THIRD DIVISION

[G.R. No. 85985. August 13, 1993.]

PHILIPPINE AIRLINES, INC. (PAL), Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION,

LABOR ARBITER ISABEL P. ORTIGUERRA, and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION
(PALEA), Respondents.

Solon Garcia for Petitioner.

Adolpho M. Guanzon for respondent PALEA.

DECISION

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 prescribe rules and
regulations regarding employees’ 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 referred to the requirements for negotiating a CBA which was inapplicable as indeed the
current CBA had been negotiated. chanrob les.co m:cralaw: red

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: chanrob 1es virtual 1aw l ibra ry

Section 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.

Section 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.)

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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: chanrob 1es vi rtua l 1aw lib rary

WHEREFORE, premises considered, respondent PAL is hereby ordered as follows: chanrob1e s virtual 1aw l ib rary

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. chanroble s.com:c ralaw:red

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: chanrob1es v irt ual 1aw l ibra ry

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 of 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: chanrob1es v irt ual 1aw li bra ry

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. chanroble s virt ual lawl ibra ry

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 their 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 v. 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) v. 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: chanrob1es vi rt ual 1aw li brary

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

2
(University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories
(Phil.), Inc. v. NLRC (154 SCRA 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 employees’ 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 v. 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 v. 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 of 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 must less, obtain the conformity
thereto" (pp. 11-12, Petitioner’s Memorandum; pp. 180-181, Rollo.) Petitioners view is based on the following
provision of the agreement: chanrob1e s virtual 1aw lib rary

The Association recognizes the right of the Company to determine matters of management 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. chanrobles. com.ph : vi rtua l law lib ra ry

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 matter 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.

Feliciano, Bidin, Romero, and Vitug, JJ., concur.

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 EN BANC

ANTONIO C. CARAG, G.R. No. 147590

Petitioner,
Present:

PUNO, C.J.,
QUISUMBING,
- versus - YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
TINGA,
NATIONAL LABOR RELATIONS CHICO-NAZARIO,
COMMISSION, ISABEL G. GARCIA,
PANGANIBAN-ORTIGUERRA, as VELASCO, JR., and
Executive Labor Arbiter, NAFLU, and NACHURA, JJ.
MARIVELES APPAREL
CORPORATION LABOR UNION,
Respondents. Promulgated:

April 2, 2007
x--------------------------------------------------x

DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari[1] assailing the Decision dated 29 February
2000[2] and the Resolution dated 27 March 2001[3] of the Court of Appeals (appellate court)
in CA-G.R. SP Nos. 54404-06. The appellate court affirmed the decision dated 17 June
1994[4] of Labor Arbiter Isabel Panganiban-Ortiguerra (Arbiter Ortiguerra) in RAB-III-08-
5198-93 and the resolution dated 5 January 1995[5] of the National Labor Relations
Commission (NLRC) in NLRC CA No. L-007731-94.

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

4
 The Facts

National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor
Union (MACLU) (collectively, complainants), on behalf of all of MACs 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.,

5
 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 MACs 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

6
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 attorneys 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 attorneys fees.

7
 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 attorneys 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 attorneys 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 P49,101,621.00; and
2. To pay complainants attorneys 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)

8
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
corporations 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
(P48,101,621.00) 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 MACs prayer for the issuance of a temporary restraining
order to enjoin the NLRC from enforcing Arbiter Ortiguerras Decision. On 31 May 1995,
we granted complainants motion for consolidation of G.R. No. 118820 with G.R. No.

9
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 MACs 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 Courts First Division denied the petition for Carags
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 Courts First Division denied Carags 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 Courts 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

10
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
Courts 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 courts decision of 29 February 2000 by raising the following
issues before this Court:

1. Has petitioner Carags right to due process been blatantly violated by holding him
personally liable for over P50 million of the corporations liability, merely as board
chairman and solelyon 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
unions 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 petitioners 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 Ortiguerras Decision that she only summoned
complainants and MAC, and not Carag, to a conference for possible settlement. In her

11
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 P49,101,621 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 Ortiguerras 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 petitioners stubborn insistence that private respondents be
declared in default.

Second, the parties agreed to submit their respective motions petitioners 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,

12
 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 Ortiguerras 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 Ortiguerras 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

13
 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.[26] In 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.

14
 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 (P1,000.00) nor more than Ten Thousand Pesos
(P10,000.00), 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 283[28] 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 Ortiguerras 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
MACs 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)

15
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. NLRC[29] and Spouses Santos v. NLRC[30] 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.
xxx
The ruling in A.C. Ransom Labor Union-CCLU v. NLRC, 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

16
 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. (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, 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 latters 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 Courts
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
Directors 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 () 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

17
 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.

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:

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.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

18
 REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Associate Justice

ANGELINA SANDOVAL- MA. ALICIA AUSTRIA-

GUTIERREZ MARTINEZ
Associate Justice Associate Justice

RENATO C. CORONA CONCHITA CARPIO MORALES

Associate Justice Associate Justice

ROMEO J. CALLEJO, SR. ADOLFO S. AZCUNA

Associate Justice Associate Justice

DANTE O. TINGA MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

CANCIO C. GARCIA PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

19
 ANTONIO EDUARDO B. NACHURA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Court.

REYNATO S. PUNO
Chief Justice

[1] Under Rule 45 of the 1997 Rules of Civil Procedure.

[2] Rollo, pp. 66-87. Penned by Associate Justice Teodoro P. Regino, with Associate Justices Conchita Carpio Morales (now
Associate Justice of this Court) and Jose L. Sabio, Jr., concurring.
[3] Id. at 89-90. Penned by Associate Justice Teodoro P. Regino, with Associate Justices Conchita Carpio Morales (now Associate

Justice of this Court ) and Jose L. Sabio, Jr., concurring.

[4] Id. at 169-175.
[5] Id. at 201-204.
[6] Id. at 149-150.
[7] Id. at 153-155.
[8] Id. at 169-175.
[9] Id. at 193-194.
[10] Id. at 203.
[11] 356 Phil. 811 (1998).
[12] Rollo, p. 86.

[13] Id. at 89-90.

[14] Id. at 15.
[15] Section 2. Mandatory Conference/Conciliation. Within two (2) days from receipt of an assigned case, the Labor Arbiter shall

summon the parties to a conference for the purpose of amicably settling the case upon a fair compromise or determining
the real parties in interest, defining and simplifying the issues in the case, entering into admissions and/or stipulations of
facts, and threshing out all other preliminary matters. The notice or summons shall specify the date, time and place of the
preliminary conference/pretrial and shall be accompanied by a copy of the complaint.
Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be reduced to writing and signed
by the parties and their respective counsels, if any before the Labor Arbiter. The settlement shall be approved by the
Labor Arbiter after being satisfied that it was voluntarily entered into by the parties and after having explained to them
the terms and consequences thereof.
A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before whom the case is pending shall
be approved by him if, after confronting the parties, particularly the complainants, he is satisfied that they understand the
terms and conditions of the settlement and that it was entered into freely and voluntarily by them and the agreement is
not contrary to law, morals, and public policies.
A compromise agreement duly entered into in accordance with this Section shall be final and binding upon the parties and the
Order approving it shall have the effect of a judgment rendered by the Labor Arbiter in the final disposition of the case.

20
The number of conferences shall not exceed three (3) settings and shall be terminated within thirty (30) calendar days from the date
of the first conference.
[16] Section 3. Submission of Position Papers/Memorandum. Should the parties fail to agree upon an amicable settlement, either in

whole or in part, during the conferences, the Labor Arbiter shall issue an order stating therein the matters taken up and
agreed upon during the conferences and directing the parties to simultaneously file their respective verified position
papers.
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may
have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. The parties shall thereafter not be allowed
to allege facts, or present evidence to prove facts, not referred to and any cause or causes of action not included in the
complaint or position papers, affidavits and other documents. Unless otherwise requested in writing by both parties, the
Labor Arbiter shall direct both parties to submit simultaneously their position papers/memorandum with the supporting
documents and affidavits within fifteen (15) calendar days from the date of the last conference, with proof of having
furnished each other with copies thereof.
[17] Section 4. Determination of Necessity of Hearing. Immediately after the submission by the parties of their position

papers/memorandum, the Labor Arbiter shall motu proprio determine whether there is need for a formal trial or
hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary
evidence, if any, from any party or witness.
[18] Section 5. Period to Decide Case. x x x x

xxxx
b) If the Labor Arbiter finds no necessity of further hearing after the parties have submitted their position papers and
supporting documents, he shall issue and Order to that effect and shall inform the parties, stating the reasons therefor. In
any event, he shall render his decision in the case within the same period provided in paragraph (a) hereof.
[19] Section 11. Non-appearance of Parties at Conference/Hearings. x x x x

xxxx
c) In case of two (2) successive unjustified non-appearances by the respondent during his turn to present evidence, despite
due notice, the case shall be considered submitted for decision on the basis of the evidence so far presented.
[20] Promulgated on 31 August 1990 and took effect on 9 October 1990.
[21] Section 3, Rule V of The New Rules of Procedure of the NLRC.
[22] 372 Phil. 873, 877-879 (1999).
[23] Rollo, p. 173.
[24] McLeod v. NLRC, G.R. No. 146667, 23 January 2007, citing Lim v. Court of Appeals, 380 Phil. 60 (2000) and Del Rosario v.

NLRC, G.R. No. 85416, 24 July 1990, 187 SCRA 777.

[25] Id.
[26] Id.
[27] G.R. No. 103575, 5 April 1993, 221 SCRA 9, 14.

[28] Art. 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. 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 cases of closures or 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 as one (1) whole year.
[29] See note 24.
[30] 354 Phil. 918 (1998).
[31] McLeod v. NLRC, supra note 24.

21
 THIRD DIVISION

[G.R. No. 113856. September 7, 1998]

SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED

WORKERS OF THE PHILIPPINES (SMTFM-UWP), its officers and
members, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
HON. JOSE G. DE VERA and TOP FORM MANUFACTURING PHIL.,
INC., respondents.

DECISION
ROMERO, J.:

The issue in this petition for certiorari is whether or not an employer committed an unfair labor practice
by bargaining in bad faith and discriminating against its employees. The charge arose from the employers
refusal to grant across-the-board increases to its employees in implementing Wage Orders Nos. 01 and 02
of the Regional Tripartite Wages and Productivity Board of the National Capital Region (RTWPB-
NCR). Such refusal was aggravated by the fact that prior to the issuance of said wage orders, the employer
allegedly promised at the collective bargaining conferences to implement any government-mandated wage
increases on an across-the-board basis.
Petitioner Samahang Manggagawa sa Top Form Manufacturing United Workers of the Philippines
(SMTFM) was the certified collective bargaining representative of all regular rank and file employees of
private respondent Top Form Manufacturing Philippines, Inc. At the collective bargaining negotiation held
at the Milky Way Restaurant in Makati, Metro Manila on February 27, 1990, the parties agreed to discuss
unresolved economic issues. According to the minutes of the meeting, Article VII of the collective
bargaining agreement was discussed. The following appear in said Minutes:

ARTICLE VII. Wages

Section 1. Defer

Section 2. Status quo

Section 3. Union proposed that any future wage increase given by the government should be
implemented by the company across-the-board or non-conditional.

Management requested the union to retain this provision since their sincerity was already proven when
the P25.00 wage increase was granted across-the-board. The union acknowledges managements sincerity
but they are worried that in case there is a new set of management, they can just show their CBA. The
union decided to defer this provision.[1]

In their joint affidavit dated January 30, 1992,[2] union members Salve L. Barnes, Eulisa Mendoza,
Lourdes Barbero and Concesa Ibaez affirmed that at the subsequent collective bargaining negotiations, the
union insisted on the incorporation in the collective bargaining agreement (CBA) of the union proposal on
automatic across-the-board wage increase. They added that:

11. On the strength of the representation of the negotiating panel of the company and the
above undertaking/promise made by its negotiating panel, our union agreed to drop said
proposal relying on the undertakings made by the officials of the company who negotiated
with us, namely, Mr. William Reynolds, Mr. Samuel Wong and Mrs. Remedios Felizardo.
Also, in the past years, the company has granted to us government mandated wage increases
on across-the-board basis.

22
 On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an increase of P17.00 per
day in the salary of workers. This was followed by Wage Order No. 02 dated December 20, 1990 providing
for a P12.00 daily increase in salary.
As expected, the union requested the implementation of said wage orders. However, they demanded
that the increase be on an across-the-board basis. Private respondent refused to accede to that
demand.Instead, it implemented a scheme of increases purportedly to avoid wage distortion. Thus, private
respondent granted the P17.00 increase under Wage Order No. 01 to workers/employees receiving salary
of P125.00 per day and below. The P12.00 increase mandated by Wage Order No. 02 was granted to those
receiving the salary of P140.00 per day and below. For employees receiving salary higher than P125.00 or
P140.00 per day, private respondent granted an escalated increase ranging from P6.99 to P14.30 and from
P6.00 to P10.00, respectively.[3]
On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter demanding
that it should fulfill its pledge of sincerity to the union by granting an across-the-board wage increases (sic)
to all employees under the wage orders. The union reiterated that it had agreed to retain the old provision
of CBA on the strength of private respondents promise and assurance of an across-the-board salary increase
should the government mandate salary increases.[4] Several conferences between the parties
notwithstanding, private respondent adamantly maintained its position on the salary increases it had granted
that were purportedly designed to avoid wage distortion.
Consequently, the union filed a complaint with the NCR NLRC alleging that private respondents act
of reneging on its undertaking/promise clearly constitutes an act of unfair labor practice through bargaining
in bad faith. It charged private respondent with acts of unfair labor practices or violation of Article 247 of
the Labor Code, as amended, specifically bargaining in bad faith, and prayed that it be awarded actual,
moral and exemplary damages.[5] In its position paper, the union added that it was charging private
respondent with violation of Article 100 of the Labor Code.[6]
Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01 and 02,
it had avoided the existence of a wage distortion that would arise from such implementation. It emphasized
that only after a reasonable length of time from the implementation of the wage orders that the union
surprisingly raised the question that the company should have implemented said wage orders on an across-
the-board basis. It asserted that there was no agreement to the effect that future wage increases mandated
by the government should be implemented on an across-the-board basis. Otherwise, that agreement would
have been incorporated and expressly stipulated in the CBA. It quoted the provision of the CBA that reflects
the parties intention to fully set forth therein all their agreements that had been arrived at after negotiations
that gave the parties unlimited right and opportunity to make demands and proposals with respect to any
subject or matter not removed by law from the area of collective bargaining. The same CBA provided that
during its effectivity, the parties each voluntarily and unqualifiedly waives the right, and each agrees that
the other shall not be obligated, to bargain collectively, with respect to any subject or matter not specifically
referred to or covered by this Agreement, even though such subject or matter may not have been within the
knowledge or contemplation of either or both of the parties at the time they negotiated or signed this
Agreement.[7]
On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the complaint for
lack of merit.[8] He considered two main issues in the case: (a) whether or not respondents are guilty of
unfair labor practice, and (b) whether or not the respondents are liable to implement Wage Orders Nos. 01
and 02 on an across-the-board basis. Finding no basis to rule in the affirmative on both issues, he explained
as follows:

The charge of bargaining in bad faith that the complainant union attributes to the respondents
is bereft of any certitude inasmuch as based on the complainant unions own admission, the
latter vacillated on its own proposal to adopt an across-the-board stand or future wage
increases. In fact, the union acknowledges the managements sincerity when the latter
allegedly implemented Republic Act 6727 on an across-the-board basis. That such union
proposal was not adopted in the existing CBA was due to the fact that it was the union itself
which decided for its deferment. It is, therefore, misleading to claim that the management
undertook/promised to implement future wage increases on an across-the-board basis when
as the evidence shows it was the union who asked for the deferment of its own proposal to
that effect.

23
The alleged discrimination in the implementation of the subject wage orders does not inspire
belief at all where the wage orders themselves do not allow the grant of wage increases on an
across-the-board basis. That there were employees who were granted the full extent of the
increase authorized and some others who received less and still others who did not receive
any increase at all, would not ripen into what the complainants termed as discrimination.
That the implementation of the subject wage orders resulted into an uneven implementation
of wage increases is justified under the law to prevent any wage distortion. What the
respondents did under the circumstances in order to deter an eventual wage distortion
without any arbitral proceedings is certainly commendable.

The alleged violation of Article 100 of the Labor Code, as amended, as well as Article XVII,
Section 7 of the existing CBA as herein earlier quoted is likewise found by this Branch to
have no basis in fact and in law. No benefits or privileges previously enjoyed by the
employees were withdrawn as a result of the implementation of the subject orders. Likewise,
the alleged company practice of implementing wage increases declared by the government
on an across-the-board basis has not been duly established by the complainants evidence.
The complainants asserted that the company implemented Republic Act No. 6727 which
granted a wage increase of P25.00 effective July 1, 1989 on an across-the-board basis.
Granting that the same is true, such isolated single act that respondents adopted would
definitely not ripen into a company practice. It has been said that `a sparrow or two returning
to Capistrano does not a summer make.

Finally, on the second issue of whether or not the employees of the respondents are entitled
to an across-the-board wage increase pursuant to Wage Orders Nos. 01 and 02, in the face of
the above discussion as well as our finding that the respondents correctly applied the law on
wage increases, this Branch rules in the negative.

Likewise, for want of factual basis and under the circumstances where our findings above are
adverse to the complainants, their prayer for moral and exemplary damages and attorneys
fees may not be granted.

Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed Resolution of
April 29, 1993[9] dismissing the appeal for lack of merit. Still dissatisfied, petitioner sought reconsideration
which, however, was denied by the NLRC in the Resolution dated January 17, 1994. Hence, the instant
petition for certiorari contending that:
-A-

THE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING

THE PRIVATE RESPONDENTS GUILTY OF ACTS OF UNFAIR LABOR
PRACTICES WHEN, OBVIOUSLY, THE LATTER HAS BARGAINED IN
BAD FAITH WITH THE UNION AND HAS VIOLATED THE CBA
WHICH IT EXECUTED WITH THE HEREIN PETITIONER UNION.

-B-

THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT

DECLARING THE PRIVATE RESPONDENTS GUILTY OF ACTS OF
DISCRIMINATION IN THE IMPLEMENTATION OF NCR WAGE
ORDER NOS. 01 AND 02.

-C-

THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING

THE PRIVATE RESPONDENTS GUILTY OF HAVING VIOLATED
SECTION 4, ARTICLE XVII OF THE EXISTING CBA.

24
 -D-

THE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING

THE PRIVATE RESPONDENTS GUILTY OF HAVING VIOLATED
ARTICLE 100 OF THE LABOR CODE OF THE PHILIPPINES, AS
AMENDED.

-E-

ASSUMING, WITHOUT ADMITTING THAT THE PUBLIC

RESPONDENTS HAVE CORRECTLY RULED THAT THE PRIVATE
RESPONDENTS ARE GUILTY OF ACTS OF UNFAIR LABOR
PRACTICES, THEY COMMITTED SERIOUS ERROR IN NOT FINDING
THAT THERE IS A SIGNIFICANT DISTORTION IN THE WAGE
STRUCTURE OF THE RESPONDENT COMPANY.

-F-

THE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE

PETITIONERS HEREIN ACTUAL, MORAL, AND EXEMPLARY
DAMAGES AND ATTORNEYS FEES.

As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit: (a) whether or
not private respondent committed an unfair labor practice in its refusal to grant across-the-board wage
increases in implementing Wage Orders Nos. 01 and 02, and (b) whether or not there was a significant
wage distortion of the wage structure in private respondent as a result of the manner by which said wage
orders were implemented.
With respect to the first issue, petitioner union anchors its arguments on the alleged commitment of
private respondent to grant an automatic across-the-board wage increase in the event that a statutory or
legislated wage increase is promulgated. It cites as basis therefor, the aforequoted portion of the Minutes
of the collective bargaining negotiation on February 27, 1990 regarding wages, arguing additionally that
said Minutes forms part of the entire agreement between the parties.
The basic premise of this argument is definitely untenable. To start with, if there was indeed a promise
or undertaking on the part of private respondent to obligate itself to grant an automatic across-the-board
wage increase, petitioner union should have requested or demanded that such promise or undertaking be
incorporated in the CBA. After all, petitioner union has the means under the law to compel private
respondent to incorporate this specific economic proposal in the CBA. It could have invoked Article 252
of the Labor Code defining duty to bargain, thus, the duty includes executing a contract incorporating such
agreements if requested by either party. Petitioner unions assertion that it had insisted on the incorporation
of the same proposal may have a factual basis considering the allegations in the aforementioned joint
affidavit of its members. However, Article 252 also states that the duty to bargain does not compel any
party to agree to a proposal or make any concession. Thus, petitioner union may not validly claim that the
proposal embodied in the Minutes of the negotiation forms part of the CBA that it finally entered into with
private respondent.
The CBA is the law between the contracting parties[10] the collective bargaining representative and the
employer-company. Compliance with a CBA is mandated by the expressed policy to give protection to
labor.[11] In the same vein, CBA provisions should be construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction upon it, giving due consideration
to the context in which it is negotiated and purpose which it is intended to serve."[12] This is founded on
the dictum that a CBA is not an ordinary contract but one impressed with public interest.[13] It goes without
saying, however, that only provisions embodied in the CBA should be so interpreted and complied
with. Where a proposal raised by a contracting party does not find print in the CBA,[14]it is not a part thereof
and the proponent has no claim whatsoever to its implementation.
Hence, petitioner unions contention that the Minutes of the collective bargaining negotiation meeting
forms part of the entire agreement is pointless. The Minutes reflects the proceedings and discussions
undertaken in the process of bargaining for worker benefits in the same way that the minutes of court
proceedings show what transpired therein.[15] At the negotiations, it is but natural for both management and
labor to adopt positions or make demands and offer proposals and counter-proposals. However, nothing is

25
considered final until the parties have reached an agreement. In fact, one of managements usual negotiation
strategies is to x x x agree tentatively as you go along with the understanding that nothing is binding until
the entire agreement is reached.[16] If indeed private respondent promised to continue with the practice of
granting across-the-board salary increases ordered by the government, such promise could only be
demandable in law if incorporated in the CBA.
Moreover, by making such promise, private respondent may not be considered in bad faith or at the
very least, resorting to the scheme of feigning to undertake the negotiation proceedings through empty
promises. As earlier stated, petitioner union had, under the law, the right and the opportunity to insist on
the foreseeable fulfillment of the private respondents promise by demanding its incorporation in the
CBA. Because the proposal was never embodied in the CBA, the promise has remained just that, a promise,
the implementation of which cannot be validly demanded under the law.
Petitioners reliance on this Courts pronouncements[17] in Kiok Loy v. NLRC[18] is, therefore,
misplaced. In that case, the employer refused to bargain with the collective bargaining representative,
ignoring all notices for negotiations and requests for counter proposals that the union had to resort to
conciliation proceedings. In that case, the Court opined that (a) Companys refusal to make counter-
proposal, if considered in relation to the entire bargaining process, may indicate bad faith and this is
specially true where the Unions request for a counter-proposal is left unanswered. Considering the facts of
that case, the Court concluded that the company was unwilling to negotiate and reach an agreement with
the Union.[19]
In the case at bench, however, petitioner union does not deny that discussion on its proposal that all
government-mandated salary increases should be on an across-the-board basis was deferred, purportedly
because it relied upon the undertaking of the negotiating panel of private respondent.[20] Neither does
petitioner union deny the fact that there is no provision of the 1990 CBA containing a stipulation that the
company will grant across-the-board to its employees the mandated wage increase. They simply assert that
private respondent committed acts of unfair labor practices by virtue of its contractual commitment made
during the collective bargaining process.[21] The mere fact, however, that the proposal in question was not
included in the CBA indicates that no contractual commitmentthereon was ever made by private respondent
as no agreement had been arrived at by the parties. Thus:

Obviously the purpose of collective bargaining is the reaching of an agreement resulting in a contract
binding on the parties; but the failure to reach an agreement after negotiations continued for a reasonable
period does not establish a lack of good faith. The statutes invite and contemplate a collective bargaining
contract, but they do not compel one. The duty to bargain does not include the obligation to reach an
agreement. x x x.[22]

With the execution of the CBA, bad faith bargaining can no longer be imputed upon any of the parties
thereto. All provisions in the CBA are supposed to have been jointly and voluntarily incorporated therein
by the parties. This is not a case where private respondent exhibited an indifferent attitude towards
collective bargaining because the negotiations were not the unilateral activity of petitioner union.The CBA
is proof enough that private respondent exerted reasonable effort at good faith bargaining.[23]
Indeed, the adamant insistence on a bargaining position to the point where the negotiations reach an
impasse does not establish bad faith. Neither can bad faith be inferred from a partys insistence on the
inclusion of a particular substantive provision unless it concerns trivial matters or is obviously intolerable.[24]

The question as to what are mandatory and what are merely permissive subjects of collective bargaining
is of significance on the right of a party to insist on his position to the point of stalemate. A party may
refuse to enter into a collective bargaining contract unless it includes a desired provision as to a matter
which is a mandatory subject of collective bargaining; but a refusal to contract unless the agreement
covers a matter which is not a mandatory subject is in substance a refusal to bargain about matters which
are mandatory subjects of collective bargaining; and it is no answer to the charge of refusal to bargain in
good faith that the insistence on the disputed clause was not the sole cause of the failure to agree or that
agreement was not reached with respect to other disputed clauses."[25]

On account of the importance of the economic issue proposed by petitioner union, it could have refused
to bargain and to enter into a CBA with private respondent. On the other hand, private respondents firm
stand against the proposal did not mean that it was bargaining in bad faith. It had the right to insist on (its)
position to the point of stalemate. On the part of petitioner union, the importance of its proposal dawned on
it only after the wage orders were issued after the CBA had been entered into. Indeed, from the facts of this
case, the charge of bad faith bargaining on the part of private respondent was nothing but a belated reaction

26
to the implementation of the wage orders that private respondent made in accordance with law. In other
words, petitioner union harbored the notion that its members and the other employees could have had a
better deal in terms of wage increases had it relentlessly pursued the incorporation in the CBA of its
proposal. The inevitable conclusion is that private respondent did not commit the unfair labor practices of
bargaining in bad faith and discriminating against its employees for implementing the wage orders pursuant
to law.
The Court likewise finds unmeritorious petitioner unions contention that by its failure to grant across-
the-board wage increases, private respondent violated the provisions of Section 5, Article VII of the existing
CBA[26] as well as Article 100 of the Labor Code. The CBA provision states:

Section 5. The COMPANY agrees to comply with all the applicable provisions of the Labor
Code of the Philippines, as amended, and all other laws, decrees, orders, instructions,
jurisprudence, rules and regulations affecting labor.

Article 100 of the Labor Code on prohibition against elimination or diminution of benefits provides that
(n)othing in this Book shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code.
We agree with the Labor Arbiter and the NLRC that no benefits or privileges previously enjoyed by
petitioner union and the other employees were withdrawn as a result of the manner by which private
respondent implemented the wage orders. Granted that private respondent had granted an across-the-board
increase pursuant to Republic Act No. 6727, that single instance may not be considered an established
company practice. Petitioner unions argument in this regard is actually tied up with its claim that the
implementation of Wage Orders Nos. 01 and 02 by private respondent resulted in wage distortion.
The issue of whether or not a wage distortion exists is a question of fact[27] that is within the jurisdiction
of the quasi-judicial tribunals below. Factual findings of administrative agencies are accorded respect and
even finality in this Court if they are supported by substantial evidence.[28] Thus, in Metropolitan Bank and
Trust Company, Inc. v. NLRC, the Court said:

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to
certain employees, we agree, is, by and large, a question of fact the determination of which is the statutory
function of the NLRC. Judicial review of labor cases, we may add, does not go beyond the evaluation of
the sufficiency of the evidence upon which the labor officials findings rest. As such, the factual findings
of the NLRC are generally accorded not only respect but also finality provided that its decisions are
supported by substantial evidence and devoid of any taint of unfairness or arbitrariness. When, however,
the members of the same labor tribunal are not in accord on those aspects of a case, as in this case, this
Court is well cautioned not to be as so conscious in passing upon the sufficiency of the evidence, let alone
the conclusions derived therefrom.[29]

Unlike in above-cited case where the Decision of the NLRC was not unanimous, the NLRC Decision
in this case which was penned by the dissenter in that case, Presiding Commissioner Edna Bonto-Perez,
unanimously ruled that no wage distortions marred private respondents implementation of the wage
orders. The NLRC said:

On the issue of wage distortion, we are satisfied that there was a meaningful implementation of Wage
Orders Nos. 01 and 02. This debunks the claim that there was wage distortion as could be shown by the
itemized wages implementation quoted above. It should be noted that this itemization has not been
successfully traversed by the appellants. x x x.[30]

The NLRC then quoted the labor arbiters ruling on wage distortion.
We find no reason to depart from the conclusions of both the labor arbiter and the NLRC. It
is apropos to note, moreover, that petitioners contention on the issue of wage distortion and the resulting
allegation of discrimination against the private respondents employees are anchored on its dubious position
that private respondents promise to grant an across-the-board increase in government-mandated salary
benefits reflected in the Minutes of the negotiation is an enforceable part of the CBA.
In the resolution of labor cases, this Court has always been guided by the State policy enshrined in the
Constitution that the rights of workers and the promotion of their welfare shall be protected. [31] The Court
is likewise guided by the goal of attaining industrial peace by the proper application of the law. It cannot

27
favor one party, be it labor or management, in arriving at a just solution to a controversy if the party has no
valid support to its claims. It is not within this Courts power to rule beyond the ambit of the law.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the questioned
Resolutions of the NLRC AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Kapunan and Purisima, JJ., concur.

[1] Annex D to Petition; Rollo, pp. 71-74.

[2] Annex K to Petition; Rollo, pp. 139-143.
[3] NLRC Resolution of April 29, 1993, p. 2; Rollo, p. 61.
[4] Annex E to Petition; Rollo, pp. 80-81.
[5] Annex F to Petition; Rollo, pp. 75-78.
[6] Rollo, p. 93.
[7] Ibid., p. 95.
[8] Ibid., p. 53.
[9]
Penned by Presiding Commissioner Edna Bonto-Perez and concurred in by Commissioners Domingo H. Zapanta and Rogelio I.
Rayala.
[10] Marcopper Mining Corporation v. NLRC, 325 Phil. 618, 632 (1996).
[11] Meycauayan College v. Drilon, G.R. No. 81144, May 7, 1990, 185 SCRA 50, 56 citing Art. 3 of the Labor Code.
[12] Marcopper Mining Corporation v. NLRC, supra, at p. 634.
[13]
Art. 1700 of the Civil Code provides: The relations between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws
on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar
subjects.
[14]Art. 252 of the Labor Code provides that the duty to bargain collectively means the performance of a mutual obligation to meet
and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement with respect to wages, hours of
work an all other terms and conditions of employment including proposals for adjusting any grievances or questions arising under
such agreement and executing a contract incorporating such agreements if requested by either party but such duty does not compel
any party to agree to a proposal or to make any concession. Notably, however, the first paragraph of Sec. 13 of Rep. Act No. 875,
the Industrial Peace Act, provides the execution of a written contract incorporating the collective bargaining agreement as part of
the parties duty to bargain collectively.
[15]While the minutes kept by the judge are not the memorial of the judgment, and are not records required by law to be kept, they
constitute legal evidence of what was adjudged, and as such may serve as the foundation for the correction of errors of the clerk in
the performance of his duty. The minutes are only evidence of what was done (27 WORDS AND PHRASES 425 citing State ex
rel. Sheridan Pub. Co. v. Goodrich, 140 S.W. 629, 630, 159 Mo.App. 422, citing Kreisel v. Snavely, 115 S.W. 1060, 135 Mo. App.
158).
[16]
William G. Caphs and Robert A. Graney, The Technique of Labor-Management Negotiations, University of Illinois Law Forum,
Summer 1955, p. 293 cited in C.A. AZUCENA, THE LABOR CODE WITH COMMENTS AND CASES, Vol. II, 1993 ed., p.
228.
[17] Petitioners Memorandum, pp. 18-20.
[18] G.R. No. 54334, January 22, 1986, 141 SCRA 179.
[19] Ibid., at pp. 185 & 186.
[20] Petitioners Memorandum, pp. 14-15.
[21] Ibid., p. 17.
[22] 51 C.J.S. 910.
[23]
Divine Word University of Tacloban v. Secretary of Labor and Employment, G.R. No. 91915, September 11, 1992, 213 SCRA
759, 773.
[24] Ibid., at p. 910.
[25] Ibid., at p. 912-913.
[26] Petitioners Memorandum, p. 35.

28
[27]
Manila Mandarin Employees Union v. NLRC, G.R. No. 108556, November 19, 1996, 264 SCRA 320, 336 citing Associate
Labor Unions-TUCP v. NLRC, G.R. No. 109328, August 16, 1994, 235 SCRA 395; Metropolitan Bank and Trust Co. Employees
Union-ALU-TUCP v. NLRC, G.R. No. 102636, September 10, 1993, 226 SCRA 268; Cardona v. NLRC, G.R. No. 89007, March
11, 1991, 195 SCRA 92.
[28] Philippine Savings Bank v. NLRC, 330 Phil. 106 (1996).
[29] Supra, at p. 275.
[30] Rollo, p. 66.
[31] Sec. 18, Art. II, 1987 Constitution.

29
 FIRST DIVISION

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

SAN MIGUEL FOODS, INC.-CEBU B-MEG FEED PLANT, petitioner, vs. 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 (RO700-9309-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 the 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 SMFIs 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 SMFIs 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 SMFIs
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 SMFIs 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 date July 26, 1993[1] and September 2,
1993,[2] respectively, wherein IBMs first petition for certification election was denied mainly due to
IBMs 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:

30
 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 oclock 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 petitioners establishment based on two
grounds: (1) the authenticity and due execution of the Charter Certificate submitted by IBM in
favor of its local at SMFI cannot yet be ascertained as it is still now 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 petitioners appeal, viz.:
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:
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

31
 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 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.
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:

ART. 242. Rights of legitimate organizations.--A legitimate labor organization shall

have the right:

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

(b) To be certiified 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 x x x x x x."
The pertinent question, therefore, must be asked: When does a labor organization acquire
legitimacy?

32
 Ordinarily, a labor organization attains the status of legitamacy 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.:
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:

(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 on 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.
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 portions of which provide:
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 chapter
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.
xxxxxxxxx
(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 book of accounts. For
reporting purposes, the procedure governing the reporting of independently
registered unions, federations or national unions shall be observed.
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

33
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:
A local or chapter therefore becomes a legitimate labor organization only upon
submission of the following to the BLR:
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.
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:
[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
unions secretary on the non-availability of the unions Books of Accounts. Said
documents (except the charter certificate) are certified under oath and attested to by
the local unions 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:
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

34
 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 respondents 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 a mere by-stander. It has no legal standing in a
certification election as it cannot oppose the petition or appeal the Med-Arbiters 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.[25]
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 organizations 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 locals 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
locals president.
IV

Petitioner, in its Reply to public respondents 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,

35
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 petitioners 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.
V

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.
Bellosillo, Vitug, and Kapunan, JJ., concur.
Padilla (Chairman), J., no part, on account of interests in San Miguel Group of companies.

[1] Rollo, pp. 52-53.

[2] Rollo, pp. 67-69.
[3] Rollo, p. 83.
[4] Rollo, pp. 31-32.
[5] Rollo, p. 40.
[6] Rollo, p. 42.
[7] Rollo, p. 20.
[8]
Progressive Development Corporation v. Secretary, Department of Labor and Employment, 205 SCRA 802, 810
[1992].
[9] Ibid.
[10] 247 SCRA 1, 8 [1995].
[11] 244 SCRA 173, 177 [1995].
[12] 242 SCRA 99, 106 [1995].
[13] Supra.
[14] Rollo, p. 31.
[15] Rollo, pp. 37-38.
[16] Rollo, pp. 38-39.
[17] Rollo, p. 118.
[18] Rollo, p. 78.

36
[19] R. Transport Corporation v. Laguesma, 227 SCRA 826, 833 [1993].
[20]ART. 258. When an employer may file petition. When requested to bargain collectively, an employer may petition
the Bureau for an election. If there is no existing certified collective bargaining agreement in the unit, the Bureau shall,
after hearing, order a certification election.
All certification cases shall be decided within twenty (20) working days.
The Bureau shall conduct a certification election within twenty (20) days in accordance with the rules and regulations
prescribed by the Secretary of Labor and Employment.
[21] Phil. Telegraph and Telephone Corp. v. Laguesma, 223 SCRA 452, 456-457 [1993].
[22] 120 SCRA 64, 66 [1983].
[23] Philippine Scout Veterans Security and Investigation Agency v. Torres, 224 SCRA 682, 690 [1993].
[24] Consolidated Farms, Inc. v. Noriel, 84 SCRA 469,473 [1978].
[25] Philippine Scout Veterans Security and Investigation Agency, supra.
[26]
Trade Unions of the Philippines v. Laguesma, 233 SCRA 565, 571 [1994], citing Warren Manufacturing Workers
Union v. Bureau of Labor Relations, 159 SCRA 387 [1988]; General Textiles Allied Workers Association, v.Director of
Bureau of Labor Relations, 84 SCRA 430 [1978]; Philippine Association of Free Labor Unions v. Bureau of Labor
Relations, 69 SCRA 132 [1976].
[27]
Ibid., citing Belyca Corporation v. Ferrer-Calleja, 168 SCRA 184 [1988]; Philippine Airlines Employees Association
(PALEA) v. Ferrer-Calleja, 162 SCRA 426 [1988]; George and Peter Lines, Inc. v. Associated Labor Unions (ALU) ,
134 SCRA 82 [1986].
[28]
Port workers Union of the Phils. (PWUP) v. Laguesma, 207 SCRA 329, 333 [1992], citing National Association of
Free Trade Unions v. Bureau of Labor Relations, 164 SCRA 12 [1988].
[29] Trade Unions of the Philippines, supra. at 572, citing PALEA v. Ferrer-Calleja, 162 SCRA 426, 431 [1988].
[30] Ibid.
[31] Supra, at 813.
[32] Rollo, p. 162.
[33] C. Alcantara & Sons, Inc. v. NLRC, 229 SCRA 109, 115 [1994], citing Medida v. C.A., 208 SCRA 887 [1992]).
[34] Herrera, Oscar M., Remedial Law, Volume III, 1996 ed., p. 164.
[35] Oscar Ledesma and Company v. National Labor Relations Commission, 246 SCRA 47, 51 [1995].
[36] Rollo, p. 127.
[37] Trade Unions of the Philippines, supra.

37
 THIRD DIVISION

G.R. No. 159460 : November 15, 2010

SOLIDBANK CORPORATION (now known as FIRST METRO INVESTMENT CORPORATION),

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

G.R. No. 159461 : November 15, 2010

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

CORPORATION, DEOGRACIAS N. VISTAN AND EDGARDO MENDOZA, JR., Petitioners, v.
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.:

38
The consolidated petitions before us seek to reverse and set aside the Decision[1] 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.[2] During 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 Order[4] 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.

39
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 memorandum[7] 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,

40
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 decision[17] 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 (P150,000.00) each as moral
damages and ONE HUNDRED THOUSAND PESOS (P100,000.00) 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
(P33,794,222.80), 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 Decision[19] 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.

41
 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 Resolution[25] dated September 28, 2001.

As to respondents’ appeal, the NLRC’s Third Division by Decision[26] 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

42
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 Resolution[29] 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 Decision[32] (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 Decision[34] 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 Decision[35] 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.

43
 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 x[37] (Emphasis supplied.)

On April 2, 2003, petitioners filed a motion for reconsideration but this was denied by the CA in its
Resolution[38] dated 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

44
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

45
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.)

46
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.

xxxx (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

47
 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.[52] Hence, 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 x[55]

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.

Are these dismissed employees entitled to backwages and separation pay?

48
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.
Infante[56]--

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

x x x

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.)

49
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 31[60] 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.

MARTIN S. VILLARAMA, JR.

50
 Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

Chairperson

ARTURO D. BRION

Associate Justice

LUCAS P. BERSAMIN

Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

CONCHITA CARPIO MORALES

Associate Justice

Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division Chairperson’s Attestation,
I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

Chief Justice

51
Endnotes

[1] Rollo, Vol. I, pp. 128-142. Penned by Associate Justice Romeo A. Brawner (deceased) and
concurred in by Associate Justices Bienvenido L. Reyes and Danilo B. Pine.

[2] Id. at 214.

[3] Id. at 212-213.

[4] Id. at 214-220.

[5] Id. at 219-220.

[6] Id. at 224.

[7] Id. at 246.

[8] Id. at 247-248.

[9] Id. at 249 and 294.

[10]Id. at 871, 914-954.

[11]Id. at 254-255.

[12]Id. at 903-904.

[13]Id. at 904.

[14]Id. at 256-282.

52
[15]Id. at 48-49, 1074.

[16]Id. at 312-313.

[17]Id. at 609-626.

[18]Id. at 625-626.

[19]Id. at 633-647. Penned by Commissioner Victoriano R. Calaycay and concurred in by Presiding

Commissioner Raul T. Aquino and Commissioner Angelita A. Gacutan.

[20]Id. at 646.

[21]G.R. Nos. 143013-14, December 18, 2000, 348 SCRA 565.

[22]Rollo, Vol. I, pp. 643-646.

[23]Id. at 864-886.

[24]Id. at 642-643.

[25]Id. at 650-654.

[26]Id. at 403-418. Penned by Commissioner Ireneo B. Bernardo and concurred in by Presiding

Commissioner Lourdes C. Javier and Commissioner Tito F. Genilo.

[27]Id. at 417-418.

[28]Id. at 413-417.

[29]Id. at 420-421.

53
[30]CA rollo (CA-G.R. SP No. 67730), pp. 2-43.

[31]CA rollo (CA-G.R. SP No. 70820), pp. 2-43.

[32]CA rollo (CA-G.R. SP No. 67730), pp. 457-467. Penned by Associate Justice Bernardo P. Abesamis
and concurred in by Associate Justices Josefina Guevara-Salonga and Amelita G. Tolentino.

[33]Id. at 467.

[34]Id. at 480-491. Penned by Associate Justice Rodrigo V. Cosico and concurred in Associate Justices
Buenaventura J. Guerrero and Perlita J. Tria Tirona.

[35]Supra note 1.

[36]Id. at 141.

[37]Id. at 139-141.

[38]Id. at 144-145.

[39]Rollo, Vol. II, pp. 1729-1730.

[40]Id. at 1730-1730-A.

[41]Gold City Integrated Port Service, Inc. v. National Labor Relations Commission, G.R. Nos. 103560
& 103599, July 6, 1995, 245 SCRA 627, 635-636.

[42]Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Suplicio Lines, Inc.,G.R. No. 140992,
March 25, 2004, 426 SCRA 319, 326, citing Sec. 2, P.D. No. 823, as amended by P.D. No. 849.

[43]Bangalisan v. Hon. CA, 342 Phil. 586, 594 (1997) cited in Gesite v. Court of Appeals, G.R. Nos.
123562-65, November 25, 2004, 444 SCRA 51, 57.

[44]G.R. Nos. 158786 & 158789, October 19, 2007, 537 SCRA 171, 200-202.

54
[45]Supra note 3.

[46]Philcom Employees Union v. Philippine Global Communications, G.R. No. 144315, July 17, 2006,
495 SCRA 214, 244.

[47]Telefunken Semiconductors Employees Union-FFW v. Court of Appeals, supra note 21 at 582.

[48]Philcom Employees Union v. Philippine Global Communications, supra note 46 at 243. See
also Philippine Airlines, Inc. v. Brillantes, G.R. No. 119360, October 10, 1997, 280 SCRA 515, 516,
citing Phil. Airlines, Inc. v. Secretary of Labor and Employment, G.R. No. 88210, January 23, 1991, 193
SCRA 223; Union of Filipro Employees v. Nestle Philippines, Inc., G.R. Nos. 88710-13, December 19,
1990, 192 SCRA 396; Federation of Free Workers v. Inciong, G.R. No. 49983, April 20, 1992, 208 SCRA
157; and St. Scholastica’s College v. Torres, G.R. No. 100158, June 29, 1992, 210 SCRA 565.

[49]Philcom Employees Union v. Philippine Global Communications, id. at 246.

[50]Steel Corporation of the Philippines v. SCP Employees Union-National Federation of Labor Unions,
G.R. Nos. 169829-30, April 16, 2008, 551 SCRA 594, 612, citing Santa Rosa Coca-Cola Plant Employees
Union v. Coca-Cola Bottlers Phils, Inc., G.R. Nos. 164302-03, January 24, 2007, 512 SCRA 437, 458-
459 and Stamford Marketing Corp. v. Julian, G.R. No. 145496, February 24, 2004, 423 SCRA 633, 648.

[51]Id.

[52]Nissan Motors Philippines, Inc. v. Secretary of Labor and Employment, G.R. Nos. 158190-91,
158276 and 158283, June 21, 2006, 491 SCRA 604, 624, citing Association of Independent Unions in
the Philippines v. NLRC, G.R. No. 120505, March 25, 1999, 305 SCRA 219.

[53]See Sukhothai Cuisine and Restaurant v. Court of Appeals, G.R. No. 150437, July 17, 2006, 495
SCRA 336, 348, citing First City Interlink Transportation Co., Inc. v. Sec. Confesor, 338 Phil. 635, 644
(1997).

[54]Id. at 355-356, citing Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines, Inc.,
supra note 42 at 328 and Asso. of Independent Unions in the Phil. v. NLRC, 364 Phil. 697, 708-709
(1999).

[55]Id. at 351, citing United Seamen’s Union of the Phil. v. Davao Shipowners Association, Nos. L-18778
and L-18779, August 31, 1967, 20 SCRA 1226, 1240; Cromwell Commercial Employees and Laborers
Union (PTUC) v. Court of Industrial Relations, No. L-19778, September 30, 1964, 12 SCRA 124, 132;
Liberal Labor Union v. Phil. Can Co., 91 Phil. 72, 78 (1952); Linn v. United Plan Guard Workers, 15 L.Ed
2d 582; 31 Am. Jur. § 245, p. 954; 116 A.L.R. 477, 505; 32 A.L.R. 756; 27 A.L.R. 375; cited in 2 C.A.
Azucena, The Labor Code With Comments and Cases p. 500 (1999) and Asso. of Independent Unions in
the Phil. v. NLRC, id. at 706-707.

[56]G.R. No. 160303, September 13, 2007, 533 SCRA 288, 301-302.

55
[57]Id. at 304.

[58]Id. at 300.

[59]Art. 212. x x x

xxxx

(e) “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.

[60]SEC. 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 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

[61]Carag v. National Labor Relations Commission, G.R. No. 147590, April 2, 2007, 520 SCRA 28, 55.

[62]Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos, G.R. No. 113907, April 20,
2001, 357 SCRA 77, 93-94.

[63]See McLeod v. NLRC, G.R. No. 146667, January 23, 2007, 512 SCRA 222, 246, citing Lim v. Court
of Appeals, 380 Phil. 60 (2000) and Del Rosario v. National Labor Relations Commission, G.R. No. 85416,
July 24, 1990, 187 SCRA 777.

[64]Ford Philippines, Inc. v. Court of Appeals, G.R. No. 99039, February 3, 1997, 267 SCRA 320, 328.

56
 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.chanroble svirtualawl ibra ry

The antecedents of the present petitions are as follows: chanrob1es vi rtual 1aw lib rary

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: chanrob1es vi rtua l 1aw lib ra 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: chanrobles vi rtual lawlib rary

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. chanrobles lawlib rary : rednad

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

57
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. chanroble svi rtualaw lib rary

On April 30, 1993, the Labor Arbiter rendered a decision the dispositive portion of which reads: chanrob1es 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: chanrob1e s vi rtual 1aw lib rary

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. chanrobles v irt 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:chanrob1es vi rtual 1aw lib rary

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.

58
 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 chanroble svi rtual|awl ibra ry

On the other hand, in G.R. No. 122136, petitioner Complex Electronics Corporation raised the following issues, to wit: chanrob1es v irt ual 1aw l ibra ry

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: chanrob1es 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.
chanrobles. com:cha nrob les.com. ph
chanrobles vi rt ualawlib ra ry

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. chanroble s virtual lawl ib 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: chanrob1es vi rtua l 1aw lib rary

[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

59
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: chanrob1es vi rtua l 1aw lib rary

The basic rule is still that which can be deduced from the Court’s pronouncement in Sunio v. National Labor Relations
Commission, thus: chanrob1e s vi rtual 1aw lib rary

. . . . 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. chanroble 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 rtua l 1aw lib ra 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 rtua l 1aw lib ra 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. chanroble svirtual|awli bra 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 vi rtua l 1aw lib rary

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

60
the respondent NLRC with favor: chanroble 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: chanrob1es 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:chanrob1es vi rtua l 1aw lib ra ry

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. chanroblesvi rt ual|awlib rary

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. chanroble s virtual lawl ibra ry

We disagree.

Article 283 further provides: chanrob1e s virtual 1aw lib rary

. . . . 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)

61
month pay for every year of service as termination pay. chanrobles. com : virtual law l ibra ry

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

SO ORDERED.

Davide, Jr., C.J., Melo, Pardo and Ynares-Santiago, JJ., concur.

Endnotes:

1. Rollo, of G.R. No. 122636, p. 270.

2. Id., at 271.

3. NLRC Decision dated March 10, 1995, rollo of G.R. No. 121315, p. 78.

4. Sec. 3. Notice of strike or lockout. — In cases of bargaining deadlocks, a notice of strike or lockout shall be filed with the
regional branch of the Board at least thirty (30) days before the intended dated thereof, a copy of said notice having been
served on the other party concerned. In case of unfair labor practices, the period of notice shall be fifteen (15) days.
However, in case of unfair labor practice involving the dismissal from employment of union officers duly elected in
accordance with the union constitution and by-laws which may constitute union-busting where the existence of the union is
threatened, the fifteen-day cooling-off period shall not apply and the union may take action immediately after the strike
vote is conducted and the results thereof submitted to the Department of Labor and Employment.

Sec. 8. Declaration of strike and lockout. — Should the dispute remain unsettled after the lapse of the requisite number of
days from the filing of the notice of strike or lockout and the results of the election required in the preceding section, the
labor union may strike or the employer may lockout its workers. The regional branch or the Board shall continue mediating
and conciliating.

5. Rollo of G.R. 121315, pp. 72-73.

6. Id., at 99-100.

7. Id., at 102-106.

8. Id., at 31.

9. Rollo of G.R. No. 122136, p. 21.

10. Rollo of G.R. 121315, pp. 273-274.

11. Rollo of G.R. No. 122136, p. 597.

12. Rollo of G.R. No. 121315, pp. 383-386.

13. Id., at 287-291.

14. See Textile Workers Union v. Darlington Mfg. Co., 380 US 263, 12 L Ed. 2d 827, 85, S Ct 994.

15. William P. Statsky, WEST’S LEGAL THESAURUS/DICTIONARY, Special Deluxe Edition, p. 671.

16. 205 SCRA 697 (1992).

17. 187 SCRA 777 (1990).

18. 254 SCRA 673 (1996).

19. Concept Builders, Inc. v. National Labor Relations Commission, 257 SCRA 149 (1996); Philippine International Bank v.
Court of Appeals, 252 SCRA 259 (1996); Yu v. National Labor Relations Commission, 245 SCRA 134 (1995).

20. Matuguina Integrated Wood Products, Inc. v. Court of Appeals, 263 SCRA 490 (1996).

21. Art. 212 (p), LABOR CODE OF THE PHILIPPINES.

22. Sta. Mesa Slipways & Engineering Co. v. CIR, 48 O.G. 3353, as cited in II C.A. Azucena, THE LABOR CODE WITH
COMMENTS AND CASES, Revised 1993 Ed., p. 296.

23. Records pp. 427-434.

24. 247 SCRA 46 (1995).

25. AHS/Philippines, Inc. v. Court of Appeals, 257 SCRA 319 (1996).

26. Rollo of G.R. No. 121315, p. 182.

27. Id., at 97-98.

28. Coca Cola Bottlers (Phils.), Inc. v. NLRC, 194 SCRA 592 (1991).

29. 252 SCRA 483 (1996).

30. PAL v. NLRC, 225 SCRA 301 (1993).

62
31. North Davao Mining Corp. v. NLRC, 254 SCRA 721, (1996); See also: State Investment House, Inc. v. Court of
Appeals, 206 SCRA 348, (1992); Mindanao Terminal and Brokerage Service, Inc. v. The Hon. Minister of Labor and
Employment, 238 SCRA 77, (199

63
 THIRD DIVISION

[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]

64
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 Complaint dated 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

65
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 45 petition 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'

66
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

67
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.

Carpio Morales, (Chairperson), Brion, Bersamin, and Sereno, JJ., concur.

Endnotes:

Rollo, pp. 221-237. Penned by Associate Justice Mercedes Gozo-Dadole, with Associate Justices Eugenio S.
[1]

Labitoria and Rosmari D. Carandang, concurring.

[2] Id. at 239.

[3] With Registration No. NCR-10-165-88. See CA rollo, Vol. I, p. 183.

[4] Rollo, pp. 31-47.

[5]
Id. at 48.

68
[6] Id. at 71, 136.

[7] Id. at 52.

[8] Id.

[9] Id. at 517-529.

[10]
Id. at 551-553 and 556.

[11] Id. at 556.

[12] Letter dated October 30, 1998. Id. at 557-558.

[13]
Id. at 531-534.

[14] Id. at 492.

[15] Id. at 492 and 560.

[16] Id. at 68.

[17] Id. at 69-73.

[18] Docketed as Case No. OD-9903-004-IRD. See rollo, pp. 563-568.

[19] Rollo, pp. 535-549.

[20]
Id. at 543-544.

[21] Id. at 546-548.

[22] Id. at 490.

[23] Id. at 571.

[24] Id.

[25] Id.

[26]
Id. at 574.

[27]
Dated January 21, 2000. Id. at 575-584.

[28]
Dated March 8, 2000. Id. at 81-87.

[29]
Id. at 178.

[30] The appeal was docketed as BLR-A-TR-13-17-2-00. See rollo, p. 176.

[31] Rollo, p. 181.

[32] Id. at 585-614.

[33]
Id. at 495.

[34] Id. at 615-624.

[35] Id. at 623-624.

[36] Id. at 626-634.

[37] Id. at 633.

[38] NLRC Decision dated September 27, 2001. Id. at 185-215.

[39] NLRC Order dated June 21, 2002. Id. at 217-219.

[40] Id. at 234-236.

[41]
Id. at 469-470.

[42]
Id. at 782.

[43] Id. at 731.

[44] Article 248 (d) of the Labor Code provides:

ART. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of the
following unfair labor practices:

xxxx

(d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any labor
organization, including the giving of financial or other support to it or its organizers or supporters;

69
xxxx

[45] Rollo, pp. 783-790.

[46] Id. at 734-740.

[47] Id. at 661-663.

[48]
Id. at 675-676.

[49] C.A. Azucena, Jr., Vol. II, The Labor Code with Comments and Cases, 2004 ed., p. 111.

[50] Rollo, p. 48.

[51]
Del Monte Philippines, Inc. v. Saldivar, G.R. No. 158620, October 11, 2006, 504 SCRA 192, 201.

De La Salle University v. De La Salle University Employees Association (DLSUEA-NAFTEU), G.R. No. 177283,
[52]

584 SCRA 592, 603.

[53]
Article 248 of the Labor Code provides in part:

ART. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of the
following unfair labor practices:

xxxx

(i) To violate a collective bargaining agreement.

[54]
Art. 261 of the Labor Code provides in part:

ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. - The Voluntary Arbitrator or
panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining Agreement, except those which
are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this article, gross violations
of a Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with
the economic provisions of such agreement. (Emphasis supplied.)

[55]
Rollo, pp. 499-500.

[56]
G.R. No. 110226, June 19, 1997, 274 SCRA 159.

[57]
Id. at 173.

[58]
Rollo, pp. 752-753.

[59]Flight Attendants and Stewards Association of the Philippines v. Philippine Airlines, Inc., G.R. No. 178083,
July 22, 2008, 559 SCRA 252, 294.

[60] Article 2234 of the Civil Code provides in part:

ART. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show that he is
entitled to moral, temperate or compensatory damages before the court may consider the question of whether
or not exemplary damages should be awarded. x x x

[61] Supra note 52 at 604.

[62] Article 2221 of the Civil Code provides:

ART. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.

70
 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).

71
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.

72
 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

73
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.

Paras and Regalado, JJ., concur.

74
Padilla, Sarmiento, JJ., took no part.

75
 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 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, LUZVMINDA 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,

76
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, CRESTITA 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
77
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, HERMINIA GONZALES,
FRANCISCA GUILING, JULIAN HERNANDEZ, GLECERIA 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,
78
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, EVELYN 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
79
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 CONG, 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,
80
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,
81
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, vs. 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.

DECISION

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, Paraaque, 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:

Article II-Union Security

Section 1. Coverage and Scope. 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.

xxxxxx

82
 xxxxxx

Section 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 UNIONs 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 employees 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."

Article IX

Section 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 x x x."[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 ito ng 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]

83
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 Paceo, 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:

" x x x 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 unions 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 latters 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 unions 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:

84
 "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 latters 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 harrassment.[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

85
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 companys 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 Offfice 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:

86
 "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 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., Paraaque, M.M.

May 17, 1989

xxx

On March 14, 1989, without justifiable cause and without due notice, you left your
work assignment at the prejudice of the Companys 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 Manager"[12]

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 oppresion.

87
After the filing of the complaint, the lease contracts on the respondent companys office and
factory at Merville Subdivision, Paraaque 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 Arbiters 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 BYTHE 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 federations 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:

88
 "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 commisioners 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 affimed 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]

89
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 contracts[14] cannot override ones right to due process.

In the case of Cario 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, xxx. 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
commiting 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 federations 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
companys 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 Cario, "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 expell 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 the termination was effective on the same day that the
the termination notice was served on the petitioners.

90
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.

"xxx 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 unions instance secure
in the unions 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 the 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 a 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. x x x 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

91
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

"xxx 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 federations 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 ULGWPs constitution.
Respondents reliance upon Article V, Section 6, of the federations constitution is not right
because said section, in fact, bolsters the petitioner unions claim of its right to declare
autonomy:

Section 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 federations 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 unions 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

92
guilty of unfair labor pratice in that it violated the petitioners right to self-organization. The strike
was staged to protest respondent companys 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 x x x 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 respondents 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
admittted 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 respondents 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. Corrolarily, 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 unions
demand in accordance with a union security agreement does not constitute unfair labor
practice.[31]

93
However, the dismissal was invalidated in this case because of respondent companys 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. NLRC[32] 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.

Gonzaga-Reyes, J., concur.

Melo, J., (Chairman), in the result.

Vitug, and Panganiban, JJ., reiterate separate opinion in Serrano vs. NLRC, G.R. 117040 Jan.
27, 2000.

[1]
Rollo, p. 29
[2]
Ibid, p. 30-31, p. 823-824
[3]
Rollo, p. 34
[4]
Rollo, p.35
[5]
Ibid., p.40
[6]
Rollo, p.47
[7]
Ibid, p. 48
[8]
Rollo, p. 1522-1523.
[9]
Ibid., 1523-1524
[10]
Rollo, p. 58-59.

94
[11]
Rollo, p. 937.
[12]
Rollo, p. 837.
[13]
Decicion of the Labor Arbiter, p. 16 (p. 197 of Rollo)
[14]
Tanduay Distillery Labor Union vvs. NLRC, 149 SCRA 470 citing Victorias Milling Co., Inc. vs. Victorias-Manapla Workers
Organization, 9 SCRA 154
[15]
G. R. No. 91086, 8 May 1990, 185 SCRA 177.
[16]
Sanyo Philippines Workers Union-PSSLU vs. Canizares, 211 SCRA 361
[17]
90 SCRA 391
[18]
Rollo, p. 199
[19]
Ibid.
[20]
Rollo, p. 200
[21]
Bontia vs. NLRC, 255 SCRA 167
[22]
Volkschel vs. Bureau of Labor Relations, 137 SCRA 42
[23]
Tropical Hut Employees Union-CGW vs. Tropical Hut Food Market Inc., 181 SCRA 173; Adamson, Inc. vs. CIR, 127 SCRA
268; Liberty Cotton Mills Worker Union vs. Liberty Cotton Mills, Inc., 66 SCRA 512
[24]
Ferrer vs. National Labor Relations Commission, 224 SCRA 410; Peoples Industrial and Commercial Employees and Workers
Organization (FFW) vs. Peoples Industrial and Commercial Corp., 112 SCRA 440
[25]
Master Iron Labor Union vs. National Labor Relation s Commission , 219 SCRA 47.
[26]
Panay Electric Company Inc. vs. NLRC, 248 SCRA 688; Peoples Industrial and Commercial Employees and Workers
Organization (FFW) vs. PIC Corp., 112 SCRA 440; Consolidated Labor Association of the Philippines vs. Marsman and Co.,
Inc., 11 SCRA 589; Master Iron Labor Union vs. NLRC, 219 SCRA 47; Phil. Metal Foundries Inc. vs. CIR, 90 SCRA 135;
[27]
Decision of the Labor Arbiter, Rollo, p. 203
[28]
Philippine Advertising Counselors, Inc. vs. National Labor Relations Commission, 263 SCRA 395; Balayan Colleges vs.
National Labor Relations Commission, 255 SCRA 1.
[29]
Nueva Ecija I Electric Cooperative, Inc. vs. Minister of Labor, 184 SCRA 25, 30.
[30]
Bontia vs. National Labor Relations Commission, 255 SCRA 167; Batangas Laguna Tayabas Bus Company vs. NLRC, 212
SCRA 792; Jackson Building Condominium Corporation vs. NLRC, 246 SCRA 329
[31]
Tanduay Distillery Labor Union vs. NLRC, 149 SCRA 470;Seno vs. Mendoza, 21 SCRA 1124.
[32]
170 SCRA 69 (1989)

95
 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 Resolution 1 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.

96
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.

97
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.

98
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.

99
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.

100
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.

101
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.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

102
 MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice Asscociate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1
Penned by Associate Justice Perlita J. Tria-Tirona with Associate Justices Conrado M. Vasquez,

Jr. and Edgardo F. Sundiam, concurring, rollo, pp. 69-76.

2
Id. at 78-80.

3
Id. at 76.

4
Id. at 60-65.

5
Id. at 95, 185.

6
Id. at 186-202.

7
Id. at 147-149.

8
Id. at 233-246.

9
Id. at 69.

10
Id. at 215-216.

11
Id. at 217.

12
Id. at 70.

13
Id. at 81-88.

14
Id. at 83-84.

15
Id. at 218-228.

16
Id. at 247-265.

17
Id. at 90-93.

18
Id. at 94-114.

103
19
Id. at 69-76.

20
Id. at 78-80.

21
Id. at 11-67.

Insular Life Assurance Company, Ltd. v. Court of Appeals, G.R. No. 126850, 28 April 2004, 428
22

SCRA 79, 85-86.

23
12 Am. Jur. 389, as cited in Halili v. Court of Industrial Relations, 220 Phil. 507, 526 (1985).

24
17 C.J.S. 4, as cited in Heirs of Trinidad de Leon Vda. de Roxas v. Court of Appeals, G.R. No.
138660, 5 February 2004, 422 SCRA 101, 114.

25
Ruiz v. Judge How, 459 Phil. 728, 738 (2003).

26
Penfield Company of California v. Securities and Exchange Commission, 330 U.S. 585, 67 S.Ct. 918
(1947), as cited in Ceniza v. Wistehuff, Sr., G.R. No. 165734, 16 June 2006, 491 SCRA 148, 165.

27
Montenegro v. Montenegro, G.R. No. 156829, 8 June 2004, 431 SCRA 415, 423.

28
Id.

29
Id.

30
Id. at 81-88.

31
Id. at 90-93.

32
Id. at 73.

33
446 Phil. 53, 69-70 (2003).

34
Ruiz v. Judge How, supra note 25 at 739.

35
Atty. Cañas v. Judge Castigador, 401 Phil. 618, 630 (2000).

Remedial Law Compedium (Seventh Revised Edition), p. 808 as cited in Land Bank of the
36

Philippines v. Listaña, Sr., 455 Phil. 750 (2003).

37
Lacson v. San Jose-Lacson, 133 Phil. 884, 895 (1968), as cited in Enriquez v. Enriquez, G.R. No.
139303, 25 August 2005, 468 SCRA 77, 84.

38
Id.

39
Id. at 83-85.

40
9 Phil. 22, 26 (1907).

41
Nedia v. Laviña, A.M. No. RTJ-05-1957, 26 September 2005, 471 SCRA 10, 17.

42
People v. Regalario, G.R. No. 101451, 23 March 1993, 220 SCRA 368.

43
Oca v. Court of Appeals, 428 Phil. 696, 702 (2002).

44
Id.

45
Tijam v. Sibonghanoy, 22 Phil. 29 (1968).

46
Francel Realty Corporation v. Sycip, G.R. No. 154684, 8 September 2005, 469 SCRA 424, 430.

47
Tijam v. Sibonghanoy, supra note no. 45.

104
 Manila Surety and Fidelity Co., Inc. (Surety), the bonding company of defendants Spouses
48

Magdaleno Sibonghanoy and Lucia Baguio in Tijam v. Sibonghanoy (id.).

49
Calimlim v. Ramirez, 204. Phil. 25 (1982).

50
Tijam v. Sibonghanoy, supra note no. 45.

51
Id.

105
 SECOND DIVISION

[G.R. No. 176085 : February 08, 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 certiorari[1] seeking the reversal of the resolutions of the Court of Appeals
(CA) rendered on February 24, 2006[2] and December 14, 2006[3] in CA-G.R. SP No. 80436. cralaw

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
memorandum[4] 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 memorandum[5] 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

106
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 resolution[10]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.[12] Hence, 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 Comment[14] 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 Comment[19] and Memorandum[20] 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.

107
On December 16, 2008, the petitioners filed a Memorandum[21] 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 218[22] 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 Appeals[27] and People v. Godoy[28]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

108
(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 TRO[32] and the writ of preliminary
injunction,[33] we first inquire into what really happened to these directives.

The assailed NLRC resolution of October 31, 2000[34] 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
P63,087.33.

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

109
despotic manner by reason of passion or personal hostility.[35]

The petitioners insist that the respondents violated the NLRC directives, especially the status quo anteorder, 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 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. cralaw

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit and AFFIRM the assailed
resolutions of the Court of Appeals.

SO ORDERED.

Carpio, (Chairperson), Perez, Sereno, and Reyes, JJ., concur.

Endnotes:

[1]
Rollo, pp. 10-91; filed pursuant to Rule 45 of the Rules of Court.

[2]Id. at 320-327; penned by Associate Justice Arcangelita M. Romilla-Lontok, and concurred in by Associate
Justices Marina L. Buzon and Aurora Santiago-Lagman.

[3] Id. at 329-331.

[4] Rollo, p. 450.

[5] Id. at 453.

[6] Id. at 454-462.

[7]
Id. at 191-208.

[8] Id. at 209-210.

[9] Id. at 234-235.

[10]
Id. at 162-184.

[11]
Supra note 2.

[12] Supra note 3.

[13] Rollo, p. 74.

[14] Id. at 415-440.

[15] Id. at 642-686.

[16] G.R. Nos. 164684-85, November 11, 2005, 474 SCRA 761.

[17] NLRC–NCR Case No. 00-08-04455-91.

110
[18] Rollo, pp. 370-375.

[19] Id. at 504-509.

[20] Id. at 622-633.

[21] Id. at 706-784.

[22]
Article 218 of the Labor Code provides:

Powers of the Commission. – The Commission shall have the power and authority:

xxx

(d) To hold any person in contempt directly or indirectly and impose appropriate penalties therefor in
accordance with law.

A person guilty of misbehavior in the presence of or so near the Chairman or any member of the Commission or
any Labor Arbiter as to obstruct or interrupt the proceedings before the same, including disrespect toward said
officials, offensive personalities toward others, or refusal to be sworn, or to answer as a witness or to subscribe
an affidavit or deposition when lawfully required to do so, may be summarily adjudged in direct contempt by
said officials and punished by fine not exceeding five hundred pesos (P500) or imprisonment not exceeding five
(5) days, or both, if it be the Commission, or a member thereof, or by a fine not exceeding one hundred pesos
(P100) or imprisonment not exceeding one (1) day, or both, if it be a Labor Arbiter.

The person adjudged in direct contempt by a Labor Arbiter may appeal to the Commission and the execution of
the judgment shall be suspended pending the resolution of the appeal upon the filing by such person of a bond
on condition that he will abide by and perform the judgment of the Commission should the appeal be decided
against him. Judgment of the Commission on direct contempt is immediately executory and unappealable.
Indirect contempt shall be dealt with by the Commission or Labor Arbiter in the manner prescribed under Rule
71 of the Revised Rules of Court[.]

[23]
Id., last paragraph.

SEC. 12. Contempt against quasi-judicial entities. – Unless otherwise provided by law, this Rule
[24]

shall apply to contempt committed against persons, entities, bodies or agencies exercising quasi-
judicial functions, or shall have suppletory effect to such rules as they may have adopted pursuant
to authority granted to them by law to punish for contempt. The Regional Trial Court of the place
wherein the contempt has been committed shall have jurisdiction over such charges as may be filed
therefor.

[25] G.R. No. 129521, September 7, 1999, 313 SCRA 739, 744.

[26] See also People v. Godoy, G.R. Nos. 115908-09, March 29, 1995, 243 SCRA 64.

[27] G.R. No. 107671, February 26, 1997, 268 SCRA 688, 697.

[28] Supra note 26, at 78.

[29] G.R. No. 89318, April 3, 1990, 184 SCRA 118, 121.

[30] No. L-27874, January 30, 1982, 111 SCRA 202, 204.

[31] Supra note 1, at 47-48.

[32] Supra note 8.

[33] Supra note 9.

[34] Supra note 10, at 181-183.

Gonzales v. Intermediate Appellate Court, 252 Phil. 253 (1989); see also Manila Electric Company v. Barlis,
[35]

G.R. No. 114231, June 29, 2004, 433 SCRA 11.

[36] Supra note 10.

[37] Id. at 183-184.

[38] LABOR CODE, Article 217.

111
 Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

MARIALY O. SY, G.R. No. 182915

VIVENCIA PENULLAR,
AURORA AGUINALDO,
GINA ANIANO,⃰
GEMMA DELA PEA,
EFREMIA⃰ MATIAS,
ROSARIO BALUNSAY, ROSALINDA
PARUNGAO, ARACELI⃰ RUAZA,
REGINA RELOX,
TEODORA VENTURA,
AMELIA PESCADERO,
LYDIA DE GUZMAN,
HERMINIA HERNANDEZ,
OLIVIA ABUAN,
CARMEN PORTUGUEZ,
LYDIA PENNULAR,⃰ EMERENCIANA
WOOD, PRISCILLA⃰ ESPINEDA,
NANCY FERNANDEZ,
EVA* MANDURIAGA,
CONSOLACION SERRANO,
SIONY CASILLAN,
LUZVIMINDA GABUYA,
MYRNA TAMIN,
EVELYN REYES,
EVA AYENG,
EDNA YAP,
RIZA⃰ DELA CRUZ
ZUIGA, TRINIDAD RELOX,
MARLON FALLA,
MARICEL OCON, and
ELVIRA MACAPAGAL,
Petitioners,

- versus -

FAIRLAND KNITCRAFT CO., INC.,

112
 Respondent.
x---------------------------x
SUSAN T. DE LEON, G.R. No. 189658
Petitioner,

- versus -

FAIRLAND KNITCRAFT CO., INC., MARIALY

O. SY,
VIVENCIA PENULLAR,
AURORA AGUINALDO,
GINA ANIANO,
GEMMA DELA PEA,
EFREMIA MATIAS,
ROSARIO BALUNSAY, ROSALINDA
PARUNGAO, ARACELI RUAZA,
REGINA RELOX,
TEODORA VENTURA,
AMELIA PESCADERO,
RICHON APARRE,
LYDIA DE GUZMAN,
HERMINIA HERNANDEZ,
Present:
OLIVIA ABUAN,
CARMEN PORTUGUEZ,
CORONA, C.J., Chairperson,
LYDIA PENNULAR, EMERENCIANA WOOD,
PRISCILLA ESPINEDA, LEONARDO-DE CASTRO,

NANCY FERNANDEZ, BRION,⃰

EVA MANDURIAGA, CONSOLACION DEL CASTILLO, and

SERRANO,
PERLAS-BERNABE,* JJ.
SIONY CASILLAN,
LUZVIMINDA GABUYA,
MYRNA TAMIN,

113
 EVELYN REYES,
EVA AYENG,
EDNA YAP,
RIZA DELA CRUZ ZUIGA, TRINIDAD RELOX,
MARLON FALLA,
MARICEL OCON, and
ELVIRA MACAPAGAL,

Promulgated:
Respondents. December 12, 2011
x-------------------------------------------------------------------x

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 CAs 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 CAs
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.

114
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 Pea 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

115
 Luzviminda Gabuya 11-2000 1,000.00/week

Liza Dela Cuz Zuiga 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 Pea 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 clients 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]

116
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 13th month 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 attorneys fees.

SO ORDERED.[24]

117
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 CAs First Division denied Fairlands petition.[28] It affirmed the NLRCs 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 CAs Special Ninth Division for resolution of Fairlands
Motion for Reconsideration.[32]

On May 9, 2008, the CAs Special Ninth Division reversed[33] the First Divisions 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.

118
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 Susans 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 Courts 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 Susans petition with that of the
workers.[43]

119
Susans Motion for Reconsideration of this Courts
December 16, 2009 Resolution in G.R No. 189658 is
granted. Consequently, her Petition for Review on
Certiorari is reinstated.

With Susan and Fairlands respective Motions for Reconsideration still unresolved, this Court shall
first address them.

One of the grounds for the denial of Susans 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 Susans 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 Susans 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 Susans Motion for Reconsideration and consequently, reinstate her
Petition for Review on Certiorari.

As to Fairlands Motion for Reconsideration, we shall treat the same as its comment to Susans
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.

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 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]

Susans 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]

121
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]

Fairlands 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 Arbiters 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
(Weesans) 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 Weesans 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 plaintiffs 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]

122
 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.

Fairlands 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.

123
 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 Fairlands
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.

124
 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 Mayors 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 Susans 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
(Fairlands petition for certiorari before the CA), pointed out that in Fairlands 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 Weesans 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 Weesans 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 CAs 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.)

125
 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 Weesans financial
statement. Even if we are to concede to Susans 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 Weesans 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 Susans effort to negate Fairlands 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.

126
 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 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 Weesans application for closure given the circumstances surrounding the same.

First, workers Marialy Sy, Vivencia Penullar, Aurora Aguinaldo, Gina Aniano, Gemma
Dela Pea and Efremia Matias filed before the Labor Arbiter their complaint for underpayment of
salary, non-payment of benefits, damages and attorneys 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.

127
 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 Weesans 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
fide falls 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.

128
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.

Fairlands 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 Fairlands claim, same deserves scant consideration.

Interestingly, we noticed Fairlands letter[86] dated January 31, 2003 informing Weesan that
it would temporarily not be availing of the latters 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 Weesans 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 latters 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
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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.

Petitioners 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 courts
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

130
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 CAs 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 Arbiters 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 Fairlands duly authorized directors or officers, is defective as no board resolution or
secretarys 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

131
that Debbie signed the verification attached to the position paper filed by Atty. Geronimo, without
a secretarys 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
formers 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. Geronimos alleged unauthorized
appearance. Suffice it to say that an attorneys 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

132
 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 counsels receipt of the decision, order
or award, it necessarily follows that the reckoning period for their finality is likewise the counsels
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 CAs
conclusion, the said NLRC Decision became final, as to Fairland, 10 calendar days after Atty.
Tecsons 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 latters filing of pleadings on their behalf.

Fairland is Weesans 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/Weesans
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

133
both Weesan and Fairland assert that the former had other clients aside from the latter, no proof of
Weesans 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 Fairlands
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.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

134
 TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION
Associate Justice
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions
in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

⃰Also spelled as Anano, Eufemia, Aracelli, Penullar, Priscila, Eve and Liza in some parts of the records.
⃰Designated as additional member per raffle dated October 10, 2011.
[1] CA rollo (CA-G.R. SP No. 93204), pp. 1093-1109; penned by Associate Justice Bienvenido L. Reyes (now a member of this

Court) and concurred in by Associate Justices Vicente Q. Roxas and Pampio A. Abarintos.
[2] Id. at 819-844; penned by Associate Justice Celia C. Librea-Leagogo and concurred in by then Presiding Justice Ruben T. Reyes

(later to become a member of this Court) and Associate Justice Regalado E. Maambong.
[3] Records, Vol. 1, pp. 231-255; penned by Presiding Commissioner Raul T. Aquino and concurred in by Commissioners

Victoriano R. Calaycay and Angelita A. Gacutan.

[4] Id. at 281-282.
[5] Id. at 115-120.
[6] CA rollo (CA-G.R. SP No. 93860), pp. 802-823; penned by Associate Justice Martin S. Villarama, Jr. (now a Member of this

Court) and concurred in by Associate Justices Arturo G. Tayag and Ramon M. Bato, Jr.
[7] Id. at 879.
[8] Records, Vol. I, p. 30.
[9] Id. at 2.
[10] Id. at 25-28.
[11] Id. at 29-35.
[12] Id. at 38.
[13] See Constancia for the April 3, 2003 hearing, id. at 43.
[14] Id. at 44.
[15] Id. at 45-48.
[16] Id. at 52-56.
[17] Id. at 97-100.
[18] Id. at 105-108.
[19] Id. at 108.
[20] Id. at 111-112.
[21] Supra note 5.
[22] Records, Vol. I, p.120.

135
[23] Supra note 3.
[24]
Records, Vol. I, pp. 249-254.
[25] Id. at 259-261.
[26] Id. at 261A-274.
[27] Supra note 4.
[28] Supra note 2.
[29] CA rollo (CA-G.R. SP No. 93204), pp. 954-988.
[30] Id. at 989-992.
[31] Id. at 1037-1045; penned by Associate Justices Regalado E. Maambong and Celia C. Librea-Leagogo.
[32] Upon the inhibition of Justices Leagogo (ponente) and Maambong, the case was re-raffled to Justice Monina Arevalo-Zenarosa

as new ponente on November 14, 2007. The case was again re-raffled on January 16, 2008 to Justice Bienvenido L.
Reyes (ponente) and the members of his Division. See rollo cover of CA-G.R. SP No. 93204.
[33] Supra note 1.
[34] CA rollo (CA-G.R. SP No. 93204), p. 1109.
[35] CA rollo (CA-G.R. SP No. 93860), pp. 730-737; penned by Associate Justice Lucas P. Bersamin (now a Member of this Court)

and concurred in by Associate Justices Renato C. Dacudao and Mariflor Punzalan Castillo.
[36] See Resolution dated July 13, 2006, id. at 789-798; penned by Associate Justice Lucas P. Bersamin (now a member of this

Court) and concurred in by Associate Justices Martin S. Villarama, Jr. (now a member of this Court) and Ramon M. Bato, Jr.
[37] Supra note 6.
[38] CA rollo (CA-G.R. SP No. 93860), p. 823.
[39] See Susans Motion for Reconsideration, id. at 855-862.
[40] Supra note 7.
[41] Rollo (G.R. No. 189658), pp. 455-456.
[42] See Susans Motion for Reconsideration, id. at 529-537 and Fairlands Motion for Reconsideration, id. at 459-509.
[43] Rollo (G.R. No. 182915), p. 597.
[44] Section 4. Contents of petition. The petition shall x x x

xxxx
(b) Indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received, when
a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received;
xxxx
[45] Great Southern Maritime Services Corp. v. Acua, 492 Phil. 518, 527 (2005).
[46] Stitched to the rollo of CA-G.R. SP No. 93860 between pp. 855 and 856 where the first and second pages of Susans Motion for

Reconsideration may be found.

[47] Rollo (G.R. No. 189658), p. 3.
[48] Id. at 20.
[49] See Memorandum for Petitioners, rollo (G.R. No. 182915), pp. 408-482.
[50] Id.
[51] See Fairlands Motion for Reconsideration, supra note 42.
[52]
Id.
[53] Id.
[54] Rollo (G.R. No. 182915), p. 17.
[55] Escario v. National Labor Relations Commission, 388 Phil. 929, 938 (2000).
[56] Records, Vol. I, pp. 49-51.
[57] For the years 2000, 2001 and 2002, id. at 208, 211 & 214.
[58] Id. at 129-152.
[59] CA rollo (CA-G.R. SP No. 93860), pp. 383-388.
[60] Id. (CA-G.R. SP No. 93204), pp. 516-521.
[61] Id. at 522-526.
[62] See Petitioners (Fairland) Reply, id. at 543-554.
[63] Id. (CA-G.R. SP No. 93860), p. 817.
[64] Rollo (G.R. No. 189658), p. 311.
[65] Id. at 314.
[66] Id. at 440-442.
[67] Id. at 443-444.
[68] Id. at 445-449.
[69] 7K Corporation v. National Labor Relations Commission, G.R. No. 148490, November 22, 2006, 507 SCRA 509, 523.
[70] Id.
[71] Art. 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. 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 cases of closures
or 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.
[72] Eastridge Golf Club, Inc. vs. Eastridge Golf Club Inc., Labor Union-Super, G.R. No. 166760, August 22, 2008, 563 SCRA 93,

105.
[73] Id. at 106-107.
[74] Records, Vol. I, p. 57.
[75] Id. at 1.
[76] Id. at 5.
[77] See the Return Card attached to the Summons, id.
[78] Id. at 9, 13, 19 and 24.
[79]
Id. at 58-60.

136
[80] Id. at 62-63, 65-66 and 68-69.
[81]
Id. at 25.
[82] San Pedro Hospital of Digos, Inc. v. Sec. of Labor, 331 Phil. 390, 406 (1996).
[83] G.R. No. 175910, July 30, 2009, 594 SCRA 410, 428-429.
[84] Section 16. Death of party; duty of counsel. Whenever a party to a pending action dies, and the claim is not thereby extinguished,

it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give
the name and address of his legal representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary
action.
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty
(30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within the
specified period, the court may order the opposing party, within a specified time, to procure the appointment of an executor
or administrator for the estate of the deceased and the latter shall immediately appear for and on behalf of the deceased. The
court charges in procuring such appointment, if defrayed by the opposing party, may be recovered as costs.
[85] Regional Agrarian Reform Adjudication Board v. Court of Appeals, G.R. No. 165155, April 13, 2010, 618 SCRA 181, 201.
[86] Records, Vol. I, p. 51.
[87] Larkins v. National Labor Relations Commission, 311 Phil. 687, 693 (1995).
[88] Rapid City Realty and Development Corp. v. Villa, G.R. No. 184197, February 11, 2010, 612 SCRA 302, 305.
[89] Records, Vol. I, p. 5.
[90] See the return card attached to the Summons, id.
[91] 325 Phil. 145 (1996).
[92] Id. at 155-156.
[93] See Constancia for the hearing held on April 3, 2003, records, vol. I, p. 43.
[94] See Constancia for the hearing held on April 28, 2003, id. at 44.
[95] Id. at 45-48 & 52-56.
[96] Id. at 105-108.
[97] Paramount Insurance Corporation v. Japzon, G.R. No. 68037, July 29, 1992, 211 SCRA 879, 886.
[98] The NLRC Rules in force at that time.
[99] The present Section 8, Rule III of the 2005 Revised Rules of Procedure of the NLRC partly reads:

SECTION 8. APPEARANCES. a) A lawyer appearing for a party is presumed to be properly authorized for that purpose. In every case, he
shall indicate in his pleadings and motions his Attorneys Roll Number, as well as his PTR and IBP numbers for the current year. x x x
[100] Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue, G.R. No. 151413, February 13, 2008, 545 SCRA 10,
18-19.
[101] AGPALO, RUBEN E., LEGAL AND JUDICIAL ETHICS, Eight Ed. (2009), p. 328.
[102] Id. at 328-329.
[103] 353 Phil. 431 (1998).
[104] See pp. 11-12 of the Resolution dated May 9, 2008 of the CAs Special Ninth Division, CA rollo (CA-G.R. No. 93204), pp.

1103-1104.
[105] 411 Phil. 953. 957-958 (2001).
[106] Sec. 14, Rule VII of the 2005 Revised NLRC Rules now reads:

Sec. 14. FINALITY OF DECISION OF THE COMMISSION AND ENTRY OF JUDGMENT a) Finality of the Decisions, Resolutions or
Orders of the Commission. Except as provided in Section 9 of Rule X, the decisions, resolutions or orders of the Commission shall
become final and executory after ten (10) calendar days from receipt thereof by the parties. x x x
[107] See proof of receipt, records, vol. I, p. 284.
[108] By then, Fairland was already being represented by Atty. Melina O. Tecson after the latter filed before the NLRC a Motion for
Reconsideration claiming that Fairland was not aware of the complaints filed against it and that it never engaged the services
of Atty. Geronimo.
[109] Records, Vol. I, p. 50.
[110] Association of Integrated Security Force of Bislig (AISFB)-ALU v. Court of Appeals, 505 Phil. 10, 24 (2005).
[111] 7K Corporation v. National Labor Relations Commission, supra note 69.

137
 FIRST DIVISION

[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. chanrob1e s virtua1 1aw 1 ibra 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 rtua l 1a w libra ry

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

138
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: chanrob1es vi rtual 1aw lib rary

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. chanrob1es vi rtua1 1aw 1i brary

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: chanrob1es vi rt ual 1aw li brary

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 cralaw:red

139
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:chanrob1es vi rt ual 1aw li bra 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: chanrob1e s virtual 1aw l ibrary

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: chanrob1e s virtual 1aw lib rary

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: chanrob1es vi rtual 1aw lib 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)

140
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. chanrob1es vi rt ua1 1aw 1i bra ry

SO ORDERED.

Davide, Jr., C.J., Vitug, Ynares-Santiago and Carpio, JJ., concur.

Endnotes:

1. Entitled: "San Miguel Corp. v. Ilaw at Buklod ng Manggagawa, Et Al.," rollo, pp. 27–36.

2. Rollo, p. 37.

3. Rollo, pp. 38–48.

4. Rollo, pp. 59–61.

5. Rollo, pp. 63–65.

6. Rollo, p. 66.

7. Rollo, pp. 67–72.

8. Rollo, pp. 82–89.

9. Rollo, pp. 90–93.

10. Rollo, pp. 123–127.

11. 193 SCRA 223 (1991).

12. Rollo, pp. 128–129.

13. Rollo, p. 130.

14. Rollo, p. 137.

15. Rollo, p. 138.

16. Rollo, p. 139.

17. Rollo, p. 10.

18. Rollo, pp. 152–168.

19. Rollo, p. 169.

20. Rollo, pp. 169–170.

21. Rollo, pp. 171–197.

22 Rollo, pp. 225–227.

23. Supra, note 1.

24. Supra, note 2.

25. Rollo, p. 12.

26. 304 SCRA 1 (1999).

141
27. 198 SCRA 586 (1991).

28. AIUP, Et. Al. v. NLRC, Et Al., 305 SCRA 219 (1999).

29. NFSW v. Ovejera Et. Al., 114 SCRA 354 (1982).

30. NFL, Et. Al. v. NLRC, Et Al., 283 SCRA 275 (1997), First City Interlink Transportation Co. v. Confesor, 272 SCRA 124
(1997), Lapanday Workers Union v. NLRC, 248 SCRA 95 (1995).

31. Rules to Implement the Labor Code, Book V, Rule XXII, Sec. 6.

32. LABOR CODE, art. 211 (a).

33. Rules to Implement the Labor Code, Book V, Rule XXII,

Sec. 1. Grounds for strike and lockout — A strike or lockout may be declared in cases of bargaining deadlocks and unfair
labor practice. Violations of collective bargaining agreements, except flagrant and/or malicious refusal to comply with its
economic provisions, shall not be considered unfair labor practice and shall not be strikeable. No strike or lockout may be
declared on grounds involving inter-union and intra-union disputes or on issues brought to voluntary or compulsory
arbitration.

x x x

Sec. 3. Notice of Strike or Lockout — . . . Any notice which does not conform with the requirements of this and the
foregoing sections shall be deemed as not having been filed and the party concerned shall be so informed by the regional
branch of the Board.

34. Supra, note 11.

35. 287 SCRA 192 (1998).

36. Rules to Implement the Labor Code, Book V, Rule XXII, Sec. 6.

37. Rollo, p. 35.

38. Rollo, p. 228.

39. 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.
(Emphasis supplied.)

40. Supra, note 26.

41. Insurefco Paper Pulp & Project Workers’ Union v. Insular Sugar Refining Corp., 95 Phil. 761 (1954).

42. MSMG-UWP v. Ramos, Et Al., 326 SCRA 428 (2000), citing Master Iron Labor Union, Et. Al. v. NLRC, Et Al., 219 SCRA
47 (1993).

43. CONSTITUTION, art. XIII, sec. 3.

44. Bulletin Publishing Corporation v. Sanchez, 144 SCRA 628 (1986).

142