the fact that it still has an existing CBA with EUBP. Thus as
to Bayer, Lonishen and Amistoso the question was whether they were liable for
unfair labor practice, which issue was within the jurisdiction of the NLRC. The
dismissal of the second ULP complaint was therefore erroneous.

However, as to respondents Remigio and Villareal, we find that petitioners'

complaint was validly dismissed.

Petitioners' ULP complaint cannot prosper as against respondents Remigio and

Villareal because the issue, as against them, essentially involves an intra-union
dispute based on Section 1 (n) of DOLE Department Order No. 40-03. To rule on
the validity or illegality of their acts, the Labor Arbiter and the NLRC will necessarily
touch on the issues respecting the propriety of their disaffiliation and the legality of
the establishment of REUBP - issues that are outside the scope of their jurisdiction.
Accordingly, the dismissal of the complaint was validly made, but only with respect
to these two respondents.

But are Bayer, Lonishen and Amistoso liable for unfair labor practice? On this
score, we find that the evidence supports an answer in the affirmative.

It must be remembered that a CBA is entered into in order to foster stability and
mutual cooperation between labor and capital. An employer should not be allowed
to rescind unilaterally its CBA with the duly certified bargaining agent it had
previously contracted with, and decide to bargain anew with a different group if
there is no legitimate reason for doing so and without first following the proper
procedure. If such behavior would be tolerated, bargaining and negotiations
between the employer and the union will never be truthful and meaningful, and no
CBA forged after arduous negotiations will ever be honored or be relied upon.
Article 253 of the Labor Code, as amended, plainly provides:

ART. 253. Duty to bargain collectively when there exists a collective

bargaining agreement. - Where there is a collective bargaining
agreement, the duty to bargain collectively shall also mean that
neither party shall terminate or modify such agreement during
its lifetime.However, either party can serve a written notice to
terminate or modify the agreement at least sixty (60) days prior to its
expiration date. It shall be the duty of both parties to keep the status
quo and to continue in full force and effect the terms and conditions of
the existing agreement during the 60-day period and/or until a new
agreement is reached by the parties. (Emphasis supplied.)

This is the reason why it is axiomatic in labor relations that a CBA entered into by a
legitimate labor organization that has been duly certified as the exclusive
bargaining representative and the employer becomes the law between them.
Additionally, in the Certificate of Registration[50] issued by the DOLE, it is specified
that the registered CBA serves as the covenant between the parties and has the
force and effect of law between them during the period of its duration. Compliance
with the terms and conditions of the CBA is mandated by express policy of the law
primarily to afford protection to labor[51]and to promote industrial peace. Thus,
when a valid and binding CBA had been entered into by the workers and the
employer, the latter is behooved to observe the terms and conditions thereof
bearing on union dues and representation.[52] If the employer grossly violates its
CBA with the duly recognized union, the former may be held administratively and
criminally liable for unfair labor practice.[53]

Respondents Bayer, Lonishen and Amistoso, contend that their acts cannot
constitute unfair labor practice as the same did not involve gross violations in the
economic provisions of the CBA, citing the provisions of Articles 248 (1) and
261[54] of the Labor Code, as amended.[55] Their argument is, however, misplaced.

Indeed, in Silva v. National Labor Relations Commission,[56] we explained the

correlations of Article 248 (1) and Article 261 of the Labor Code to mean that for a
ULP case to be cognizable by the Labor Arbiter, and for the NLRC to exercise
appellate jurisdiction thereon, the allegations in the complaint must show prima
facie the concurrence of two things, namely: (1) gross violation of the CBA; and (2)
the violation pertains to the economic provisions of the CBA.[57]

This pronouncement in Silva, however, should not be construed to apply to

violations of the CBA which can be considered as gross violations per se, such as
utter disregard of the very existence of the CBA itself, similar to what happened in
this case. When an employer proceeds to negotiate with a splinter union despite the
existence of its valid CBA with the duly certified and exclusive bargaining agent, the
former indubitably abandons its recognition of the latter and terminates the entire
CBA.

Respondents cannot claim good faith to justify their acts. They knew that Facundo's
group represented the duly-elected officers of EUBP. Moreover, they were cognizant
of the fact that even the DOLE Secretary himself had recognized the legitimacy of
EUBP's mandate by rendering an arbitral award ordering the signing of the 1997-
2001 CBA between Bayer and EUBP. Respondents were likewise well-aware of the
pendency of the intra-union dispute case, yet they still proceeded to turn over the
collected union dues to REUBP and to effusively deal with Remigio. The totality of
respondents' conduct, therefore, reeks with anti-EUBP animus.

Bayer, Lonishen and Amistoso argue that the case is already moot and academic
following the lapse of the 1997-2001 CBA and their renegotiation with EUBP for the
2006-2007 CBA. They also reason that the act of the company in negotiating with
EUBP for the 2006-2007 CBA is an obvious recognition on their part that EUBP is
now the certified collective bargaining agent of its rank-and-file employees.[58]

We do not agree. First, a legitimate labor organization cannot be construed to have

abandoned its pending claim against the management/employer by returning to the
negotiating table to fulfill its duty to represent the interest of its members, except
when the pending claim has been expressly waived or compromised in its
subsequent negotiations with the management. To hold otherwise would be
tantamount to subjecting industrial peace to the precondition that previous claims
that labor may have against capital must first be waived or abandoned before
negotiations between them may resume. Undoubtedly, this would be against public
policy of affording protection to labor and will encourage scheming employers to
commit unlawful acts without fear of being sanctioned in the future.

Second, that the management of Bayer decided to recognize EUBP as the certified
collective bargaining agent of its rank-and-file employees for purposes of its 2006-
2007 CBA negotiations is of no moment. It did not obliterate the fact that the
management of Bayer had withdrawn its recognition of EUBP and supported REUBP
during the tumultuous implementation of the 1997-2001 CBA. Such act of
interference which is violative of the existing CBA with EUBP led to the filing of the
subject complaint.

On the matter of damages prayed for by the petitioners, we have held that as a
general rule, a corporation cannot suffer nor be entitled to moral damages. A
corporation, and by analogy a labor organization, being an artificial person and
having existence only in legal contemplation, has no feelings, no emotions, no
senses; therefore, it cannot experience physical suffering and mental
anguish. Mental suffering can be experienced only by one having a nervous system
and it flows from real ills, sorrows, and griefs of life - all of which cannot be
suffered by an artificial, juridical person.[59] A fortiori, the prayer for exemplary
damages must also be denied.[60] Nevertheless, we find it in order to award (1)
nominal damages in the amount of P250,000.00 on the basis of our ruling in De La
Salle University v. De La Salle University Employees Association (DLSUEA-
NAFTEU)[61] and Article 2221,[62]and (2) attorney's fees equivalent to 10% of the
monetary award. The remittance to petitioners of the collected union dues
previously turned over to Remigio and Villareal is likewise in order.

WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The

Decision dated December 15, 2003 and the Resolution dated March 23, 2004 of the
Court of Appeals in CA-G.R. SP No. 73813 are MODIFIED as follows:

1) Respondents Bayer Phils., Dieter J. Lonishen and Asuncion Amistoso are

found LIABLE for Unfair Labor Practice, and are hereby ORDERED to remit to
petitioners the amount of P254,857.15 representing the collected union dues
previously turned over to Avelina Remigio and Anastacia Villareal. They are
likewise ORDERED to pay petitioners nominal damages in the amount of
P250,000.00 and attorney's fees equivalent to 10% of the monetary award; and

2) The complaint, as against respondents Remigio and Villareal. is DISMISSED due

to the lack of jurisdiction of the Labor Arbiter and the NLRC, the complaint being in
the nature of an intra-union dispute.

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 87700 June 13, 1990

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II,

HERMINIA REYES, MARCELA PURIFICACION, ET AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166,
RTC, PASIG, and SAN MIGUEL CORPORATION, respondents.

Romeo C. Lagman for petitioners.

Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.

MELENCIO-HERRERA, J.:

Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this special civil action for certiorari and
Prohibition for having issued the challenged Writ of Preliminary Injunction on 29 March 1989 in Civil Case No. 57055 of his Court entitled
"San Miguel Corporation vs. SMCEU-PTGWO, et als."

Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse
of discretion, a labor dispute being involved. Private respondent San Miguel Corporation (SanMig.
for short), for its part, defends the Writ on the ground of absence of any employer-employee
relationship between it and the contractual workers employed by the companies Lipercon Services,
Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of
personality to represent said workers for purposes of collective bargaining. The Solicitor General
agrees with the position of SanMig.

The antecedents of the controversy reveal that:

Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with
Lipercon and D'Rite (Annexes K and I, SanMig's Comment, respectively). These companies are
independent contractors duly licensed by the Department of Labor and Employment (DOLE).
SanMig entered into those contracts to maintain its competitive position and in keeping with the
imperatives of efficiency, business expansion and diversity of its operation. In said contracts, it was
expressly understood and agreed that the workers employed by the contractors were to be paid by
the latter and that none of them were to be deemed employees or agents of SanMig. There was to
be no employer-employee relation between the contractors and/or its workers, on the one hand, and
SanMig on the other.

Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly
authorized representative of the monthly paid rank-and-file employees of SanMig with whom the
latter executed a Collective Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989
(Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary,
probationary, or contract employees and workers are excluded from the bargaining unit and,
therefore, outside the scope of this Agreement."

In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some
Lipercon and D'Rite workers had signed up for union membership and sought the regularization of
their employment with SMC. The Union alleged that this group of employees, while appearing to be
contractual workers supposedly independent contractors, have been continuously working for
SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither
casual nor seasonal as they are performing work or activities necessary or desirable in the usual
business or trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting
situation. It was then demanded that the employment status of these workers be regularized.

On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig,
the Union filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex
D, Petition).

On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex
F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently,
the two (2) notices of strike were consolidated and several conciliation conferences were held to
settle the dispute before the National Conciliation and Mediation Board (NCMB) of DOLE (Annex G,
Petition).

Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and
D'Rite workers in various SMC plants and offices.

On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent
Court to enjoin the Union from:

a. representing and/or acting for and in behalf of the employees of LIPERCON and/or
D'RITE for the purposes of collective bargaining;

b. calling for and holding a strike vote, to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;

c. inciting, instigating and/or inducing the employees or workers of LIPERCON and

D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA,...;

d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON

and D'RITE;

e. using the employees or workers of LIPERCON AND D'RITE to man the strike area
and/or picket lines and/or barricades which the defendants may set up at the plants
and offices of plaintiff within the bargaining unit referred to in the CBA ...;

f. intimidating, threatening with bodily harm and/or molesting the other employees
and/or contract workers of plaintiff, as well as those persons lawfully transacting
business with plaintiff at the work places within the bargaining unit referred to in the
CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;

g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to,
and egress from, the work places within the bargaining unit referred to in the CBA ..,
to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;

h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the
work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to
compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex
H, Petition)

Respondent Court found the Complaint sufficient in form and substance and issued a Temporary
Restraining Order for the purpose of maintaining the status quo, and set the application for Injunction
for hearing.

In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the
ground of lack of jurisdiction over the case/nature of the action, which motion was opposed by
SanMig. That Motion was denied by respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where the parties presented both
testimonial and documentary evidence on 25 March 1989, respondent Court issued the questioned
Order (Annex A, Petition) granting the application and enjoining the Union from Committing the acts
complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the corresponding
Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer
for whatever damages petitioners may sustain by reason thereof.

In issuing the Injunction, respondent Court rationalized:

The absence of employer-employee relationship negates the existence of labor

dispute. Verily, this court has jurisdiction to take cognizance of plaintiff's grievance.

The evidence so far presented indicates that plaintiff has contracts for services with
Lipercon and D'Rite. The application and contract for employment of the defendants'
witnesses are either with Lipercon or D'Rite. What could be discerned is that there is
no employer-employee relationship between plaintiff and the contractual workers
employed by Lipercon and D'Rite. This, however, does not mean that a final
determination regarding the question of the existence of employer-employee
relationship has already been made. To finally resolve this dispute, the court must
extensively consider and delve into the manner of selection and engagement of the
putative employee; the mode of payment of wages; the presence or absence of a
power of dismissal; and the Presence or absence of a power to control the putative
employee's conduct. This necessitates a full-blown trial. If the acts complained of are
not restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the
other hand, a writ of injunction does not necessarily expose defendants to irreparable
damages.

Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)

Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the
challenged Writ. On 24 April 1989, we issued a Temporary Restraining Order enjoining the
implementation of the Injunction issued by respondent Court. The Union construed this to mean that
"we can now strike," which it superimposed on the Order and widely circulated to entice the Union
membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we
required the parties to "RESTORE the status quo ante declaration of strike" (p. 2,62 Rollo).

In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the
contractual workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen
(13) of the latter's plants and offices.

On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to
conciliation. The Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite
employees were recalled, and discussion on their other demands, such as wage distortion and
appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement
between SanMig and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case)
and Civil Case No. 57055 (the case below), the laid-off individuals ... shall be recalled effective 8
May 1989 to their former jobs or equivalent positions under the same terms and conditions prior to
"lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and
return to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and
required the parties to submit their memoranda simultaneously, the last of which was filed on 9
January 1990.

The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction
over the present controversy and properly issued the Writ of Preliminary Injunction to the resolution
of that question, is the matter of whether, or not the case at bar involves, or is in connection with, or
relates to a labor dispute. An affirmative answer would bring the case within the original and
exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts.

Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves
or arose out of a labor dispute and is directly connected or interwoven with the cases pending with
the NCMB-DOLE, and is thus beyond the ambit of the public respondent's jurisdiction. That the acts
complained of (i.e., the mass concerted action of picketing and the reliefs prayed for by the private
respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners'
Memo).

On the other hand, SanMig denies the existence of any employer-employee relationship and
consequently of any labor dispute between itself and the Union. SanMig submits, in particular, that
"respondent Court is vested with jurisdiction and judicial competence to enjoin the specific type of
strike staged by petitioner union and its officers herein complained of," for the reasons that:

A. The exclusive bargaining representative of an employer unit cannot strike to

compel the employer to hire and thereby create an employment relationship with
contractual workers, especially were the contractual workers were recognized by the
union, under the governing collective bargaining agreement, as excluded from, and
therefore strangers to, the bargaining unit.

B. A strike is a coercive economic weapon granted the bargaining representative

only in the event of a deadlock in a labor dispute over 'wages, hours of work and all
other and of the employment' of the employees in the unit. The union leaders cannot
instigate a strike to compel the employer, especially on the eve of certification
elections, to hire strangers or workers outside the unit, in the hope the latter will help
re-elect them.

C. Civil courts have the jurisdiction to enjoin the above because this specie of strike
does not arise out of a labor dispute, is an abuse of right, and violates the employer's
constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp. 475-476,
Rollo).

We find the Petition of a meritorious character.

A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter
concerning terms and conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment,
regardless of whether the disputants stand in the proximate relation of employer and employee."

While it is SanMig's submission that no employer-employee relationship exists between itself, on the
one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can
nevertheless exist "regardless of whether the disputants stand in the proximate relationship of
employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns,
among others, the terms and conditions of employment or a "change" or "arrangement" thereof
(ibid). Put differently, and as defined by law, the existence of a labor dispute is not negative by the
fact that the plaintiffs and defendants do not stand in the proximate relation of employer and
employee.

That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union
seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that
they be absorbed into the working unit of SanMig. This matter definitely dwells on the working
relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their
employment and the arrangement of those terms are thus involved bringing the matter within the
purview of a labor dispute. Further, the Union also seeks to represent those workers, who have
signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part,
resists that Union demand on the ground that there is no employer-employee relationship between it
and those workers and because the demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating the conditions of employment are also
involved. In fact, the injunction sought by SanMig was precisely also to prevent such representation.
Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied
that the controversy below is directly connected with the labor dispute already taken cognizance of
by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-093-83).

Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and
D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship
may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon
and D'Rite in their demands against SanMig in the light of the existing CBA; whether or not the
notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the
employer to hire strangers outside the working unit; — those are issues the resolution of which call
for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably
linked with those issues.

The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon
by SanMig is not controlling as in that case there was no controversy over terms, tenure or
conditions, of employment or the representation of employees that called for the application of labor
laws. In that case, what the petitioning union demanded was not a change in working terms and
conditions, or the representation of the employees, but that its members be hired as stevedores in
the place of the members of a rival union, which petitioners wanted discharged notwithstanding the
existing contract of the arrastre company with the latter union. Hence, the ruling therein, on the basis
of those facts unique to that case, that such a demand could hardly be considered a labor dispute.

As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As
explicitly provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on
21 March 1989, since the suit below was instituted on 6 March 1989, Labor Arbiters have original
and exclusive jurisdiction to hear and decide the following cases involving all workers including "1.
unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other
terms and conditions of employment; ... and 5. cases arising from any violation of Article 265 of this
Code, including questions involving the legality of striker and lockouts. ..." Article 217 lays down the
plain command of the law.

The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil
Code would not suffice to keep the case within the jurisdictional boundaries of regular Courts. That
claim for damages is interwoven with a labor dispute existing between the parties and would have to
be ventilated before the administrative machinery established for the expeditious settlement of those
disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is
obnoxious to the orderly administration of justice (Philippine Communications, Electronics and
Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321).

We recognize the proprietary right of SanMig to exercise an inherent management prerogative and
its best business judgment to determine whether it should contract out the performance of some of
its work to independent contractors. However, the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law (Section 3, Article XIII, 1987 Constitution) equally call for recognition and
protection. Those contending interests must be placed in proper perspective and equilibrium.

WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March
1989 and 29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent
Judge is enjoined from taking any further action in Civil Case No. 57055 except for the purpose of
dismissing it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be
observed pending the proceedings in the National Conciliation Mediation Board-Department of Labor
and Employment, docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.

SO ORDERED.

THIRD DIVISION

G. R. No. 113907 - February 28, 2000

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (MSMG-UWP), ITS

PRESIDENT BEDA MAGDALENA VILLANUEVA, MARIO DAGANIO, DONATO GUERRERO, BELLA
P. SANCHEZ, ELENA TOBIS, RHODA TAMAYO, LIWAYWAY MALLILIN, ELOISA SANTOS,
DOMINADOR REBULLO, JOSE IRLAND, TEOFILA QUEJADA, VICENTE SAMONTINA, FELICITAS
DURIAN, ANTONIO POLDO, ANGELINA TUGNA, SALVADOR PENALOSA, LUZVIMINDA TUBIG,
ILUMINADA RIVERA, ROMULO SUMILANG, NENITA BARBELONIA, LEVI BASILIA, RICARDO
PALAGA, MERCY ROBLES, LEODEGARIO GARIN, DOMINGO ECLARINAL, MELCHOR
GALLARDO, MARCELO GARIN, ROSALINA BAUTISTA, MARY ANN TALIGATOS, ALEJANDRO
SANTOS, ANTONIO FRAGA, LUZ GAPULTOS, MAGDALENA URSUA, EUGENIO ORDAN, LIGAYA
MANALO, PEPITO DELA PAZ, PERLITA DIMAQUIAT, MYRNA VASQUEZ, FLORENTINA
SAMPAGA, ARACELI FRAGA, MAXIMINA FAUSTINO, MARINA TAN, OLIGARIO LOMO,
PRECILA EUSEBIO, SUSAN ABOGANO, CAROLINA MANINANG, GINA GLIFONIA, OSCAR
SOTTO, CELEDONA MALIGAYA, EFREN VELASQUEZ, DELIA ANOVER, JOSEPHINE TALIMORO,
MAGDALENA TABOR, NARCISA SARMIENTO, SUSAN MACASIEB, FELICIDAD SISON, PRICELA
CARTA, MILA MACAHILIG, CORAZON NUNALA, VISITACION ELAMBRE, ELIZABETH INOFRE,
VIOLETA BARTE, LUZVIMINDA VILLOSA, NORMA SALVADOR, ELIZABETH BOGATE, MERLYN
BALBOA, EUFRECINA SARMIENTO, SIMPLICIA SIMPLICIA BORLEO, MATERNIDAD DAVID,
LAILA JOP, POTENCIANA CULALA, LUCIVITA NAVARRO, ROLANDO BOTIN, AMELITA
MAGALONA, AGNES CENA, NOLI BARTOLAY, DANTE AQUINO, HERMINIA RILLON, CANDIDA
APARIJADO, LYDIA JIMENEZ, ELIZABETH ANOCHE, ALDA MURO, TERESA VILLANUEVA,
TERESITA RECUENCO, ELIZA SERRANO, ESTELLA POLINAR, GERTRUDES NUNEZ, FELIPE
BADIOLA, ROSLYN FERNANDEZ, OSCAR PAGUTA, NATIVIDAD BALIWAS, ELIZABETH
BARCIBAL, CYNTHIA ESTELLER, TEODORA SANTOS, ALICIA PILAR, MILA PATENO, GLORIA
CATRIZ, MILA MACAHILIG, ADELAIDA DE LEON, ROSENDO EDILO, ARSENIA ESPIRITU,
NUMERIANO CABRERA, CONCEPSION ARRIOLA, PAULINA DIMAPASOK, ANGELA SANGCO,
PRESILA ARIAS, ZENAIDA NUNES, EDITHA IGNACIO, ROSA GUIRON, TERESITA CANETA,
ALICIA ARRO, TEOFILO RUWETAS, CARLING AGCAOILI, ROSA NOLASCO, GERLIE PALALON,
CLAUDIO DIRAS, LETICIA ALBOS, AURORA ALUBOG, LOLITA ACALEN, GREGORIO ALIVIO,
GUILLERMO ANICETA, ANGELIE ANDRADA, SUSAN ANGELES, ISABELITA AURIN, MANUELA
AVELINA, CARLING AGCAOILI, TERESITA ALANO, LOLITA AURIN, EMMABETH ARCIAGA,
CRESENCIA ACUNA, LUZVIMINDA ABINES, FLORENCIA ADALID, OLIVIA AGUSTIN,
EVANGELINE ALCORAN, ROSALINA ALFERES, LORNA AMANTE, FLORENTINA AMBITO,
JULIETA AMANONCO, CARMEN AMARILLO, JOSEFINA AMBAGAN, ZENAIDA ANAYA, MARIA
ANGLO, EDITHA ANTA ZO, MARY JANE ANTE, ANDREA AQUINO, ROWENA ARABIT, MARIETA
ARAGON, REBECCA ARCENA, LYDIA ARCIDO, FERNANDO ARENAS, GREGORIO ARGUELLES,
EDITHA ARRIOLA, EMMA ATIENZA, EMMA ATIENZA, TEODY ATIENZA, ELIZABETH AUSTRIA,
DIOSA AZARES, SOLIDA AZAINA, MILAGROS BUAG, MARIA BANADERA, EDNALYN BRAGA,
OFELIA BITANGA, FREDISMINDA BUGUIS, VIOLETA BALLESTEROS, ROSARIO BALLADJAY,
BETTY BORIO, ROMANA BAUTISTA, SUSARA BRAVO, LILIA BAHINGTING, ENIETA BALDOZA,
DAMIANA BANGCORE, HERMINIA BARIL, PETRONA BARRIOS, MILAGROS BARRAMEDA,
PERLA BAUTISTA, CLARITA BAUTISTA, ROSALINA BAUTISTA, ADELINA BELGA,
CONSOLACION BENAS, MARIA BEREZO, MERCEDES BEREBER, VIOLETA BISCOCHO, ERNESTO
BRIONES, ALVINA BROSOTO, AGUSTINA BUNYI, CARMEN BUGNOT, ERLINDA BUENAFLOR,
LITA BAQUIN, CONSEJO BABOL, CRISANTA BACOLOD, CELIA DE BACTAT, MAZIMA BAGA,
ELENA BALADAD, ROSARIO BALADJAY, AMALIA BALAGTAS, ANITA BALAGTAS, MARIA
BALAKIT, RUFINA BALATAN, REBECCA BALDERAMA, AMELIA BALLESTER, BELEN BARQUIO,
BERNANDITA BASILIDES, HELEN BATO, HELEN BAUTISTA, ROMANA BAUTISTA, ALMEDA
BAYTA, AVELINA BELAYON, NORMA DE BELEN, THELMA DE BELEN, JOCELYN BELTRAN,
ELENA BENITEZ, VIRGINIA BERNARDINO, MERLINA BINUYAG, LINA BINUYA, BLESILDA
BISNAR, SHIRLEY BOLIVAR, CRESENTACION MEDLO, JOCELYN BONIFACIO, AMELIA BORBE,
AMALIA BOROMEO, ZENAIDA BRAVO, RODRIGO BEULDA, TERESITA MENDEZ, ELENA
CAMAN, LALIANE CANDELARIA, MARRY CARUJANO, REVELINA CORANES, MARITESS
CABRERA, JUSTINA CLAZADA, APOLONIA DELA CRUZ, VICTORIA CRUZ, JOSEFINA DELA
CRUZ, MARITESS CATANGHAL, EDNA CRUZ, LUCIA DE CASTRO, JOSIE CARIASO, OFELIA
CERVANTES, MEDITA CORTADO, AMALIA CASAJEROS, LUCINA CASTILIO, EMMA CARPIO,
ANACORITA CABALES, YOLANDA CAMO, MILA CAMAZUELA, ANITA CANTO, ESTELA
CANCERAN, FEMENCIA CANCIO, CYNTHIA CAPALAD, MERLE CASTILLO, JESUSA CASTRO,
CECILIA CASTILLO, SILVERITA CASTRODES, VIVIAN CELLANO, NORMA CELINO, TERESITA
CELSO, GLORIA COLINA, EFIPANIA CONSTANTINO, SALVACION CONSULTA, MEDITA
CORTADO, AIDA CRUZ, MARISSA DELA CRUZ, EDITO CORCILLES, JELYNE CRUZ, ROSA
CORPOS, ROSITA CUGONA, ELSIE CABELLES, EMMA CADUT, VICTORIA CALANZA, BARBARA
CALATA, IMELDA CALDERON, CRISTINA CALIDGUID, EMMALINDA CAMALON, MARIA
CAMERINO, CARMENCITA CAMPO, CONNIE CANEZO, LOURDES CAPANANG, MA. MILAGROS
CAPILI, MYRNA T. CAPIRAL, FLOR SAMPAGA, SUSAN B. CARINO, ROSARIO CARIZON,
VIRGINIA DEL CARMEN, EMMA CARPIO, PRESCILA CARTA, FE CASERO, LUZ DE CASTRO,
ANNA CATARONGAN, JOSEFINA CASTISIMO, JOY MANALO, EMMIE CAWALING, JOVITA
CARA, MARINA CERBITO, MARY CAREJANO, ESTELA R. CHAVEZ, CONCEPCION PARAJA, GINA
CLAUDIO, FLORDELIZA CORALES, EDITO CORCIELER, ROSA C. CORROS, AMELIA CRUZ,
JELYNE CRUZ, WILFREDO DELA CRUZ, REINA CUEVAS, MARILOU DEJECES, JOSEPHINE
DESACULA, EDITHA DEE, EDITHA DIAZ, VIRGIE DOMONDON, CELSA DOROPAW, VIOLETA
DUMELINA, MARIBEL DIMATATAC, ELBERTO DAGANIO, LETECIA DAGOHOY, DINDO DALUZ,
ANGELITA DANTES, GLORIA DAYO, LUCIA DE CASTRO, CARLITA DE GUZMAN, CARMEN DELA
CRUZ, MERCY DE LEON, MARY DELOS REYES, MARIETA DEPILO, MATILDE DIBLAS, JULIETA
DIMAYUGA, TEODORA DIMAYUGA, YOLANDA DOMDOM, LUCITA DONATO, NELMA DORADO,
RITA DORADO, SUSAN DUNTON, HERMINIA SAN ESTEBAN, AMALI EUGENIO, OLIVIA
EUSOYA, ERNESTO ESCOBIN, EVELYN ESCUREL, LYDIA ESCOBIN, VICENTE E. ELOIDA.
ELENA EGAR, GLORIA ERENO, NORMA ESPIRIDION, ARSENIA ESPIRITU, AURORA ESTACIO,
DEMETRIA ESTONELO, MILAGROS FONSEGA, LYDIA FLORENTINO, JULIA FARABIER,
TRINIDAD FATALLA, IMELDA FLORES, JESSINA FRANCO, MA. CRISTINA FRIJAS,
ESPECTACION FERRER, BERDENA FLORES, LEONILA FRANCISCO, BERNARDA FAUSTINO,
DOLORES FACUNDO, CRETITA FAMILARAN, EMELITA FIGUERAS, MA. VIRGINIA FLORENDO,
AURORA FRANCISCO, MA. JESUSA FRANCISCO, NENITA FUENTES, MARILOU GOLINGAN,
JUANITA GUERRERO, LYDIA GUEVARRA, SOCORRO GONZAGA, PATRICIA GOMEO,
ROSALINDA GALAPIN, CARMELITA GALVEZ, TERESA GLE, SONIA GONZALES, PRIMITA
GOMEZ, THERESA GALUA, JOSEFINA GELUA, BRENDA GONZAGA, FLORA GALLARDO,
LUCINDA GRACILLA, VICTORIA GOZUM, NENITA GAMAO, EDNA GARCIA, DANILO GARCIA,
ROSARIO GIRAY, ARACELI GOMEZ, JOEMARIE GONZAGA, NELIA GONZAGA, MARY GRANCE
GOZON, CARMEN GONZALES, MERLITA GREGORIO, HERMINIA GONZALES, CARLITA DE
GUZMAN, MODESTA GABRENTINA, EDITHA GADDI, SALVACIO GALIAS, MERLINDA GALIDO,
MELINDA GAMIT, JULIETA GARCIA, EMELITA GAVINO, CHARITO GILLIA, GENERA GONEDA,
CRESTITA GONZALES, FRANCISCA GUILING, JULIAN HERNANDEZ, HERRADURA, SUSANA
HIPOLITO, NERISSA HAZ, SUSAN HERNAEZ, APOLONIA ISON, SUSAN IBARRA, LUDIVINA
IGNACIO, CHOLITA INFANTE, JULIETA ITURRIOS, ANITA IBO, MIRASOL INGALLA, JULIO
JARDINIANO, MERLITA JULAO, JULIETA JULIAN, MARIBETH DE JOSE, JOSEPHINE JENER,
IMELDA JATAP, JULIETA JAVIER, SALOME JAVIER, VICTORIA JAVIER, SALVACION JOMOLO,
EDNA JARNE, LYDIA JIMENEZ, TERESITA DE JUAN, MARILYN LUARCA, ROSITA LOSITO,
ROSALINA LUMAYAG, LORNA LARGA, CRESTETA DE LEON, ZENAIDA LEGASPI, ADELAIDA
LEON, IMELDA DE LEON, MELITINA LUMABI, LYDIA LUMABI, ASUNCION LUMACANG,
REGINA LAPIADRIO, MELANIA LUBUGUAN, EVANGELINE LACAP, PELAGIA LACSI, LORNA
LAGUI, VIRGIE LAITAN, VIRGINIA LEE, CRESTELITA DE LEON, FELICISIMA LEONERO,
DIOSA LOPE, ANGELITA LOPEZ, TERESITA LORICA, JUANITA MENDIETA, JUANITA
MARANQUEZ, JANET MALIFERO, INAS MORADOS, MELANIE MANING, LUCENA MABANGLO,
CLARITA MEJIA, IRENE MENDOZA, LILIA MORTA, VIGINIA MARAY, CHARITO MASINAHON,
FILMA MALAYA, LILIA MORTA, VIRGINIA MARAY, CHARITO MASINAHON, FILMA MALAYA,
LILIA MORTA, ROSITA MATIBAG, LORENZA MLINA, SABINA DEL MUNDO, EDITHA MUYCO,
NARCISA MABEZA, MA. FE MACATANGAY, CONCEPCION MAGDARAOG, IMELDA MAHIYA,
ELSA MALLARI, LIGAYA MANAHAN, SOLEDA MANLAPAS, VIRGINIA MAPA, JOSEI MARCOS,
LIBRADA MARQUEZ, VIRGINIA MAZA, JULIANITA MENDIETA, EDILBERTA MENDOZA, IRENE
MERCADO, HELEN MEROY, CRISTINA MEJARES, CECILIA MILLET, EMELITA MINON,
JOSEPHINE MIRANA, PERLITA MIRANO, EVANGELINE MISBAL, ELEANOR MORALES,
TERESITA MORILLA, LYDIA NUDO, MYRIAM NAVAL, CAROLINA NOLIA, ALICIA NUNEZ,
MAGDALENA NAGUIDA, ELSA NICOL, LILIA NACIONALES, MA. LIZA MABO, REMEDIOS
NIEVES, MARGARITA NUYLAN, TERESITA NIEVES, PORFERIA NARAG, RHODORA NUCASA,
CORAZON OCRAY, LILIA OLIMPO, VERONA OVERENCIA, FERMIN OSENA, FLORENCIA
OLIVAROS, SOLEDAD OBEAS, NARISSA OLIVEROS, PELAGIA ORTEGA, SUSAN ORTEGA,
CRISTINA PRENCIPE, PURITA PENGSON, REBECCA PACERAN, EDNA PARINA, MARIETA
PINAT, EPIFANIA PAJERLAN, ROSALINA PASIBE, CECILIA DELA PAZ, LORETA PENA,
APOLONIA PALCONIT, FRANCISCO PAGUIO, LYDIA PAMINTAHON, ELSIE PACALDO,
TERESITA PADILLA, MYRNA PINEDA, MERCEIDTA PEREZ, NOVENA PORLUCAS, TERESITA
PODPOD, ADORACION PORNOBI, ALICIA PERILLO, HELEN JOY PENDAL, LOURDES PACHECO,
LUZVIMINDA PAGALA, LORETA PAGAPULAN, FRANCISCO PAGUIO, PRISCO PALACA, FLORA
PAMINTUAN, NOEMI PARISALES, JOSEPHINE PATRICIO, CRISTINA PE BENITO, ANGELA
PECO, ANGELITA PENA, ESTER PENONES, NORMA PEREZ, MAURA PERSEVERANCIA, MARINA
PETILLA, JOSIE PIA, ZULVILITA PIODO, REBECCA PACERAN, CLARITA POLICARPIO,
MAXIMO POTENTO, PORFIRIO POTENTO, FLORDELIZA PUMARAS, FERNANDO QUEVEDO,
JULIANA QUINDOZA, CHARITO QUIROZ, CARMELITA ROSINO, RODELIA RAYONDOYON,
FLORENCIA RAGOS, REBECCA ROSALES, ROSALYN RIVERO, FRANCISCO RUIZ, FRANCIA
ROSERO, EMELY RUBIO, EDILBERTO RUIO, JUANA RUBY, RAQUEL REYES, MERCY ROBLES,
ESTELA RELANO, ROSITA REYES NIMFA RENDON, EPIFANIO RAMIRO, MURIEL REALCO,
BERNARDITA RED, LEONITA RODIL, BENITA REBOLA, DELMA REGALARIO, LENY REDILLAS,
JULIETA DELA ROSA, FELICITAS DELA ROSA, SUSAN RAFALLO, ELENA RONDINA, NORMA
RACELIS, JOSEPHINE RAGEL, ESPERANZA RAMIREZ, LUZVIMINDA RANADA, CRISTINA
RAPINSAN, JOCELYN RED, ORLANDO REYES, TERESITA REYES, ANGELITA ROBERTO, DELIA
ROCHA, EDLTRUDES ROMERO, MELECIA ROSALES, ZENAIDA ROTAO, BELEN RUBIS, FE
RUEDA, SYLVIA SONGCAYAWON, CRISTINA SANANO, NERCISA SARMIENTO, HELEN SIBAL,
ESTELITA SANTOS, NORMA SILVESTRE, DARLITA SINGSON, EUFROCINA SARMIENTO,
MYRNA SAMSON, EMERLINA SADIA, LORNA SALAZAR, AVELINA SALVADOR, NACIFORA
SALAZAR, TITA SEUS, MARIFE SANTOS, GRACIA SARMIENTO, ANGELITA SUMANGIL,
ELIZABETH SICAT, MA. VICTORIA SIDELA, ANALITA SALVADOR, MARITES SANTOS,
VIRGINIA SANTOS, THELMA SARONG, NILDA SAYAT, FANCITA SEGUNDO, FYNAIDA SAGUI,
EDITHA SALAZAR, EDNA SALZAR, EMMA SALENDARIO, SOLEDAD SAMSON, EDNA SAN
DIEGO, TERESITA SAN GABRIEL, GERTRUDES SAN JOSE, EGLECERIA OSANCHEZ, ESTRELLA
SANCHEZ, CECILIA DELOS SANTOS, LUISA SEGOVIA, JOCELYN SENDING, ELENA SONGALIA,
FELICITAS SORIANO, OFELIA TIBAYAN, AIDA TIRNIDA, MONICA TIBAYAN, CRISTETA
TAMBARAN, GLORIA TACDA, NENVINA, FELINA TEVES, ANTONINA DELA TORRE, MAXIMA
TANILON, NENA TABAT, ZOSIMA TOLOSA, MARITA TENOSO, IMELDA TANIO, LUZ TANIO,
EVANGELINE TAYO, JOSEFINA TINGTING, ARSENIA TISOY, MAGDALENA TRAJANO,
JOSEFINA UBALDE, GINA UMALI, IRMA VALENZUELA, FELY VALDEZ, PAULINA VALEZ,
ROSELITA VALLENTE, LOURDES VELASCO, AIDA VILLA, FRANCISCA VILLARITO, ZENAIDA
VISMONTE, DELIA VILLAMIEL, NENITA VASQUEZ, JOCELYN VILLASIS, FERMARGARITA
VARGAS, CELIA VALLE, MILA CONCEPCION VIRAY, DOMINGA VALDEZ, LUZVIMINDA
VOCINA, MADELINE VIVERO, RUFINA VELASCO, AUREA VIDALEON, GLORIA DEL VALLE,
THELMA VALLOYAS, CYNTHIA DELA VEGA, ADELA VILLAGOMEZ, TERESITA VINLUAN,
EUFEMIA VITAN, GLORIA VILLAFLORES, EDORACION VALDEZ, ANGELITA VALDEZ,
ILUMINADA VALENCI, MYRNA VASQUEZ, EVELNYN VEJERAMO, TEODORA VELASQUEZ, EDAN
VILLANUEVA, PURITA VILLASENOR, SALVADOR WILSON, EMELINA YU, ADELFA YU, ANA
ABRIGUE, VIRGINIA ADOBAS, VICTORIA ANTIPUESTO, MERCEDITA CASTILLO, JOCELYN
CASTRO, CREMENIA DELA CRUZ, JOSEPHINE IGNACIO, MELITA ILILANGOS, LIGAYA
LUMAYAT, DELIA LUMBES, ROSITA LIBRADO, DELIA LAGRAMADA, GEMMA MAGPANTAY,
EMILY MENDOZA, FIDELA PANGANIBAN, LEONOR RIZALDO, ILUMINDA RIVERA, DIVINA
SAMBAYAN, ELMERITA SOLAYAO, NANCY SAMALA, JOSIE SUMARAN, LUZVIMINDA ABINES,
ALMA ACOL, ROBERTO ADRIATICO, GLORIA AGUINALDO, ROSARIO ALEYO, CRISTETA
ALEJANDRO, LILIA ALMOGUERA, CARMEN AMARILLO, TRINIDAD ARDANIEL, CERINA
AVENTAJADO, ZENAIDA AVAYA, LOLITA ARABIS, MARIA ARSENIA, SOFIA AGUINALDO,
SALVE ABAD, JOSEFINA AMBANGAN EMILIA AQUINO, JOSEFINA AQUINO, JULIANA AUSAN,
AMERCIANA ACOSTA, CONCEPCION ALEROZA, DIANA ADOVOS, FELY ADVINCULA,
SEOMINTA ARIAS, JOSEPHINE ARCEDE, NORMA AMISTOSO, PRESENTACION ALONOS, EMMA
ATIENZA, LEONIDA AQUINO, ANITA ARILLON, ADELAIDA ARELLANO, NORMA AMISTOSO,
JOSEPHINE ARCEDE, SEMIONITA ARIAS, JOSEFINA BANTUG, LOLITA BARTE, HERMINIA
BASCO, MARGARITA BOTARDO, RUFINO BUGNOT, LOLITA BUSTILLO, ISABEL BALAKIT,
ROSARIO BARRERO, TESSIE BALBOS, NORMA BENISANO, GUILLERMA BRUGES,
BERNADETTE BARTOLOME, SHIRLEY BELMONTE, MERONA BELZA, AZUCENA BERNALES,
JOSE BASCO, NIMPHA BANTOG, BENILDA BUBAN, REGINA BUBAN, SALOME BARRAMEDA,
IRENE BISCO, FELICITAS BAUTISTA, VIOLETA BURA, LINA BINUYA, BIBIANA BAARDE, ELSA
BAES, ANASTACIA BELONZO, SONIA BENOYO, ELIZABETH BACUNGAN, PATRICIA
BARRAMEDA, ERLINDA BARCELONA, EMMA BANICO, APOLONIA BUNAO, LUCITA BOLEA,
PACIFICA BARCELONA, EDITHA BASIJAN, RENITA BADAMA, ELENA BALADAD, CRESENCIA
BAJO, BERNADITA BASILID, MELINDA BEATO, YOLANDA BATANES, EDITHA BORILLA, ANITA
BAS, ELSA CALIPUNDAN, MARIA CAMERINO,VIRGINIA CAMPOSANO, MILAGROS CAPILI,
CARINA CARINO, EUFEMIA CASIHAN, NENITA CASTRO, FLORENCIA CASUBUAN, GIRLIE
CENTENO, MARIANITA CHIQUITO, IMELDA DELA CRUZ, TEODOSIA GONG, TEOFILA
CARACOL, TERESITA CANTA, IRENEA CUNANAN, JULITA CANDILOSAS, VIOLETA CIERES,
MILAGROS DELA CRUZ, FLOREPES CAPULONG, CARMENCITA CAMPO, MARILYN CARILLO,
RUTH DELA CRUZ, RITA CIJAS, LYDIA CASTOR, VIRGIE CALUBAD, EMELITA CABERA,
CRISTETA CRUZ, ERLINDA COGADAS, IMELDA CALDERON, SUSIE LUZ CEZAR, ESTELA
CHAVEZ, NORMA CABRERA, ELDA DAGATAN, LEONISA DIMACUNA, ERNA DUGTONG,
FLORDELISA DIGMA, VIRGILIO DADIOS, LOLITA DAGTA, ADELAIDA DORADO, CELSA
DATUMANONG, VIRGINIA DOCTOLERO, EDNA SAN DIEGO, JULIETA DANG, JULIETA
DORANTINAO, LOLITA DAGANO, JUDITH DIAZ, MARIA ENICANE, MARITA ESCARDE,
ENRIMITA ESMAYOR, ROSARIO EPIRITU, REMEDIOS EMBOLTORIO, IRENE ESTUITA,
TERESITA ERESE, ERMELINDA ELEZO, MARIA ESTAREJA, MERLITA ESQUERRA, YOLANDA
FELICITAS, FRUTO FRANCIA, MARTHA FRUTO, LILIA FLORES, SALVACION FORTALESA,
JUDITH FAJARDO, SUSANA FERNANDO, EDWIN FRANCISCO, NENITA GREGORY, ROSA
CAMILO, MARIVIC GERRARDO, CHARITA GOREMBALEM, NORMA GRANDE, DOLORES
GUTIERREZ, CHARLIE GARCIA, LUZ GALVEZ, ADELAIDA GAMILLA, LUZ GAPULTOS, ERLINDA
GARCIA, HELEN GARCIA, ERLINDA GAUDIA, FRANCISCA GUILING, MINTA HERRERA,
ASUNCION HONOA, JUAN HERNANDEZ, LUCERIA ANNA MAE HERNANDEZ, JULIANA
HERNANDEZ, EDITHA IGNACIO, ANITA INOCENCIO, EULALIA INSORIO, ESTELITA IRLANDA,
MILAGROS IGNACIO, LINDA JABONILLO, ADELIMA JAEL, ROWENA JARABJO, ROBERT
JAVILINAR, CLARITA JOSE, CARMENCITA JUNDEZ, SOFIA LALUCIS, GLORIA LABITORIA,
ANGELITA LODES, ERLINDA LATOGA, EVELYN LEGASPI, ROMEO LIMCHOCO, JESUS LARA,
ESTRELLA DE LUNA, LORETA LAREZA, JOSEPHINE ALSCO, MERCY DE LEON, CONSOLACION
LIBAO, MARILYN LIWAG, TERESITA LIZAZO, LILIA MACAPAGAL, SALVACION MACAREZA,
AMALIA MADO, TERESITA MADRIAGA, JOVITA MAGNAYE, JEAN MALABAD, FRANCISCA
MENDOZA, NELCITA MANGANTANG, TERESITA NELLA, GENEROZA MERCADO, CRISTETA
MOJANA, BERNARDA MONGADO, LYDIA MIRANDA, ELISA MADRILEJOS, LOIDA MAGSINO,
AMELIA MALTO, JULITA MAHIBA, MYRNA MAYORES, LUISA MARAIG, FLORENCIA MARAIG,
EMMA MONZON, IMELDA MAGDANGAN, VICTORIA MARTIN, NOEMI MANGUILLO, BASILIZA
MEDINA, VICTORIO MERCADO, ESTELA MAYPA, EMILIA MENDOZA, LINA MAGPANTAY,
FELICIANA MANLOLO, ELENA MANACOP, WILMA MORENO, JUANA MENDOZA, EVELYN DEL
MUNDO, ROSIE MATUTINA, MATILDE MANALO, TERESITA MENDEZ, FELIPINA MAGONCIA,
MARIA MANZANO, LIGAYA MANALO, LETICIA MARCHA, MARINA MANDIGMA, LETICIA
MANDASOC, PRESCILLA MARTINEZ, JULIA MENDOZA, PACITA MAGALLANES, ANGELINA
MARJES, SHIRLEY MELIGRITO, IRENE MERCADO, ELISA MAATUBANG, MARCELINA NICOLAS,
AGUSTINA NICOLAS, ROSA NOLASCO, WILMA NILAYE, VIOLETA ORACION, ANGELA
OSTAYA, JUANITA OSAYOS, MAGDALENA OCAMPO, MARDIANA OCTA, ROSELA OPAO,
LIBRADA OCAMPO, YOLANDA OLIVER, MARCIA ORLANDA, PAGDUNAN, RITA PABILONA,
MYRA PALACA, BETHLEHEM PALINES, GINA PALIGAR, NORMA PALIGAR, DELMA PEREZ,
CLAUDIA PRADO, JULIE PUTONG, LUDIVINA PAGSALINGAN, MERLYN PANALIGAN, VIOLETA
PANAMBITAN, NOREN PAR, ERLINDA PARAGAS, MILA PARINO, REBECCA PENAFLOR,
IMELDA PENAMORA, JERMICILLIN PERALTA, REBECCA PIAPES, EDITHA PILAR, MAROBETH
PILLADO, DIOSCORO PIMENTEL, AURORA LAS PINAS, EVANGELINA PINON, MA. NITA
PONDOC, MA. MERCEDES PODPOD, ANGELITO PANDEZ, LIGAYA PIGTAIN, LEONILA
QUIAMBAO, ELENA QUINO, MARITESS QUIJANO, CHOLITA REBUENO, LOLITA REYES,
JOCELYN RAMOS, ROSITA RAMIREZ, ELINORA RAMOS, ISABEL RAMOS, ANNABELLE
RESURRECCION, EMMA REYES, ALILY ROXAS, MARY GRACE DELOS REYES, JOCELYN DEL
ROSARIO, JOSEFINA RABUSA, ANGELITA ROTAIRO, SAMCETA ROSETA, EDERLINA RUIZ,
ZENAIDA ROSARIO, BENITA REBOLA, ROSITA REVILLA, ROSITA SANTOS, ROWENA
SALAZAR, EMILYN SARMIENTO, ANA SENIS, ELOISA SANTOS, NARCISA SONGLIAD, ELMA
SONGALIA, AMPARA SABIO, JESSIE SANCHEZ, VIVIAN SAMILO, GLORIA SUMALINOG,
ROSALINA DELOS SANTOS, MARIETA SOMBRERO, HELEN SERRETARIO, TEODORO SULIT,
BELLA SONGUINES, LINDA SARANTAN, ESTELLA SALABAR, MILAGROS SISON, GLORIA
TALIDAGA, CECILIA TEODORO, ROMILLA TUAZON, AMELITA TABULAO, MACARIA TORRES,
LUTGARDA TUSI, ESTELLA TORREJOS, VICTORIA TAN, MERLITA DELA VEGA, WEVINA
ORENCIA, REMEDIOS BALECHA, TERESITA TIBAR, LACHICA LEONORA, JULITA YBUT,
JOSEFINA ZABALA, WINNIE ZALDARIAGA, BENHUR ANTENERO, MARCELINA ANTENERO,
ANTONINA ALAPAN, EDITHA ANTOZO, ROWENA ARABIT, ANDRA AQUINO, TERESITA
ANGULO, MARIA ANGLO, MYRNA ALBOS, ELENITA AUSTRIA, ANNA ABRIGUE, VIRGINIA
ADOBAS, VICTORIA ANTIPUESTO, REMEDIOS BOLECHE, MACARIA BARRIOS, THELMA
BELEN, ESTELLA BARRETTO, JOCELYN CHAVEZ, VIRGINIA CAPISTRANO, BENEDICTA CINCO,
YOLLY CATPANG, REINA CUEVAS, VICTORIA CALANZA, FE CASERO, ROBERTA CATALBAS,
LOURDES CAPANANG, CLEMENCIA CRUZ, JOCELYN COSTO, MERCEDITA CASTILLO, EDITHA
DEE, LUCITA DONATO NORMA ESPIRIDION, LORETA FERNANDEZ, AURORA FRANCISCO,
VILMA FAJARDO, MODESTA GABRENTINA, TERESITA GABRIEL, SALVACION GAMBOA,
JOSEPHINE IGNACIO, SUSAN IBARRA, ESPERANZA JABSON, OSCAR JAMBARO, ROSANNA
JARDIN, CORAZON JALOCON, ZENAIDA LEGASPI, DELLA LAGRAMADA, ROSITA LIBRANDO,
LIGAYA LUMAYOT, DELIA LUMBIS, LEONORA LANCHICA, RELAGIA LACSI, JOSEFINA LUMBO,
VIOLETA DE LUNA, EVELYN MADRID, TERESITA MORILLA, GEMMA MAGPANTAY, EMILY
MENDOZA, IRENEA MEDINA, NARCISA MABEZA, ROSANNA MEDINA, DELIA MARTINEZ,
ROSARIO MAG-ISA, EDITHA MENDOZA, EDILBERTA MENDOZA, FIDELA PANGANIBAN,
OFELIA PANGANIBAN, AZUCENA POSTGO, LOURDES PACHECO, LILIA PADILLA, MARISSA
PEREZ, FLORDELIZA PUMARES, LUZ REYES, NORMA RACELIS, LEONOR RIZALDO, JOSIE
SUMASAR, NANCY SAMALA, EMERLITA SOLAYAO, MERCEDITA SAMANIEGO, BLANDINA
SIMBULAN, JOCELYN SENDING, LUISITA TABERRERO, TERESITA TIBAR, ESTERLINA
VALDEZ, GLORIA VEJERANO, ILUMINADA VALENCIA, MERLITA DELA VEGA, VIRGIE LAITAN,
JULIET VILLARAMA, LUISISTA OCAMPO, NARIO ANDRES, ANSELMA TULFO, GLORIA MATEO,
FLANIA MENDOZA, CONNIE CANGO, EDITHA SALAZAR, MYRNA DELOS SANTOS, TERESITA
SERGIO, CHARITO GILLA, FLORENTINA HERNAEZ, BERNARDINO VIRGINIA, AMPO
ANACORITA, SYLVIA POASADAS, ESTRELLA ESPIRITU, CONCORDIA LUZURIAGA, MARINA
CERBITO, EMMA REYES, NOEMI PENISALES, CLARITA POLICARPIO, BELEN BANGUIO,
HERMINIA ADVINCULA, LILIA MORTA, REGINA LAPIDARIO, LORNA LARGA, TERESITA
VINLUAN, MARITA TENOSO, NILDS SAYAT, THELMA SARONG, DELMA REGALIS, SUSAN
RAFAULO, ELENA RONDINA, MYRNA PIENDA, VIOLETA DUMELINA, FLORENCIA ADALID,
FILMA MELAYA, ERLINDA DE BAUTISTA, MATILDE DE BLAS, DOLORES FACUNDO, REBECCA
LEDAMA, MA. FE MACATANGAY, EMELITA MINON, NORMA PAGUIO, ELIZA VASQUEZ, GLORIA
VILLARINO, MA. JESUS FRANCISCO, TERESITA GURPIDO, LIGAYA MANALO, FE PINEDA,
MIRIAM OCMAR, LUISA SEGOVIA, TEODY ATIENZA, SOLEDA AZCURE, CARMEN DELA CRUZ,
DMETRIA ESTONELO, MA. FLORIDA LOAZNO, IMELDA MAHIYA, EDILBERTA MENDOZA,
SYLVIA POSADAS, SUSANA ORTEGA, JOSEPHINE D. TALIMORO, TERESITA LORECA,
ARSENIA TISOY, LIGAYA MANALO, TERESITA GURPIO, FE PINEDA, and MARIA JESUS
FRANCISCO, Petitioners, v. HON. CRESENCIO J. RAMOS, NATIONAL LABOR RELATIONS
COMMISSION, M. GREENFIELD (B), INC., SAUL TAWIL, CARLOS T. JAVELOSA, RENATO C.
PUANGCO, WINCEL LIGOT, MARCIANO HALOG, GODOFREDO PACENO, SR., GERVACIO
CASILLANO, LORENZO ITAOC, ATTY. GODOFREDO PACENO, JR., MARGARITO CABRERA,
GAUDENCIO RACHO, SANTIAGO IBANEZ, AND RODRIGO AGUILING, Respondents.

PURISIMA, J.:

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court to annul the decision of
the National Labor Relations Commission in an unfair labor practice case instituted by a local union
against its employer company and the officers of its national federation.

The petitioner, Malayang Samahan ng mga Manggagawa sa M. Greenfield, Inc., (B) (MSMG),
hereinafter referred to as the "local union", is an affiliate of the private respondent, United Lumber
and General Workers of the Philippines (ULGWP), referred to as the "federation". The collective
bargaining agreement between MSMG and M. Greenfield, Inc., names the parties as follows:

This agreement made and entered into by and between:

M. GREENFIELD, INC. (B) a corporation duly organized in accordance with the laws of
the Republic of the Philippines with office address at Km. 14, Merville Road,
Parañaque, Metro Manila, represented in this act by its General manager, Mr. Carlos T.
Javelosa, hereinafter referred to as the Company;

-and-

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (B)

(MSMG)/UNITED LUMBER AND GENERAL WORKERS OF THE PHILIPPINES (ULGWP), a
legitimate labor organization with address at Suite 404, Trinity Building, T. M. Kalaw
Street, Manila, represented in this act by a Negotiating Committee headed by its
 National President, Mr. Godofredo Paceno, Sr., referred to in this Agreement as the
UNION.1

The CBA includes, among others, the following pertinent provisions:

Art. II-Union Security

Sec. 1. Coverage andope. All employees who are covered by this Agreement and
presently members of the UNION shall remain members of the UNION for the duration
of this Agreement as a condition precedent to continued employment with the
COMPANY.

xxx-xxx-xxx

Sec. 4. Dismissal. Any such employee mentioned in Section 2 hereof, who fails to
maintain his membership in the UNION for non-payment of UNION dues, for
resignation and for violation of UNION's Constitution and By-Laws and any new
employee as defined in Section 2 of this Article shall upon written notice of such failure
to join or to maintain membership in the UNION and upon written recommendation to
the COMPANY by the UNION, be dismissed from the employment by the
COMPANY; provided, however, that the UNION shall hold the COMPANY free and
blameless from any and all liabilities that may arise should the dismissed employee
question, in any manner, his dismissal; provided, further that the matter of the
employee's dismissal under this Article may be submitted as a grievance under Article
XIII and, provided, finally, that no such written recommendation shall be made upon
the COMPANY nor shall COMPANY be compelled to act upon any such recommendation
within the period of sixty (60) days prior to the expiry date of this Agreement
conformably to law.

Art. IX

Sec. 4. Program Fund The Company shall provide the amount of P10,000.00 a month
for a continuing labor education program which shall be remitted to the Federation . .
.2

On September 12, 1986, a local union election was held under the auspices of the ULGWP wherein the
herein petitioner, Beda Magdalena Villanueva, and the other union officers were proclaimed as
winners. Minutes of the said election were duly filed with the Bureau of Labor Relations on September
29, 1986.

On March 21, 1987, a Petition for Impeachment was filed with the national federation ULGWP by the
defeated candidates in the aforementioned election.

On June 16, 1987, the federation conducted an audit of the local union funds. The investigation did
not yield any unfavorable result and the local union officers were cleared of the charges of anomaly in
the custody, handling and disposition of the union funds.

The 14 defeated candidates filed a Petition for Impeachment/Expulsion of the local union officers with
the DOLE NCR on November 5, 1987, docketed as NCR-OD-M-11-780-87. However, the same was
dismissed on March 2, 1988, by Med-Arbiter Renato Parungo for failure to substantiate the charges
and to present evidence in support of the allegations.

On April 17, 1988, the local union held a general membership meeting at the Caruncho Complex in
Pasig. Several union members failed to attend the meeting, prompting the Executive Board to create a
committee tasked to investigate the non-attendance of several union members in the said assembly,
pursuant to Sections 4 and 5, Article V of the Constitution and By-Laws of the union, which read:

Seksyon 4. Ang mga kinukusang hindi pagdalo o hindi paglahok sa lahat ng hakbangin
ng unyon ng sinumang kasapi o pinuno ay maaaring maging sanhi ng pagtitiwalag o
pagpapataw ng multa ng hindi hihigit sa P50.00 sa bawat araw na nagkulang.

Seksyon 5. Ang sinumang dadalo na aalis ng hindi pa natatapos ang pulong ay

ituturing na pagliban at maparusahan itong alinsunod sa Article V, Seksyong 4 ng
Saligang Batas na ito. Sino mang kasapi o pisyales na mahuli and dating sa takdang
oras ng di lalampas sa isang oras ay magmumulta ng P25.00 at babawasin sa sahod
sa pamamagitan ng salary deduction at higit sa isang oras ng pagdating ng huli ay
ituturing na pagliban.3

On June 27, 1988, the local union wrote respondent company a letter requesting it to deduct the
union fines from the wages/salaries of those union members who failed to attend the general
membership meeting. A portion of the said letter stated:

xxx-xxx-xxx

In connection with Section 4 Article II of our existing Collective Bargaining Agreement,

please deduct the amount of P50.00 from each of the union members named in said
annexes on the payroll of July 2-8, 1988 as fine for their failure to attend said general
membership meeting.4

In a Memorandum dated July 3, 1988, the Secretary General of the national federation, Godofredo
Paceño, Jr. disapproved the resolution of the local union imposing the P50.00 fine. The union officers
protested such action by the Federation in a Reply dated July 4, 1988.

On July 11, 1988, the Federation wrote respondent company a letter advising the latter not to deduct
the fifty-peso fine from the salaries of the union members requesting that:

. . . any and all future representations by MSMG affecting a number of members be

first cleared from the federation before corresponding action by the Company.5

The following day, respondent company sent a reply to petitioner union's request in a letter, stating
that it cannot deduct fines from the employees' salary without going against certain laws. The
company suggested that the union refer the matter to the proper government office for resolution in
order to avoid placing the company in the middle of the issue.

The imposition of P50.00 fine became the subject of bitter disagreement between the Federation and
the local union culminating in the latter's declaration of general autonomy from the former through
Resolution No. 10 passed by the local executive board and ratified by the general membership on July
16, 1988.

In retaliation, the national federation asked respondent company to stop the remittance of the local
union's share in the education funds effective August 1988. This was objected to by the local union
which demanded that the education fund be remitted to it in full.

The company was thus constrained to file a Complaint for Interpleader with a Petition for Declaratory
Relief with the Med-Arbitration Branch of the Department of Labor and Employment, docketed as Case
No. OD-M-8-435-88. This was resolved on October 28, 1988, by Med-Arbiter Anastacio Bactin in an
Order, disposing thus:

WHEREFORE, premises considered, it is hereby ordered:

 1. That the United Lumber and General Workers of the Philippines (ULGWP) through
its local union officers shall administer the collective bargaining agreement (CBA).

2. That petitioner company shall remit the P10,000.00 monthly labor education
program fund to the ULGWP subject to the condition that it shall use the said amount
for its intended purpose.

3. That the Treasurer of the MSMG shall be authorized to collect from the 356 union
members the amount of P50.00 as penalty for their failure to attend the general
membership assembly on April 17, 1988.

However, if the MSMG Officers could present the individual written authorizations of
the 356 union members, then the company is obliged to deduct from the salaries of
the 356 union members the P50.00 fine.6

On appeal, Director Pura-Ferrer Calleja issued a Resolution dated February 7, 1989, which modified in
part the earlier disposition, to wit:

WHEREFORE, premises considered, the appealed portion is hereby modified to the

extent that the company should remit the amount of five thousand pesos (P5,000.00)
of the P10,000.00 monthly labor education program fund to ULGWP and the other
P5,000.00 to MSMG, both unions to use the same for its intended purpose.7

Meanwhile, on September 2, 1988, several local unions (Top Form, M. Greenfield, Grosby, Triumph
International, General Milling, and Vander Hons chapters) filed a Petition for Audit and Examination of
the federation and education funds of ULGWP which was granted by Med-Arbiter Rasidali Abdullah on
December 25, 1988 in an Order which directed the audit and examination of the books of account of
ULGWP.

On September 30, 1988, the officials of ULGWP called a Special National Executive Board Meeting at
Nasipit, Agusan del Norte where a Resolution was passed placing the MSMG under trusteeship and
appointing respondent Cesar Clarete as administrator.

On October 27, 1988, the said administrator wrote the respondent company informing the latter of its
designation of a certain Alfredo Kalingking as local union president and "disauthorizing" the incumbent
union officers from representing the employees. This action by the national federation was protested
by the petitioners in a letter to respondent company dated November 11, 1988.

On November 13, 1988, the petitioner union officers received identical letters from the administrator
requiring them to explain within 72 hours why they should not be removed from their office and
expelled from union membership.

On November 26, 1988, petitioners replied:

(a) Questioning the validity of the alleged National Executive Board Resolution placing
their union under trusteeship;

(b) Justifying the action of their union in declaring a general autonomy from ULGWP
due to the latter's inability to give proper educational, organizational and legal services
to its affiliates and the pendency of the audit of the federation funds;

(c) Advising that their union did not commit any act of disloyalty as it has remained an
affiliate of ULGWP;
 (d) Giving ULGWP a period of five (5) days to cease and desist from further
committing acts of coercion, intimidation and harassment.8

However, as early as November 21, 1988, the officers were expelled from the ULGWP. The termination
letter read:

Effective today, November 21, 1988, you are hereby expelled from UNITED LUMBER
AND GENERAL WORKERS OF THE PHILIPPINES (ULGWP) for committing acts of
disloyalty and/or acts inimical to the interest and violative to the Constitution and by-
laws of your federation.

You failed and/or refused to offer an explanation inspite of the time granted to you.

Since you are no longer a member of good standing, ULGWP is constrained to

recommend for your termination from your employment, and provided in Article II
Section 4, known as UNION SECURITY, in the Collective Bargaining agreement. 9

On the same day, the federation advised respondent company of the expulsion of the 30 union officers
and demanded their separation from employment pursuant to the Union Security Clause in their
collective bargaining agreement. This demand was reiterated twice, through letters dated February 21
and March 4, 1989, respectively, to respondent company.

Thereafter, the Federation filed a Notice of Strike with the National Conciliation and Mediation Board to
compel the company to effect the immediate termination of the expelled union officers.

On March 7, 1989, under the pressure of a threatened strike, respondent company terminated the 30
union officers from employment, serving them identical copies of the termination letter reproduced
below:

We received a demand letter dated 21 November 1988 from the United Lumber and
General Workers of the Philippines (ULGWP) demanding for your dismissal from
employment pursuant to the provisions of Article II, Section 4 of the existing Collective
Bargaining Agreement (CBA). In the said demand letter, ULGWP informed us that as of
November 21, 1988, you were expelled from the said federation "for committing acts
of disloyalty and/or acts inimical to the interest of ULGWP and violative to its
Constitution and By-laws particularly Article V, Section 6, 9, and 12, Article XIII,
Section 8.

In subsequent letters dated 21 February and 4 March 1989, the ULGWP reiterated its
demand for your dismissal, pointing out that notwithstanding your expulsion from the
federation, you have continued in your employment with the company in violation of
Sec. 1 and 4 of Article II of our CBA, and of existing provisions of law.

In view thereof, we are left with no alternative but to comply with the provisions of the
Union Security Clause of our CBA. Accordingly, we hereby serve notice upon you that
we are dismissing you from your employment with M. Greenfield, Inc., pursuant to
Sections 1 and 4, Article II of the CBA effective immediately.10

On that same day, the expelled union officers assigned in the first shift were physically or bodily
brought out of the company premises by the company's security guards. Likewise, those assigned to
the second shift were not allowed to report for work. This provoked some of the members of the local
union to demonstrate their protest for the dismissal of the said union officers. Some union members
left their work posts and walked out of the company premises.
On the other hand, the Federation, having achieved its objective, withdrew the Notice of Strike filed
with the NCMB.

On March 8, 1989, the petitioners filed a Notice of Strike with the NCMB, DOLE, Manila, docketed as
Case No. NCMB-NCR-NS-03-216-89, alleging the following grounds for the strike:

(a) Discrimination

(b) Interference in union activities

(c) Mass dismissal of union officers and shop stewards

(d) Threats, coercion and intimidation

(e) Union busting

The following day, March 9, 1989, a strike vote referendum was conducted and out of 2, 103 union
members who cast their votes, 2,086 members voted to declare a strike.

On March 10, 1989, the thirty (30) dismissed union officers filed an urgent petition, docketed as Case
No. NCMB-NCR-NS-03-216-89, with the Office of the Secretary of the Department of Labor and
Employment praying for the suspension of the effects of their termination from employment. However,
the petition was dismissed by then Secretary Franklin Drilon on April 11, 1989, the pertinent portion of
which stated as follows:

At this point in time, it is clear that the dispute at M. Greenfield is purely an intra-
union matter. No mass lay-off is evident as the terminations have been limited to
those allegedly leading the secessionist group leaving MSMG-ULGWP to form a union
under the KMU. . . .

xxx-xxx-xxx

WHEREFORE, finding no sufficient jurisdiction to warrant the exercise of our

extraordinary authority under Article 277 (b) of the Labor Code, as amended, the
instant Petition is hereby DISMISSED for lack of merit.

SO ORDERED.11

On March 13 and 14, 1989, a total of 78 union shop stewards were placed under preventive
suspension by respondent company. This prompted the union members to again stage a walk-out and
resulted in the official declaration of strike at around 3:30 in the afternoon of March 14, 1989. The
strike was attended with violence, force and intimidation on both sides resulting to physical injuries to
several employees, both striking and non-striking, and damage to company properties.

The employees who participated in the strike and allegedly figured in the violent incident were placed
under preventive suspension by respondent company. The company also sent return-to-work notices
to the home addresses of the striking employees thrice successively, on March 27, April 8 and April
31, 1989, respectively. However, respondent company admitted that only 261 employees were
eventually accepted back to work. Those who did not respond to the return-to-work notice were sent
termination letters dated May 17, 1989, reproduced below:

M. Greenfield Inc., (B)

Km. 14, Merville Rd., Parañaque, M.M.

 May 17, 1989

xxx-xxx-xxx

On March 14, 1989, without justifiable cause and without due notice, you left your
work assignment at the prejudice of the Company's operations. On March 27, April 11,
and April 21, 1989, we sent you notices to report to the Company. Inspite of your
receipt of said notices, we have not heard from you up to this date.

Accordingly, for your failure to report, it is construed that you have effectively
abandoned your employment and the Company is, therefore, constrained to dismiss
you for said cause.

Very truly yours,

M. GREENFIELD, INC., (B)

By:

WENZEL STEPHEN LIGOT

Asst. HRD Manager12

On August 7, 1989, the petitioners filed a verified complaint with the Arbitration Branch, National
Capital Region, DOLE, Manila, docketed as Case No. NCR-00-09-04199-89, charging private
respondents of unfair labor practice which consists of union busting, illegal dismissal, illegal
suspension, interference in union activities, discrimination, threats, intimidation, coercion, violence,
and oppression.

After the filing of the complaint, the lease contracts on the respondent company's office and factory at
Merville Subdivision, Parañaque expired and were not renewed. Upon demand of the owners of the
premises, the company was compelled to vacate its office and factory.

Thereafter, the company transferred its administration and account/client servicing department at
AFP-RSBS Industrial Park in Taguig, Metro Manila. For failure to find a suitable place in Metro Manila
for relocation of its factory and manufacturing operations, the company was constrained to move the
said departments to Tacloban, Leyte. Hence, on April 16, 1990, respondent company accordingly
notified its employees of a temporary shutdown in operations. Employees who were interested in
relocating to Tacloban were advised to enlist on or before April 23, 1990.

The complaint for unfair labor practice was assigned to Labor Arbiter Manuel Asuncion but was
thereafter reassigned to Labor Arbiter Cresencio Ramos when respondents moved to inhibit him from
acting on the case.

On December 15, 1992, finding the termination to be valid in compliance with the union security
clause of the collective bargaining agreement, Labor Arbiter Cresencio Ramos dismissed the
complaint.

Petitioners then appealed to the NLRC. During its pendency, Commissioner Romeo Putong retired from
the service, leaving only two commissioners, Commissioner Vicente Veloso III and Hon. Chairman
Bartolome Carale in the First Division. When Commissioner Veloso inhibited himself from the case,
Commissioner Joaquin Tanodra of the Third Division was temporarily designated to sit in the First
Division for the proper disposition of the case.
The First Division affirmed the Labor Arbiter's disposition. With the denial of their motion for
reconsideration on January 28, 1994, petitioners elevated the case to this Court, attributing grave
abuse of discretion to public respondent NLRC in:

I. UPHOLDING THE DISMISSAL OF THE UNION OFFICERS BY RESPONDENT COMPANY

AS VALID;

II. HOLDING THAT THE STRIKE STAGED BY THE PETITIONERS AS ILLEGAL;

III. HOLDING THAT THE PETITIONER EMPLOYEES WERE DEEMED TO HAVE

ABANDONED THEIR WORK AND HENCE, VALIDLY DISMISSED BY RESPONDENT
COMPANY; AND

IV. NOT FINDING RESPONDENT COMPANY AND RESPONDENT FEDERATION OFFICERS

GUILTY OF ACTS OF UNFAIR LABOR PRACTICE.

Notwithstanding the several issues raised by the petitioners and respondents in the voluminous
pleadings presented before the NLRC and this Court, they revolve around and proceed from the issue
of whether or not respondent company was justified in dismissing petitioner employees merely upon
the labor federation's demand for the enforcement of the union security clause embodied in their
collective bargaining agreement.

Before delving into the main issue, the procedural flaw pointed out by the petitioners should first be
resolved.

Petitioners contend that the decision rendered by the First Division of the NLRC is not valid because
Commissioner Tanodra, who is from the Third Division, did not have any lawful authority to sit, much
less write the ponencia, on a case pending before the First Division. It is claimed that a commissioner
from one division of the NLRC cannot be assigned or temporarily designated to another division
because each division is assigned a particular territorial jurisdiction. Thus, the decision rendered did
not have any legal effect at all for being irregularly issued.

Petitioners' argument is misplaced. Article 213 of the Labor Code in enumerating the powers of the
Chairman of the National Labor Relations Commission provides that:

The concurrence of two (2) Commissioners of a division shall be necessary for the
pronouncement of a judgment or resolution. Whenever the required membership in a
division is not complete and the concurrence of two (2) commissioners to arrive at a
judgment or resolution cannot be obtained, the Chairman shall designate such number
of additional Commissioners from the other divisions as may be necessary.

It must be remembered that during the pendency of the case in the First Division of the NLRC, one of
the three commissioners, Commissioner Romeo Putong, retired, leaving Chairman Bartolome Carale
and Commissioner Vicente Veloso III. Subsequently, Commissioner Veloso inhibited himself from the
case because the counsel for the petitioners was his former classmate in law school. The First Division
was thus left with only one commissioner. Since the law requires the concurrence of two
commissioners to arrive at a judgment or resolution, the Commission was constrained to temporarily
designate a commissioner from another division to complete the First Division. There is nothing
irregular at all in such a temporary designation for the law empowers the Chairman to make
temporary assignments whenever the required concurrence is not met. The law does not say that a
commissioner from the first division cannot be temporarily assigned to the second or third division to
fill the gap or vice versa. The territorial divisions do not confer exclusive jurisdiction to each division
and are merely designed for administrative efficiency.

Going into the merits of the case, the court finds that the Complaint for unfair labor practice filed by
the petitioners against respondent company which charges union busting, illegal dismissal, illegal
suspension, interference in union activities, discrimination, threats, intimidation, coercion, violence,
and oppression actually proceeds from one main issue which is the termination of several employees
by respondent company upon the demand of the labor federation pursuant to the union security
clause embodied in their collective bargaining agreement.

Petitioners contend that their dismissal from work was effected in an arbitrary, hasty, capricious and
illegal manner because it was undertaken by the respondent company without any prior administrative
investigation; that, had respondent company conducted prior independent investigation it would have
found that their expulsion from the union was unlawful similarly for lack of prior administrative
investigation; that the federation cannot recommend the dismissal of the union officers because it was
not a principal party to the collective bargaining agreement between the company and the union; that
public respondents acted with grave abuse of discretion when they declared petitioners' dismissals as
valid and the union strike as illegal and in not declaring that respondents were guilty of unfair labor
practice.

Private respondents, on the other hand, maintain that the thirty dismissed employees who were
former officers of the federation have no cause of action against the company, the termination of their
employment having been made upon the demand of the federation pursuant to the union security
clause of the CBA; the expelled officers of the local union were accorded due process of law prior to
their expulsion from their federation; that the strike conducted by the petitioners was illegal for
noncompliance with the requirements; that the employees who participated in the illegal strike and in
the commission of violence thereof were validly terminated from work; that petitioners were deemed
to have abandoned their employment when they did not respond to the three return to work notices
sent to them; that petitioner labor union has no legal personality to file and prosecute the case for and
on behalf of the individual employees as the right to do so is personal to the latter; and that, the
officers of respondent company cannot be liable because as mere corporate officers, they acted within
the scope of their authority.

Public respondent, through the Labor Arbiter, ruled that the dismissed union officers were validly and
legally terminated because the dismissal was effected in compliance with the union security clause of
the CBA which is the law between the parties. And this was affirmed by the Commission on appeal.
Moreover, the Labor Arbiter declared that notwithstanding the lack of a prior administrative
investigation by respondent company, under the union security clause provision in the CBA, the
company cannot look into the legality or illegality of the recommendation to dismiss by the union nd
the obligation to dismiss is ministerial on the part of the company.13

This ruling of the NLRC is erroneous. Although this Court has ruled that union security clauses
embodied in the collective bargaining agreement may be validly enforced and that dismissals pursuant
thereto may likewise be valid, this does not erode the fundamental requirement of due process. The
reason behind the enforcement of union security clauses which is the sanctity and inviolability of
contracts14 cannot override one's right to due process.

In the case of Cariño vs. National Labor Relations Commission,15 this Court pronounced that while the
company, under a maintenance of membership provision of the collective bargaining agreement, is
bound to dismiss any employee expelled by the union for disloyalty upon its written request, this
undertaking should not be done hastily and summarily. The company acts in bad faith in dismissing a
worker without giving him the benefit of a hearing.

The power to dismiss is a normal prerogative of the employer. However, this is not
without limitation. The employer is bound to exercise caution in terminating the
services of his employees especially so when it is made upon the request of a labor
union pursuant to the Collective Bargaining Agreement, . . . Dismissals must not be
arbitrary and capricious. Due process must be observed in dismissing an employee
because it affects not only his position but also his means of livelihood. Employers
should respect and protect the rights of their employees, which include the right to
labor.
In the case under scrutiny, petitioner union officers were expelled by the federation for allegedly
committing acts of disloyalty and/or inimical to the interest of ULGWP and in violation of its
Constitution and By-laws. Upon demand of the federation, the company terminated the petitioners
without conducting a separate and independent investigation. Respondent company did not inquire
into the cause of the expulsion and whether or not the federation had sufficient grounds to effect the
same. Relying merely upon the federation's allegations, respondent company terminated petitioners
from employment when a separate inquiry could have revealed if the federation had acted arbitrarily
and capriciously in expelling the union officers. Respondent company's allegation that petitioners were
accorded due process is belied by the termination letters received by the petitioners which state that
the dismissal shall be immediately effective.

As held in the aforecited case of Cariño, "the right of an employee to be informed of the charges
against him and to reasonable opportunity to present his side in a controversy with either the
company or his own union is not wiped away by a union security clause or a union shop clause in a
collective bargaining agreement. An employee is entitled to be protected not only from a company
which disregards his rights but also from his own union the leadership of which could yield to the
temptation of swift and arbitrary expulsion from membership and mere dismissal from his job.

While respondent company may validly dismiss the employees expelled by the union for disloyalty
under the union security clause of the collective bargaining agreement upon the recommendation by
the union, this dismissal should not be done hastily and summarily thereby eroding the employees'
right to due process, self-organization and security of tenure. The enforcement of union security
clauses is authorized by law provided such enforcement is not characterized by arbitrariness, and
always with due process.16 Even on the assumption that the federation had valid grounds to expel the
union officers, due process requires that these union officers be accorded a separate hearing by
respondent company.

In its decision, public respondent also declared that if complainants (herein petitioners) have any
recourse in law, their right of action is against the federation and not against the company or its
officers, relying on the findings of the Labor Secretary that the issue of expulsion of petitioner union
officers by the federation is a purely intra-union matter.

Again, such a contention is untenable. While it is true that the issue of expulsion of the local union
officers is originally between the local union and the federation, hence, intra-union in character, the
issue was later on converted into a termination dispute when the company dismissed the petitioners
from work without the benefit of a separate notice and hearing. As a matter of fact, the records reveal
that the termination was effective on the same day that the termination notice was served on the
petitioners.

In the case of Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc.17, the Court held the
company liable for the payment of backwages for having acted in bad faith in effecting the dismissal of
the employees.

. . . Bad faith on the part of the respondent company may be gleaned from the fact
that the petitioner workers were dismissed hastily and summarily. At best, it was
guilty of a tortious act, for which it must assume solidary liability, since it apparently
chose to summarily dismiss the workers at the union's instance secure in the union's
contractual undertaking that the union would hold it "free from any liability" arising
from such dismissal.

Thus, notwithstanding the fact that the dismissal was at the instance of the federation and that it
undertook to hold the company free from any liability resulting from such a dismissal, the company
may still be held liable if it was remiss in its duty to accord the would-be dismissed employees their
right to be heard on the matter.
Anent petitioners contention that the federation was not a principal party to the collective bargaining
agreement between the company and the union, suffice it to say that the matter was already ruled
upon in the Interpleader case filed by respondent company. Med-Arbiter Anastacio Bactin thus ruled:

After a careful examination of the facts and evidences presented by the parties, this
Officer hereby renders its decision as follows:

1.) It appears on record that in Collective Bargaining Agreement (CBA) which took
effect on July 1, 1986, the contracting parties are M. Greenfield, Inc. (B) and
Malayang Samahan ng Mga Manggagawa sa M. Greenfield, Inc. (B) (MSMG)/United
Lumber and General Workers of the Philippines (ULGWP). However, MSMG was not yet
registered labor organization at the time of the signing of the CBA. Hence, the union
referred to in the CBA is the ULGWP.18

Likewise on appeal, Director Pura Ferrer-Calleja put the issue to rest as follows:

It is undisputed that ULGWP is the certified sole and exclusive collective bargaining
agent of all the regular rank-and-file workers of the company, M. Greenfield, Inc.
(pages 31-32 of the records).

It has been established also that the company and ULGWP signed a 3-year collective
bargaining agreement effective July 1, 1986 up to June 30, 1989.19

Although the issue of whether or not the federation had reasonable grounds to expel the petitioner
union officers is properly within the original and exclusive jurisdiction of the Bureau of Labor Relations,
being an intra-union conflict, this Court deems it justifiable that such issue be nonetheless ruled upon,
as the Labor Arbiter did, for to remand the same to the Bureau of Labor Relations would be to
intolerably delay the case.

The Labor Arbiter found that petitioner union officers were justifiably expelled from the federation for
committing acts of disloyalty when it "undertook to disaffiliate from the federation by charging ULGWP
with failure to provide any legal, educational or organizational support to the local. . . . and declared
autonomy, wherein they prohibit the federation from interfering in any internal and external affairs of
the local union."20

It is well-settled that findings of facts of the NLRC are entitled to great respect and are generally
binding on this Court, but it is equally well-settled that the Court will not uphold erroneous conclusions
of the NLRC as when the Court finds insufficient or insubstantial evidence on record to support those
factual findings. The same holds true when it is perceived that far too much is concluded, inferred or
deduced from the bare or incomplete facts appearing of record.21

In its decision, the Labor Arbiter declared that the act of disaffiliation and declaration of autonomy by
the local union was part of its "plan to take over the respondent federation." This is purely conjecture
and speculation on the part of public respondent, totally unsupported by the evidence.

A local union has the right to disaffiliate from its mother union or declare its autonomy. A local union,
being a separate and voluntary association, is free to serve the interests of all its members including
the freedom to disaffiliate or declare its autonomy from the federation to which it belongs when
circumstances warrant, in accordance with the constitutional guarantee of freedom of association. 22

The purpose of affiliation by a local union with a mother union or a federation.

. . . is to increase by collective action the bargaining power in respect of the terms and
conditions of labor. Yet the locals remained the basic units of association, free to serve
their own and the common interest of all, subject to the restraints imposed by the
 Constitution and By-Laws of the Association, and free also to renounce the affiliation
for mutual welfare upon the terms laid down in the agreement which brought it into
existence.23

Thus, a local union which has affiliated itself with a federation is free to sever such affiliation anytime
and such disaffiliation cannot be considered disloyalty. In the absence of specific provisions in the
federation's constitution prohibiting disaffiliation or the declaration of autonomy of a local union, a
local may dissociate with its parent union.24

The evidence on hand does not show that there is such a provision in ULGWP's constitution.
Respondents' reliance upon Article V, Section 6, of the federation's constitution is not right because
said section, in fact, bolsters the petitioner union's claim of its right to declare autonomy:

Sec. 6. The autonomy of a local union affiliated with ULGWP shall be respected insofar
as it pertains to its internal affairs, except as provided elsewhere in this Constitution.

There is no disloyalty to speak of, neither is there any violation of the federation's constitution
because there is nothing in the said constitution which specifically prohibits disaffiliation or declaration
of autonomy. Hence, there cannot be any valid dismissal because Article II, Section 4 of the union
security clause in the CBA limits the dismissal to only three (3) grounds, to wit: failure to maintain
membership in the union (1) for non-payment of union dues, (2) for resignation; and (3) for violation
of the union's Constitution and By-Laws.

To support the finding of disloyalty, the Labor Arbiter gave weight to the fact that on February 26,
1989, the petitioners declared as vacant all the responsible positions of ULGWP, filled these vacancies
through an election and filed a petition for the registration of UWP as a national federation. It should
be pointed out, however, that these occurred after the federation had already expelled the union
officers. The expulsion was effective November 21, 1988. Therefore, the act of establishing a different
federation, entirely separate from the federation which expelled them, is but a normal retaliatory
reaction to their expulsion.

With regard to the issue of the legality or illegality of the strike, the Labor Arbiter held that the strike
was illegal for the following reasons: (1) it was based on an intra-union dispute which cannot properly
be the subject of a strike, the right to strike being limited to cases of bargaining deadlocks and unfair
labor practice (2) it was made in violation of the "no strike, no lock-out" clause in the CBA, and (3) it
was attended with violence, force and intimidation upon the persons of the company officials, other
employees reporting for work and third persons having legitimate business with the company,
resulting to serious physical injuries to several employees and damage to company property.

On the submission that the strike was illegal for being grounded on a non-strikeable issue, that is, the
intra-union conflict between the federation and the local union, it bears reiterating that when
respondent company dismissed the union officers, the issue was transformed into a termination
dispute and brought respondent company into the picture. Petitioners believed in good faith that in
dismissing them upon request by the federation, respondent company was guilty of unfair labor
practice in that it violated the petitioner's right to self-organization. The strike was staged to protest
respondent company's act of dismissing the union officers. Even if the allegations of unfair labor
practice are subsequently found out to be untrue, the presumption of legality of the strike prevails. 25

Another reason why the Labor Arbiter declared the strike illegal is due to the existence of a no strike
no lockout provision in the CBA. Again, such a ruling is erroneous. A no strike, no lock out provision
can only be invoked when the strike is economic in nature, i.e. to force wage or other concessions
from the employer which he is not required by law to grant.26 Such a provision cannot be used to
assail the legality of a strike which is grounded on unfair labor practice, as was the honest belief of
herein petitioners. Again, whether or not there was indeed unfair labor practice does not affect the
strike.
On the allegation of violence committed in the course of the strike, it must be remembered that the
Labor Arbiter and the Commission found that "the parties are agreed that there were violent incidents
. . . resulting to injuries to both sides, the union and management."27 The evidence on record show
that the violence cannot be attributed to the striking employees alone for the company itself employed
hired men to pacify the strikers. With violence committed on both sides, the management and the
employees, such violence cannot be a ground for declaring the strike as illegal.

With respect to the dismissal of individual petitioners, the Labor Arbiter declared that their refusal to
heed respondent's recall to work notice is a clear indication that they were no longer interested in
continuing their employment and is deemed abandonment. It is admitted that three return to work
notices were sent by respondent company to the striking employees on March 27, April 11, and April
21, 1989 and that 261 employees who responded to the notice were admitted back to work.

However, jurisprudence holds that for abandonment of work to exist, it is essential (1) that the
employee must have failed to report for work or must have been absent without valid or justifiable
reason; and (2) that there must have been a clear intention to sever the employer-employee
relationship manifested by some overt acts.28 Deliberate and unjustified refusal on the part of the
employee to go back to his work post amd resume his employment must be established. Absence
must be accompanied by overt acts unerringly pointing to the fact that the employee simply does not
want to work anymore.29 And the burden of proof to show that there was unjustified refusal to go back
to work rests on the employer.

In the present case, respondents failed to prove that there was a clear intention on the part of the
striking employees to sever their employer-employee relationship. Although admittedly the company
sent three return to work notices to them, it has not been substantially proven that these notices were
actually sent and received by the employees. As a matter of fact, some employees deny that they
ever received such notices. Others alleged that they were refused entry to the company premises by
the security guards and were advised to secure a clearance from ULGWP and to sign a waiver. Some
employees who responded to the notice were allegedly told to wait for further notice from respondent
company as there was lack of work.

Furthermore, this Court has ruled that an employee who took steps to protest his lay-off cannot be
said to have abandoned his work.30 The filing of a complaint for illegal dismissal is inconsistent with
the allegation of abandonment. In the case under consideration, the petitioners did, in fact, file a
complaint when they were refused reinstatement by respondent company.

Anent public respondent's finding that there was no unfair labor practice on the part of respondent
company and federation officers, the Court sustains the same. As earlier discussed, union security
clauses in collective bargaining agreements, if freely and voluntarily entered into, are valid and
binding. Corollary, dismissals pursuant to union security clauses are valid and legal subject only to the
requirement of due process, that is, notice and hearing prior to dismissal. Thus, the dismissal of an
employee by the company pursuant to a labor union's demand in accordance with a union security
agreement does not constitute unfair labor practice.31

However, the dismissal was invalidated in this case because of respondent company's failure to accord
petitioners with due process, that is, notice and hearing prior to their termination. Also, said dismissal
was invalidated because the reason relied upon by respondent Federation was not valid. Nonetheless,
the dismissal still does not constitute unfair labor practice.

Lastly, the Court is of the opinion, and so holds, that respondent company officials cannot be held
personally liable for damages on account of the employees' dismissal because the employer
corporation has a personality separate and distinct from its officers who merely acted as its agents.

It has come to the attention of this Court that the 30-day prior notice requirement for the dismissal of
employees has been repeatedly violated and the sanction imposed for such violation enunciated
in Wenphil Corporation vs. NLRC32 has become an ineffective deterrent. Thus, the Court recently
promulgated a decision to reinforce and make more effective the requirement of notice and hearing, a
procedure that must be observed before termination of employment can be legally effected.

In Ruben Serrano vs. NLRC and Isetann Department Store (G.R. No. 117040, January 27, 2000), the
Court ruled that an employee who is dismissed, whether or not for just or authorized cause but
without prior notice of his termination, is entitled to full backwages from the time he was terminated
until the decision in his case becomes final, when the dismissal was for cause; and in case the
dismissal was without just or valid cause, the backwages shall be computed from the time of his
dismissal until his actual reinstatement. In the case at bar, where the requirement of notice and
hearing was not complied with, the aforecited doctrine laid down in the Serrano case applies.

WHEREFORE, the Petition is GRANTED; the decision of the National Labor Relations Commission in
Case No. NCR-00-09-04199-89 is REVERSED and SET ASIDE; and the respondent company is hereby
ordered to immediately reinstate the petitioners to their respective positions. Should reinstatement be
not feasible, respondent company shall pay separation pay of one month salary for every year of
service. Since petitioners were terminated without the requisite written notice at least 30 days prior to
their termination, following the recent ruling in the case of Ruben Serrano vs. National Labor Relations
Commission and Isetann Department Store, the respondent company is hereby ordered to pay full
backwages to petitioner-employees while the Federation is also ordered to pay full backwages to
petitioner-union officers who were dismissed upon its instigation. Since the dismissal of petitioners
was without cause, backwages shall be computed from the time the herein petitioner employees and
union officers were dismissed until their actual reinstatement. Should reinstatement be not feasible,
their backwages shall be computed from the time petitioners were terminated until the finality of this
decision. Costs against the respondent company.

SO ORDERED

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 167988 February 6, 2007

MA. CONCEPCION L. REGALADO, Petitioner,

vs.
ANTONIO S. GO, Respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the
Resolution1 dated 30 August 2004 of the Court of Appeals, finding petitioner Ma. Concepcion L.
Regalado (Atty. Regalado) guilty of indirect contempt. Likewise assailed in this petition is the
Resolution2 denying her Motion for Reconsideration. The dispositive portion of the Resolution reads:

WHEREFORE, Atty. Ma. Concepcion Regalado of De Borja Medialdea Bello Guevarra and Gerodias
Law Offices is declared GUILTY of INDIRECT CONTEMPT and is ordered to pay a fine of Five
Thousand Pesos (P5,000), with a STERN WARNING that a repetition of the same or similar acts in
the future will be dealt with more severely. The imposed fine should be paid to this Court upon
finality hereof.

Let a copy of this resolution be furnished the Bar Confidant (sic), the Integrated Bar of the
Philippines and the Court Administrator for investigation and possible administrative sanction.3

The present controversy stemmed from the complaint of illegal dismissal filed before the Labor
Arbiter by herein respondent Antonio S. Go against Eurotech Hair Systems, Inc. (EHSI), and its
President Lutz Kunack and General Manager Jose E. Barin.

In a Decision4 dated 29 December 2000, the Labor Arbiter ruled that respondent Go was illegally
dismissed from employment, the decretal portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring [EHSI, Kunack and Barin] guilty of illegal dismissal;

2. Considering that reinstatement would not be feasible because of strained relations, [EHSI,
Kunack and Barin] are ordered to pay [herein respondent Go] backwages in the amount of
Php900,000.00 (Php60,000 x 15 months), separation pay of Php180,000.00 (one month pay
for every year of service = Php60,000 x 3 years);

3. Ordering [EHSI, Kunack and Barin] to pay [respondent Go] Php500,000.00 as moral
damages;

4. Ordering [EHSI, Kunack and Barin] to pay [respondent Go] Php300,000 as exemplary
damages;

5. Ordering the payment of ten percent (10%) of the total monetary award as attorney’s fees
in the sum of Php188,000.00.

All other claims are hereby dismissed for lack of merit.

On appeal to the National Labor Relations Commission (NLRC), EHSI, Kunack and Barin employed
the legal services of De Borja Medialdea Bello Guevarra and Gerodias Law Offices where herein
petitioner Atty. Regalado worked as an associate.5

On 11 June 2001, the NLRC rendered a Decision6 reversing the Labor Arbiter’s decision and
declaring that respondent Go’s separation from employment was legal for it was attended by a just
cause and was validly effected by EHSI, Kunack and Barin. The dispositive part of the decision
reads:

WHEREFORE, the appealed decision is set aside. The complaint below is dismissed for being
without merit.

For lack of patent or palpable error, the Motion for Reconsideration interposed by respondent Go
was denied by the NLRC in an Order7 dated 20 December 2001.

Aggrieved, respondent Go elevated the adverse decision to the Court of Appeals which was
docketed as CA-G.R. SP No. 69909 entitled, Antonio S. Go v. National Labor Relations
Commission, Eurotech Hair Systems, Inc., Lutz Kunack and Jose Barin.
On 9 July 2003, the Court of Appeals promulgated a Decision8 setting aside the ruling of the NLRC
and reinstating the decision of the Labor Arbiter adjudging EHSI, Kunack and Barin guilty of illegal
dismissal. The appellate court thus ordered EHSI, Kunack and Barin to pay respondent Go full
backwages, separation pay, moral and exemplary damages. The fallo of the decision reads:

WHEREFORE, the petition for certiorari is GRANTED. The assailed decision of the NLRC
promulgated on July 30, 2001 and its Order dated December 20, 2001 are SET ASIDE while the
decision of Labor Arbiter Waldo Emerson R. Gan dated December 29, 2000 declaring the dismissal
of [herein respondent Go] as illegal is hereby REINSTATED with the modification that [EHSI] is
hereby Ordered to pay [respondent Go]:

1. His full backwages from the time of his illegal dismissal until the finality of this decision;

2. Separation pay equal to one month pay for every year of service;

3. Moral damages in the amount of ₱50,000.00; and

4. Exemplary damages in the amount of ₱20,000.00

The award of attorney’s fees is DELETED.

EHSI, Kunack and Barin were able to receive a copy of the decision through registered mail on 17
July 2003 while respondent Go received his copy on 21 July 2003.9

On 16 July 2003, after the promulgation of the Court of Appeals decision but prior to the receipt of
the parties of their respective copies, the parties decided to settle the case and signed a Release
Waiver and Quitclaim10 with the approval of the Labor Arbiter. In view of the amicable settlement, the
Labor Arbiter, on the same day, issued an Order11 dismissing the illegal dismissal case with
prejudice. The order thus reads:

In view of the Release, Waiver and Quitclaim voluntarily executed by the [herein respondent]
Antonio S. Go, let the instant case be as it is hereby DISMISSED WITH PREJUDICE.

The execution of the compromise agreement was attended by the counsel for EHSI, Kunack and
Barin, petitioner Atty. Regalado, and respondent Go, but in the absence and without the knowledge
of respondent Go’s lawyer.12

After the receipt of a copy of the Court of Appeals decision, respondent Go, through counsel, filed,
on 29 July 2003, a Manifestation with Omnibus Motion13 seeking to nullify the Release Waiver and
Quitclaim dated 16 July 2003 on the ground of fraud, mistake or undue influence. In the same
motion, respondent Go, through counsel, moved that petitioner Atty. Regalado be made to explain
her unethical conduct for directly negotiating with respondent Go without the knowledge of his
counsel. The motion thus prays:

WHEREFORE, premises considered, it is most respectfully prayed for the Honorable Court to
declare Null and Void the dismissal of the instant (sic), with prejudice, by Labor (sic) Waldo Emerson
Gan, as well as the Release Waiver and Quitclaim dated July 16, 2003 signed by [herein respondent
Go] for having been obtained through mistake, fraud or undue influence committed by [EHSI,
Kunack and Barin] and their counsels (sic).
It is likewise prayed for [EHSI, Kunack and Barin’s] counsel, particularly Atty. Ma. Concepcion
Regalado, to be required to explain why no disciplinary action should be taken against them (sic) for
their (sic), unethical conduct of directly negotiating with [respondent Go] without the presence of
undersigned counsel, and for submitting the Release, Waiver and Quitclaim before Labor Arbiter
Waldo Emerson Gan knowing fully well that the controversy between [respondent Go] and [EHSI] is
still pending before this Honorable Court.

[Respondent Go] likewise prays for such other relief [as may be] just and equitable under the
premises.14

For their part, EHSI, Kunack and Barin submitted a Manifestation and Motion with Leave of
Court15 praying that CA-G.R. SP No. 69909 be considered settled with finality in view of the amicable
settlement among the parties which resulted in the dismissal of respondent Go’s complaint with
prejudice in the Labor Arbiter’s Order dated 16 July 2003.

In addition, EHSI, Kunack and Barin also filed a Motion for Reconsideration16 with an ad
cautelam that in case of unfavorable action on their foregoing Manifestation and Motion, the
appellate court should reconsider its decision dated 9 July 2003.

Acting on the motions, the appellate court issued a Resolution17 on 19 November 2003 annulling the
Order of the Labor Arbiter dated 16 July 2003 for lack of jurisdiction. It also denied for lack of merit
EHSI, Kunack and Barin’s Motion for Reconsideration Ad Cautelam. In the same resolution,
petitioner Atty. Regalado was ordered to explain why she should not be cited for contempt of court
for violating Canon 9 of the Canons of Professional Ethics. The decretal portion of the Resolution
reads:

WHEREFORE, premises considered, the Manifestation with Omnibus Motion is PARTIALLY

GRANTED. The order of Labor Arbiter Gan dismissing the case with prejudice is hereby declared
NULL and VOID for lack of jurisdiction. [EHSI, Kunack and Barin’s] counsel, [herein petitioner] Atty.
Ma. Concepcion Regalado is ordered to SHOW CAUSE within five (5) days from receipt of this
Resolution why she should not be cited for contempt of court for directly negotiating with [herein
respondent Go] in violation of Canon 9 of the Canons of Professional Ethics. On the other hand, the
Motion for Reconsideration Ad Cautelam is hereby denied for lack of merit.

EHSI, Kunack and Barin thus filed a Petition for Review on Certiorari before this Court, assailing the
Court of Appeals decision promulgated on 9 July 2003 and its Resolution dated 19 November 2003,
denying their Motion for Reconsideration. The case is cognized by another division of this Court.

For her part, petitioner Atty. Regalado submitted a Compliance18 and explained that she never took
part in the negotiation for the amicable settlement of the illegal dismissal case with respondent Go
which led to the execution of a compromise agreement by the parties on 16 July 2003. EHSI,
Kunack and Barin, through a Mr. Ragay, a former EHSI employee and a close ally of respondent Go,
were the ones who negotiated the settlement.

Further, petitioner Atty. Regalado maintained that she never met personally respondent Go, not until
16 July 2003, when the latter appeared before the Labor Arbiter for the execution of the Release
Waiver and Quitclaim. Petitioner Atty. Regalado claimed that she was in fact apprehensive to
release the money to respondent Go because the latter cannot present any valid identification card
to prove his identity. It was only upon the assurance of Labor Arbiter Gan that Antonio S. Go and the
person representing himself as such were one and the same, that the execution of the agreement
was consummated.
Considering the circumstances, petitioner Atty. Regalado firmly stood that there was no way that she
had directly dealt with respondent Go, to the latter’s damage and prejudice, and misled him to enter
into an amicable settlement with her client.

On 30 August 2004, the Court of Appeals issued a Resolution19 disregarding petitioner Atty.
Regalado’s defenses and adjudging her guilty of indirect contempt under Rule 71 of the Revised
Rules of Court. As declared by the appellate court, even granting arguendo that petitioner Atty.
Regalado did not participate in the negotiation process, she was nonetheless under the obligation to
restrain her clients from doing acts that she herself was prohibited to perform as mandated by
Canon 16 of the Canons of Professional Ethics. However, instead of preventing her clients from
negotiating with respondent Go who was unassisted by his counsel, Atty. Regalado actively
participated in the consummation of the compromise agreement by dealing directly with respondent
Go and allowing him to sign the Release Waiver and Quitclaim without his lawyer.

Undaunted, petitioner Atty. Regalado filed a Motion for Reconsideration which was also denied by
the appellate court for lack of merit.20

Hence, this instant Petition for Review on Certiorari,21 raising the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS COMPLETELY VIOLATED

PETITIONER’S CONSTITUTIONAL RIGHTS.

II.

WHETHER OR NOT THE COURT OF APPEALS TOTALLY DISREGARDED THE

MANDATORY PROVISION OF RULE 71 OF THE 1997 RULES OF CIVIL
PROCEDURE.

III.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A MANIFEST

ERROR OF LAW IN RULING THAT PETITIONER IS ESTOPPED FROM
CHALLENGING ITS AUTHORITY TO ENTERTAIN THE CONTEMPT CHARGES
AGAINST HER.

IV.

WHETHER OR NOT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
DISREGARDING THE OVERWHELMING EVIDENCE ON RECORD TO EFFECT
THAT PETITIONER DID NOT COMMIT ANY CONTUMACIOUS CONDUCT.

V.

WHETHER OR NOT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF

DISCRETION AND COMMITTED A GROSS MISAPPRECIATION OF FACTS IN
FINDING THE PETITIONER GUILTY OF INDIRECT CONTEMPT ON THE BASIS
OF THE CONFLICTING, UNCORROBORATED, AND UNVERIFIED ASSERTIONS
OF THE RESPONDENT.
Considering that the issues raised herein are both questions of law and fact, and consistent with our
policy that this Court is not a trier of facts, we shall address only the pure questions of law and leave
the factual issues, which are supported by evidence, as found by the appellate court. It is an oft-
repeated principle that in the exercise of the Supreme Court’s power of review, the Court is not a
trier of facts and does not normally undertake the re-examination of the evidence presented by the
contending parties during the trial of the case considering that the findings of facts of the Court of
Appeals, if supported by evidence, are conclusive and binding upon this Court. 22 1awphi1.net

Contempt of court is a defiance of the authority, justice or dignity of the court; such conduct as tends
to bring the authority and administration of the law into disrespect or to interfere with or prejudice
parties litigant or their witnesses during litigation.23 It is defined as disobedience to the Court by
acting in opposition to its authority, justice, and dignity. It signifies not only a willful disregard or
disobedience of the court’s orders, but such conduct as tends to bring the authority of the court and
the administration of law into disrepute or in some manner to impede the due administration of
justice.24

The power to punish for contempt is inherent in all courts and is essential to the preservation of
order in judicial proceedings and to the enforcement of judgments, orders, and mandates of the
court, and consequently, to the due administration of justice.25

Thus, contempt proceedings has a dual function: (1) vindication of public interest by punishment of
contemptuous conduct; and (2) coercion to compel the contemnor to do what the law requires him to
uphold the power of the Court, and also to secure the rights of the parties to a suit awarded by the
Court.26

In our jurisdiction, the Rules of Court penalizes two types of contempt, namely direct contempt and
indirect contempt. 27

Direct contempt is committed in the presence of or so near a court as to obstruct or interrupt the
proceedings before the same, and includes disrespect toward the court, offensive personalities
toward others, or refusal to be sworn or answer as a witness, or to subscribe an affidavit or
deposition when lawfully required to do so.28

On the other hand, Section 3, Rule 71 of the Rules of Court enumerates particular acts which
constitute indirect contempt, thus:

(a) Misbehavior of an officer of a court in the performance of his official duties or in his official
transactions;

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court,

including the act of a person who, after being dispossessed or ejected from any real property
by the judgment or process of any court of competent jurisdiction, enters or attempts or
induces another to enter into or upon such real property, for the purpose of executing acts of
ownership or possession, or in any manner disturbs the possession given to the person
adjudged to be entitled thereto;

(c) Any abuse of or any unlawful interference with the processes or proceedings of a court
not constituting direct contempt under Section 1 of this Rule;

(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the
administration of justice;
 (e) Assuming to be an attorney or an officer of a court, and acting as such without authority;

(f) Failure to obey a subpoena duly served;

(g) The rescue, or attempted rescue, of a person or property in the custody of an officer by
virtue of an order or process of a court held by him.

But nothing in this section shall be so construed as to prevent the court from issuing process to bring
the respondent into court, or from holding him in custody pending such proceedings. (Emphasis
supplied.)29

Section 4, Rule 71 of the same Rules provides how proceedings for indirect contempt should be
commenced, thus:

SEC. 4. How proceedings commenced. – Proceedings for indirect contempt may be initiated motu
proprio by the court against which the contempt was committed by an order or any other formal
charge requiring the respondent to show cause why he should not be punished for contempt.

In all other cases, charges for indirect contempt shall be commenced by a verified petition with
supporting particulars and certified true copies of documents or papers involved therein, and upon
full compliance with the requirements for filing initiatory pleadings for civil actions in the court
concerned. If the contempt charges arose out of or are related to a principal action pending in the
court, the petition for contempt shall allege that fact but said petition shall be docketed, heard and
decided separately, unless the court in its discretion orders the consolidation of the contempt charge
and the principal action for joint hearing and decision. (Emphases supplied.)

As can be gleaned above, the provisions of the Rules are unequivocal. Indirect contempt
proceedings may be initiated only in two ways: (1) motu proprio by the court; or (2) through a verified
petition and upon compliance with the requirements for initiatory pleadings. Procedural requirements
as outlined must be complied with.

There is no doubt that the complained acts of Atty. Regalado would fall under paragraphs (a) and (d)
of Section 3, Rule 71, as in fact, she was adjudged guilty of indirect contempt. But were the
proceedings conducted in convicting petitioner done in accordance with law?

In the instant case, the indirect contempt proceedings was initiated by respondent Go through a
Manifestation with Omnibus Motion.30 It was based on the aforesaid Motion that the appellate court
issued a Resolution31 dated 19 November 2003, requiring petitioner Atty. Regalado to show cause
why she should not be cited for contempt.

Clearly, respondent Go’s Manifestation with Omnibus Motion was the catalyst which set everything
in motion and led to the eventual conviction of Atty. Regalado. It was respondent Go who brought to
the attention of the appellate court the alleged misbehavior committed by petitioner Atty. Regalado.
Without such positive act on the part of respondent Go, no indirect contempt charge could have
been initiated at all.

Indeed, the appellate court itself, in its Resolution dated 30 August 2004, made categorical findings
as to how the contempt charge was initiated, to wit:
In the present case, [respondent’s Go] Manifestation With Omnibus Motion which led to our 19
November 2003 Resolution requiring Atty. Regalado to explain why she should not be cited for
contempt, x x x.32

We cannot, therefore, argue that the Court of Appeals on its own initiated the indirect contempt
charge without contradicting the factual findings made by the very same court which rendered the
questioned resolution.

It is true in Leonidas v. Judge Supnet,33 this Court ruled that the contempt proceedings was
considered commenced by the court motu proprio even if the show cause order came after the filing
of the motions to cite for contempt filed by the adverse party. The Decision thus reads:

Thus, independently of the motions filed by the Tamondong Spouses, it was the Pasay MTC which
commenced the contempt proceedings motu proprio. No verified petition is required if proceedings
for indirect contempt are initiated in this manner, and the absence of a verified petition does not
affect the procedure adopted.

It is true that the Tamondong Spouses did file a Motion To Cite Plaintiff For Contempt Of Court,
dated May 17, 2000. In this pleading they prayed that Union Bank be declared in indirect contempt
of court for its disobedience to the Pasay MTC’s Order dated May 9, 2000. This Order dated May 9,
2000 specifically directed Union Bank to "return immediately to the defendants the replevied motor
vehicle." However, the Tamondong Spouses’ unverified motion dated May 17, 2000 cannot
invalidate the contempt proceedings because these proceedings were initiated by respondent judge
motu proprio in accordance with Section 4, Rule 71 of the 1997 Rules of Civil Procedure.

This above-cited case, however, has no application in the case at bar for the factual milieu of the
cases are different from each other. In Leonidas, there was an order of the court that was utterly
violated by Union Bank. Thus, even in the absence of the motion of spouses Tamondong to cite
Union Bank in contempt, the court a quo on its own can verily initiate the action. In the present case,
the appellate court could not have acquired knowledge of petitioner Atty. Regalado’s misbehavior
without respondent Go’s Manifestation with Omnibus Motion reiterating the alleged deceitful conduct
committed by the former.

Having painstakingly laid down that the instant case was not initiated by the court motu proprio
necessitates us to look into the second mode of filing indirect contempt proceedings.

In cases where the court did not initiate the contempt charge, the Rules prescribe that a verified
petition which has complied with the requirements of initiatory pleadings as outlined in the heretofore
quoted provision of second paragraph, Section 4, Rule 71 of the Rules of Court, must be filed.

The manner upon which the case at bar was commenced is clearly in contravention with the
categorical mandate of the Rules. Respondent Go filed a Manifestation with Omnibus Motion, which
was unverified and without any supporting particulars and documents. Such procedural flaw
notwithstanding, the appellate court granted the motion and directed petitioner Atty. Regalado to
show cause why she should not be cited for contempt. Upon petitioner Atty. Regalado’s compliance
with the appellate court’s directive, the tribunal proceeded in adjudging her guilty of indirect contempt
and imposing a penalty of fine, completely ignoring the procedural infirmities in the commencement
of the indirect contempt action.

It bears to stress that the power to punish for contempt is not limitless. It must be used sparingly with
caution, restraint, judiciousness, deliberation, and due regard to the provisions of the law and the
constitutional rights of the individual. 34
The limitations in the exercise of the power to punish for indirect contempt are delineated by the
procedural guidelines specified under Section 4, Rule 71 of the Rules of Court. Strict compliance
with such procedural guidelines is mandatory considering that proceedings against person alleged to
be guilty of contempt are commonly treated as criminal in nature.35

As explained by Justice Florenz Regalado,36 the filing of a verified petition that has complied with the
requirements for the filing of initiatory pleading, is mandatory, and thus states:

1. This new provision clarifies with a regularity norm the proper procedure for commencing contempt
proceedings. While such proceeding has been classified as special civil action under the former
Rules, the heterogenous practice tolerated by the courts, has been for any party to file a motion
without paying any docket or lawful fees therefore and without complying with the requirements for
initiatory pleadings, which is now required in the second paragraph of this amended section.

xxxx

Henceforth, except for indirect contempt proceedings initiated motu propio by order of or a formal
charge by the offended court, all charges shall be commenced by a verified petition with full
compliance with the requirements therefore and shall be disposed in accordance with the second
paragraph of this section.

Time and again we rule that the use of the word "shall" underscores the mandatory character of the
Rule. The term "shall" is a word of command, and one which has always or which must be given a
compulsory meaning, and it is generally imperative or mandatory.37

In Enriquez v. Enriquez,38 this Court applied the word "shall" by giving it mandatory and imperative
import and ruled that non-compliance with the mandatory requirements of the Rules goes into the
very authority of the court to acquire jurisdiction over the subject matter of the case, thus:

"However, the 1997 Rules of Civil Procedure, as amended, which took effect on July 1, 1997, now
require that appellate docket and other lawful fees must be paid within the same period for taking an
appeal. This is clear from the opening sentence of Section 4, Rule 41 of the same rules that,
"(W)ithin the period for taking an appeal, the appellant shall pay to the clerk of court which rendered
the judgment or final order appealed from, the full amount of the appellate court docket and other
lawful fees."

xxxx

Time and again, this Court has consistently held that payment of docket fee within the prescribed
period is mandatory for the perfection of an appeal. Without such payment, the appellate court does
not acquire jurisdiction over the subject matter of the action and the decision sought to be appealed
from becomes final and executory.39(Emphases supplied.)

In United States v. de la Santa,40 which bears parallelism in the instant case, we held:

The objection in this case is not, strictly speaking, to the sufficiency of the complaint, but goes
directly to the jurisdiction of the court over the crime with which the accused was charged. x
x x. (Emphasis supplied.)

Even if the contempt proceedings stemmed from the main case over which the court already
acquired jurisdiction, the Rules direct that the petition for contempt be treated independently of the
principal action. Consequently, the necessary prerequisites for the filing of initiatory pleadings, such
as the filing of a verified petition, attachment of a certification on non-forum shopping, and the
payment of the necessary docket fees, must be faithfully observed.41

We now proceed to the issue of estoppel raised by the Court of Appeals. When petitioner Atty.
Regalado brought to the attention of the appellate court through a Motion for Reconsideration the
remedial defect attendant to her conviction, the Court of Appeals, instead of rectifying the palpable
and patent procedural error it earlier committed, altogether disregarded the glaring mistake by
interposing the doctrine of estoppel. The appellate court ruled that having actively participated in the
contempt proceedings, petitioner Atty. Regalado is now barred from impugning the Court of Appeals
jurisdiction over her contempt case citing the case of People v. Regalario.42

We do not agree.

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to
do that which, by exercising due diligence, could or should have been done earlier, it is negligence
or omission to assert a right within a reasonable length of time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it."43

The ruling in People v. Regalario44 that was based on the landmark doctrine enunciated in Tijam v.
Sibonghanoy45on the matter of jurisdiction by estoppel is the exception rather than the
rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in cases in which
the factual milieu is analogous to that in the cited case. In such controversies, laches should have
been clearly present; that is, lack of jurisdiction must have been raised so belatedly as to warrant the
presumption that the party entitled to assert it had abandoned or declined to assert it.46

In Sibonghanoy,47 the defense of lack of jurisdiction was raised for the first time in a motion to
dismiss filed by the Surety48 almost 15 years after the questioned ruling had been rendered.49 At
several stages of the proceedings, in the court a quo as well as in the Court of Appeals, the Surety
invoked the jurisdiction of the said courts to obtain affirmative relief and submitted its case for final
adjudication on the merits. It was only when the adverse decision was rendered by the Court of
Appeals that it finally woke up to raise the question of jurisdiction.50

Clearly, the factual settings attendant in Sibonghanoy are not present in the case at bar. Petitioner
Atty. Regalado, after the receipt of the Court of Appeals resolution finding her guilty of contempt,
promptly filed a Motion for Reconsideration assailing the said court’s jurisdiction based on
procedural infirmity in initiating the action. Her compliance with the appellate court’s directive to
show cause why she should not be cited for contempt and filing a single piece of pleading to that
effect could not be considered as an active participation in the judicial proceedings so as to take the
case within the milieu of Sibonghanoy. Rather, it is the natural fear to disobey the mandate of the
court that could lead to dire consequences that impelled her to comply.

The provisions of the Rules are worded in very clear and categorical language. In case where the
indirect contempt charge is not initiated by the courts, the filing of a verified petition which fulfills the
requirements on initiatory pleadings is a prerequisite. Beyond question now is the mandatory
requirement of a verified petition in initiating an indirect contempt proceeding. Truly, prior to the
amendment of the 1997 Rules of Civil Procedure, mere motion without complying with the
requirements for initiatory pleadings was tolerated by the courts.51 At the onset of the 1997 Revised
Rules of Civil Procedure, however, such practice can no longer be countenanced.
Evidently, the proceedings attendant to the conviction of petitioner Atty. Regalado for indirect
contempt suffered a serious procedural defect to which this Court cannot close its eyes without
offending the fundamental principles enunciated in the Rules that we, ourselves, had promulgated.

The other issues raised on the merits of the contempt case have become moot and academic.

WHEREFORE, premises considered, the instant Petition is GRANTED. The indirect contempt
proceedings before the Court of Appeals is DECLARED null and void.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 176085 February 8, 2012

FEDERICO S. ROBOSA, ROLANDO E. PANDY, NOEL D. ROXAS, ALEXANDER ANGELES,

VERONICA GUTIERREZ, FERNANDO EMBAT, and NANETTE H. PINTO, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), CHEMO-TECHNISCHE
MANUFACTURING, INC. and its responsible officials led by FRANKLIN R. DE LUZURIAGA,
and PROCTER & GAMBLE PHILIPPINES, INC.,Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 seeking the reversal of the resolutions of the Court of
Appeals (CA) rendered on February 24, 20062 and December 14, 20063 in CA-G.R. SP No. 80436.

Factual Background

Federico S. Robosa, Rolando E. Pandy, Noel D. Roxas, Alexander Angeles, Veronica Gutierrez,
Fernando Embat and Nanette H. Pinto (petitioners) were rank-and-file employees of respondent
Chemo-Technische Manufacturing, Inc. (CTMI), the manufacturer and distributor of "Wella" products.
They were officers and members of the CTMI Employees Union-DFA (union). Respondent Procter
and Gamble Philippines, Inc. (P & GPI) acquired all the interests, franchises and goodwill of CTMI
during the pendency of the dispute.

Sometime in the first semester of 1991, the union filed a petition for certification election at CTMI. On
June 10, 1991, Med-Arbiter Rasidali Abdullah of the Office of the Department of Labor and
Employment in the National Capital Region (DOLE-NCR) granted the petition. The DOLE-NCR
conducted a consent election on July 5, 1991, but the union failed to garner the votes required to be
certified as the exclusive bargaining agent of the company.
On July 15, 1991, CTMI, through its President and General Manager Franklin R. de Luzuriaga,
issued a memorandum4 announcing that effective that day: (1) all sales territories were demobilized;
(2) all vehicles assigned to sales representatives should be returned to the company and would be
sold; (3) sales representatives would continue to service their customers through public
transportation and would be given transportation allowance; (4) deliveries of customers’ orders
would be undertaken by the warehouses; and (5) revolving funds for ex-truck selling held by sales
representatives should be surrendered to the cashier (for Metro Manila) or to the supervisor (for
Visayas and Mindanao), and truck stocks should immediately be surrendered to the warehouse.

On the same day, CTMI issued another memorandum5 informing the company’s sales
representatives and sales drivers of the new system in the Salon Business Group’s selling
operations.

The union asked for the withdrawal and deferment of CTMI’s directives, branding them as union
busting acts constituting unfair labor practice. CTMI ignored the request. Instead, it issued on July
23, 1991 a notice of termination of employment to the sales drivers, due to the abolition of the sales
driver positions.6

On August 1, 1991, the union and its affected members filed a complaint for illegal dismissal and
unfair labor practice, with a claim for damages, against CTMI, De Luzuriaga and other CTMI officers.
The union also moved for the issuance of a writ of preliminary injunction and/or temporary
restraining order (TRO).

The Compulsory Arbitration Proceedings

The labor arbiter handling the case denied the union’s motion for a stay order on the ground that the
issues raised by the petitioners can best be ventilated during the trial on the merits of the case. This
prompted the union to file on August 16, 1991 with the National Labor Relations Commission
(NLRC), a petition for the issuance of a preliminary mandatory injunction and/or TRO.7

On August 23, 1991, the NLRC issued a TRO.8 It directed CTMI, De Luzuriaga and other company
executives to (1) cease and desist from dismissing any member of the union and from implementing
the July 23, 1991 memorandum terminating the services of the sales drivers, and to immediately
reinstate them if the dismissals have been effected; (2) cease and desist from implementing the July
15, 1991 memorandum grounding the sales personnel; and (3) restore the status quo ante prior to
the formation of the union and the conduct of the consent election.

Allegedly, the respondents did not comply with the NLRC’s August 23, 1991 resolution. They instead
moved to dissolve the TRO and opposed the union’s petition for preliminary injunction.

On September 12, 1991, the NLRC upgraded the TRO to a writ of preliminary injunction.9 The
respondents moved for reconsideration. The union opposed the motion and urgently moved to cite
the responsible CTMI officers in contempt of court.

On August 25, 1993, the NLRC denied the respondents’ motion for reconsideration and directed
Labor Arbiter Cristeta Tamayo to hear the motion for contempt. In reaction, the respondents
questioned the NLRC orders before this Court through a petition for certiorari and prohibition with
preliminary injunction. The Court dismissed the petition for being premature. It also denied the
respondents’ motion for reconsideration, as well as a second motion for reconsideration, with finality.
This notwithstanding, the respondents allegedly refused to obey the NLRC directives. The
respondents’ defiance, according to the petitioners, resulted in the loss of their employment.
Meanwhile, the NLRC heard the contempt charge. On October 31, 2000, it issued a
resolution10 dismissing the charge. It ordered the labor arbiter to proceed hearing the main case on
the merits.

The petitioners moved for, but failed to secure, a reconsideration from the NLRC on the dismissal of
the contempt charge. They then sought relief from the CA by way of a petition for certiorari under
Rule 65.

The CA Decision

The CA saw no need to dwell on the issues raised by the petitioners as the question it deemed
appropriate for resolution is whether the NLRC’s dismissal of the contempt charge against the
respondents may be the proper subject of an appeal. It opined that the dismissal is not subject to
review by an appellate court. Accordingly, the CA Special Sixth Division dismissed the petition in its
resolution of February 24, 2006.11

The CA considered the prayer of P & GPI to be dropped as party-respondent moot and academic.

The petitioners sought a reconsideration, but the CA denied the motion in its resolution of December
14, 2006.12Hence, the present Rule 45 petition.

The Petition

The petitioners charge the CA with grave abuse of discretion in upholding the NLRC resolutions,
despite the reversible errors the labor tribunal committed in dismissing the contempt charge against
the respondents. They contend that the respondents were guilty of contempt for their failure (1) to
observe strictly the NLRC status quo order; and (2) to reinstate the dismissed petitioners and to pay
them their lost wages, sales commissions, per diems, allowances and other employee benefits. They
also claim that the NLRC, in effect, overturned this Court’s affirmation of the TRO and of the
preliminary injunction.

The petitioners assail the CA’s reliance on the Court’s ruling that a contempt charge partakes of a
criminal proceeding where an acquittal is not subject to appeal. They argue that the facts obtaining
in the present case are different from the facts of the cases where the Court’s ruling was made. They
further argue that by the nature of this case, the Labor Code and its implementing rules and
regulations should apply, but in any event, the appellate court is not prevented from reviewing the
factual basis of the acquittal of the respondents from the contempt charges.

The petitioners lament that the NLRC, in issuing the challenged resolutions, had unconstitutionally
applied the law. They maintain that not only did the NLRC unconscionably delay the disposition of
the case for more than twelve (12) years; it also rendered an unjust, unkind and dubious judgment.
They bewail that "[f]or some strange reason, the respondent NLRC made a queer [somersault] from
its earlier rulings which favor the petitioners."13

The Case for the Respondents

Franklin K. De Luzuriaga

De Luzuriaga filed a Comment14 on May 17, 2007 and a Memorandum on December 4,

2008,15 praying for a dismissal of the petition.
De Luzuriaga argues that the CA committed no error when it dismissed the petition for certiorari
since the dismissal of the contempt charge against the respondents amounted to an acquittal where
review by an appellate court will not lie. In any event, he submits, the respondents were charged
with indirect contempt which may be initiated only in the appropriate regional trial court, pursuant to
Section 12, Rule 71 of the Rules of Court. He posits that the NLRC has no jurisdiction over an
indirect contempt charge. He thus argues that the petitioners improperly brought the contempt
charge before the NLRC.

Additionally, De Luzuriaga points out that the petition raises only questions of facts which,
procedurally, is not allowed in a petition for review on certiorari. Be this as it may, he submits that
pursuant to Philippine Long Distance Telephone Company, Inc. v. Tiamson,16 factual findings of labor
officials, who are deemed to have acquired expertise in matters within their respective jurisdictions,
are generally accorded not only respect but even finality. He stresses that the CA committed no
reversible error in not reviewing the NLRC’s factual findings.

Further, De Luzuriaga contends that the petitioners’ verification and certification against forum
shopping is defective because it was only Robosa and Pandy who executed the document. There
was no indication that they were authorized by Roxas, Angeles, Gutierrez, Embat and Pinto to
execute the required verification and certification.

Lastly, De Luzuriaga maintains that the petitioners are guilty of forum shopping as the reliefs prayed
for in the petition before the CA, as well as in the present petition, are the same reliefs that the
petitioners may be entitled to in the complaint before the labor arbiter.17

P & GPI

As it did with the CA when it was asked to comment on the petitioners’ motion for reconsideration,18 P
& GPI prays in its Comment19 and Memorandum20 that it be dropped as a party-respondent, and that it
be excused from further participating in the proceedings. It argues that inasmuch as the NLRC
resolved the contempt charge on the merits, an appeal from its dismissal through a petition for
certiorari is barred. Especially in its case, the dismissal of the petition for certiorari is correct because
it was never made a party to the contempt proceedings and, thus, it was never afforded the
opportunity to be heard. It adds that it is an entity separate from CTMI. It submits that it cannot be
made to assume any or all of CTMI’s liabilities, absent an agreement to that effect but even if it may
be liable, the present proceedings are not the proper venue to determine its liability, if any.

On December 16, 2008, the petitioners filed a Memorandum21 raising essentially the same issues and
arguments laid down in the petition.

The Court’s Ruling

Issues

The parties’ submissions raise the following issues:

(1) whether the NLRC has contempt powers;

(2) whether the dismissal of a contempt charge is appealable; and

(3) whether the NLRC committed grave abuse of discretion in dismissing the contempt
charge against the respondents.
On the first issue, we stress that under Article 21822 of the Labor Code, the NLRC (and the labor
arbiters) may hold any offending party in contempt, directly or indirectly, and impose appropriate
penalties in accordance with law. The penalty for direct contempt consists of either imprisonment or
fine, the degree or amount depends on whether the contempt is against the Commission or the labor
arbiter. The Labor Code, however, requires the labor arbiter or the Commission to deal with indirect
contempt in the manner prescribed under Rule 71 of the Rules of Court.23

Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to initiate indirect
contempt proceedings before the trial court. This mode is to be observed only when there is no law
granting them contempt powers.24 As is clear under Article 218(d) of the Labor Code, the labor arbiter
or the Commission is empowered or has jurisdiction to hold the offending party or parties in direct or
indirect contempt. The petitioners, therefore, have not improperly brought the indirect contempt
charges against the respondents before the NLRC.

The second issue pertains to the nature of contempt proceedings, especially with respect to the
remedy available to the party adjudged to have committed indirect contempt or has been absolved of
indirect contempt charges. In this regard, Section 11, Rule 71 of the Rules of Court states that the
judgment or final order of a court in a case of indirect contempt may be appealed to the proper court
as in a criminal case. This is not the point at issue, however, in this petition. It is rather the question
of whether the dismissal of a contempt charge, as in the present case, is appealable. The CA held
that the NLRC’s dismissal of the contempt charges against the respondents amounts to an acquittal
in a criminal case and is not subject to appeal.

The CA ruling is grounded on prevailing jurisprudence.

In Yasay, Jr. v. Recto,25 the Court declared:

A distinction is made between a civil and [a] criminal contempt. Civil contempt is the failure to do
something ordered by a court to be done for the benefit of a party. A criminal contempt is any
conduct directed against the authority or dignity of the court.26

The Court further explained in Remman Enterprises, Inc. v. Court of Appeals27 and People v.
Godoy28 the character of contempt proceedings, thus –

The real character of the proceedings in contempt cases is to be determined by the relief sought or
by the dominant purpose. The proceedings are to be regarded as criminal when the purpose is
primarily punishment and civil when the purpose is primarily compensatory or remedial.

Still further, the Court held in Santiago v. Anunciacion, Jr.29 that:

But whether the first or the second, contempt is still a criminal proceeding in which acquittal, for
instance, is a bar to a second prosecution. The distinction is for the purpose only of determining the
character of punishment to be administered.

In the earlier case of The Insurance Commissioner v. Globe Assurance Co., Inc.,30 the Court
dismissed the appeal from the ruling of the lower court denying a petition to punish the respondent
therein from contempt for lack of evidence. The Court said in that case:

It is not the sole reason for dismissing this appeal. In the leading case of In re Mison, Jr. v. Subido, it
was stressed by Justice J.B.L. Reyes as ponente, that the contempt proceeding far from being a civil
action is "of a criminal nature and of summary character in which the court exercises but limited
jurisdiction." It was then explicitly held: "Hence, as in criminal proceedings, an appeal would not lie
from the order of dismissal of, or an exoneration from, a charge of contempt of court." [footnote
omitted]

Is the NLRC’s dismissal of the contempt charges against the respondents beyond review by this
Court? On this important question, we note that the petitioners, in assailing the CA main decision,
claim that the appellate court committed grave abuse of discretion in not ruling on the dismissal by
the NLRC of the contempt charges.31 They also charge the NLRC of having gravely abused its
discretion and having committed reversible errors in:

(1) setting aside its earlier resolutions and orders, including the writ of preliminary injunction
it issued, with its dismissal of the petition to cite the respondents in contempt of court;

(2) overturning this Court’s resolutions upholding the TRO and the writ of preliminary
injunction;

(3) failing to impose administrative fines upon the respondents for violation of the TRO and
the writ of preliminary injunction; and

(4) failing to order the reinstatement of the dismissed petitioners and the payment of their
accrued wages and other benefits.

In view of the grave abuse of discretion allegation in this case, we deem it necessary to look into the
NLRC’s dismissal of the contempt charges against the respondents. As the charges were rooted into
the respondents’ alleged non-compliance with the NLRC directives contained in the TRO32 and the
writ of preliminary injunction,33 we first inquire into what really happened to these directives.

The assailed NLRC resolution of October 31, 200034 gave us the following account on the matter -

On the first directive, x x x We find that there was no violation of the said order. A perusal of the
records would show that in compliance with the temporary restraining order (TRO), respondents
reinstated back to work the sales drivers who complained of illegal dismissal (Memorandum of
Respondents, page 4).

Petitioners’ allegation that there was only payroll reinstatement does not make the respondents
guilty of contempt of court. Even if the drivers were just in the garage doing nothing, the same does
not make respondents guilty of contempt nor does it make them violators of the injunction order.
What is important is that they were reinstated and receiving their salaries.

As for petitioners Danilo Real, Roberto Sedano and Rolando Manalo, they have resigned from their
jobs and were paid their separation pay xxx (Exhibits "6," "6-A," "7," "7-A," "8," "8-A," Respondents’
Memorandum dated August 12, 1996). The issue of whether they were illegally dismissed should be
threshed out before the Labor Arbiter in whose sala the case of unfair labor practice and illegal
dismissal were (sic) filed. Records also show that petitioner Antonio Desquitado during the pendency
of the case executed an affidavit of desistance asking that he be dropped as party complainant in as
much as he has already accepted separation benefits totaling to ₱63,087.33.

With respect to the second directive ordering respondents to cease and desist from implementing
the memoranda dated July 15, 1991 designed to ground sales personnel who are members of the
union, respondents alleged that they can no longer be restrained or enjoined and that the status quo
can no longer be restored, for implementation of the memorandum was already consummated or
was a fait accompli. x x x

All sales vehicles were ordered to be turned over to management and the same were already sold[.]
xxx [I]t would be hard to undo the sales transactions, the same being valid and binding. The
memorandum of July 15, 1991 authorized still all sales representatives to continue servicing their
customers using public transportation and a transportation allowance would be issued.

xxxx

The third directive of the Commission is to preserve the "status quo ante" between the parties.

Records reveal that WELLA AG of Germany terminated its Licensing Agreement with respondent
company effective December 31, 1991 (Exhibit "11," Respondents’ Memorandum).

On January 31, 1992, individual petitioners together with the other employees were terminated xxx.
In fact, this event resulted to the closure of the respondent company. The manufacturing and
marketing operations ceased. This is evidenced by the testimony of Rosalito del Rosario and her
affidavit (Exh. "9," memorandum of Respondents) as well as Employer’s Monthly Report on
Employees Termination/dismissals/suspension xxx (Exhibits "12-A" to "12-F," ibid) as well as the
report that there is a permanent shutdown/total closure of all units of operations in the establishment
(Ibid). A letter was likewise sent to the Department of Labor and Employment (Exh. "12," Ibid) in
compliance with Article 283 of the Labor Code, serving notice that it will cease business operations
effective January 31, 1992.

The petitioners strongly dispute the above account. They maintain that the NLRC failed to consider
the following:

1. CTMI violated the status quo ante order when it did not restore to their former work
assignments the dismissed sales drivers. They lament that their being "garaged" deprived
them of benefits, and they were subjected to ridicule and psychological abuse. They assail
the NLRC for considering the payroll reinstatement of the drivers as compliance with its stay
order.

They also bewail the NLRC’s recognition of the resignation of Danilo Real, Roberto Sedano,
Rolando Manalo and Antonio Desquitado as they were just compelled by economic
necessity to resign from their employment. The quitclaims they executed were contrary to
public policy and should not bar them from claiming the full measure of their rights, including
their counsel who was unduly deprived of his right to collect attorney’s fees.

2. It was error for the NLRC to rule that the memorandum, grounding the sales drivers, could
no longer be restrained or enjoined because all sales vehicles were already sold. No
substantial evidence was presented by the respondents to prove their allegation, but even if
there was a valid sale of the vehicles, it did not relieve the respondents of responsibility
under the stay order.

3. The alleged termination of the licensing agreement between CTMI and WELLA AG of
Germany, which allegedly resulted in the closure of CTMI’s manufacturing and marketing
operations, occurred after the NLRC’s issuance of the injunctive reliefs. CTMI failed to
present substantial evidence to support its contention that it folded up its operations when
the licensing agreement was terminated. Even assuming that there was a valid closure of
CTMI’s business operations, they should have been paid their lost wages, allowances,
 incentives, sales commissions, per diems and other employee benefits from August 23, 1991
up to the date of the alleged termination of CTMI’s marketing operations.

Did the NLRC commit grave abuse of discretion in dismissing the contempt charges against the
respondents? An act of a court or tribunal may only be considered as committed in grave abuse of
discretion when it was performed in a capricious or whimsical exercise of judgment which is
equivalent to lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount
to an evasion of a positive duty enjoined by law, or to act at all in contemplation of law, as where the
power is exercised in an arbitrary and despotic manner by reason of passion or personal hostility.35

The petitioners insist that the respondents violated the NLRC directives, especially the status quo
ante order, for their failure to reinstate the dismissed petitioners and to pay them their benefits. In
light of the facts of the case as drawn above, we cannot see how the status quo ante or the
employer-employee situation before the formation of the union and the conduct of the consent
election can be maintained. As the NLRC explained, CTMI closed its manufacturing and marketing
operations after the termination of its licensing agreement with WELLA AG of Germany. In fact, the
closure resulted in the termination of CTMI’s remaining employees on January 31, 1992, aside from
the sales drivers who were earlier dismissed but reinstated in the payroll, in compliance with the
NLRC injunction. The petitioners’ termination of employment, as well as all of their money claims,
was the subject of the illegal dismissal and unfair labor practice complaint before the labor arbiter.
The latter was ordered by the NLRC on October 31, 2000 to proceed hearing the case.36 The NLRC
thus subsumed all other issues into the main illegal dismissal and unfair labor practice case pending
with the labor arbiter. On this point, the NLRC declared:

Note that when the injunction order was issued, WELLA AG of Germany was still under licensing
agreement with respondent company. However, the situation has changed when WELLA AG of
Germany terminated its licensing agreement with the respondent, causing the latter to close its
business.

Respondents could no longer be ordered to restore the status quo as far as the individual petitioners
are concerned as these matters regarding the termination of the employees are now pending
litigation with the Arbitration Branch of the Commission. To resolve the incident now regarding the
closure of the respondent company and the matters alleged by petitioners such as the creations of
three (3) new corporations xxx as successor-corporations are matters best left to the Labor Arbiter
hearing the merits of the unfair labor practice and illegal dismissal cases.37

We find no grave abuse of discretion in the assailed NLRC ruling. It rightly avoided delving into
issues which would clearly be in excess of its jurisdiction for they are issues involving the merits of
the case which are by law within the original and exclusive jurisdiction of the labor arbiter.38 To be
sure, whether payroll reinstatement of some of the petitioners is proper; whether the resignation of
some of them was compelled by dire economic necessity; whether the petitioners are entitled to their
money claims; and whether quitclaims are contrary to law or public policy are issues that should be
heard by the labor arbiter in the first instance. The NLRC can inquire into them only on appeal after
the merits of the case shall have been adjudicated by the labor arbiter.

The NLRC correctly dismissed the contempt charges against the respondents. The CA likewise
1âwphi1

committed no grave abuse of discretion in not disturbing the NLRC resolution.

In light of the above discussion, we find no need to dwell into the other issues the parties raised.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit and AFFIRM the
assailed resolutions of the Court of Appeals.
SO ORDERED.

[G.R. No. 182915 : December 12, 2011]

MARIALY O. SY, VIVENCIA PENULLAR, AURORA AGUINALDO, GINA

ANIANO, GEMMA DELA PEÑA, EFREMIA MATIAS, ROSARIO BALUNSAY,
ROSALINDA PARUNGAO, ARACELI RUAZA, REGINA RELOX, TEODORA
VENTURA, AMELIA PESCADERO, LYDIA DE GUZMAN, HERMINIA
HERNANDEZ, OLIVIA ABUAN, CARMEN PORTUGUEZ, LYDIA PENNULAR,
EMERENCIANA WOOD, PRISCILLA ESPINEDA, NANCY FERNANDEZ, EVA
MANDURIAGA, CONSOLACION SERRANO, SIONY CASILLAN, LUZVIMINDA
GABUYA, MYRNA TAMIN, EVELYN REYES, EVA AYENG, EDNA YAP, RIZA
DELA CRUZ ZUÑIGA, TRINIDAD RELOX, MARLON FALLA, MARICEL OCON,
AND ELVIRA MACAPAGAL, PETITIONERS, FAIRLAND KNITCRAFT CO., INC.,
RESPONDENT.

[G.R. NO. 189658]

SUSAN T. DE LEON, PETITIONER, VS. FAIRLAND KNITCRAFT CO., INC.,

MARIALY O. SY, VIVENCIA PENULLAR, AURORA AGUINALDO, GINA
ANIANO, GEMMA DELA PEÑA, EFREMIA MATIAS, ROSARIO BALUNSAY,
ROSALINDA PARUNGAO, ARACELI RUAZA, REGINA RELOX, TEODORA
VENTURA, AMELIA PESCADERO, RICHON APARRE, LYDIA DE GUZMAN,
HERMINIA HERNANDEZ, OLIVIA ABUAN, CARMEN PORTUGUEZ, LYDIA
PENNULAR, EMERENCIANA WOOD, PRISCILLA ESPINEDA, NANCY
FERNANDEZ, EVA MANDURIAGA, CONSOLACION SERRANO, SIONY
CASILLAN, LUZVIMINDA GABUYA, MYRNA TAMIN, EVELYN REYES, EVA
AYENG, EDNA YAP, RIZA DELA CRUZ ZUÑIGA, TRINIDAD RELOX, MARLON
FALLA, MARICEL OCON, AND ELVIRA MACAPAGAL, RESPONDENTS.

DECISION

DEL CASTILLO, J.:

The issues of labor-only contracting and the acquisition of a labor tribunal of

jurisdiction over the person of a respondent are the matters up for consideration in
these consolidated Petitions for Review on Certiorari.

Assailed in G.R. No. 182915 is the May 9, 2008 Resolution[1] of the Special Ninth
Division of the Court of Appeals (CA) in CA-G.R. SP No. 93204 which reversed and
set aside the July 25, 2007 Decision[2] of the CA's First Division and ordered the
exclusion of Fairland Knitcraft Co., Inc. (Fairland) from the decisions of the labor
tribunals. Said July 25, 2007 Decision, on the other hand, affirmed the November
30, 2004 Decision[3] and August 26, 2005 Resolution[4] of the National Labor
Relations Commission (NLRC) which, in turn, reversed and set aside the November
26, 2003 Decision[5] of the Labor Arbiter finding the dismissal as valid.

On the other hand, assailed in G.R. No. 189658 is the July 20, 2009 Decision[6] of
the CA's Special Former Special Eighth Division in CA-G.R. SP No. 93860, which
affirmed the aforesaid November 30, 2004 Decision and August 26, 2005
Resolution of the NLRC. Likewise assailed is the October 1, 2009 CA
Resolution[7] denying the Motion for Reconsideration thereto.

Factual Antecedents

Fairland is a domestic corporation engaged in garments business, while Susan de

Leon (Susan) is the owner/proprietress of Weesan Garments (Weesan).

On the other hand, the complaining workers (the workers) are sewers, trimmers,
helpers, a guard and a secretary who were hired by Weesan as follows:

NAME DATE HIRED SALARIES

Marialy O. Sy 06-23-97 P 1,500.00/week

Lydia Penullar 04-99 1,000.00/week

Lydia De Guzman 08-01-98 1,000.00/week

Olivia Abuan 08-95 1,300.00/week

Evelyn Reyes 11-2000 1,000.00/week

Myrna Tamin 11-2000 1,000.00/week

Elvira Macapagal 04-01-02 1,000.00/week

Edna Yap 10-24-99 700.00/week

Rosario Balunsay 01-21-98 1,400.00/week

Rosalinda P. Parungao 03-02-01 1,000.00/week

Gemma Dela Peña 11-24-99 1,000.00/week

Emerenciana Wood 01-98 1,400.00/week

Carmen Portuguez 11-2000 800.00/week

Gina G. Anano 09-98 1,500.00/week

 Aurora Aguinaldo 01-2000 1,000.00/week

Amelia Pescadero 01-96 1,000.00/week

Siony Casillan 05-2002 1,000.00/week

Consolacion Serrano 10-2001 900.00/week

Teodora Ventura 01-2000 1,000.00/week

Regina Relox 05-97 1,500.00/week

Eufemia Matias 03-2000 1,000.00/week

Herminia Hernandez 08-95 1,000.00/week

Richon Aparre 07-99 1,200.00/week

Eve Manduriaga 02-2000 1,000.00/week

Priscila Espineda 11-2000 1,300.00/week

Aracelli Ruaza 03-2000 1,000.00/week

Nancy Fernandez 11-2000 1,400.00/week

Eva Ayeng 11-2000 1,000.00/week

Luzviminda Gabuya 11-2000 1,000.00/week

Liza Dela Cuz Zuñiga 10-2001 1,200.00/week

Vivencia Penullar 01-2000 1,500.00/week

Trinidad Relox 08-96 1,200.00/week

Marlon Falla 06-24-00 840.00/week

Maricel Ocon 01-15-01 1,500.00/week[8]

On December 23, 2002, workers Marialy O. Sy, Vivencia Penullar, Aurora

Aguinaldo, Gina Aniano, Gemma dela Peña and Efremia Matias filed with the
Arbitration Branch of the NLRC a Complaint[9] for underpayment and/or non-
payment of wages, overtime pay, premium pay for holidays, 13th month pay and
other monetary benefits against Susan/Weesan. In January 2003, the rest of the
aforementioned workers also filed similar complaints. Eventually all the cases were
consolidated as they involved the same causes of action.

On February 5, 2003, Weesan filed before the Department of Labor and

Employment-National Capital Region (DOLE-NCR) a report on its temporary closure
for a period of not less than six months. As the workers were not anymore allowed
to work on that same day, they filed on February 18, 2003 an Amended
Complaint,[10] and on March 13, 2003, another pleading entitled Amended
Complaints and Position Paper for Complainants,[11] to include the charge of illegal
dismissal and impleaded Fairland and its manager, Debbie Manduabas (Debbie), as
additional respondents.

A Notice of Hearing[12] was thereafter sent to Weesan requesting it to appear before

Labor Arbiter Ramon Valentin C. Reyes (Labor Arbiter Reyes) on April 3, 2003, at
10:00 a.m. On said date and time, Atty. Antonio A. Geronimo (Atty. Geronimo)
appeared as counsel for Weesan and requested for an extension of time to file his
client's position paper.[13] On the next hearing on April 28, 2003, Atty. Geronimo
also entered his appearance for Fairland and again requested for an extension of
time to file position paper.[14]

On May 16, 2003, Atty. Geronimo filed two separate position papers - one for
Fairland[15]and another for Susan/Weesan.[16] The Position Paper for Fairland was
verified by Debbie while the one for Susan/Weesan was verified by Susan. To these
pleadings, the workers filed a Reply.[17]

Atty. Geronimo then filed a Consolidated Reply[18] verified[19] both by Susan and
Debbie.

On November 25, 2003, the workers submitted their Rejoinder.[20]

Ruling of the Labor Arbiter

On November 26, 2003, Labor Arbiter Reyes rendered his Decision,[21] the
dispositive portion of which reads:

WHEREFORE, premises all considered, judgment is hereby rendered,

as follows:

Dismissing the complaint for lack of merit; and ordering the

respondents to pay each complainant P5,000.00 by way of financial
assistance.

SO ORDERED.[22]

Ruling of the National Labor Relations Commission

The workers filed their appeal which was granted by the NLRC. The dispositive
portion of the NLRC Decision[23] reads:

WHEREFORE, premises considered, the appealed decision is hereby

set aside and the dismissal of complainants is declared illegal.
 Respondents are, therefore, ordered to reinstate complainants to their
original or equivalent position with full backwages with legal interests
thereon from February 5, 2003, until actually reinstated and fully paid,
with retention of seniority rights and are further ordered to pay
solidarily to the complainants the difference of their underpaid/unpaid
wages, unpaid holidays, unpaid 13thmonth pays and unpaid service
incentive leaves with legal interests thereon, to wit:

xxxx

In the event that reinstatement is not possible, respondents are

ordered to pay solidarily to complainants their respective separation
pays computed as follows:

xxxx

Respondents are likewise ordered to pay ten (10%) percent of the

gross award as and by way of attorney's fees.

SO ORDERED.[24]

Hence, Atty. Geronimo filed a Motion for Reconsideration.[25] However, Fairland

filed another Motion for Reconsideration[26]through Atty. Melina O. Tecson (Atty.
Tecson) assailing the jurisdiction of the Labor Arbiter and the NLRC over it, claiming
that it was never summoned to appear, attend or participate in all the proceedings
conducted therein. It also denied that it engaged the services of Atty. Geronimo.

The NLRC however, denied both motions for lack of merit.[27]

Fairland and Susan thus filed their separate Petitions for Certiorari before the CA
docketed as CA-G.R. SP No. 93204 and CA-G.R. SP No. 93860, respectively.

Ruling of the Court of Appeals in CA-G.R. SP No. 93204

On July 25, 2007, the CA's First Division denied Fairland's petition.[28] It affirmed
the NLRC's ruling that the workers were illegally dismissed and that Weesan and
Fairland are solidarily liable to them as labor-only contractor and principal,
respectively.

Fairland filed its Motion for Reconsideration[29] as well as a Motion for Voluntary
Inhibition[30] of Associate Justices Celia C. Librea-Leagogo and Regalado E.
Maambong from handling the case. As the Motion for Voluntary Inhibition was
granted through a Resolution[31] dated November 8, 2007, the case was transferred
to the CA's Special Ninth Division for resolution of Fairland's Motion for
Reconsideration.[32]

On May 9, 2008, the CA's Special Ninth Division reversed[33] the First Division's
ruling. It held that the labor tribunals did not acquire jurisdiction over the person
of Fairland, and even assuming they did, Fairland is not liable to the workers since
Weesan is not a mere labor-only contractor but a bona fide independent
contractor. The Special Ninth Division thus annulled and set aside the assailed
NLRC Decision and Resolution insofar as Fairland is concerned and excluded the
latter therefrom. The dispositive portion of said Resolution reads:

WHEREFORE, the Motion for Reconsideration filed by the movant is

GRANTED.

The July 25, 2007 Decision of the First Division of this Court finding
that the NLRC did not act with grave abuse of discretion amounting to
lack or excess of jurisdiction and denying the Petition is REVERSED
and SET ASIDE.

Consequently, the Decision and Resolution issued by the public

respondent on November 30, 2004 and August 26, 2005, respectively,
are hereby ANNULLED and SET ASIDE insofar as [it] concerns the
petitioner Fairland Knitcraft Co., Inc. [which] is hereby ordered
dropped and excluded therefrom.

SO ORDERED.[34]

Aggrieved, the workers filed before us their Petition for Review

on Certiorari docketed as G.R. No. 182915.

Ruling of the Court of Appeals in CA-G.R. SP No. 93860

With regard to Susan's petition, the CA Special Ninth Division issued on May 11,
2006 a Resolution[35] temporarily restraining the NLRC from enforcing its assailed
November 30, 2004 Decision and thereafter the CA Special Eighth Division issued a
writ of preliminary prohibitory injunction.[36] On July 20, 2009, the Special Former
Special Eighth Division of the CA resolved the case through a Decision,[37] the
dispositive portion of which reads:

WHEREFORE, premises considered, the present petition is hereby

DENIED DUE COURSE and accordingly DISMISSED for lack of merit.
The Decision dated November 30, 2004 and Resolution dated August
26, 2005 of the National Labor Relations Commission (NLRC) in CA No.
039375-04 (NLRC NCR 00-12-11294-02, 00-01-00027-03, 00-01-
 00131-03, 00-01-00820-03 and 00-01-01249-03) are hereby
AFFIRMED and UPHELD.

The writ of preliminary prohibitory injunction issued by this Court on

July 13, 2006 is hereby LIFTED and SET ASIDE.

With cost against petitioner.

SO ORDERED.[38]

Susan moved for reconsideration[39] which was denied by the CA in its October 1,
2009 Resolution.[40]

Hence, she filed before this Court a Petition for Review on Certiorari docketed as
G.R. No. 189658 which was denied in this Court's December 16, 2009
Resolution[41] on technicality and for failure to sufficiently show any reversible error
in the assailed judgment.

Susan and Fairland filed their respective Motions for Reconsideration.[42] But before
said motions could be resolved, the Court ordered the consolidation of Susan's
petition with that of the workers.[43]

Susan's Motion for Reconsideration of this Court's December 16, 2009 Resolution in
G.R No. 189658 is granted. Consequently, her Petition for Review on Certiorari is
reinstated.

With Susan and Fairland's respective Motions for Reconsideration still unresolved,
this Court shall first address them.

One of the grounds for the denial of Susan's petition was her failure to indicate the
date of filing her Motion for Reconsideration with the CA as required under Section
4(b),[44] Rule 45 of the Rules of Court. However, "failure to comply with the rule on
a statement of material [date] in the petition may be excused [if] the [date is]
evident from the records."[45] In the case of Susan, records show that she received
the copy of the Decision of the CA on July 24, 2009. She then timely filed her
Motion for Reconsideration via registered mail on August 7, 2009 as shown by the
envelope[46] with stamped receipt of the Batangas City Post Office bearing the date
August 7, 2009. The fact of such filing was also stated in the Motion for Extension
of Time to File Petition for Review[47] that she filed before this Court which forms
part of the records of this case. Hence, it is clear that Susan seasonably filed her
Motion for Reconsideration.

Moreover, while we note that Susan's petition was also denied on the ground of no
reversible error committed by the CA, we deem it proper, in the interest of justice,
to take a second look on the merits of Susan's petition and reinstate G.R. No.
189658. This is also to harmonize our ruling in these consolidated petitions and
avoid confusion that may arise in their execution. Hence, we grant Susan's Motion
for Reconsideration and consequently, reinstate her Petition for Review
on Certiorari.

As to Fairland's Motion for Reconsideration, we shall treat the same as its comment
to Susan's petition, Fairland being one of the respondents therein.

Issues

In G.R. No. 189658, Susan imputes upon the CA the following errors:

I.

The Court of Appeals erred in finding that petitioner is a labor-only

contractor acting as an agent of respondent Fairland.

II.

The Court of Appeals erred in finding that the individual private

respondents were illegally dismissed.

III.

The Court of Appeals erred in not resolving the issue raised by

petitioner in her reply DATED JULY 8, 2006 regarding the propriety of
the appeal taken by private respondent Richon Cainoy Aparre who was
already dead prior to the filing of the memorandum of appeal before
the NLRC.[48]

Susan's Arguments

Susan insists that the CA erred in ruling that Weesan is a labor-only contractor
based on the finding that its workplace is owned by Fairland. She maintains that
the place is owned by De Luxe Shirt Factory, Inc. (De Luxe) and not by Fairland as
shown by the Contracts of Lease between Weesan and De Luxe.

Susan also avers that the CA erred in ruling that Weesan was guilty of illegal
dismissal. She maintains that the termination of the workers was due to financial
losses suffered by Weesan as shown by various documents submitted by the latter
to the tribunals below. In fact, Weesan submitted its Establishment Termination
Report with the DOLE-NCR and same was duly received by the latter.

Lastly, Susan argues that the appeal of one of the workers, Richon Cainoy Aparre
(Richon), should not have been given due course because in the Notice of Appeal
with Appeal Memorandum filed with the NLRC, a certain Luzvilla A. Rayon (Luzvilla),
whose identity was never established, signed for and on his behalf. However, there
is no information submitted before the NLRC that Richon is already dead, and in
any event, no proper substitution was ever made.

The Workers' Arguments

The workers claim that Weesan is a labor-only contractor because it does not have
substantial capital or investment in the form of tools, equipment, machineries, and
work premises, among others, and that the workers it recruited are performing
activities which are directly related to the garments business of Fairland. Hence,
Weesan should be considered as a mere agent of Fairland, who shall be responsible
to the workers as if they were directly employed by it (Fairland).[49]

The workers also allege that the temporary suspension of operations of Weesan was
motivated not by a desire to prevent further losses, but to discourage the workers
from ventilating their claims for non-payment/underpayment of wages and
benefits. The fact that Weesan was experiencing serious business losses was not
sufficiently established and therefore the termination of the workers due to alleged
business losses is invalid.[50]

Fairland's Arguments

Fairland maintains that it was never served with summons to appear in the
proceedings before the Labor Arbiter nor furnished copies of the Labor Arbiter's
Decision and Resolution on the workers' complaints for illegal dismissal; that it
never voluntarily appeared before the labor tribunals through Atty.
Geronimo;[51] that it is a separate and distinct business entity from Weesan; that
Weesan is a legitimate job contractor, hence, the workers were actually its
(Weesan's) employees; and that, consequently, the workers have no cause of
action against Fairland.[52]

At any rate, assuming that the workers have a cause of action against Fairland,
their claims are already barred by prescription. Of the 34 individual complainants
(the workers), only six were employees of Weesan during the period of its
contractual relationship with Fairland in 1996 and 1997. They were Marialy Sy,
Olivia Abuan, Amelia Pescadero, Regina Relox, Hermina Hernandez and Trinidad
Relox. These workers filed their complaints in December 2002 and January 2003 or
more than four years from the expiration of Weesan's contractual arrangement with
Fairland in 1997. Article 291 of the Labor Code provides that all money claims
arising from employer-employee relationship shall be filed within three years from
the time the cause of action accrued; otherwise, they shall be forever barred.
Illegal dismissal prescribes in four years and damages due to separation from
employment for alleged unjustifiable causes injuring a plaintiff's right must likewise
be brought within four years under the Civil Code. Clearly, the claims of said six
employees are already barred by prescription.[53]

In G.R. No. 182915, the workers advance the following issues:

I.

Whether x x x the National Labor Relations Commission acquired

jurisdiction over the [person of the] respondent[;]

II.

Whether x x x the decision of the National Labor Relations Commission

became final and executory[; and]

III.

Whether x x x respondent is solidarily liable with WEESAN GARMENT/

SUSAN DE LEON[.][54]

The Workers' Arguments

The workers contend that the Labor Arbiter and the NLRC properly acquired
jurisdiction over the person of Fairland because the latter voluntarily appeared and
actively participated in the proceedings below when Atty. Geronimo submitted on
its behalf a Position Paper verified by its manager, Debbie. As manager, Debbie
knew of all the material and significant events which transpired in Fairland since
she had constant contact with the people in the day-to-day operations of the
company. Thus, the workers maintain that the Labor Arbiter and the NLRC
acquired jurisdiction over the person of Fairland and the Decisions rendered by the
said tribunals are valid and binding upon it.

Lastly, the workers aver that Fairland is solidarily liable with Susan/ Weesan
because it was shown that the latter was indeed the sewing arm of the former and
is a mere "labor-only contractor".

Fairland's Arguments

In gist, Fairland contests the labor tribunals' acquisition of jurisdiction over its
person either through service of summons or voluntary appearance. It denies that
it engaged the services of Atty. Geronimo and asserts that it has its own legal
counsel, Atty. Tecson, who would have represented it had it known of the pendency
of the complaints against Fairland.
Fairland likewise emphasizes that when it filed its Motion for Reconsideration with
the NLRC, it made an express reservation that the same was without prejudice to
its right to question the jurisdiction over its person and the binding effect of the
assailed decision. In the absence, therefore, of a valid service of summons or
voluntary appearance, the proceedings conducted and the judgment rendered by
the labor tribunals are null and void as against it. Hence, Fairland cannot be held
solidarily liable with Susan/Weesan.

Our Ruling

We grant the workers' petition (G.R. No. 182915) but deny the petition of Susan
(G.R. No. 189658).

G.R. No. 189658

Susan/Weesan is a mere labor-only contractor.

"There is labor-only contracting when the contractor or subcontractor merely

recruits, supplies or places workers to perform a job, work or service for a
principal. In labor-only contracting, the following elements are present:

(a) The person supplying workers to an employer does not have

substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others; and

(b) The workers recruited and placed by such person are performing
activities which are directly related to the principal business of the
employer."[55]

Here, there is no question that the workers, majority of whom are sewers, were
recruited by Susan/Weesan and that they performed activities which are directly
related to Fairland's principal business of garments. What must be determined is
whether Susan/Weesan has substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others.

We have examined the records but found nothing therein to show that Weesan has
investment in the form of tools, equipment or machineries. The records show that
Fairland has to furnish Weesan with sewing machines for it to be able to provide the
sewing needs of the former.[56] Also, save for the Balance Sheets[57] purportedly
submitted by Weesan to the Bureau of Internal Revenue (BIR) indicating its fixed
assets (factory equipment) in the amount of P243,000.00, Weesan was unable to
show that apart from the borrowed sewing machines, it owned and possessed any
other tools, equipment, and machineries necessary to its being a contractor or sub-
contractor for garments. Neither was Weesan able to prove that it has substantial
capital for its business.

Likewise significant is the fact that there is doubt as to who really owns the work
premises occupied by Weesan. As may be recalled, the workers emphasized in
their Appeal Memorandum[58] filed with the NLRC that Susan/Weesan was a labor-
only contractor and that Fairland was its principal. To buttress this, they alleged
that the work premises utilized by Weesan is owned by Fairland, which significantly,
was not in the business of renting properties. They also advanced that there was no
showing that Susan/Weesan paid any rentals for the use of the premises.
They contended that all that Susan had was a Mayor's Permit for

Weesan indicating 715 Ricafort Street, Tondo, Manila as its address.

Susan failed to refute these allegations before the NLRC and attributed such failure
to her former counsel, Atty. Geronimo. But when Susan's petition for certiorari was
given due course by the CA, she finally had the chance to answer the same by
denying that Fairland owned the work premises. Susan instead claimed that
Weesan rented the premises from another entity, De Luxe. To support this, she
attached to her petition two Contracts of Lease[59] purportedly entered into by her
and De Luxe for the lease of the premises covering the periods August 1, 1997 to
July 31, 2000 and January 1, 2001 to December 31, 2004.

On the other hand, the workers in their Comment[60] filed in CA-G.R. SP No. 93204
(Fairland's petition for certiorari before the CA), pointed out that in Fairland's
Amended Articles of Incorporation,[61] five out of the seven incorporators listed
therein appeared to be residents of the same 715 Ricafort St., Tondo, Manila. To
the workers, this is a clear indication that Fairland indeed owned Weesan's work
premises. Fairland, for its part, tried to explain this by saying that its
incorporators, just like Weesan, were also mere lessees of a portion of the multi-
storey building owned by De Luxe located at 715 Ricafort St., Tondo, Manila. It
also claimed that two years prior to Weesan's occupation of said premises in 1996,
the five incorporators alluded to already transferred.[62]

We cannot, however, ignore the apt observation on the matter made by the CA's
Special Former Special Eighth Division in its Decision in CA-G.R. SP No. 93860, viz:

The work premises are likewise owned by Fairland, which petitioner

tried to disprove by presenting a purported Contract of Lease with
another entity, De Luxe Shirt Factory Co., Inc. However, there is no
competent proof it paid the supposed rentals to said
`owner'.Curiously, under the item `Rent Expenses' in its
audited financial statement, only equipment rental was listed
therein without any disbursement/expense for rental of factory
 premises, which only buttressed the claim of private respondents that
the place where they reported to and performed sewing jobs for
petitioner [Susan] and Fairland at No. 715 Ricafort St., Tondo, Manila,
belonged to Fairland.[63](Emphasis supplied.)

Susan contests this pronouncement by pointing out that although only sewing
machines were specified under the entry "Rent Expenses" in its financial statement,
the rent for the factory premises is already deemed included therein since the
contracts of lease she entered into with De Luxe referred to both the factory
premises and machineries.

We, however, find this contention implausible.

We went over the said contracts of lease and noted that same were principally for
the lease of the premises in 715 Ricafort St., Tondo, Manila. Only incidental thereto
is the inclusion therein of the equipment found in said premises. Hence, we cannot
see why the rentals for the work premises, for which Susan even went to the extent
of executing a contract with the purported lessor, was not included in the entry for
rent expenses in Weesan's financial statement. Even if we are to concede to
Susan's claim that the entry for rent expenses already includes the rentals for the
work premises, we wonder why the rental expenses for the year 2000 which was
P396,000.00 is of the same amount with the rental expenses for the year 2001. As
borne out by the Contract of Lease covering the period August 1, 1997 to July 31,
2000, the monthly rent for the work premises was pegged at
P25,000.00.[64] However, in January to December 2001, same was increased to
P27,500.00.[65] There being an increase in the rentals for the work premises, how
come that Weesan's rental expenses for the year 2001 is still P396,000.00? This
could only mean that said entry really only refers to the rentals of sewing machines
and does not include the rentals for the work premises. Moreover, we note that
Susan could have just simply submitted receipts for her payments of rentals to De
Luxe. However, she failed to present even a single receipt evidencing such
payment.

In an attempt to prove that it is De Luxe and not Fairland which owned the work
premises, Susan attached to her petition the following: (1) a plain copy of Transfer
Certificate of Title (TCT) No. 139790[66] and Declaration of Real Property[67] both
under the name of De Luxe; and, (2) Real Property Tax receipts issued to De Luxe
for the years 2000-2004.[68] However, the Court finds these documents
wanting. Nowhere from the said TCT and Declaration of Real Property can it be
inferred that the property they refer to is the same property as that located at 715
Ricafort St., Tondo, Manila. Although in said Declaration, 715 Ricafort St., Tondo is
the indicated address of the declarant (De Luxe), the address of the property
declared is merely "Ricafort, Tondo I-A". The same thing can also be said with
regard to the real property tax receipts. The entry under the box Location of
Property in the receipt for 2001 is "I - 718 Ricafort" and in the receipts for 2002,
2003, and 2004, the entries are either "I - Ricafort St., Tondo" or merely "I-Ricafort
St."

In sum, the Court finds that Susan's effort to negate Fairland's ownership of the
work premises is futile. The logical conclusion now is that Weesan does not have
its own workplace and is only utilizing the workplace of Fairland to whom it supplied
workers for its garment business.

Suffice it to say that "[t]he presumption is that a contractor is a labor-only

contractor unless such contractor overcomes the burden of proving that it has
substantial capital, investment, tools and the like."[69] As Susan/Weesan was not
able to adduce evidence that Weesan had any substantial capital, investment or
assets to perform the work contracted for, the presumption that Weesan is a labor-
only contractor stands.[70]

The National Labor Relations Commission and the Court of Appeals did not err in
their findings of illegal dismissal.

To negate illegal dismissal, Susan relies on the due closure of Weesan pursuant to
the Establishment Termination Report it submitted to the DOLE-NCR.

Indeed, Article 283[71] of the Labor Code allows as a mode of termination of

employment the closure or termination of business. "Closure or cessation of
business is the complete or partial cessation of the operations and/or shut-down of
the establishment of the employer. It is carried out to either stave off the financial
ruin or promote the business interest of the employer."[72] "The decision to close
business [or to temporarily suspend operation] is a management prerogative
exclusive to the employer, the exercise of which no court or tribunal can meddle
with, except only when the employer fails to prove compliance with the
requirements of Art. 283, to wit: a) that the closure/cessation of business is bona
fide, i.e., its purpose is to advance the interest of the employer and not to defeat or
circumvent the rights of employees under the law or a valid agreement; b) that
written notice was served on the employees and the DOLE at least one month
before the intended date of closure or cessation of business; and c) in case of
closure/cessation of business not due to financial losses, that the employees
affected have been given separation pay equivalent to ½ month pay for every
year of service or one month pay, whichever is higher."[73]

Here, Weesan filed its Establishment Termination Report[74] allegedly due to serious
business losses and other economic reasons. However, we are mindful of the
doubtful character of Weesan's application for closure given the circumstances
surrounding the same.
First, workers Marialy Sy, Vivencia Penullar, Aurora Aguinaldo, Gina Aniano,
Gemma Dela Peña and Efremia Matias filed before the Labor Arbiter their
complaint for underpayment of salary, non-payment of benefits, damages and
attorney's fees against Weesan on December 23, 2002.[75] Summons[76] was
accordingly issued and same was received by Susan on January 15,
2003.[77] Meanwhile, other workers followed suit and filed their respective
complaints on January 2, 6, 17 and 28, 2003.[78] Shortly thereafter or merely eight
days after the filing of the last complaint, Weesan filed with the DOLE-NCR its
Establishment Termination Report.

Second, the Income Tax Returns[79] for the years 2000, 2001 and 2002 attached to
the Establishment Termination Report, although bearing the stamped receipt of the
Revenue District Office where they were purportedly filed, contain no signature or
initials of the receiving officer. The same holds true with Weesan's audited financial
statements.[80] This engenders doubt as to whether these documents were indeed
filed with the proper authorities.

Third, there was no showing that Weesan served upon the workers written notice at
least one month before the intended date of closure of business, as required under
Art. 283 of the Labor Code. In fact, the workers alleged that when Weesan filed its
Establishment Termination Report on February 5, 2003, it already closed the work
premises and did not anymore allow them to report for work. This is the reason
why the workers on February 18, 2003 amended their complaint to include the
charge of illegal dismissal.[81]

It bears stressing that "[t]he burden of proving that x x x a temporary suspension

is bona fidefalls upon the employer."[82] Clearly here, Susan/Weesan was not able
to discharge this burden. The documents Weesan submitted to support its claim of
severe business losses cannot be considered as proof of financial crisis to justify the
temporary suspension of its operations since they clearly appear to have not been
duly filed with the BIR. Weesan failed to satisfactorily explain why the Income Tax
Returns and financial statements it submitted do not bear the signature of the
receiving officers. Also hard to ignore is the absence of the mandatory 30-day prior
notice to the workers.

Hence, the Court finds that Susan failed to prove that the suspension of operations
of Weesan was bona fide and that it complied with the mandatory requirement of
notice under the law. Susan likewise failed to discharge her burden of proving that
the termination of the workers was for a lawful cause. Therefore, the NLRC and the
CA, in CA-G.R. SP No. 93860, did not err in their findings that the workers were
illegally dismissed by Susan/Weesan.

The formal substitution of the deceased worker Richon

Aparre is not necessary as his heir voluntarily appeared
and participated in the proceedings before the National
Labor Relations Commission.

In Sarsaba v. Fe Vda. de Te, we held that:[83]

The rule on substitution of parties is governed by Section 16,[84] Rule 3 of the

[Rules of Court].

Strictly speaking, the rule on substitution by heirs is not a matter of

jurisdiction, but a requirement of due process. The rule on substitution
was crafted to protect every party's right to due process. It was
designed to ensure that the deceased party would continue to be
properly represented in the suit through his heirs or the duly appointed
legal representative of his estate. Moreover, non-compliance with the
Rules results in the denial of the right to due process for the heirs
who, though not duly notified of the proceedings, would be
substantially affected by the decision rendered therein. Thus, it is only
when there is a denial of due process, as when the deceased is not
represented by any legal representative or heir, that the court nullifies
the trial proceedings and the resulting judgment therein.

Here, the lack of formal substitution of the deceased worker Richon did not result to
denial of due process as to affect the validity of the proceedings before the NLRC
since his heir, Luzvilla, was aware of the proceedings therein. In fact, she is
considered to have voluntarily appeared before the said tribunal when she signed
the workers' Memorandum of Appeal filed therewith. "This Court has ruled that
formal substitution of parties is not necessary when the heirs themselves
voluntarily appeared, participated, and presented evidence during the
proceedings."[85] Hence, the NLRC did not err in giving due course to the appeal
with respect to Richon.

Fairland's claim of prescription deserves scant consideration.

Fairland asserts that assuming that the workers have valid claims against it, same
only pertain to six out of the 34 workers-complainants. According to Fairland,
these six workers were the only ones who were in the employ of Weesan at the
time Fairland and Weesan had existing contractual relationship in 1996 to
1997. But then, Fairland contends that the claims of these six workers have
already been barred by prescription as they filed their complaint more than four
years from the expiration of the alleged contractual relationship in 1997. However,
the Court notes that the records are bereft of anything that provides for such
alleged contractual relationship and the period covered by it. Absent anything to
support Fairland's claim, same deserves scant consideration.
Interestingly, we noticed Fairland's letter[86]dated January 31, 2003 informing
Weesan that it would temporarily not be availing of the latter's sewing services and
at the same time requesting for the return of the sewing machines it lent to
Weesan. Assuming said letter to be true, why was Fairland terminating Weesan's
services only on January 31, 2003 when it is now claiming that its contractual
relationship with the latter only lasted until 1997? Thus, we find the contentions
rather abstruse.

G.R. No. 182915

"It is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the
respondent without the latter being served with summons."[87] However, "if there is
no valid service of summons, the court can still acquire jurisdiction over the person
of the defendant by virtue of the latter's voluntary appearance."[88]

Although not served with summons, jurisdiction over Fairland

and Debbie was acquired through their voluntary appearance.

It can be recalled that the workers' original complaints for non-payment/

underpayment of wages and benefits were only against Susan/Weesan. For these
complaints, the Labor Arbiter issued summons[89] to Susan/Weesan which was
received by the latter on January 15, 2003.[90] The workers thereafter amended
their then already consolidated complaints to include illegal dismissal as an
additional cause of action as well as Fairland and Debbie as additional respondents.
We have, however, scanned the records but found nothing to indicate that
summons with respect to the said amended complaints was ever served upon
Weesan, Susan, or Fairland. True to their claim, Fairland and Debbie were indeed
never summoned by the Labor Arbiter.

The crucial question now is: Did Fairland and Debbie voluntarily appear before the
Labor Arbiter as to submit themselves to its jurisdiction?

Fairland argued before the CA that it did not engage Atty. Geronimo as its counsel.
However, the Court held in Santos v. National Labor Relations Commission,[91] viz:

In the instant petition for certiorari, petitioner Santos reiterates that

he should not have been adjudged personally liable by public
respondents, the latter not having validly acquired jurisdiction over his
person whether by personal service of summons or by substituted
service under Rule 19 of the Rules of Court.

Petitioner's contention is unacceptable. The fact that Atty. Romeo B.

Perez has been able to timely ask for a deferment of the initial hearing
on 14 November 1986, coupled with his subsequent active
 participation in the proceedings, should disprove the supposed want of
service of legal processes. Although as a rule, modes of service of
summons are strictly followed in order that the court may acquire
jurisdiction over the person of a defendant, such procedural modes,
however, are liberally construed in quasi-judicial proceedings,
substantial compliance with the same being considered
adequate. Moreover, jurisdiction over the person of the defendant in
civil cases is acquired not only by service of summons but also by
voluntary appearance in court and submission to its
authority. `Appearance' by a legal advocate is such `voluntary
submission to a court's jurisdiction'. It may be made not only by
actual physical appearance but likewise by the submission of pleadings
in compliance with the order of the court or tribunal.

To say that petitioner did not authorize Atty. Perez to represent him in
the case is to unduly tax credulity. Like the Solicitor General, the
Court likewise considers it unlikely that Atty. Perez would have been so
irresponsible as to represent petitioner if he were not, in fact,
authorized. Atty. Perez is an officer of the court, and he must be
presumed to have acted with due propriety. The employment of a
counsel or the authority to employ an attorney, it might be pointed
out, need not be proved in writing; such fact could [be] inferred from
circumstantial evidence. x x x[92] (Citations omitted.)

From the records, it appears that Atty. Geronimo first entered his appearance on
behalf of Susan/Weesan in the hearing held on April 3, 2003.[93] Being then newly
hired, he requested for an extension of time within which to file a position paper for
said respondents. On the next scheduled hearing on April 28, 2003, Atty.
Geronimo again asked for another extension to file a position paper for all the
respondents considering that he likewise entered his appearance for
Fairland.[94] Thereafter, said counsel filed pleadings such as Respondents' Position
Paper[95] and Respondents' Consolidated Reply[96] on behalf of all the respondents
namely, Susan/Weesan, Fairland and Debbie. The fact that Atty. Geronimo entered
his appearance for Fairland and Debbie and that he actively defended them before
the Labor Arbiter raised the presumption that he is authorized to appear for them.
As held in Santos, it is unlikely that Atty. Geronimo would have been so
irresponsible as to represent Fairland and Debbie if he were not in fact
authorized. As an officer of the Court, Atty. Geronimo is presumed to have acted
with due propriety. Moreover, "[i]t strains credulity that a counsel who has no
personal interest in the case would fight for and defend a case with persistence and
vigor if he has not been authorized or employed by the party concerned."[97]

We do not agree with the reasons relied upon by the CA's Special Ninth Division in
its May 9, 2008 Resolution in CA-G.R. No. 93204 when it ruled that Fairland,
through Atty. Geronimo, did not voluntarily submit itself to the Labor Arbiter's
jurisdiction.

In so ruling, the CA noted that Atty. Geronimo has no prior authorization from the
board of directors of Fairland to handle the case. Also, the alleged verification
signed by Debbie, who is not one of Fairland's duly authorized directors or officers,
is defective as no board resolution or secretary's certificate authorizing her to sign
the same was attached thereto. Because of these, the Special Ninth Division held
that the Labor Arbiter committed grave abuse of discretion in not requiring Atty.
Geronimo to show his proof of authority to represent Fairland considering that the
latter is a corporation.

The presumption of authority of counsel to appear on behalf of a client is found

both in the Rules of Court and in the New Rules of Procedure of the NLRC.[98]

Sec. 21, Rule 138 of the Rules of Court provides:

Sec. 21. Authority of attorney to appear - An attorney is presumed to

be properly authorized to represent any cause in which he appears,
and no written power of attorney is required to authorize him to
appear in court for his client, but the presiding judge may, on motion
of either party and reasonable grounds therefor being shown, require
any attorney who assumes the right to appear in a case to produce or
prove the authority under which he appears, and to disclose whenever
pertinent to any issue, the name of the person who employed him, and
may thereupon make such order as justice requires. An attorney
willfully appearing in court for a person without being employed,
unless by leave of the court, may be punished for contempt as an
officer of the court who has misbehaved in his official transactions.

On the other hand, Sec. 8, Rule III of the New Rules of Procedure of the
NLRC,[99] which is the rules prevailing at that time, states in part:

SECTION 8. APPEARANCES. - An attorney appearing for a party is

presumed to be properly authorized for that purpose. However, he
shall be required to indicate in his pleadings his PTR and IBP numbers
for the current year.

Between the two provisions providing for such authority of counsel to appear, the
Labor Arbiter is primarily bound by the latter one, the NLRC Rules of Procedure
being specifically applicable to labor cases. As Atty. Geronimo consistently indicated
his PTR and IBP numbers in the pleadings he filed, there is no reason for the Labor
Arbiter not to extend to Atty. Geronimo the presumption that he is authorized to
represent Fairland.
Even if we are to apply Sec. 21, Rule 138 of the Rules of Court, the Labor Arbiter
cannot be expected to require Atty. Geronimo to prove his authority under said
provision since there was no motion to that effect from either party showing
reasonable grounds therefor. Moreover, the fact that Debbie signed the verification
attached to the position paper filed by Atty. Geronimo, without a secretary's
certificate or board resolution attached thereto, is not sufficient reason for the
Labor Arbiter to be on his guard and require Atty. Geronimo to prove his
authority. Debbie, as General Manager of Fairland is one of the officials of the
company who can sign the verification without need of a board resolution because
as such, she is in a position to verify the truthfulness and correctness of the
allegations in the petition.[100]

Although we note that Fairland filed a disbarment case against Atty. Geronimo due
to the former's claim of unauthorized appearance, we hold that same is not
sufficient to overcome the presumption of authority. Such mere filing is not proof
of Atty. Geronimo's alleged unauthorized appearance. Suffice it to say that an
attorney's presumption of authority is a strong one.[101] "A mere denial by a party
that he authorized an attorney to appear for him, in the absence of a compelling
reason, is insufficient to overcome the presumption, especially when the denial
comes after the rendition of an adverse judgment,"[102] such as in the present case.

Citing PNOC Dockyard and Engineering Corporation v. National Labor Relations

Commission,[103] the CA likewise emphasized that in labor cases, both the party and
his counsel must be duly served their separate copies of the order, decision or
resolution unlike in ordinary proceedings where notice to counsel is deemed notice
to the party. It then quoted Article 224 of the Labor Code as follows:

ARTICLE 224. Execution of decisions, orders or awards. - (a) the

Secretary of Labor and Employment or any Regional Director, the
Commission or any Labor Arbiter, or med-arbiter or voluntary
arbitrator may, motu proprio or on motion of any interested party,
issue a writ of execution on a judgment within five (5) years from the
date it becomes final and executory, requiring a sheriff or a duly
deputized officer to execute or enforce final decisions, orders or
awards of the Secretary of Labor and Employment or [R]egional
Director, the Commission, the Labor Arbiter or Med-Arbiter, or
Voluntary Arbitrators. In any case, it shall be the duty of the
responsible officer to separately furnish immediately the counsels
of record and the parties with copies of said decision, orders or
awards. Failure to comply with the duty prescribed herein shall
subject such responsible officer to appropriate administrative sanctions
x x x (Emphasis in the original).[104]
The CA then concluded that since Fairland and its counsel were not separately
furnished with a copy of the August 26, 2005 NLRC Resolution denying the motions
for reconsideration of its November 30, 2004 Decision, said Decision cannot be
enforced against Fairland. The CA likewise concluded that because of this, said
November 30, 2004 Decision which held Susan/Weesan and Fairland solidarily liable
to the workers, has not attained finality.

We cannot agree. In Ginete v. Sunrise Manning Agency[105] we held that:

The case of PNOC Dockyard and Engineering Corporation vs. NLRC

cited by petitioner enunciated that `in labor cases, both the party and
its counsel must be duly served their separate copies of the order,
decision or resolution; unlike in ordinary judicial proceedings where
notice to counsel is deemed notice to the party.' Reference was made
therein to Article 224 of the Labor Code. But, as correctly pointed out
by private respondent in its Comment to the petition, Article 224 of
the Labor Code does not govern the procedure for filing a petition for
certiorari with the Court of Appeals from the decision of the NLRC but
rather, it refers to the execution of `final decisions, orders or awards'
and requires the sheriff or a duly deputized officer to furnish both the
parties and their counsel with copies of the decision or award for that
purpose. There is no reference, express or implied, to the period to
appeal or to file a petition for certiorari as indeed the caption is
`execution of decisions, orders or awards'. Taken in proper context,
Article 224 contemplates the furnishing of copies of `final decisions,
orders or awards' and could not have been intended to refer to the
period for computing the period for appeal to the Court of Appeals
from a non-final judgment or order. The period or manner of `appeal'
from the NLRC to the Court of Appeals is governed by Rule 65
pursuant to the ruling of the Court in the case of St. Martin Funeral
Homes vs. NLRC. Section 4 of Rule 65, as amended, states that the
`petition may be filed not later than sixty (60) days from notice of the
judgment, or resolution sought to be assailed'.

Corollarily, Section 4, Rule III of the New Rules of Procedure of the

NLRC expressly mandates that `(F)or the purposes of computing the
period of appeal, the same shall be counted from receipt of such
decisions, awards or orders by the counsel of record.' Although this
rule explicitly contemplates an appeal before the Labor Arbiter and the
NLRC, we do not see any cogent reason why the same rule should not
apply to petitions for certiorari filed with the Court of Appeals from
decisions of the NLRC. This procedure is in line with the
established rule that notice to counsel is notice to party and
when a party is represented by counsel, notices should be
 made upon the counsel of record at his given address to which
notices of all kinds emanating from the court should be sent. It
is to be noted also that Section 7 of the NLRC Rules of
Procedure provides that `(A)ttorneys and other
representatives of parties shall have authority to bind their
clients in all matters of procedure'' a provision which is similar
to Section 23, Rule 138 of the Rules of Court. More importantly,
Section 2, Rule 13 of the 1997 Rules of Civil Procedure
analogously provides that if any party has appeared by counsel,
service upon him shall be made upon his counsel.(Citations
omitted; emphasis supplied)

To stress, Article 224 contemplates the furnishing of copies of final decisions,

orders or awards both to the parties and their counsel in connection with the
execution of such final decisions, orders or awards. However, for the purpose of
computing the period for filing an appeal from the NLRC to the CA, same shall be
counted from receipt of the decision, order or award by the counsel of record
pursuant to the established rule that notice to counsel is notice to party. And since
the period for filing of an appeal is reckoned from the counsel's receipt of the
decision, order or award, it necessarily follows that the reckoning period for their
finality is likewise the counsel's date of receipt thereof, if a party is represented by
counsel. Hence, the date of receipt referred to in Sec. 14, Rule VII of the then in
force New Rules of Procedure of the NLRC[106] which provides that decisions,
resolutions or orders of the NLRC shall become executory after 10 calendar days
from receipt of the same, refers to the date of receipt by counsel. Thus contrary to
the CA's conclusion, the said NLRC Decision became final, as to Fairland, 10
calendar days after Atty. Tecson's receipt[107] thereof.[108] In sum, we hold that the
Labor Arbiter had validly acquired jurisdiction over Fairland and its manager,
Debbie, through the appearance of Atty. Geronimo as their counsel and likewise,
through the latter's filing of pleadings on their behalf.

Fairland is Weesan's principal.

In addition to our discussion in G.R. No. 189658 with respect to the finding that
Susan/Weesan is a mere labor-only contractor which we find to be likewise
significant here, a careful examination of the records reveals other telling facts that
Fairland is Susan/Weesan's principal, to wit: (1) aside from sewing machines,
Fairland also lent Weesan other equipment such as fire extinguishers, office tables
and chairs, and plastic chairs;[109] (2) no proof evidencing the contractual
arrangement between Weesan and Fairland was ever submitted by Fairland; (3)
while both Weesan and Fairland assert that the former had other clients aside from
the latter, no proof of Weesan's contractual relationship with its other alleged client
is extant on the records; and (4) there is no showing that any of the workers were
assigned to other clients aside from Fairland. Moreover, as found by the NLRC and
affirmed by both the Special Former Special Eighth Division in CA-G.R. SP No.
93860 and the First Division in CA-G.R. SP No. 93204, the activities, the manner of
work and the movement of the workers were subject to Fairland's control. It bears
emphasizing that "factual findings of quasi-judicial agencies like the NLRC, when
affirmed by the Court of Appeals, as in the present case, are conclusive upon the
parties and binding on this Court."[110]

Viewed in its entirety, we thus declare that Fairland is the principal of the labor-only
contractor, Weesan.

Fairland, therefore, as the principal employer, is solidarily liable with

Susan/Weesan, the labor-only contractor, for the rightful claims of the employees.
Under this set-up, Susan/Weesan, as the "labor-only" contractor, is deemed an
agent of the principal, Fairland, and the law makes the principal responsible to the
employees of the "labor-only" contractor as if the principal itself directly hired or
employed the employees.[111]

WHEREFORE, the Court,

1) in G.R. No. 189658, denies the Petition for Review on Certiorari. The assailed
Decision dated July 20, 2009 and Resolution dated October 1, 2009 of the Special
Former Special Eighth Division of the Court of Appeals in CA-G.R. No. 93860
are AFFIRMED.

2) in G.R. No. 182915, grants the Petition for Review on Certiorari. The assailed
Resolution dated May 9, 2008 of the Special Ninth Division of the Court of Appeals
in CA-G.R. No. 93204 is hereby REVERSED and SET ASIDE and the Decision
dated July 25, 2007 of the First Division of the Court of Appeals is REINSTATED
and AFFIRMED.

SO ORDERED.

[G.R. No. 119293. June 10, 2003.]

SAN MIGUEL CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS

COMMISSION, Second Division, ILAW AT BUKLOD NG MANGGAGAWA
(IBM), Respondents.

DECISION

AZCUNA, J.:
Before us is a petition for certiorari and prohibition seeking to set aside the decision
of the Second Division of the National Labor Relations Commission (NLRC) in
Injunction Case No. 00468-94 dated November 29, 1994, 1 and its resolution dated
February 1, 1995 2 denying petitioner’s motion for reconsideration. chanrob1es vi rt ua1 1aw 1i bra ry

Petitioner San Miguel Corporation (SMC) and respondent Ilaw at Buklod ng

Manggagawa (IBM), exclusive bargaining agent of petitioner’s daily-paid rank and
file employees, executed a Collective Bargaining Agreement (CBA) under which
they agreed to submit all disputes to grievance and arbitration proceedings. The
CBA also included a mutually enforceable no-strike no-lockout agreement. The
pertinent provisions of the said CBA are quoted hereunder: chanrob1es vi rtual 1aw lib rary

ARTICLE IV

GRIEVANCE MACHINERY

Section 1. The parties hereto agree on the principle that all disputes between labor
and management may be solved through friendly negotiation; . . . that an open
conflict in any form involves losses to the parties, and that, therefore, every effort
shall be exerted to avoid such an open conflict. In furtherance of the foregoing
principle, the parties hereto have agreed to establish a procedure for the
adjustment of grievances so as to (1) provide an opportunity for discussion of any
request or complaint and (2) establish procedure for the processing and settlement
of grievances.

x x x

ARTICLE V

ARBITRATION

Section 1. Any and all disputes, disagreements and controversies of any kind
between the COMPANY and the UNION and/or the workers involving or relating to
wages, hours of work, conditions of employment and/or employer-employee
relations arising during the effectivity of this Agreement or any renewal thereof,
shall be settled by arbitration through a Committee in accordance with the
procedure established in this Article. No dispute, disagreement or controversy
which may be submitted to the grievance procedure in Article IV shall be presented
for arbitration until all the steps of the grievance procedure are exhausted.

x x x
ARTICLE VI

STRIKES AND WORK STOPPAGES

Section 1. The UNION agrees that there shall be no strikes, walkouts, stoppage or
slowdown of work, boycotts, secondary boycotts, refusal to handle any
merchandise, picketing, sit-down strikes of any kind, sympathetic or general
strikes, or any other interference with any of the operations of the COMPANY during
the term of this Agreement.

Section 2. The COMPANY agrees that there shall be no lockout during the term of
this Agreement so long as the procedure outlined in Article IV hereof is followed by
the UNION. 3

On April 11, 1994, IBM, through its vice-president Alfredo Colomeda, filed with the
National Conciliation and Mediation Board (NCMB) a notice of strike, docketed as
NCMB-NCR-NS-04-180-94, against petitioner for allegedly committing: (1) illegal
dismissal of union members, (2) illegal transfer, (3) violation of CBA, (4)
contracting out of jobs being performed by union members, (5) labor-only
contracting, (6) harassment of union officers and members, (7) non-recognition of
duly-elected union officers, and (8) other acts of unfair labor practice. 4

The next day, IBM filed another notice of strike, this time through its president
Edilberto Galvez, raising similar grounds: (1) illegal transfer, (2) labor-only
contracting, (3) violation of CBA, (4) dismissal of union officers and members, and
(5) other acts of unfair labor practice. This was docketed as NCMB-NCR-NS-04-182-
94. 5

The Galvez group subsequently requested the NCMB to consolidate its notice of
strike with that of the Colomeda group, 6 to which the latter opposed, alleging
Galvez’s lack of authority in filing the same. 7

Petitioner thereafter filed a Motion for Severance of Notices of Strike with Motion to
Dismiss, on the grounds that the notices raised non-strikeable issues and that they
affected four corporations which are separate and distinct from each other. 8

After several conciliation meetings, NCMB Director Reynaldo Ubaldo found that the
real issues involved are non-strikeable. Hence on May 2, 1994, he issued separate
letter-orders to both union groups, converting their notices of strike into preventive
mediation. The said letter-orders, in part, read:chanrob1e s virtual 1aw lib rary

During the conciliation meetings, it was clearly established that the real issues
involved are illegal dismissal, labor only contracting and internal union disputes,
which affect not only the interest of the San Miguel Corporation but also the
interests of the MAGNOLIA-NESTLE CORPORATION, the SAN MIGUEL FOODS, INC.,
and the SAN MIGUEL JUICES, INC.

Considering that San Miguel Corporation is the only impleaded employer-

respondent, and considering further that the aforesaid companies are separate and
distinct corporate entities, we deemed it wise to reduce and treat your Notice of
Strike as Preventive Mediation case for the four (4) different companies in order to
evolve voluntary settlement of the disputes. . . . 9 (Emphasis supplied)

On May 16, 1994, while separate preventive mediation conferences were ongoing,
the Colomeda group filed with the NCMB a notice of holding a strike vote. Petitioner
opposed by filing a Manifestation and Motion to Declare Notice of Strike Vote Illegal,
10 invoking the case of PAL v. Drilon, 11 which held that no strike could be legally
declared during the pendency of preventive mediation. NCMB Director Ubaldo in
response issued another letter to the Colomeda Group reiterating the conversion of
the notice of strike into a case of preventive mediation and emphasizing the
findings that the grounds raised center only on an intra-union conflict, which is not
strikeable, thus:
chan rob1es v irt ual 1aw l ibra ry

x x x

A perusal of the records of the case clearly shows that the basic point to be
resolved entails the question of as to who between the two (2) groups shall
represent the workers for collective bargaining purposes, which has been the
subject of a Petition for Interpleader case pending resolution before the Office of
the Secretary of Labor and Employment. Similarly, the other issues raised which
have been discussed by the parties at the plant level, are ancillary issues to the
main question, that is, the union leadership . . . 12 (Emphasis supplied)

Meanwhile, on May 23, 1994, the Galvez group filed its second notice of strike
against petitioner, docketed as NCMB-NCR-NS-05-263-94. Additional grounds were
set forth therein, including discrimination, coercion of employees, illegal lockout and
illegal closure. 13 The NCMB however found these grounds to be mere
amplifications of those alleged in the first notice that the group filed. It therefore
ordered the consolidation of the second notice with the preceding one that was
earlier reduced to preventive mediation. 14 On the same date, the group likewise
notified the NCMB of its intention to hold a strike vote on May 27, 1994. c han rob1es v irt ua1 1aw 1i bra ry

On May 27, 1994, the Colomeda group notified the NCMB of the results of their
strike vote, which favored the holding of a strike. 15 In reply, NCMB issued a letter
again advising them that by virtue of the PAL v. Drilon ruling, their notice of strike
is deemed not to have been filed, consequently invalidating any subsequent strike
for lack of compliance with the notice requirement. 16 Despite this and the
pendency of the preventive mediation proceedings, on June 4, 1994, IBM went on
strike. The strike paralyzed the operations of petitioner, causing it losses allegedly
worth P29.98 million in daily lost production. 17

Two days after the declaration of strike, or on June 6, 1994, petitioner filed with
public respondent NLRC an amended Petition for Injunction with Prayer for the
Issuance of Temporary Restraining Order, Free Ingress and Egress Order and
Deputization Order. 18 After due hearing and ocular inspection, the NLRC on June
13, 1994 resolved to issue a temporary restraining order (TRO) directing free
ingress to and egress from petitioner’s plants, without prejudice to the union’s right
to peaceful picketing and continuous hearings on the injunction case. 19

To minimize further damage to itself, petitioner on June 16, 1994, entered into a
Memorandum of Agreement (MOA) with the respondent-union, calling for a lifting of
the picket lines and resumption of work in exchange of "good faith talks" between
the management and the labor management committees. The MOA, signed in the
presence of Department of Labor and Employment (DOLE) officials, expressly
stated that cases filed in relation to their dispute will continue and will not be
affected in any manner whatsoever by the agreement. 20 The picket lines ended
and work was then resumed.

Respondent thereafter moved to reconsider the issuance of the TRO, and sought to
dismiss the injunction case in view of the cessation of its picketing activities as a
result of the signed MOA. It argued that the case had become moot and academic
there being no more prohibited activities to restrain, be they actual or threatened.
21 Petitioner, however, opposed and submitted copies of flyers being circulated by
IBM, as proof of the union’s alleged threat to revive the strike. 22 The NLRC did not
rule on the opposition to the TRO and allowed it to lapse.

On November 29, 1994, the NLRC issued the challenged decision, denying the
petition for injunction for lack of factual basis. It found that the circumstances at
the time did not constitute or no longer constituted an actual or threatened
commission of unlawful acts. 23 It likewise denied petitioner’s motion for
reconsideration in its resolution dated February 1, 1995. 24

Hence, this petition.

Aggrieved by public respondent’s denial of a permanent injunction, petitioner

contends that: chanrob1e s virtual 1aw l ibra ry

A.

THE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT FAILED TO ENFORCE, BY

INJUNCTION, THE PARTIES’ RECIPROCAL OBLIGATIONS TO SUBMIT TO
ARBITRATION AND NOT TO STRIKE.

B.

THE NLRC GRAVELY ABUSED ITS DISCRETION IN WITHHOLDING INJUNCTION

WHICH IS THE ONLY IMMEDIATE AND EFFECTIVE SUBSTITUTE FOR THE
DISASTROUS ECONOMIC WARFARE THAT ARBITRATION IS DESIGNED TO AVOID.

C.

THE NLRC GRAVELY ABUSED ITS DISCRETION IN ALLOWING THE TRO TO LAPSE
WITHOUT RESOLVING THE PRAYER FOR INJUNCTION, DENYING INJUNCTION
WITHOUT EXPRESSING THE FACTS AND THE LAW ON WHICH IT IS BASED AND
ISSUING ITS DENIAL FIVE MONTHS AFTER THE LAPSE OF THE TRO.25 c ralaw:red

We find for the petitioner.

Article 254 of the Labor Code provides that no temporary or permanent injunction
or restraining order in any case involving or growing out of labor disputes shall be
issued by any court or other entity except as otherwise provided in Articles 218 and
264 of the Labor Code. Under the first exception, Article 218 (e) of the Labor Code
expressly confers upon the NLRC the power to "enjoin or restrain actual and
threatened commission of any or all prohibited or unlawful acts, or to require the
performance of a particular act in any labor dispute which, if not restrained or
performed forthwith, may cause grave or irreparable damage to any party or render
ineffectual any decision in favor of such party . . . ." The second exception, on the
other hand, is when the labor organization or the employer engages in any of the
"prohibited activities" enumerated in Article 264.

Pursuant to Article 218 (e), the coercive measure of injunction may also be used to
restrain an actual or threatened unlawful strike. In the case of San Miguel
Corporation v. NLRC 26 where the same issue of NLRC’s duty to enjoin an unlawful
strike was raised, we ruled that the NLRC committed grave abuse of discretion
when it denied the petition for injunction to restrain the union from declaring a
strike based on non-strikeable grounds. Further, in IBM v. NLRC, 27 we held that it
is the "legal duty and obligation" of the NLRC to enjoin a partial strike staged in
violation of the law. Failure promptly to issue an injunction by the public respondent
was likewise held therein to be an abuse of discretion.

In the case at bar, petitioner sought a permanent injunction to enjoin the

respondent’s strike. A strike is considered as the most effective weapon in
protecting the rights of the employees to improve the terms and conditions of their
employment. However, to be valid, a strike must be pursued within legal bounds.
28 One of the procedural requisites that Article 263 of the Labor Code and its
Implementing Rules prescribe is the filing of a valid notice of strike with the NCMB.
Imposed for the purpose of encouraging the voluntary settlement of disputes, 29
this requirement has been held to be mandatory, the lack of which shall render a
strike illegal. 30

In the present case, NCMB converted IBM’s notices into preventive mediation as it
found that the real issues raised are non-strikeable. Such order is in pursuance of
the NCMB’s duty to exert "all efforts at mediation and conciliation to enable the
parties to settle the dispute amicably," 31 and in line with the state policy of
favoring voluntary modes of settling labor disputes. 32 In accordance with the
Implementing Rules of the Labor Code, the said conversion has the effect of
dismissing the notices of strike filed by Respondent. 33 A case in point is PAL v.
Drilon, 34 where we declared a strike illegal for lack of a valid notice of strike, in
view of the NCMB’s conversion of the notice therein into a preventive mediation
case. We ruled, thus: chan rob 1es virtual 1aw l ibra ry

The NCMB had declared the notice of strike as "appropriate for preventive
mediation." The effect of that declaration (which PALEA did not ask to be
reconsidered or set aside) was to drop the case from the docket of notice of strikes,
as provided in Rule 41 of the NCMB Rules, as if there was no notice of strike.
During the pendency of preventive mediation proceedings no strike could be legally
declared . . . The strike which the union mounted, while preventive mediation
proceedings were ongoing, was aptly described by the petitioner as "an ambush."
(Emphasis supplied)

Clearly, therefore, applying the aforecited ruling to the case at bar, when the NCMB
ordered the preventive mediation on May 2, 1994, respondent had thereupon lost
the notices of strike it had filed. Subsequently, however, it still defiantly proceeded
with the strike while mediation was ongoing, and notwithstanding the letter-
advisories of NCMB warning it of its lack of notice of strike. In the case of
NUWHRAIN v. NLRC, 35 where the petitioner-union therein similarly defied a
prohibition by the NCMB, we said: chan rob1e s virtual 1aw l ibra ry

Petitioners should have complied with the prohibition to strike ordered by the NCMB
when the latter dismissed the notices of strike after finding that the alleged acts of
discrimination of the hotel were not ULP, hence not "strikeable." The refusal of the
petitioners to heed said proscription of the NCMB is reflective of bad faith.

Such disregard of the mediation proceedings was a blatant violation of the

Implementing Rules, which explicitly oblige the parties to bargain collectively in
good faith and prohibit them from impeding or disrupting the proceedings. 36

The NCMB having no coercive powers of injunction, petitioner sought recourse from
the public Respondent. The NLRC issued a TRO only for free ingress to and egress
from petitioner’s plants, but did not enjoin the unlawful strike itself. It ignored the
fatal lack of notice of strike, and five months after came out with a decision
summarily rejecting petitioner’s cited jurisprudence in this wise: chan rob1e s virtual 1aw li bra ry

Complainant’s scholarly and impressive arguments, formidably supported by a long

line of jurisprudence cannot however be appropriately considered in the favorable
resolution of the instant case for the complainant. The cited jurisprudence do not
squarely cover and apply in this case, as they are not similarly situated and the
remedy sought for were different. 37

Unfortunately, the NLRC decision stated no reason to substantiate the above

conclusion.

Public respondent, in its decision, moreover ruled that there was a lack of factual
basis in issuing the injunction. Contrary to the NLRC’s finding, we find that at the
time the injunction was being sought, there existed a threat to revive the unlawful
strike as evidenced by the flyers then being circulated by the IBM-NCR Council
which led the union. These flyers categorically declared: "Ipaalala n’yo sa
management na hindi iniaatras ang ating Notice of Strike (NOS) at anumang oras
ay pwede nating muling itirik ang picket line." 38 These flyers were not denied by
respondent, and were dated June 19, 1994, just a day after the union’s
manifestation with the NLRC that there existed no threat of commission of
prohibited activities.

Moreover, it bears stressing that Article 264(a) of the Labor Code 39 explicitly
states that a declaration of strike without first having filed the required notice is a
prohibited activity, which may be prevented through an injunction in accordance
with Article 254. Clearly, public respondent should have granted the injunctive relief
to prevent the grave damage brought about by the unlawful strike.

Also noteworthy is public respondent’s disregard of petitioner’s argument pointing

out the union’s failure to observe the CBA provisions on grievance and arbitration.
In the case of San Miguel Corp. v. NLRC 40 we ruled that the union therein violated
the mandatory provisions of the CBA when it filed a notice of strike without availing
of the remedies prescribed therein. Thus we held: chan rob1e s virtual 1aw l ib rary

. . . For failing to exhaust all steps in the grievance machinery and arbitration
proceedings provided in the Collective Bargaining Agreement, the notice of strike
should have been dismissed by the NLRC and private respondent union ordered to
proceed with the grievance and arbitration proceedings. In the case of Liberal Labor
Union v. Phil. Can Co., the court declared as illegal the strike staged by the union
for not complying with the grievance procedure provided in the collective bargaining
agreement . . . (Citations omitted)
As in the abovecited case, petitioner herein evinced its willingness to negotiate with
the union by seeking for an order from the NLRC to compel observance of the
grievance and arbitration proceedings. Respondent however resorted to force
without exhausting all available means within its reach. Such infringement of the
aforecited CBA provisions constitutes further justification for the issuance of an
injunction against the strike. As we said long ago: "Strikes held in violation of the
terms contained in a collective bargaining agreement are illegal especially when
they provide for conclusive arbitration clauses. These agreements must be strictly
adhered to and respected if their ends have to be achieved." 41

As to petitioner’s allegation of violation of the no-strike provision in the CBA,

jurisprudence has enunciated that such clauses only bar strikes which are economic
in nature, but not strikes grounded on unfair labor practices. 42 The notices filed in
the case at bar alleged unfair labor practices, the initial determination of which
would entail fact-finding that is best left for the labor arbiters. Nevertheless, our
finding herein of the invalidity of the notices of strike dispenses with the need to
discuss this issue.

We cannot sanction the respondent-union’s brazen disregard of legal requirements

imposed purposely to carry out the state policy of promoting voluntary modes of
settling disputes. The state’s commitment to enforce mutual compliance therewith
to foster industrial peace is affirmed by no less than our Constitution. 43 Trade
unionism and strikes are legitimate weapons of labor granted by our statutes. But
misuse of these instruments can be the subject of judicial intervention to forestall
grave injury to a business enterprise. 44

WHEREFORE, the instant petition is hereby GRANTED. The decision and resolution
of the NLRC in Injunction Case No. 00468-94 are REVERSED and SET ASIDE.
Petitioner and private respondent are hereby directed to submit the issues raised in
the dismissed notices of strike to grievance procedure and proceed with arbitration
proceedings as prescribed in their CBA, if necessary. No pronouncement as to
costs.
chanrob1e s virtua1 1 aw 1ib rary

SO ORDERED.

.
 FIRST DIVISION

[G.R. No. 127639. December 3, 1999]

SAN MIGUEL CORPORATION and BERNARDO NOEL in his

capacity as Industrial Relations
Manager, Petitioners, v. ALFREDO ETCUBAN, BERNABE
ETCUBAN, NORBERTO LABUCA, FELIPE ECHAVEZ,
BERNARDINO ENJAMBRE, ROGELIO ABELLANOSA, ROMULO
CATALAN, PEDRO EBOT, ANATOLIO GERALDIZO, JOSE
ALFANTA, EDUARDO LOFRANCO, LECERIO PARBA, RAFAEL
AGUILAR, RICARDO LACUAREN, BENJAMIN ALESNA,
ANTONIO BACUS, PRIMO SOTEROL, JESUS JADORMEO,
MANUEL MANKIKIS, APRONIANO ANG, RENATO VILLALON,
SAMUEL OUANO, JOSE DELA, JESUS BASILGO, CATALINO
COLE, SR., ALFREDO GONZALES, RAMON FLORES, MARCOS
VITO CRUZ, JACINTO DIVINAGRACIA, ALAN ALINSUGAY and
CLAUDIO AGAN, Respondents.

DECISION

KAPUNAN, J.:

Before the Court is a petition for review on certiorari of the

Decision, dated 16 May 1996 of the Court of Appeals in CA-G.R. CV
No. 46554 and of its Resolution, dated November 1996 denying
petitioners motion for reconsideration of said decision. The Court of
Appeals decision reversed and set aside the resolution of the
Regional Trial Court of Cebu, Branch 19, in Civil Case No. CEB-
15310, dismissing for lack of jurisdiction respondents complaint for
damages against petitioners for terminating their employment by
fraudulently inducing them to accept petitioners retrenchment
program.
The antecedents of this case are as follows:

In 1981, San Miguel Corporation (SMC) informed its Mandaue City

Brewery employees that it was suffering from heavy losses and
financial distress which could eventually lead to its total closure. In
several meetings convened by SMC with its employees, it was
explained to them that the distressed state of SMC was caused by
its poor sales performance which, in order to survive, called for a
cutback in production and a corresponding reduction in the work
force. Because of this, SMC offered its Retrenchment to Prevent
Loss Program to its employees. The offering of the retrenchment
program was coupled with an unsolicited advise from SMC that it
would be in the best interest of the affected employees to avail of
the said program since, by doing so, they would be able to obtain
their retrenchment benefits and privileges with ease. SMC
admonished its employees that their failure to avail of the
retrenchment program might lead to difficulty in following-up and
obtaining their separation pay from SMCs main office in Manila.

Convinced by the representations and importunings of SMC,

respondents, who had been employees of SMC since the 1960s,
availed of the retrenchment program at various times in 1981, 1982
and 1983. After their inclusion in the retrenchment program,
respondents were given their termination letters and separation
pay. In return, respondents executed receipt and release documents
in favor of SMC.

Sometime in May of 1986, respondents got hold of an SMC

publication allegedly revealing that SMC was never in financial
distress during the time when they were being retrenched but was,
in fact, enjoying a growth in sales. Respondents also learned that,
during their retrenchment, SMC was engaged in hiring new
employees. Thus, respondents concluded that SMCs financial
distress story and retrenchment program were merely schemes to
rid itself of regular employees and, thus, avoid the payment of their
actual benefits.

On 17 October 1988, respondents filed a complaint before the

Regional Arbitration Branch No. VII of the National Labor Relations
Commission (NLRC) for the declaration of nullity of the
retrenchment program. In their complaint, respondents alleged that
they were former regular employees of SMC who were deceived into
severing their employment due to SMCs concocted financial distress
story and fraudulent retrenchment program. Respondents prayed
for reinstatement, backwages and damages. On 25 July 1989, the
Labor Arbiter dismissed the complaint on the ground of prescription,
stating:

What is apparent from their allegations, however, is that

complainants are contesting their respective terminations pursuant
to the Retrenchment Program effected by San Miguel Corporation in
1981, 1982, and 1983. These then are claims for illegal dismissal
which fall within the ambit of Article 291 of the New Labor Code. It
provides:

ART. 291. Money claims. All money claims arising from employer-
employee relations accruing during the effectivity of this Code, shall
be filed within three (3) years from the time the cause of action
accrued; otherwise they shall be forever barred. x x x

Under the aforequoted provision therefore, complainants causes of

action have already prescribed.

Even if this Office were to apply the more liberal interpretation of

the above provisions enunciated by the Honorable Supreme Court in
the case of Callanta vs. Carnation Phils., Inc., G.R. No. 70615, Nov.
3, 1986, an interpretation that views illegal dismissal as an injury
upon the rights of a person, hence, under Article 1146 of the Civil
Code prescribes in 4 years, those who were retrenched in 1983, at
the very latest, had only until 1987 to institute a complaint against
SMC.

The records will show that all the above captioned cases were filed
in 1988.

Clearly, therefore, complainants causes of action have already

prescribed.1
Respondents then appealed to the NLRC which, on 20 December
1990, dismissed the appeal and affirmed the decision of the labor
arbiter.

On 14 December 1993, respondents, who were thirty-one (31) in

number, again filed a complaint2 against SMC, but this time before
the Regional Trial Court of Cebu City, Branch 19. Although their
complaint was captioned as an action for damages, respondents
sought the declaration of nullity of their so-called collective contract
of termination with SMC. Respondents theorized that SMCs offer of
retrenchment and their acceptance of the same resulted in the
consummation of a collective contract of termination between
themselves and SMC. Respondents asserted that since the cause of
their contract of termination was non-existent, i.e., the claim of
SMC that it was under financial distress, the said contract is null and
void. In this regard, respondents claimed that they were entitled to
damages because of the deception employed upon them by SMC
which led to their separation from the company. They further
asseverated that their separation from employment resulted in the
loss of earnings and other benefits. Hence, they prayed that
petitioners jointly and severally be ordered, among others, to pay
each of them the sum of P650,000.00 as actual and compensatory
damages, P100,000.00 as moral damages, P50,000.00 as
exemplary damages, and 25% of whatever may be awarded to
them as attorneys fees.

Instead of filing an answer, SMC filed a motion to dismiss on the

bases of lack of jurisdiction, res judicata,payment, prescription and
failure to state a cause of action. On 21 June 1994, the RTC issued
a resolution granting SMCs motion to dismiss on the grounds of lack
of jurisdiction and prescription. The pertinent portion of the
resolution reads:

Although plaintiffs, among others, pray for the declaration of nullity

of the contract of termination, their main cause is for damages,
actual, compensatory and moral damages in the aggregate amount
of P650,000.00 each and P1,200,000.00 each for plaintiffs Bernabe
Etcuban and Jose Dela. The alleged acts leading to their signing of
the contract of termination are acts constituting labor disputes. It is
a case for damages resulting from illegal termination. Under Article
217 of the Labor Code, such cases fall within the exclusive original
jurisdiction of the Labor Arbiter and the National Labor Relations
Commission. In fact, in 1988, plaintiffs instituted the same case for
Implementation of Art. 217, par. 5, now (sic) Labor Code and
Declaration of Nullity of Retrenchment Program, and Damages (see
annex A to motion to Dismiss) with the National Labor Relations
Commission. Their cases were dismissed, not because of lack of
jurisdiction, but because their cause of action already prescribed,
the cases having been filed after the three-year prescriptive period.
Plaintiffs have already submitted to the jurisdiction of the NLRC
when they filed their cases with that agency. And they prayed for
the declaration of nullity of the retrenchment program of defendant
corporation. It was only after the dismissal of those cases that they
instituted this present suit.

xxx

Moreover, the contract of termination which plaintiffs were allegedly

induced to sign is not void from the beginning. At most, such
contract is voidable, plaintiffs consent thereto being allegedly
vitiated by fraud and deceit.

Thus plaintiffs allege that the brainwashing conducting (ted) on the

affected employees through briefings and pulong-pulongs relative to
the actual economic condition of defendant corporation finally led
plaintiffs to believe that indeed said defendant was incurring losses
and has opted to reduce its production to arrest an immediate
collapse of its operations. Thus, the corresponding need to cut down
on its work force; (par. 11, complaint); This distressed state of
affairs of the defendant corporation inculcated into their (sic) minds
of defendants and the worry of non-recovery of their benefits in the
event defendant corporation closes down, induced plaintiffs to
accept the offer of retrenchment. Thereupon, they were paid their
so-called separation pay. Hence, the contract of termination
evidenced by individual termination letters and benefits paid to each
plaintiff was consummated. (par. 12). But that records, however,
revealed that from 1973 up to 1983, inclusive, defendant
corporation never suffered any business reverses or losses in its
operation.; (par. 13, complaint).

When the consent of one of the contracting parties is vitiated by

fraud or deceit, the resulting contract is only voidable or annulable,
not void or inexistent. The action to annul the same should be filed
within four (4) years from discovery of the fraud or deceit.
According to plaintiffs complaint, they acquired knowledge of the
actual business condition of defendant corporation only in May 1986
when one of them got hold of a copy of the companys publication.
That was the time they discovered that indeed, defendants deceived
them x x x. (par. 14, complaint.) From May 1986 to January 14,
1993, more than six (6) years have already elapsed. Clearly, the
action, has already prescribed.

The rest of the grounds need not be discussed.

WHEREFORE, for want of jurisdiction, and on the further ground of

prescription, the above-entitled case is dismissed.

SO ORDERED.3

Respondents seasonably appealed to the Court of Appeals (CA). In

its Decision dated 16 May 1996, the CA reversed and set aside the
lower courts order of dismissal and remanded the case to the RTC
for further proceedings. The pertinent portion of the decision reads:

A scrutiny of the allegations of the present complaint reveals that

plaintiffs cause of action is not actually based on an employer-
employee relationship between the plaintiffs and the defendants. It
primarily involves a civil dispute arising from the claim of plaintiffs
that the cause for the contract of termination of their services is
inexistent rendering said contract as null an void from the
beginning. x x x

xxx.

Guided thereby, we find that recourse by plaintiffs-appellants to the

civil law on contracts by raising the issue [of] whether or not the
contract of termination of services entered into by plaintiffs with
defendants is void from the beginning due to inexistent cause of
action under Article 1409 of the Civil Code, places the case within
the jurisdiction of the civil courts.

As refined by the Supreme Court, where the resolution of the

dispute requires expertise, not in labor management relations nor in
wage structures and other terms and conditions of employment, but
rather in the application of the general civil law, such claim falls
outside the area of competence of expertise ordinarily ascribed to
Labor Arbiters and the NLRC. Thus, the trial court erred in finding
that it has no jurisdiction over the case.

Secondly, the trial court erred in ruling that the complaint of

plaintiffs-appellants has prescribed. Article 1410 of the Civil Code, in
relation to Article 1409 as herein before quoted, specifically
provides that the action for the declaration of the inexistence of a
contract on ground (3) above does not prescribe.

Thirdly, one of the requisites for the application of the principle of

res judicata is that there must be a judgment on the merits in the
earlier case involving the same parties and the same issues.
Plaintiffs-appellants complaint was dismissed by the NLRC on the
ground that their cause of action had prescribed; no trial has been
held on the first complaint. Thus, the dismissal of the first complaint
is not a judgment on the merits and therefore not applicable to the
present case.

xxx.

WHEREFORE, the order of dismissal is reversed and set aside. Let

the original records of Civil Case No. CEB-15310, be remanded to
the Regional Trial Court (Branch 19), Cebu City for further
proceedings. Costs against defendants-appellees.

SO ORDERED.4

SMC filed a motion for reconsideration but was denied in the CAs
Resolution dated 14 November 19965. Hence, this petition.

In its petition, SMC contends that the CA erred:

 I

IN HOLDING THAT THE REGIONAL TRIAL COURT OF CEBU, BRANCH

19, HAS JURISDICTION OVER THE INSTANT CASE AND THE CAUSE
OF ACTION OF THE RESPONDENTS ARE NOT ACTUALLY BASED ON
AN EMPLOYER-EMPLOYEE RELATIONSHIP WHEN THE COMPLAINT
SHOWS THAT THE RESPONDENTS ARE CLAIMING TO HAVE BEEN
UNJUSTLY SEPARATED FROM THEIR REGULAR EMPLOYMENTS (sic)
BY THE PETITIONERS AND ARE DEMANDING TO BE PAID ACTUAL
AND COMPENSATORY DAMAGES CONSISTING OF THEIR EXPECTED
INCOME BY WAY OF SALARIES AND OTHER FRINGE BENEFITS DUE
THEM UNDER THE LAW FROM THE TIME OF THEIR SEPARATION
AND UNTIL THEIR RETIREMENT DUE TO AGE OR LENGTH OF
SERVICE . . . SOCIAL SECURITY SYSTEM BENEFITS . . .
RETIREMENT BENEFITS.

II

IN RULING THAT THE COMPLAINT OF THE RESPONDENTS HAVE

NOT YET PRESCRIBED WHEN THE RESPONDENTS HAVE CLAIMED IN
THEIR COMPLAINT THAT THEY HAVE BEEN ALLEGEDLY
BRAINWASHED BY THE PETITIONERS AND THEIR COMPAINT (sic)
WAS FILED ONLY AFTER MORE THAN SIX (6) YEARS HAVE LAPSED
FROM THE TIME THAT THE RESPONDENTS CLAIMED TO HAVE
DISCOVERED THAT INDEED, DEFENDANTS (Petitioners) DECEIVED
THEM INTO BELIEVING THAT DEFENDANT CORPORATION WAS
INCURRING LOSSES IN ITS OPERATION HENCE, THE NECESSITY TO
TRIM DOWN ITS WORK FORCE TO INDUCE THEM TO ACCEPT THE
OFFER OF RETRENCHMENT (sic).

III

IN RULING THAT THE DISMISSAL OF THE FIRST COMPLAINT IS NOT

A JUDGMENT ON THE MERITS AND THEREFORE NOT APPLICABLE
TO THE PRESENT CASE WHEN IT IS THE SAID DIVISIONS OWN
FINDING THAT: THE COMPLAINT FILED BY HEREIN PLAINTIFFS-
APPELLANTS (Respondents) WITH THE REGIONAL ARBITRATION
BRANCH PRAYED FOR THE DECLARATION OF THE TERMINATION
SCHEME ALLEGEDLY DECEPTIVELY FORCED UPON THEM TO BE
NULL AND VOID WITH THE SAME PRAYER THAT THEY BE
REINSTATED TO THEIR REGULAR EMPLOYMENT WITHJOUT ANY
LOSS OF ANY RIGHTS (sic) AND BENEFITS (sic) AS WELL AS
PAYMENT OF THEIR BACKWAGES AND DAMAGES.6

We find the petition impressed with merit.

The demarcation line between the jurisdiction of regular courts and

labor courts over cases involving workers and their employers has
always been the subject of dispute. We have recognized that not all
claims involving such groups of litigants can be resolved solely by
our labor courts.7 However, we have also admonished that the
present trend is to refer worker-employer controversies to labor
courts, unless unmistakably provided by the law to be
otherwise.8 Because of this trend, jurisprudence has developed the
reasonable causal connection rule. Under this rule, if there is a
reasonable causal connection between the claim asserted and the
employer-employee relations, then the case is within the jurisdiction
of our labor courts.9 In the absence of such nexus, it is the regular
courts that have jurisdiction.10

The jurisdiction of labor courts is provided under Article 217 of the

Labor Code, to wit:

ART. 217. Jurisdiction of Labor Arbiters and the Commission.-- (a)

Except as otherwise provided under this Code the Labor Arbiter 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:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code

including questions involving the legality of strikes and lockouts;
and

6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over

all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of

collective bargaining agreements and those arising form the
interpretation or enforcement of company personnel policies shall
be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided
in said agreements.11

With regard to claims for damages under paragraph 4 of the above

article, this Court has observed that:

Jurisprudence has evolved the rule that claims for damages under
paragraph 4 of Article 217, to be cognizable by the Labor Arbiter,
must have a reasonable causal connection with any of the claims
provided for in that article. Only if there is such a connection with
the other claims can the claim for the damages be considered as
arising from employer-employee relations.12

In the present case, while respondents insist that their action is for
the declaration of nullity of their contract of termination, what is
inescapable is the fact that it is, in reality, an action for damages
emanating form employeremployee relations. First, their claim for
damages is grounded on their having been deceived into serving
their employment due to SMCs concocted financial distress and
fraudulent retrenchment program a clear case of illegal dismissal.
Second, a comparison of respondents complaint for the declaration
of nullity of the retrenchment program before the labor arbiter and
the complaint for the declaration of nullity of their contract of
termination before the RTC reveals that the allegations and prayer
of the former are almost identical with those of the latter except
that the prayer for reinstatement was no longer included and the
claim for backwages and other benefits was replaced with a claim
for actual damages. These are telltale signs that respondents claim
for damages is intertwined with their having been separated from
their employment without just cause and, consequently, has a
reasonable causal connection with their employer-employee
relations with SMC. Accordingly, it cannot be denied that
respondents claim falls under the jurisdiction of the labor arbiter as
provided in paragraph 4 of Article 217.

Respondents assertion that their action is for the declaration of

nullity of their contract of termination is merely an ingenious way of
presenting their actual action, which is a claim for damages
grounded on their having been illegal terminated. However, it would
seem that respondents committed a Freudian slip when they
captioned their claim against SMC as an action for damages.13 Even
the term used for designating the contract, i.e. contract of
termination, was formulated in a shrewd manner so as to avoid a
semblance of employer-employee relations. This observation is
bolstered by the fact that if respondents designation for the contract
were to be made complete and reflective of its nature, its proper
designation would be a contract of termination of employment.

The Court is aware that the Civil Code provisions on contracts and
damages may be used as bases for addressing the claim of
respondents. However, the fact remains that the present action
primarily involves an employer-employee relationship. The damages
incurred by respondents as a result of the alleged fraudulent
retrenchment program and the allegedly defective contract of
termination are merely the civil aspect of the injury brought about
by their illegal dismissal.14 The civil ramifications of their actual
claim cannot alter the reality that it is primordially a labor matter
and, as such, is cognizable by labor courts. InAssociated Citizens
Bank vs. Japson,15 we held:

For the unlawful termination of employment, this Court in Primero

v. Intermediate Appellate Court, supra, ruled that the Labor Arbiter
had the exclusive and original jurisdiction over claims for moral and
other forms of damages, so that the employee in the proceedings
before the Labor Arbiter should prosecute his claims not only for
reliefs specified under the Labor Code but also for damages under
the Civil Code. This is because an illegally dismissed employee has
only a single cause of action although the act of dismissal may be a
violation not only the Labor Code but also of the Civil Code. For a
single cause of action, the dismissed employee cannot institute a
separate action before the Labor Arbiter for backwages and
reinstatement and another action before the regular court for the
recovery of moral and other forms of damages because splitting a
single cause of action is procedurally unsound and obnoxious to the
orderly administration of justice. (Primero v. Intermediate Appellate
Court, supra, citing Gonzales v. Province of Iloilo, 38 SCRA 209;
Cyphil Employees Association-Natu v. Pharmaceutical Industries, 77
SCRA 135; Calderon v. Court of Appeals, 100 SCRA 459, etc.)16

Even assuming arguendo that the RTC has jurisdiction, it is obvious

from respondents own pleadings that their action for the declaration
of nullity of the contract of termination will not prosper.
Respondents allege that they were deceived by SMC into believing
that it was under financial distress which, thus, led them into
concluding the contract of termination with the
latter.17 Respondents then posit that since the cause of the contract,
SMCs alleged financial distress, was inexsistent, the contract is null
and void. The argument is flawed.

The fact that SMC was never in financial distress does not, in any
way, affect the cause of their contract of termination. Rather, the
fraudulent representations of SMC only affected the consent of
respondents in entering into the said contract.18 If the consent of a
contracting party is vitiated by fraud, the contract is not void but,
merely, voidable.19 In Abando vs. Lozada,20 we ruled:
As correctly pointed out by the appellate court, the strategem (sic),
the deceit, the misrepresentations employed by Cuevas and Pucan
are facts constitutive of fraud which is defined in Article 1338 of the
Civil Code as that (sic) insidious words or machinations of one of the
contracting parties, by which the other is induced to enter into a
contract which, without them, he would not have agreed to. When
fraud is employed to obtain the consent of the other party to enter
into a contract, the resulting contract is merely a voidable contract,
that is, a valid and subsisting contract until annulled or set aside by
a competent court. x x x21

An action to annul a voidable contract based on fraud should be

brought within four (4) years from the discovery of the same.22 In
the present case, respondents discovered SMCs fraud in May 1986.
However, the action to question the validity of the contract was only
brought on 14 December 1993, or more than seven (7) years after
the discovery of the fraud. Clearly, respondents action has already
prescribed.

The issue of jurisdiction and prescription having been resolved, it is

no longer necessary to discuss the issue on res judicata raised in
this petition.

WHEREFORE, premises considered, the Decision of the Court of

Appeals dated 16 May 1996 and its Resolution dated 14 November
1996 are hereby REVERSED and SET ASIDE and the Resolution
dated 21 June 1994 of the Regional Trial Court of Cebu, Branch 19,
in CEB-15310, REINSTATED.

SO ORDERED.