Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 162355 August 14, 2009

STA. LUCIA EAST COMMERCIAL CORPORATION, Petitioner, vs.HON. SECRETARY OF LABOR AND EMPLOYMENT and STA. LUCIA EAST COMMERCIAL CORPORATION WORKERS ASSOCIATION (CLUP LOCAL CHAPTER), Respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review1 assailing the Decision2 promulgated on 14 August 2003 as well as the Resolution3 promulgated on 24 February 2004 of the Court of Appeals (appellate court) in CA-G.R. SP No. 77015. The appellate court denied Sta. Lucia East Commercial Corporation’s (SLECC) petition for certiorari with prayer for writ of preliminary injunction and temporary restraining order. The appellate court further ruled that the Secretary of Labor and Employment (Secretary) was correct when she held that the subsequent negotiations and registration of a collective bargaining agreement (CBA) executed by SLECC with Samahang Manggagawa sa Sta. Lucia East Commercial (SMSLEC) could not bar Sta. Lucia East Commercial Corporation Workers Association’s (SLECCWA) petition for direct certification.

The Facts

The Secretary narrated the facts as follows:

On 27 February 2001, Confederated Labor Union of the Philippines (CLUP), in behalf of its chartered local, instituted a petition for certification election among the regular rank-and-file employees of Sta. Lucia East Commercial Corporation and its Affiliates, docketed as Case No. RO400-0202-RU-007. The affiliate companies included in the petition were SLE Commercial, SLE Department Store, SLE Cinema, Robsan East Trading, Bowling Center, Planet Toys, Home Gallery and Essentials.

On 21 August 2001, Med-Arbiter Bactin ordered the dismissal of the petition due to inappropriateness of the bargaining unit. CLUP-Sta. Lucia East Commercial Corporation and its Affiliates Workers Union appealed the order of dismissal to this Office on 14 September 2001. On 20 November 2001, CLUP-Sta. Lucia East Commercial Corporation and its Affiliates Workers Union [CLUP-SLECC and its Affiliates Workers Union] moved for the withdrawal of the appeal. On 31 January 2002, this Office granted the motion and affirmed the dismissal of the petition.

In the meantime, on 10 October 2001, [CLUP-SLECC and its Affiliates Workers Union] reorganized itself and re-registered as CLUP-Sta. Lucia East Commercial Corporation Workers Association (herein appellant CLUP-SLECCWA), limiting its membership to the rank-and-file employees of Sta. Lucia East Commercial Corporation. It was issued Certificate of Creation of a Local Chapter No. RO400-0110-CC-004.

On the same date, [CLUP-SLECCWA] filed the instant petition. It alleged that [SLECC] employs about 115 employees and that more than 20% of employees belonging to the rank-and-file category are its members. [CLUP-SLECCWA] claimed that no certification election has been held among them within the last 12 months prior to the filing of the petition, and while there is another union registered with DOLE-Regional Office No. IV on 22 June 2001 covering the same employees, namely [SMSLEC], it has not been recognized as the exclusive bargaining agent of [SLECC’s] employees.

On 22 November 2001, SLECC filed a motion to dismiss the petition. It averred that it has voluntarily recognized [SMSLEC] on 20 July 2001 as the exclusive bargaining agent of its regular rank-and-file employees, and that collective bargaining negotiations already commenced between them. SLECC argued that the petition should be dismissed for violating the one year and negotiation bar rules under pars. (c) and (d), Section 11, Rule XI, Book V of the Omnibus Rules Implementing the Labor Code.

On 29 November 2001, a CBA between [SMSLEC] and [SLECC] was ratified by its rank-and-file employees and registered with DOLE-Regional Office No. IV on 9 January 2002.

In the meantime, on 19 December 2001, [CLUP-SLECCWA] filed its Opposition and Comment to [SLECC’S] Motion to Dismiss. It assailed the validity of the voluntary recognition of [SMSLEC] by [SLECC] and their consequent negotiations and execution of a CBA. According to [CLUP-SLECCWA], the same were tainted with malice, collusion and conspiracy involving some officials of the Regional Office. Appellant contended that Chief LEO Raymundo Agravante, DOLE Regional Office No. IV, Labor Relations Division should have not approved and recorded the voluntary recognition of [SMSLEC] by [SLECC] because it violated one of the major requirements for voluntary recognition, i.e., non-existence of another labor organization in the same bargaining unit. It pointed out that the time of the voluntary recognition on 20 July 2001, appellant’s registration as [CLUP-SLECC and its Affiliates Workers Union], which covers the same group of employees covered by Samahang Manggagawa sa Sta. Lucia East Commercial, was existing and has neither been cancelled or abandoned. [CLUP-SLECCWA] also accused Med-Arbiter Bactin of malice, collusion and conspiracy with appellee company when he dismissed the petition for certification election filed by [SMSLEC] for being moot and academic because of its voluntary recognition, when he was fully aware of the pendency of [CLUP-SLECCWA’s] earlier petition for certification election.

Subsequent pleadings filed by [CLUP-SLECCWA] and [SLECC] reiterated their respective positions on the validity and invalidity of the voluntary recognition. On 29 July 2002, Med-Arbiter Bactin issued the assailed Order.4

The Med-Arbiter’s Ruling

In his Order dated 29 July 2002, Med-Arbiter Anastacio L. Bactin dismissed CLUP-SLECCWA’s petition for direct certification on the ground of contract bar rule. The prior voluntary recognition of SMSLEC and the CBA between SLECC and SMSLEC bars the filing of CLUP-SLECCWA’s petition for direct certification. SMSLEC is entitled to enjoy the rights, privileges, and obligations of an exclusive bargaining representative from the time of the recording of the voluntary recognition. Moreover, the duly registered CBA bars the filing of the petition for direct certification.

CLUP-SLECCWA filed a Memorandum of Appeal of the Med-Arbiter’s Order before the Secretary.

The Ruling of the Secretary of Labor and Employment

In her Decision promulgated on 27 December 2002, the Secretary found merit in CLUP-SLECCWA’s appeal. The Secretary held that the subsequent negotiations and registration of a CBA executed by SLECC with SMSLEC could not bar CLUP-SLECCWA’s petition. CLUP-SLECC and its Affiliates Workers Union constituted a registered labor organization at the time of SLECC’s voluntary recognition of SMSLEC. The dispositive portion of the Secretary’s Decision reads:

WHEREFORE, the appeal is hereby GRANTED and the Order of the Med-Arbiter dated 29 July 2002 is REVERSED and SET ASIDE. Accordingly, let the entire records of the case be remanded to the Regional Office of origin for the immediate conduct of a certification election, subject to the usual pre-election conference, among the regular rank-and-file employees of [SLECC], with the following choices:

1. Sta. Lucia East Commercial Corporation Workers’ Association – CLUP Local Chapter;

2. Samahang Manggagawa sa Sta. Lucia East Commercial; and

3. No Union.

Pursuant to Rule XI, Section II.1 of Department Order No. 9, appellee corporation is hereby directed to submit to the office of origin, within ten (10) days from receipt hereof, the certified list of its employees in the bargaining unit or when necessary a copy of its payroll covering the same employees for the last three (3) months preceding the issuance of this Decision.

Let a copy of this Decision be furnished the Bureau of Labor Relations and Labor Relations Division of Regional Office No. IV for the cancellation of the recording of voluntary recognition in favor of Samahang Manggagawa sa Sta. Lucia East Commercial and the appropriate annotation of re-registration of CLUP-Sta. Lucia East Commercial Corporation and its Affiliates Workers Union to Sta. Lucia East Commercial Corporation Workers Association-CLUP Local Chapter.

SO DECIDED.5

SLECC filed a motion for reconsideration which the Secretary denied for lack of merit in a Resolution dated 27 March 2003. SLECC then filed a petition for certiorari before the appellate court.

The Ruling of the Appellate Court

The appellate court affirmed the ruling of the Secretary and quoted extensively from the Secretary’s decision. The appellate court agreed with the Secretary’s finding that the workers sought to be represented by CLUP-SLECC and its Affiliates Workers Union included the same workers in the bargaining unit represented by SMSLEC. SMSLEC was not the only legitimate labor organization operating in the subject bargaining unit at the time of SMSLEC’s voluntary recognition on 20 July 2001. Thus, SMSLEC’s voluntary recognition was void and could not bar CLUP-SLECCWA’s petition for certification election.

The Issue

SLECC raised only one issue in its petition. SLECC asserted that the appellate court commited a reversible error when it affirmed the Secretary’s finding that SLECC’s voluntary recognition of SMSLEC was done while a legitimate labor organization was in existence in the bargaining unit.

The Ruling of the Court

The petition has no merit. We see no reason to overturn the rulings of the Secretary and of the appellate court.

Legitimate Labor Organization

Article 212(g) of the Labor Code defines a labor organization as "any union or association of employees which exists in whole or in part for the purpose of collective bargaining or of dealing with employers concerning terms and conditions of employment." Upon compliance with all the documentary requirements, the Regional Office or Bureau shall issue in favor of the applicant labor organization a certificate indicating that it is included in the roster of legitimate labor organizations.6 Any applicant labor organization 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.7

Bargaining Unit

The concepts of a union and of a legitimate labor organization are different from, but related to, the concept of a bargaining unit. We explained the concept of a bargaining unit in San Miguel Corporation v. Laguesma,8 where we stated that:

A bargaining unit is a "group of employees of a given employer, comprised of all or less than all of the entire body of employees, consistent with equity to the employer, indicated to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law."

The fundamental factors in determining the appropriate collective bargaining unit are: (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees’ interest, such as substantial similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.

Contrary to petitioner’s assertion, this Court has categorically ruled that the existence of a prior collective bargaining history is neither decisive nor conclusive in the determination of what constitutes an appropriate bargaining unit.

However, employees in two corporations cannot be treated as a single bargaining unit even if the businesses of the two corporations are related.9

A Legitimate Labor Organization Representing An Inappropriate Bargaining Unit

CLUP-SLECC and its Affiliates Workers Union’s initial problem was that they constituted a legitimate labor organization representing a non-appropriate bargaining unit. However, CLUP-SLECC and its Affiliates Workers Union subsequently re-registered as CLUP-SLECCWA, limiting its members to the rank-and-file of SLECC. SLECC cannot ignore that CLUP-SLECC and its Affiliates Workers Union was a legitimate labor organization at the time of SLECC’s voluntary recognition of SMSLEC. SLECC and SMSLEC cannot, by themselves, decide whether CLUP-SLECC and its Affiliates Workers Union represented an appropriate bargaining unit.1avvphi1

The inclusion in the union of disqualified employees is not among the grounds for cancellation of registration, unless such inclusion is due to misrepresentation, false statement or fraud under the circumstances enumerated in Sections (a) to (c) of Article 239 of the Labor Code.10 Thus, CLUP-SLECC and its Affiliates Workers Union, having been validly issued a certificate of registration, should be considered as having acquired juridical personality which may not be attacked collaterally. The proper procedure for SLECC is to file a petition for cancellation of certificate of registration11 of CLUP-SLECC and its Affiliates Workers Union and not to immediately commence voluntary recognition proceedings with SMSLEC.

SLECC’s Voluntary Recognition of SMSLEC

The employer may voluntarily recognize the representation status of a union in unorganized establishments.12 SLECC was not an unorganized establishment when it voluntarily recognized SMSLEC as its exclusive bargaining representative on 20 July 2001. CLUP-SLECC and its Affiliates Workers Union filed a petition for certification election on 27 February 2001 and this petition remained pending as of 20 July 2001. Thus, SLECC’s voluntary recognition of SMSLEC on 20 July 2001, the subsequent negotiations and resulting registration of a CBA executed by SLECC and SMSLEC are void and cannot bar CLUP-SLECCWA’s present petition for certification election.

Employer’s Participation in a Petition for Certification Election

We find it strange that the employer itself, SLECC, filed a motion to oppose CLUP-SLECCWA’s petition for certification election. In petitions for certification election, the employer is a mere bystander and cannot oppose the petition or appeal the Med-Arbiter’s decision. The exception to this rule, which happens when the employer is requested to bargain collectively, is not present in the case before us.13

WHEREFORE, we DENY the petition. We AFFIRM the Decision promulgated on 14 August 2003 as well as the Resolution promulgated on 24 February 2004 of the Court of Appeals in CA-G.R. SP No. 77015.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 169754 February 23, 2011

LEGEND INTERNATIONAL RESORTS LIMITED, Petitioner, vs.KILUSANG MANGGAGAWA NG LEGENDA (KML-INDEPENDENT), Respondent.

D E C I S I O N

DEL CASTILLO, J.:

This Petition for Review on Certiorari assails the September 18, 2003 Decision of the Court of Appeals in CA-G.R. SP No. 72848 which found no grave abuse of discretion on the part of the Office of the Secretary of the Department of Labor and Employment (DOLE) which ruled in favor of Kilusang Manggagawa ng Legenda (KML). Also assailed is the September 14, 2005 Resolution denying petitioner’s motion for reconsideration.

Factual Antecedents

On June 6, 2001, KML filed with the Med-Arbitration Unit of the DOLE, San Fernando, Pampanga, a Petition for Certification Election1 docketed as Case No. RO300-0106-RU-001. KML alleged that it is a legitimate labor organization of the rank and file employees of Legend International Resorts Limited (LEGEND). KML claimed that it was issued its Certificate of Registration No. RO300-0105-UR-002 by the DOLE on May 18, 2001.

LEGEND moved to dismiss2 the petition alleging that KML is not a legitimate labor organization because its membership is a mixture of rank and file and supervisory employees in violation of Article 245 of the Labor Code. LEGEND also claimed that KML committed acts of fraud and misrepresentation when it made it appear that certain employees attended its general membership meeting on April 5, 2001 when in reality some of them were either at work; have already resigned as of March 2001; or were abroad.

In its Comment,3 KML argued that even if 41 of its members are indeed supervisory employees and therefore excluded from its membership, the certification election could still proceed because the required number of the total rank and file employees necessary for certification purposes is still sustained. KML also claimed that its legitimacy as a labor union could not be collaterally attacked in the certification election proceedings but only through a separate and independent action for cancellation of union registration. Finally, as to the alleged acts of misrepresentation, KML asserted that LEGEND failed to substantiate its claim.

Ruling of the Med-Arbiter

On September 20, 2001, the Med-Arbiter4 rendered judgment5 dismissing for lack of merit the petition for certification election. The Med-Arbiter found that indeed there were several supervisory employees in KML’s membership. Since Article 245 of the Labor Code expressly prohibits supervisory employees from joining the union of rank and file employees, the Med-Arbiter concluded that KML is not a legitimate labor organization. KML was also found to have fraudulently procured its registration certificate by misrepresenting that 70 employees were among those who attended its organizational meeting on April 5, 2001 when in fact they were either at work or elsewhere.

KML thus appealed to the Office of the Secretary of the DOLE.

Ruling of the Office of the Secretary of DOLE

On May 22, 2002, the Office of the Secretary of DOLE rendered its Decision6 granting KML’s appeal thereby reversing and setting aside the Med-Arbiter’s Decision. The Office of the Secretary of DOLE held that KML’s legitimacy as a union could not be collaterally attacked, citing Section 5,7 Rule V of Department Order No. 9, series of 1997.

The Office of the Secretary of DOLE also opined that Article 245 of the Labor Code merely provides for the prohibition on managerial employees to form or join a union and the ineligibility of supervisors to join the union of the rank and file employees and vice versa. It declared that any violation of the provision of Article 245 does not ipso facto render the existence of the labor organization illegal. Moreover, it held that Section 11, paragraph II of Rule XI which provides for the grounds for dismissal of a petition for certification election does not include mixed membership in one union.

The dispositive portion of the Office of the Secretary of DOLE’s Decision reads:

WHEREFORE, the appeal is hereby GRANTED and the order of the Med-Arbiter dated 20 September 2001 is REVERSED and SET ASIDE.

Accordingly, let the entire record of the case be remanded to the regional office of origin for the immediate conduct of the certification election, subject to the usual pre-election conference, among the rank and file employees of LEGEND INTERNATIONAL RESORTS LIMITED with the following choices:

1. KILUSANG MANGGAGAWA NG LEGENDA (KML-INDEPENDENT); and

2. NO UNION.

Pursuant to Rule XI, Section II.1 of D.O. No. 9, the employer is hereby directed to submit to the office of origin, within ten days from receipt of the decision, the certified list of employees in the bargaining unit for the last three (3) months prior to the issuance of this decision.

SO DECIDED.8

LEGEND filed its Motion for Reconsideration9 reiterating its earlier arguments. It also alleged that on August 24, 2001, it filed a Petition10 for Cancellation of Union Registration of KML docketed as Case No. RO300-0108-CP-001 which was granted11 by the DOLE Regional Office No. III of San Fernando, Pampanga in its Decision12 dated November 7, 2001.

In a Resolution13 dated August 20, 2002, the Office of the Secretary of DOLE denied LEGEND’s motion for reconsideration. It opined that Section 11, paragraph II(a), Rule XI of Department Order No. 9 requires a final order of cancellation before a petition for certification election may be dismissed on the ground of lack of legal personality. Besides, it noted that the November 7, 2001 Decision of DOLE Regional Office No. III of San Fernando, Pampanga in Case No. RO300-0108-CP-001 was reversed by the Bureau of Labor Relations in a Decision dated March 26, 2002.

Ruling of the Court of Appeals

Undeterred, LEGEND filed a Petition for Certiorari14 with the Court of Appeals docketed as CA-G.R. SP No. 72848. LEGEND alleged that the Office of the Secretary of DOLE gravely abused its discretion in reversing and setting aside the Decision of the Med-Arbiter despite substantial and overwhelming evidence against KML.

For its part, KML alleged that the Decision dated March 26, 2002 of the Bureau of Labor Relations in Case No. RO300-0108-CP-001 denying LEGEND’s petition for cancellation and upholding KML’s legitimacy as a labor organization has already become final and executory, entry of judgment having been made on August 21, 2002.15

The Office of the Secretary of DOLE also filed its Comment16 asserting that KML’s legitimacy cannot be attacked collaterally. Finally, the Office of the Secretary of DOLE stressed that LEGEND has no legal personality to participate in the certification election proceedings.

On September 18, 2003, the Court of Appeals rendered its Decision17 finding no grave abuse of discretion on the part of the Office of the Secretary of DOLE. The appellate court held that the issue on the legitimacy of KML as a labor organization has already been settled with finality in Case No. RO300-0108-CP-001. The March 26, 2002 Decision of the Bureau of Labor Relations upholding the legitimacy of KML as a labor organization had long become final and executory for failure of LEGEND to appeal the same. Thus, having already been settled that KML is a legitimate labor organization, the latter could properly file a petition for certification election. There was nothing left for the Office of the Secretary of DOLE to do but to order the holding of such certification election.

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, and finding that no grave abuse of discretion amounting to lack or excess of jurisdiction has been committed by the Department of Labor and Employment, the assailed May 22, 2002 Decision and August 20, 2002 Resolution in Case No. RO300-106-RU-001 are UPHELD and AFFIRMED. The instant petition is DENIED due course and, accordingly, DISMISSED for lack of merit.18

LEGEND filed a Motion for Reconsideration19 alleging, among others, that it has appealed to the Court of Appeals the March 26, 2002 Decision in Case No. RO300-0108-CP-001 denying its petition for cancellation and that it is still pending resolution.

On September 14, 2005, the appellate court denied LEGEND’s motion for reconsideration.

Hence, this Petition for Review on Certiorari raising the lone assignment of error, viz:

WHETHER X X X THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN THE APPLICATION OF LAW IN DENYING THE PETITIONER’S PETITION FOR CERTIORARI.20

Petitioner’s Arguments

LEGEND submits that the Court of Appeals grievously erred in ruling that the March 26, 2002 Decision denying its Petition for Cancellation of KML’s registration has already become final and executory. It asserts that it has seasonably filed a Petition for Certiorari21 before the CA docketed as CA-G.R. SP No. 72659 assailing said Decision. In fact, on June 30, 2005, the Court of Appeals granted the petition, reversed the March 26, 2002 Decision of the Bureau of Labor Relations and reinstated the November 7, 2001 Decision of the DOLE Regional Office III ordering the cancellation of KML’s registration.

Finally, LEGEND posits that the cancellation of KML’s certificate of registration should retroact to the time of its issuance.22 It thus claims that the petition for certification election and all of KML’s activities should be nullified because it has no legal personality to file the same, much less demand collective bargaining with LEGEND.23

LEGEND thus prays that the September 20, 2001 Decision of the Med-Arbiter dismissing KML’s petition for certification election be reinstated.24

Respondent’s Arguments

In its Comment filed before this Court dated March 21, 2006, KML insists that the Decision of the Bureau of Labor Relations upholding its legitimacy as a labor organization has already attained finality25 hence there was no more hindrance to the holding of a certification election. Moreover, it claims that the instant petition has become moot because the certification election sought to be prevented had already been conducted.

Our Ruling

The petition is partly meritorious.

LEGEND has timely appealed the March 26, 2002 Decision of the Bureau of Labor Relations to the Court of Appeals.

We cannot understand why the Court of Appeals totally disregarded LEGEND’s allegation in its Motion for Reconsideration that the March 26, 2002 Decision of the Bureau of Labor Relations has not yet attained finality considering that it has timely appealed the same to the Court of Appeals and which at that time is still pending resolution. The Court of Appeals never bothered to look into this allegation and instead dismissed outright LEGEND’s motion for reconsideration. By doing so, the Court of Appeals in effect maintained its earlier ruling that the March 26, 2002 Decision of the Bureau of Labor Relations upholding the legitimacy of KML as a labor organization has long become final and executory for failure of LEGEND to appeal the same.

This is inaccurate. Records show that (in the cancellation of registration case) LEGEND has timely filed on September 6, 2002 a petition for certiorari26 before the Court of Appeals which was docketed as CA-G.R. SP No. 72659 assailing the March 26, 2002 Decision of the Bureau of Labor Relations. In fact, KML received a copy of said petition on September 10, 200227 and has filed its Comment thereto on December 2, 2002.28 Thus, we find it quite interesting for KML to claim in its Comment (in the certification petition case) before this Court dated March 21, 200629 that the Bureau of Labor Relations’ Decision in the petition for cancellation case has already attained finality. Even in its Memorandum30 dated March 13, 2007 filed before us, KML is still insisting that the Bureau of Labor Relations’ Decision has become final and executory.

Our perusal of the records shows that on June 30, 2005, the Court of Appeals rendered its Decision31 in CA-G.R. SP No. 72659 reversing the March 26, 2002 Decision of the Bureau of Labor Relations and reinstating the November 7, 2001 Decision of the Med-Arbiter which canceled the certificate of registration of KML.32 On September 30, 2005, KML’s motion for reconsideration was denied for lack of merit.33 On November 25, 2005, KML filed its Petition for Review on Certiorari34 before this Court which was docketed as G.R. No. 169972. However, the same was denied in a Resolution35 dated February 13, 2006 for having been filed out of time. KML moved for reconsideration but it was denied with finality in a Resolution36 dated June 7, 2006. Thereafter, the said Decision canceling the certificate of registration of KML as a labor organization became final and executory and entry of judgment was made on July 18, 2006.37

The cancellation of KML’s certificate of registration should not retroact to the time of its issuance.

Notwithstanding the finality of the Decision canceling the certificate of registration of KML, we cannot subscribe to LEGEND’s proposition that the cancellation of KML’s certificate of registration should retroact to the time of its issuance. LEGEND claims that KML’s petition for certification election filed during the pendency of the petition for cancellation and its demand to enter into collective bargaining agreement with LEGEND should be dismissed due to KML’s lack of legal personality.

This issue is not new or novel. In Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor,38

we already ruled that:

Anent the issue of whether or not the Petition to cancel/revoke registration is a prejudicial question to the petition for certification election, the following ruling in the case of Association of the Court of Appeals Employees (ACAE) v. Hon. Pura Ferrer-Calleja, x x x is in point, to wit:

x x x It is well-settled rule that ‘a certification proceedings is not a litigation in the sense that the term is ordinarily understood, but an investigation of a non-adversarial and fact finding character.’ (Associated Labor Unions (ALU) v. Ferrer-Calleja, 179 SCRA 127 [1989]; Philippine Telegraph and Telephone Corporation v. NLRC, 183 SCRA 451 [1990]. Thus, the technical rules of evidence do not apply if the decision to grant it proceeds from an examination of the sufficiency of the petition as well as a careful look into the arguments contained in the position papers and other documents.

At any rate, the Court applies the established rule correctly followed by the public respondent that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation.39 (Emphasis supplied.)

In Capitol Medical Center, Inc. v. Hon. Trajano,40 we also held that "the pendency of a petition for cancellation of union registration does not preclude collective bargaining."41 Citing the Secretary of Labor, we held viz:

That there is a pending cancellation proceedings against the respondent Union is not a bar to set in motion the mechanics of collective bargaining. If a certification election may still be ordered despite the pendency of a petition to cancel the union’s registration certificate x x x more so should the collective bargaining process continue despite its pendency. 42 (Emphasis supplied.)

In Association of Court of Appeals Employees v. Ferrer-Calleja,43 this Court was tasked to resolve the issue of whether "the certification proceedings should be suspended pending [the petitioner’s] petition for the cancellation of union registration of the UCECA44."45 The Court resolved the issue in the negative holding that "an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing a cancellation."46 We reiterated this view in Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma47 where we declared that "a certification election can be conducted despite pendency of a petition to cancel the union registration certificate. For the fact is that at the time the respondent union filed its petition for certification, it still had the legal personality to perform such act absent an order directing its cancellation."48

Based on the foregoing jurisprudence, it is clear that a certification election may be conducted during the pendency of the cancellation proceedings. This is because at the time the petition for certification was filed, the petitioning union is presumed to possess the legal personality to file the same. There is therefore no basis for LEGEND’s assertion that the cancellation of KML’s certificate of registration should retroact to the time of its issuance or that it effectively nullified all of KML’s activities, including its filing of the petition for certification election and its demand to collectively bargain.

The legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election.

We agree with the ruling of the Office of the Secretary of DOLE that the legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election proceeding. This is in consonance with our ruling in Laguna Autoparts Manufacturing Corporation v. Office of the Secretary, Department of Labor and Employment49 that "such legal personality may not be subject to a collateral attack but only through a separate action instituted particularly for the purpose of assailing it."50 We further held therein that:

This is categorically prescribed by Section 5, Rule V of the Implementing Rules of Book V, which states as follows:

SEC. 5.51 Effect of registration. – The labor organization or worker’s association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack but may be questioned only in an independent petition for cancellation in accordance with these Rules.

Hence, to raise the issue of the respondent union’s legal personality is not proper in this case.1avvphi1 The pronouncement of the Labor Relations Division Chief, that the respondent union acquired a legal personality x x x cannot be challenged in a petition for certification election.

The discussion of the Secretary of Labor and Employment on this point is also enlightening, thus:

. . . Section 5, Rule V of D.O. 9 is instructive on the matter. It provides that the legal personality of a union cannot be the subject of collateral attack in a petition for certification election, but may be questioned only in an independent petition for cancellation of union registration. This has been the rule since NUBE v. Minister of Labor, 110 SCRA 274 (1981). What applies in this case is the principle that once a union acquires a legitimate status as a labor organization, it continues as such until its certificate of registration is cancelled or revoked in an independent action for cancellation.

Equally important is Section 11, Paragraph II, Rule IX of D.O. 9, which provides for the dismissal of a petition for certification election based on the lack of legal personality of a labor organization only in the following instances: (1) appellant is not listed by the Regional Office or the BLR in its registry of legitimate labor organizations; or (2) appellant’s legal

personality has been revoked or cancelled with finality. Since appellant is listed in the registry of legitimate labor organizations, and its legitimacy has not been revoked or cancelled with finality, the granting of its petition for certification election is proper.52

"[T]he legal personality of a legitimate labor organization x x x cannot be subject to a collateral attack. The law is very clear on this matter. x x x The Implementing Rules stipulate that a labor organization shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Once a certificate of registration is issued to a union, its legal personality cannot be subject to a collateral attack. In may be questioned only in an independent petition for cancellation in accordance with Section 5 of Rule V, Book V of the Implementing Rules."53

WHEREFORE, in view of the foregoing, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 18, 2003 in CA-G.R. SP No. 72848 insofar as it affirms the May 22, 2002 Decision and August 20, 2002 Resolution of the Office of the Secretary of Department of Labor and Employment is AFFIRMED. The Decision of the Court of Appeals insofar as it declares that the March 26, 2002 Decision of the Bureau of Labor Relations in Case No. RO300-0108-CP-001 upholding that the legitimacy of KML as a labor organization has long become final and executory for failure of LEGEND to appeal the same, is REVERSED and SET ASIDE.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 171153 September 12, 2007

SAN MIGUEL CORPORATION EMPLOYEES UNION–PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (SMCEU–PTGWO), petitioner, vs.SAN MIGUEL PACKAGING PRODUCTS EMPLOYEES UNION–PAMBANSANG DIWA NG MANGGAGAWANG PILIPINO (SMPPEU–PDMP), respondent1.

D E C I S I O N

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, petitioner SAN MIGUEL CORPORATION EMPLOYEES UNION-PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (SMCEU-PTGWO) prays that this Court reverse and set aside the (a) Decision2 dated 9 March 2005 of the Court of Appeals in CA-G.R. SP No. 66200, affirming the Decision3 dated 19 February 2001 of the Bureau of Labor Relations (BLR) of the Department of Labor and Employment (DOLE) which upheld the Certificate of Registration of respondent SAN MIGUEL PACKAGING PRODUCTS EMPLOYEES UNION–PAMBANSANG

DIWA NG MANGGAGAWANG PILIPINO (SMPPEU–PDMP); and (b) the Resolution4 dated 16 January 2006 of the Court of Appeals in the same case, denying petitioner's Motion for Reconsideration of the aforementioned Decision.

The following are the antecedent facts:

Petitioner is the incumbent bargaining agent for the bargaining unit comprised of the regular monthly-paid rank and file employees of the three divisions of San Miguel Corporation (SMC), namely, the San Miguel Corporate Staff Unit (SMCSU), San Miguel Brewing Philippines (SMBP), and the San Miguel Packaging Products (SMPP), in all offices and plants of SMC, including the Metal Closure and Lithography Plant in Laguna. It had been the certified bargaining agent for 20 years – from 1987 to 1997.

Respondent is registered as a chapter of Pambansang Diwa ng Manggagawang Pilipino (PDMP). PDMP issued Charter Certificate No. 112 to respondent on 15 June 1999.5 In compliance with registration requirements, respondent submitted the requisite documents to the BLR for the purpose of acquiring legal personality.6 Upon submission of its charter certificate and other documents, respondent was issued Certificate of Creation of Local or Chapter PDMP-01 by the BLR on 6 July 1999.7 Thereafter, respondent filed with the Med-Arbiter of the DOLE Regional Officer in the National Capital Region (DOLE-NCR), three separate petitions for certification election to represent SMPP, SMCSU, and SMBP.8 All three petitions were dismissed, on the ground that the separate petitions fragmented a single bargaining unit.9

On 17 August 1999, petitioner filed with the DOLE-NCR a petition seeking the cancellation of respondent's registration and its dropping from the rolls of legitimate labor organizations. In its petition, petitioner accused respondent of committing fraud and falsification, and non-compliance with registration requirements in obtaining its certificate of registration. It raised allegations that respondent violated Articles 239(a), (b) and (c)10 and 234(c)11 of the Labor Code. Moreover, petitioner claimed that PDMP is not a legitimate labor organization, but a trade union center, hence, it cannot directly create a local or chapter. The petition was docketed as Case No. NCR-OD-9908-007-IRD.12

On 14 July 2000, DOLE-NCR Regional Director Maximo B. Lim issued an Order dismissing the allegations of fraud and misrepresentation, and irregularity in the submission of documents by respondent. Regional Director Lim further ruled that respondent is allowed to directly create a local or chapter. However, he found that respondent did not comply with the 20% membership requirement and, thus, ordered the cancellation of its certificate of registration and removal from the rolls of legitimate labor organizations.13 Respondent appealed to the BLR. In a Decision dated 19 February 2001, it declared:

As a chartered local union, appellant is not required to submit the number of employees and names of all its members comprising at least 20% of the employees in the bargaining unit where it seeks to operate. Thus, the revocation of its registration based on non-compliance with the 20% membership requirement does not have any basis in the rules.

Further, although PDMP is considered as a trade union center, it is a holder of Registration Certificate No. FED-11558-LC issued by the BLR on 14 February 1991, which bestowed upon it the status of a legitimate labor organization with all the rights and privileges to act as representative of its members for purposes of collective bargaining agreement. On this basis, PDMP can charter or create a local, in accordance with the provisions of Department Order No. 9.

WHEREFORE, the appeal is hereby GRANTED. Accordingly, the decision of the Regional Director dated July 14, 2000, canceling the registration of appellant San Miguel Packaging Products Employees Union-Pambansang Diwa ng Manggagawang Pilipino (SMPPEU-PDMP) is REVERSED and SET ASIDE. Appellant shall hereby remain in the roster of legitimate labor organizations.14

While the BLR agreed with the findings of the DOLE Regional Director dismissing the allegations of fraud and misrepresentation, and in upholding that PDMP can directly create a local or a chapter, it reversed the Regional Director's ruling that the 20% membership is a requirement for respondent to attain legal personality as a labor organization. Petitioner thereafter filed a Motion for Reconsideration with the BLR. In a Resolution rendered on 19 June 2001 in BLR-A-C-64-05-9-00 (NCR-OD-9908-007-IRD), the BLR denied the Motion for Reconsideration and affirmed its Decision dated 19 February 2001.15

Invoking the power of the appellate court to review decisions of quasi-judicial agencies, petitioner filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure docketed as CA-G.R. SP No. 66200. The Court of Appeals, in a Decision dated 9 March 2005, dismissed the petition and affirmed the Decision of the BLR, ruling as follows:

In Department Order No. 9, a registered federation or national union may directly create a local by submitting to the BLR copies of the charter certificate, the local's constitution and by-laws, the principal office address of the local, and the names of its officers and their addresses. Upon complying with the documentary requirements, the local shall be issued a certificate and included in the roster of legitimate labor organizations. The [herein respondent] is an affiliate of a registered federation PDMP, having been issued a charter certificate. Under the rules we have reviewed, there is no need for SMPPEU to show a membership of 20% of the employees of the bargaining unit in order to be recognized as a legitimate labor union.

x x x x

In view of the foregoing, the assailed decision and resolution of the BLR are AFFIRMED, and the petition is DISMISSED.16

Subsequently, in a Resolution dated 16 January 2006, the Court of Appeals denied petitioner's Motion for Reconsideration of the aforementioned Decision.

Hence, this Petition for Certiorari under Rule 45 of the Revised Rules of Court where petitioner raises the sole issue of:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT PRIVATE RESPONDENT IS NOT REQUIRED TO SUBMIT THE NUMBER OF EMPLOYEES AND NAMES OF ALL ITS MEMBERS COMPRISING AT LEAST 20% OF THE EMPLOYEES IN THE BARGAINING UNIT WHERE IT SEEKS TO OPERATE.

The present petition questions the legal personality of respondent as a legitimate labor organization.

Petitioner posits that respondent is required to submit a list of members comprising at least 20% of the employees in the bargaining unit before it may acquire legitimacy, citing Article 234(c) of the Labor Code which stipulates that 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.17

Petitioner also insists that the 20% requirement for registration of respondent must be based not on the number of employees of a single division, but in all three divisions of the company in all the offices and plants of SMC since they are all part of one bargaining unit. Petitioner refers to Section 1, Article 1 of the Collective Bargaining Agreement (CBA),18 quoted hereunder:

ARTICLE 1

SCOPE

Section 1. Appropriate Bargaining Unit. The appropriate bargaining unit covered by this Agreement consists of all regular rank and file employees paid on the basis of fixed salary per month and employed by the COMPANY in its Corporate Staff Units (CSU), San Miguel Brewing Products (SMBP) and San Miguel Packaging Products (SMPP) and in different operations existing in the City of Manila and suburbs,

including Metal Closure and Lithography Plant located at Canlubang, Laguna subject to the provisions of Article XV of this Agreement provided however, that if during the term of this Agreement, a plant within the territory covered by this Agreement is transferred outside but within a radius of fifty (50) kilometers from the Rizal Monument, Rizal Park, Metro Manila, the employees in the transferred plant shall remain in the bargaining unit covered by this Agreement. (Emphasis supplied.)

Petitioner thus maintains that respondent, in any case, failed to meet this 20% membership requirement since it based its membership on the number of employees of a single division only, namely, the SMPP.

There is merit in petitioner's contentions.

A legitimate labor organization19 is defined as "any labor organization duly registered with the Department of Labor and Employment, and includes any branch or local thereof."20 The mandate of the Labor Code is to ensure strict compliance with the requirements on registration because a legitimate labor organization is entitled to specific rights under the Labor Code,21 and are involved in activities directly affecting matters of public interest. Registration requirements are intended to afford a measure of protection to unsuspecting employees who may be lured into joining unscrupulous or fly-by-night unions whose sole purpose is to control union funds or use the labor organization for illegitimate ends.22 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 representative23 of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining.24 The acquisition of rights by any union or labor organization, particularly the right to file a petition for certification election, first and foremost, depends on whether or not the labor organization has attained the status of a legitimate labor organization.25

A perusal of the records reveals that respondent is registered with the BLR as a "local" or "chapter" of PDMP and was issued Charter Certificate No. 112 on 15 June 1999. Hence, respondent was directly chartered by PDMP.

The procedure for registration of a local or chapter of a labor organization is provided in Book V of the Implementing Rules of the Labor Code, as amended by Department Order No. 9 which took effect on 21 June 1997, and again by Department Order No. 40 dated 17 February 2003. The Implementing Rules as amended by D.O. No. 9 should govern the resolution of the petition at bar since respondent's petition for certification election was filed with the BLR in 1999; and that of petitioner on 17 August 1999.26

The applicable Implementing Rules enunciates a two-fold procedure for the creation of a chapter or a local. The first involves the affiliation of an independent union with a federation or national union or industry union. The second, finding application in the instant petition, involves the direct creation of a local or a chapter through the process of chartering.27

A duly registered federation or national union may directly create a local or chapter by submitting to the DOLE Regional Office or to the BLR two copies of the following:

(a) A charter certificate issued by the federation or national union indicating the creation or establishment of the local/chapter;

(b) The names of the local/chapter's officers, their addresses, and the principal office of the local/chapter; and

(c) The local/chapter's constitution and by-laws; Provided, That where the local/chapter's constitution and by-laws is the same as that of the federation or national union, this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the local/chapter and attested to by its President.28

The Implementing Rules stipulate that a local or chapter may be directly created by a federation or national union. A duly constituted local or chapter created in accordance with the foregoing shall acquire legal personality from the date of filing of the complete documents with the BLR.29 The issuance of the certificate of registration by the BLR or the DOLE Regional Office is not the operative act that vests legal personality upon a local or a chapter under Department Order No. 9. Such legal personality is acquired from the filing of the complete documentary requirements enumerated in Section 1, Rule VI.30

Petitioner insists that Section 3 of the Implementing Rules, as amended by Department Order No. 9, violated Article 234 of the Labor Code when it provided for less stringent requirements for the creation of a chapter or local. This Court disagrees.

Article 234 of the Labor Code provides that an independent labor organization acquires legitimacy only upon its registration with the BLR:

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. (Italics supplied.)

It is emphasized that the foregoing pertains to the registration of an independent labor organization, association or group of unions or workers.

However, the creation of a branch, local or chapter is treated differently. This Court, in the landmark case of Progressive Development Corporation v. Secretary, Department of Labor and Employment,31 declared that when an unregistered union becomes a branch, local or chapter, some of the aforementioned requirements for registration are no longer necessary or compulsory. Whereas an applicant for registration of an independent union is mandated to submit, among other things, the number of employees and names of all its members comprising at least 20% of the employees in the bargaining unit where it seeks to operate, as provided under Article 234 of the Labor Code and Section 2 of Rule III, Book V of the Implementing Rules, the same is no longer required of a branch, local or chapter.32 The intent of the law in imposing less requirements in the case of a branch or local of a registered federation or national union is to encourage the affiliation of a local union with a federation or national union in order to increase the local union's bargaining powers respecting terms and conditions of labor.33

Subsequently, in Pagpalain Haulers, Inc. v. Trajano34 where the validity of Department Order No. 9 was directly put in issue, this Court was unequivocal in finding that there is no inconsistency between the Labor Code and Department Order No. 9.

As to petitioner's claims that respondent obtained its Certificate of Registration through fraud and misrepresentation, this Court finds that the imputations are not impressed with merit. In the instant case, proof to declare that respondent committed fraud and misrepresentation remains wanting. This Court had, indeed, on several occasions, pronounced that registration based on false and fraudulent statements and documents confer no legitimacy upon a labor organization irregularly recognized, which, at best, holds on to a mere scrap of paper. Under such circumstances, the labor organization, not being a legitimate labor organization, acquires no rights.35

This Court emphasizes, however, that a direct challenge to the legitimacy of a labor organization based on fraud and misrepresentation in securing its certificate of registration is a serious allegation which deserves careful scrutiny. Allegations thereof should be compounded with supporting circumstances and evidence. The records of the case are devoid of such evidence. Furthermore, this Court is not a trier of facts, and this doctrine applies with greater force in labor cases. Findings of fact of administrative agencies and quasi-judicial bodies, such as the BLR, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only great respect but even finality.36

Still, petitioner postulates that respondent was not validly and legitimately created, for PDMP cannot create a local or chapter as it is not a legitimate labor organization, it being a trade union center.

Petitioner's argument creates a predicament as it hinges on the legitimacy of PDMP as a labor organization. Firstly, this line of reasoning attempts to predicate that a trade union center is not a legitimate labor organization. In the process, the legitimacy of PDMP is being

impugned, albeit indirectly. Secondly, the same contention premises that a trade union center cannot directly create a local or chapter through the process of chartering.

Anent the foregoing, as has been held in a long line of cases, the legal personality of a legitimate labor organization, such as PDMP, cannot be subject to a collateral attack. The law is very clear on this matter. Article 212 (h) of the Labor Code, as amended, defines a legitimate labor organization37 as "any labor organization duly registered with the DOLE, and includes any branch or local thereof."38 On the other hand, a trade union center is any group of registered national unions or federations organized for the mutual aid and protection of its members; for assisting such members in collective bargaining; or for participating in the formulation of social and employment policies, standards, and programs, and is duly registered with the DOLE in accordance with Rule III, Section 2 of the Implementing Rules.39

The Implementing Rules stipulate that a labor organization shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Once a certificate of registration is issued to a union, its legal personality cannot be subject to collateral attack.40 It may be questioned only in an independent petition for cancellation in accordance with Section 5 of Rule V, Book V of the Implementing Rules. The aforementioned provision is enunciated in the following:

Sec. 5. Effect of registration. The labor organization or workers' association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack, but may be questioned only in an independent petition for cancellation in accordance with these Rules.

PDMP was registered as a trade union center and issued Registration Certificate No. FED-11558-LC by the BLR on 14 February 1991. Until the certificate of registration of PDMP is cancelled, its legal personality as a legitimate labor organization subsists. Once a union acquires legitimate status as a labor organization, it continues to be recognized as such until its certificate of registration is cancelled or revoked in an independent action for cancellation.41 It bears to emphasize that what is being directly challenged is the personality of respondent as a legitimate labor organization and not that of PDMP. This being a collateral attack, this Court is without jurisdiction to entertain questions indirectly impugning the legitimacy of PDMP.

Corollarily, PDMP is granted all the rights and privileges appurtenant to a legitimate labor organization,42 and continues to be recognized as such until its certificate of registration is successfully impugned and thereafter cancelled or revoked in an independent action for cancellation.

We now proceed to the contention that PDMP cannot directly create a local or a chapter, it being a trade union center.

This Court reverses the finding of the appellate court and BLR on this ground, and rules that PDMP cannot directly create a local or chapter.

After an exhaustive study of the governing labor law provisions, both statutory and regulatory,43 we find no legal justification to support the conclusion that a trade union center is allowed to directly create a local or chapter through chartering. Apropos, we take this occasion to reiterate the first and fundamental duty of this Court, which is to apply the law. The solemn power and duty of the Court to interpret and apply the law does not include the power to correct by reading into the law what is not written therein.44

Presidential Decree No. 442, better known as the Labor Code, was enacted in 1972. Being a legislation on social justice,45 the provisions of the Labor Code and the Implementing Rules have been subject to several amendments, and they continue to evolve, considering that labor plays a major role as a socio-economic force. The Labor Code was first amended by Republic Act No. 6715, and recently, by Republic Act No. 9481. Incidentally, the term trade union center was never mentioned under Presidential Decree No. 442, even as it was amended by Republic Act No. 6715. The term trade union center was first adopted in the Implementing Rules, under Department Order No. 9.

Culling from its definition as provided by Department Order No. 9, a trade union center is any group of registered national unions or federations organized for the mutual aid and protection of its members; for assisting such members in collective bargaining; or for participating in the formulation of social and employment policies, standards, and programs, and is duly registered with the DOLE in accordance with Rule III, Section 2 of the Implementing Rules.46 The same rule provides that the application for registration of an industry or trade union center shall be supported by the following:

(a) The list of its member organizations and their respective presidents and, in the case of an industry union, the industry where the union seeks to operate;

(b) The resolution of membership of each member organization, approved by the Board of Directors of such union;

(c) The name and principal address of the applicant, the names of its officers and their addresses, the minutes of its organizational meeting/s, and the list of member organizations and their representatives who attended such meeting/s; and

(d) A copy of its constitution and by-laws and minutes of its ratification by a majority of the presidents of the member organizations, provided that where the ratification was done simultaneously with the organizational meeting, it shall be sufficient that the fact of ratification be included in the minutes of the organizational meeting.47

Evidently, while a "national union" or "federation" is a labor organization with at least ten locals or chapters or affiliates, each of which must be a duly certified or recognized collective bargaining agent;48 a trade union center, on the other hand, is composed of a group of registered national unions or federations.49

The Implementing Rules, as amended by Department Order No. 9, provide that "a duly registered federation or national union" may directly create a local or chapter. The provision reads:

Section 1. Chartering and creation of a local/chapter. – A duly registered federation or national union may directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the following:

(a) A charter certificate issued by the federation or national union indicating the creation or establishment of the local/chapter;

(b) The names of the local/chapter's officers, their addresses, and the principal office of the local/chapter; and

(c) The local/chapter's constitution and by-laws; provided that where the local/chapter's constitution and by-laws is the same as that of the federation or national union, this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the local/chapter and attested to by its President.50

Department Order No. 9 mentions two labor organizations either of which is allowed to directly create a local or chapter through chartering – a duly registered federation or a national union. Department Order No. 9 defines a "chartered local" as a labor organization in the private sector operating at the enterprise level that acquired legal personality through a charter certificate, issued by a duly registered federation or national union and reported to the Regional Office in accordance with Rule III, Section 2-E of these Rules.51

Republic Act No. 9481 or "An Act Strengthening the Workers' Constitutional Right to Self-Organization, Amending for the Purpose Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines" lapsed52 into law on 25 May 2007 and became effective on 14 June 2007.53 This law further amends the Labor Code provisions on Labor Relations.

Pertinent amendments read as follows:

SECTION 1. Article 234 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is hereby further amended to read as follows:

ART. 234. Requirements of Registration. — A federation, national union or industry or trade union center or an independent union 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) In case the applicant is an independent union, 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 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.

SECTION 2. A new provision is hereby inserted into the Labor Code as Article 234-A to read as follows:

ART. 234-A. Chartering and Creation of a Local Chapter. — A duly registered federation or national union may directly create a local chapter by issuing a charter certificate indicating the establishment of the local chapter. The chapter shall acquire legal personality only for purposes of filing a petition for certification election from the date it was issued a charter certificate.

The chapter shall be entitled to all other rights and privileges of a legitimate labor organization only upon the submission of the following documents in addition to its charter certificate:

(a) The names of the chapter's officers, their addresses, and the principal office of the chapter; and

(b) The chapter's constitution and by-laws: Provided, That where the chapter's constitution and by-laws are the same as that of the federation or the national union, this fact shall be indicated accordingly.

The additional supporting requirements shall be certified under oath by the secretary or treasurer of the chapter and attested by its president. (Emphasis ours.)

Article 234 now includes the term trade union center, but interestingly, the provision indicating the procedure for chartering or creating a local or chapter, namely Article 234-A, still makes no mention of a "trade union center."

Also worth emphasizing is that even in the most recent amendment of the implementing rules,54 there was no mention of a trade union center as being among the labor organizations allowed to charter.

This Court deems it proper to apply the Latin maxim expressio unius est exclusio alterius. Under this maxim of statutory interpretation, the expression of one thing is the exclusion of another. When certain persons or things are specified in a law, contract, or will, an intention to exclude all others from its operation may be inferred. If a statute specifies one exception to a general rule or assumes to specify the effects of a certain provision, other exceptions or effects are excluded.55 Where the terms are expressly limited to certain matters, it may not,

by interpretation or construction, be extended to other matters.56 Such is the case here. If its intent were otherwise, the law could have so easily and conveniently included "trade union centers" in identifying the labor organizations allowed to charter a chapter or local. Anything that is not included in the enumeration is excluded therefrom, and a meaning that does not appear nor is intended or reflected in the very language of the statute cannot be placed therein.57 The rule is restrictive in the sense that it proceeds from the premise that the legislating body would not have made specific enumerations in a statute if it had the intention not to restrict its meaning and confine its terms to those expressly mentioned.58 Expressium facit cessare tacitum.59 What is expressed puts an end to what is implied. Casus omissus pro omisso habendus est. A person, object or thing omitted must have been omitted intentionally.

Therefore, since under the pertinent status and applicable implementing rules, the power granted to labor organizations to directly create a chapter or local through chartering is given to a federation or national union, then a trade union center is without authority to charter directly.

The ruling of this Court in the instant case is not a departure from the policy of the law to foster the free and voluntary organization of a strong and united labor movement,60 and thus assure the rights of workers to self-organization.61 The mandate of the Labor Code in ensuring strict compliance with the procedural requirements for registration is not without reason. It has been observed that the formation of a local or chapter becomes a handy tool for the circumvention of union registration requirements. Absent the institution of safeguards, it becomes a convenient device for a small group of employees to foist a not-so-desirable federation or union on unsuspecting co-workers and pare the need for wholehearted voluntariness, which is basic to free unionism.62 As a legitimate labor organization is entitled to specific rights under the Labor Code and involved in activities directly affecting public interest, it is necessary that the law afford utmost protection to the parties affected.63 However, as this Court has enunciated in Progressive Development Corporation v. Secretary of Department of Labor and Employment, it is not this Court's function to augment the requirements prescribed by law. Our only recourse, as previously discussed, is to exact strict compliance with what the law provides as requisites for local or chapter formation.64

In sum, although PDMP as a trade union center is a legitimate labor organization, it has no power to directly create a local or chapter. Thus, SMPPEU-PDMP cannot be created under the more lenient requirements for chartering, but must have complied with the more stringent rules for creation and registration of an independent union, including the 20% membership requirement.

WHEREFORE, the instant Petition is GRANTED. The Decision dated 09 March 2005 of the Court of Appeals in CA-GR SP No. 66200 is REVERSED and SET ASIDE. The Certificate of Registration of San Miguel Packaging Products Employees Union–Pambansang Diwa ng Manggagawang Pilipino is ORDERED CANCELLED, and SMPPEU-PDMP DROPPED from the rolls of legitimate labor organizations.

Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 158620 October 11, 2006

DEL MONTE PHILIPPINES, INC. and WARFREDO C. BALANDRA, petitioners, vs.MARIANO SALDIVAR, NENA TIMBAL, VIRGINIO VICERA, ALFREDO AMONCIO and NAZARIO S. COLASTE, respondents.

D E C I S I O N

TINGA, J.:

The main issue for resolution herein is whether there was sufficient cause for the dismissal of a rank-and-file employee effectuated through the enforcement of a closed-shop provision in the Collective Bargaining Agreement (CBA) between the employer and the union.

The operative facts are uncomplicated.

The Associated Labor Union (ALU) is the exclusive bargaining agent of plantation workers of petitioner Del Monte Philippines, Inc. (Del Monte) in Bukidnon. Respondent Nena Timbal (Timbal), as a rank-and-file employee of Del Monte plantation in Bukidnon, is also a member of ALU. Del Monte and ALU entered into a Collective Bargaining Agreement (CBA) with an effective term of five (5) years from 1 September 1988 to 31 August 1993.1

Timbal, along with four other employees (collectively, co-employees), were charged by ALU for disloyalty to the union, particularly for encouraging defections to a rival union, the National Federation of Labor (NFL). The charge was contained in a Complaint dated 25 March 1993, which specifically alleged, in relation to Timbal: "That on July 13, 1991 and the period prior or after thereto, said Nena Timbal personally recruited other bonafide members of the ALU to attend NFL seminars and has actually attended these seminars together with the other ALU members."2 The matter was referred to a body within the ALU organization, ominously named "Disloyalty Board."

The charge against Timbal was supported by an affidavit executed on 23 March 1993 by Gemma Artajo (Artajo), also an employee of Del Monte. Artajo alleged that she was personally informed by Timbal on 13 July 1991 that a seminar was to be conducted by the NFL on the following day. When Artajo demurred from attending, Timbal assured her that

she would be given honorarium in the amount of P500.00 if she were to attend the NFL meeting and bring new recruits. Artajo admitted having attended the NFL meeting together with her own recruits, including Paz Piquero (Piquero). Artajo stated that after the meeting she was given P500.00 by Timbal.3

Timbal filed an Answer before the Disloyalty Board, denying the allegations in the complaint and the averments in Artajo's Affidavit. She further alleged that her husband, Modesto Timbal, had filed a complaint against Artajo for collection of a sum of money on 17 March 1993, or just six (6) days before Artajo executed her affidavit. She noted that the allegations against her were purportedly committed nearly two (2) years earlier, and that Artajo's act was motivated by hate and revenge owing to the filing of the aforementioned civil action.4

Nevertheless, the ALU Disloyalty Board concluded that Timbal was guilty of acts or conduct inimical to the interests of ALU, through a Resolution dated 7 May 1993.5 It found that the acts imputed to Timbal were partisan activities, prohibited since the "freedom period" had not yet commenced as of that time. Thus, the Disloyalty Board recommended the expulsion of Timbal from membership in ALU, and likewise her dismissal from Del Monte in accordance with the Union Security Clause in the existing CBA between ALU and Del Monte. The Disloyalty Board also reached the same conclusions as to the co-employees, expressed in separate resolutions also recommending their expulsion from ALU.6

On 21 May 1993, the Regional Vice President of ALU adopted the recommendations of the Disloyalty Board and expelled Timbal7 and her co-employees from ALU.8 The ALU National President affirmed the expulsion.9 On 17 June 1993, Del Monte terminated Timbal and her co-employees effective 19 June 1993, noting that the termination was "upon demand of [ALU] pursuant to Sections 4 and 5 of Article III of the current Collective Bargaining Agreement."10

Timbal and her co-employees filed separate complaints against Del Monte and/or its Personnel Manager Warfredo C. Balandra and ALU with the Regional Arbitration Branch (RAB) of the National Labor Relations Commission (NLRC) for illegal dismissal, unfair labor practice and damages.11 The complaints were consolidated and heard before Labor Arbiter Irving Pedilla. The Labor Arbiter affirmed that all five (5) were illegally dismissed and ordered Del Monte to reinstate complainants, including Timbal, to their former positions and to pay their full backwages and other allowances, though the other claims and charges were dismissed for want of basis.12

Only Del Monte interposed an appeal with the NLRC.13 The NLRC reversed the Labor Arbiter and ruled that all the complainants were validly dismissed.14 On review, the Court of Appeals ruled that only Timbal was illegally dismissed.15 At the same time, the appellate court found that Del Monte had failed to observe procedural due process in dismissing the co-employees, and thus ordered the company to pay P30,000.00 to each of the co-employees as penalties. The co-employees sought to file a Petition for Review16 with this Court assailing the ruling of the Court of Appeals affirming their dismissal, but the petition was denied because it was not timely filed.17

On the other hand, Del Monte, through the instant petition, assails the Court of Appeals decision insofar as it ruled that Timbal was illegally dismissed. Notably, Del Monte does not assail in this petition the award of P30,000.00 to each of the co-employees, and the ruling of the Court of Appeals in that regard should now be considered final.

The reason offered by the Court of Appeals in exculpating Timbal revolves around the problematic relationship between her and Artajo, the complaining witness against her. As explained by the appellate court:

However, the NLRC should have considered in a different light the situation of petitioner Nena Timbal. Timbal asserted before the NLRC, and reiterates in this petition, that the statements of Gemma Artajo, ALU's sole witness against her, should not be given weight because Artajo had an ax[e] to grind at the time when she made the adverse statements against her. Respondents never disputed the claim of Timbal that in the two (2) collection suits initiated by Timbal and her husband, Artajo testified for the defendant in the first case and she was even the defendant in the second case which was won by Timbal. We find it hard to believe that Timbal would so willingly render herself vulnerable to expulsion from the Union by revealing to an estranged colleague her desire to shift loyalty. The strained relationship between Timbal and Artajo renders doubtful the charge against the former that she attempted to recruit Artajo to join a rival union. Inasmuch as the respondents failed to justify the termination of Timbal's employment, We hold that her reinstatement to her former position in accordance with the September 27, 1996 decision of the Labor Arbiter is appropriate.18

The Labor Arbiter, in his favorable ruling to the dismissed employees, had noted that "complainant Timbal['s] x x x accuser has an axe to grind against her for an unpaid debt so that her testimony cannot be given credit."19 The NLRC, in reversing the Labor Arbiter, did not see it fit to mention the circumstances of the apparent feud between Timbal and Artajo, except in the course of narrating Timbal's allegations.

However, in the present petition, Del Monte utilizes a new line of argument in justifying Timbal's dismissal. While it does not refute the contemporaneous ill-will between Timbal and Artajo, it nonetheless alleges that there was a second witness, Paz Piquero, who testified against Timbal before the Disloyalty Board.20 Piquero had allegedly corroborated Artajo's allegations and positively identified Timbal as among those present during the seminar of the NFL conducted on 14 July 1992 and as having given her transportation money after the seminar was finished. Del Monte asserts that Piquero was a disinterested witness against Timbal.21

Del Monte also submits two (2) other grounds for review. It argues that the decision of the Labor Arbiter, which awarded Timbal full backwages and other allowances, was inconsistent with jurisprudence which held that an employer who acted in good faith in dismissing employees on the basis of a closed-shop provision is not liable to pay full backwages.22 Finally, Del Monte asserts that it had, from the incipience of these proceedings consistently prayed that in the event that it were found with finality that the dismissal of Timbal and the

others is illegal, ALU should be made liable to Del Monte pursuant to the CBA. The Court of Appeals is faulted for failing to rule upon such claim.

For her part, Timbal observes that Piquero's name was mentioned for the first time in Del Monte's Motion for Partial Reconsideration of the decision of the Court of Appeals.23 She claims that both Piquero and Artajo were not in good terms with her after she had won a civil suit for the collection of a sum of money against their immediate superior, one Virgie Condeza.24

The legality of Timbal's dismissal is obviously the key issue in this case. We are particularly called upon to determine whether at this late stage, the Court may still give credence to the purported testimony of Piquero and justify Timbal's dismissal based on such testimony.

It bears elaboration that Timbal's dismissal is not predicated on any of the just or authorized causes for dismissal under Book Six, Title I of the Labor Code,25 but on the union security clause in the CBA between Del Monte and ALU. Stipulations in the CBA authorizing the dismissal of employees are of equal import as the statutory provisions on dismissal under the Labor Code, since "[a] CBA is the law between the company and the union and compliance therewith is mandated by the express policy to give protection to labor."26 The CBA, which covers all regular hourly paid employees at the pineapple plantation in Bukidnon,27 stipulates that all present and subsequent employees shall be required to become a member of ALU as a condition of continued employment. Sections 4 and 5, Article II of the CBA further state:

ARTICLE II

Section 4. Loss of membership in the UNION shall not be a ground for dismissal by the Company except where loss of membership is due to:

1. Voluntary resignation from [ALU] earlier than the expiry date of this [CBA];

2. Non-payment of duly approved and ratified union dues and fees; and

3. Disloyalty to [ALU] in accordance with its Constitution and By-Laws as duly registered with the Department of Labor and Employment.

Section 5. Upon request of [ALU], [Del Monte] shall dismiss from its service in accordance with law, any member of the bargaining unit who loses his membership in [ALU] pursuant to the provisions of the preceding section. [ALU] assumes full responsibility for any such termination and hereby agrees to hold [Del Monte] free from any liability by judgment of a competent authority for claims arising out of dismissals made upon demand of [ALU], and [the] latter shall reimburse the former of such sums as it shall have paid therefor. Such reimbursement shall be deducted from union dues and agency fees until duly paid.28

The CBA obviously adopts a closed-shop policy which mandates, as a condition of employment, membership in the exclusive bargaining agent. A "closed-shop" may be defined as an enterprise in which, by agreement between the employer and his employees

or their representatives, no person may be employed in any or certain agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement, remains a member in good standing of a union entirely comprised of or of which the employees in interest are a part.29 A CBA provision for a closed-shop is a valid form of union security and it is not a restriction on the right or freedom of association guaranteed by the Constitution.30

Timbal's expulsion from ALU was premised on the ground of disloyalty to the union, which under Section 4(3), Article II of the CBA, also stands as a ground for her dismissal from Del Monte. Indeed, Section 5, Article II of the CBA enjoins Del Monte to dismiss from employment those employees expelled from ALU for disloyalty, albeit with the qualification "in accordance with law."

Article 279 of the Labor Code ordains that "in cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by [Title I, Book Six of the Labor Code]." Admittedly, the enforcement of a closed-shop or union security provision in the CBA as a ground for termination finds no extension within any of the provisions under Title I, Book Six of the Labor Code. Yet jurisprudence has consistently recognized, thus: "It is State policy to promote unionism to enable workers to negotiate with management on an even playing field and with more persuasiveness than if they were to individually and separately bargain with the employer. For this reason, the law has allowed stipulations for 'union shop' and 'closed shop' as means of encouraging workers to join and support the union of their choice in the protection of their rights and interests vis-a-vis the employer."31

It might be suggested that since Timbal was expelled from ALU on the ground of disloyalty, Del Monte had no choice but to implement the CBA provisions and cause her dismissal. Similarly, it might be posited that any tribunal reviewing such dismissal is precluded from looking beyond the provisions of the CBA in ascertaining whether such dismissal was valid. Yet deciding the problem from such a closed perspective would virtually guarantee unmitigated discretion on the part of the union in terminating the employment status of an individual employee. What the Constitution does recognize is that all workers, whether union members or not, are "entitled to security of tenure."32 The guarantee of security of tenure itself is implemented through legislation, which lays down the proper standards in determining whether such right was violated.33

Agabon v. NLRC34 did qualify that constitutional due process or security of tenure did not shield from dismissal an employee found guilty of a just cause for termination even if the employer failed to render the statutory notice and hearing requirement. At the same time, it should be understood that in the matter of determining whether cause exists for termination, whether under Book Six, Title I of the Labor Code or under a valid CBA, substantive due process must be observed as a means of ensuring that security of tenure is not infringed.

Agabon observed that due process under the Labor Code comprised of two aspects: "substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal."35 No serious dispute arose in

Agabon over the observance of substantive due process in that case, or with the conclusion that the petitioners therein were guilty of abandonment of work, one of the just causes for dismissal under the Labor Code. The controversy in Agabon centered on whether the failure to observe procedural due process, through the non-observance of the two-notice rule, should lead to the invalidation of the dismissals. The Court ruled, over the dissents of some Justices, that the failure by the employer to observe procedural due process did not invalidate the dismissals for just cause of the petitioners therein. However, Agabon did not do away with the requirement of substantive due process, which is essentially the existence of just cause provided by law for a valid dismissal. Thus, Agabon cannot be invoked to validate a dismissal wherein substantive due process, or the proper determination of just cause, was not observed.

Even if the dismissal of an employee is conditioned not on the grounds for termination under the Labor Code, but pursuant to the provisions of a CBA, it still is necessary to observe substantive due process in order to validate the dismissal. As applied to the Labor Code, adherence to substantive due process is a requisite for a valid determination that just or authorized causes existed to justify the dismissal.36 As applied to the dismissals grounded on violations of the CBA, observance of substantial due process is indispensable in establishing the presence of the cause or causes for dismissal as provided for in the CBA.

Substantive due process, as it applies to all forms of dismissals, encompasses the proper presentation and appreciation of evidence to establish that cause under law exists for the dismissal of an employee. This holds true even if the dismissal is predicated on particular causes for dismissal established not by the Labor Code, but by the CBA. Further, in order that any CBA-mandated dismissal may receive the warrant of the courts and labor tribunals, the causes for dismissal as provided for in the CBA must satisfy to the evidentiary threshold of the NLRC and the courts.

It is necessary to emphasize these principles since the immutable truth under our constitutional and labor laws is that no employee can be dismissed without cause. Agabon may have tempered the procedural due process requirements if just cause for dismissal existed, but in no way did it eliminate the existence of a legally prescribed cause as a requisite for any dismissal. The fact that a CBA may provide for additional grounds for dismissal other than those established under the Labor Code does not detract from the necessity to duly establish the existence of such grounds before the dismissal may be validated. And even if the employer or, in this case, the collective bargaining agent, is satisfied that cause has been established to warrant the dismissal, such satisfaction will be of no consequence if, upon legal challenge, they are unable to establish before the NLRC or the courts the presence of such causes.

In the matter at bar, the Labor Arbiter—the proximate trier of facts—and the Court of Appeals both duly appreciated that the testimony of Artajo against Timbal could not be given credence, especially in proving Timbal's disloyalty to ALU. This is due to the prior animosity between the two engendered by the pending civil complaint filed by Timbal's husband against Artajo. Considering that the civil complaint was filed just six (6) days prior to the execution of Artajo's affidavit against Timbal, it would be plainly injudicious to presume that Artajo possessed an unbiased state of mind as she executed that affidavit.

Such circumstance was considered by the Labor Arbiter, and especially the Court of Appeals, as they rendered a favorable ruling to Timbal. The NLRC may have decided against Artajo, but in doing so, it failed to provide any basis as to why Artajo's testimony should be believed, instead of disbelieved. No credible disputation was offered by the NLRC to the claim that Artajo was biased against Timbal; hence, we should adjudge the findings of the Labor Arbiter and the Court of Appeals as more cogent on that point.

Before this Court, Del Monte does not even present any serious argument that Artajo's testimony against Timbal was free from prejudice. Instead, it posits that Piquero's alleged testimony against Timbal before the Disloyalty Board should be given credence, and that taken with Artajo's testimony, should sufficiently establish the ground of disloyalty for which Timbal should be dismissed.

The Court sees the danger to jurisprudence and the rights of workers in acceding to Del Monte's position. The dismissal for cause of employees must be justified by substantial evidence, as appreciated by an impartial trier of facts. None of the trier of facts below—the Labor Arbiter, the NLRC and the Court of Appeals—saw fit to accord credence to Piquero's testimony, even assuming that such testimony was properly contained in the record. Even the NLRC decision, which was adverse to Timbal, made no reference at all to Piquero's alleged testimony.

Del Monte is able to point to only one instance wherein Piquero's name and testimony appears on the record. It appears that among the several attachments to the position paper submitted by the ALU before the NLRC-RAB was a copy of the raw stenographic notes transcribed, apparently on 17 April 1993, during a hearing before the Disloyalty Board. The transcription is not wholly legible, but there appears to be references therein to the name "Paz Piquero," and her apparent testimony before the Disloyalty Board. We are unable to reproduce with accuracy, based on the handwritten stenographic notes, the contents of this seeming testimony of Piquero, although Del Monte claims before this Court that Piquero had corroborated Artajo's claims during such testimony, "positively identified [Timbal's] presence in the NFL seminar on 14 July 1992," and "confirmed that Timbal gave Artajo P500.00 for recruiting participants in the NFL seminar."37

There are evident problems on our part, at this late stage, in appreciating these raw stenographic notes adverting to the purported testimony of Piquero, especially as a means of definitively concluding that Timbal was guilty of disloyalty. Certainly, these notes cannot be appreciated as entries in the official record, which are presumed prima facie evidence of the facts therein stated,38 as such records can only be made by a public officer of the Philippines or by a person in the performance of a duty specially enjoined by law. These transcripts were not taken during a hearing conducted by any public office in the Philippines, but they were committed in the course of an internal disciplinary mechanism devised by a privately organized labor union. Unless the authenticity of these notes is duly proven before, and appreciated by the triers of fact, we cannot accord them any presumptive or conclusive value.

Moreover, despite the fact that the apparent record of Piquero's testimony was appended to ALU's position paper, the position paper itself does not make any reference to such

testimony, or even to Piquero's name for that matter. The position paper observes that "[t]his testimony of [Artajo] was directly corroborated by her actual attendance on July 14, 1992 at the agreed [venue]," but no mention is made that such testimony was also "directly corroborated" by Piquero. Then again, it was only Artajo, and not Piquero, who executed an affidavit recounting the allegations against Timbal.

Indeed, we are inclined to agree with Timbal's observation in her Comment on the present petition that from the time the complaint was filed with the NLRC-RAB, Piquero's name and testimony were invoked for the first time only in Del Monte's motion for reconsideration before the Court of Appeals. Other than the handwritten reference made in the raw stenographic notes attached to ALU's position paper before the NLRC-RAB, Piquero's name or testimony was not mentioned either by ALU or Del Monte before any of the pleadings filed before the NLRC-RAB, the NLRC, and even with those submitted to the Court of Appeals prior to that court's decision.

In order for the Court to be able to appreciate Piquero's testimony as basis for finding Timbal guilty of disloyalty, it is necessary that the fact of such testimony must have been duly established before the NLRC-RAB, the NLRC, or at the very least, even before the Court of Appeals. It is only after the fact of such testimony has been established that the triers of fact can come to any conclusion as to the veracity of the allegations in the testimony.

It should be mentioned that the Disloyalty Board, in its Resolution finding Timbal guilty of disloyalty, did mention that Artajo's testimony "was corroborated by Paz Piquero who positively identified and testified that Nena Timbal was engaged in recruitment of ALU members at [Del Monte] to attend NFL seminars."39

The Disloyalty Board may have appreciated Piquero's testimony in its own finding that Timbal was guilty, yet the said board cannot be considered as a wholly neutral or dispassionate tribunal since it was constituted by the very organization that stood as the offended party in the disloyalty charge. Without impugning the integrity of ALU and the mechanisms it has employed for the internal discipline of its members, we nonetheless hold that in order that the dismissal of an employee may be validated by this Court, it is necessary that the grounds for dismissal are justified by substantial evidence as duly appreciated by an impartial trier of facts.40 The existence of Piquero's testimony was appreciated only by the Disloyalty Board, but not by any of the impartial tribunals which heard Timbal's case. The appreciation of such testimony by the Disloyalty Board without any similar affirmation or concurrence by the NLRC-RAB, the NLRC, or the Court of Appeals, cannot satisfy the substantive due process requirement as a means of upholding Timbal's dismissal.

All told, we see no error on the part of the Court of Appeals when it held that Timbal was illegally dismissed.

We now turn to the second issue raised, whether the Labor Arbiter correctly awarded full backwages to Timbal.

Del Monte cites a jurisprudential rule that an employer who acted in good faith in dismissing employees on the basis of a closed- shop provision may not be penalized even if the dismissal were illegal. Such a doctrine is admittedly supported by the early case of National Labor Union v. Zip Venetian Blind41 and the later decision in 1989 of Soriano v. Atienza,42 wherein the Court affirmed the disallowance of backwages or "financial assistance" in dismissals under the aforementioned circumstance.

However, the Court now recognizes that this doctrine is inconsistent with Article 279 of the Labor Code, as amended by Republic Act No. 6715, which took effect just five (5) days after Soriano was promulgated. It is now provided in the Labor Code that "[a]n employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement." Thus, where reinstatement is adjudged, the award of backwages and other benefits continues beyond the date of the labor arbiter's decision ordering reinstatement and extends up to the time said order of reinstatement is actually carried out.43

Rep. Act No. 6715 effectively mitigated previous jurisprudence which had limited the extent to which illegally dismissed employees could claim for backwages. We explained in Ferrer v. NLRC:44

With the passage of Republic Act No. 6715 which took effect on March 21, 1989, Article 279 of the Labor Code was amended to read as follows:

Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

and as implemented by Section 3, Rule 8 of the 1990 New Rules of Procedure of the National Labor Relations Commission, it would seem that the Mercury Drug Rule (Mercury Drug Co., Inc. vs. Court of Industrial Relations, 56 SCRA 694 [1974]) which limited the award of back wages of illegally dismissed workers to three (3) years "without deduction or qualification" to obviate the need for further proceedings in the course of execution, is no longer applicable.

A legally dismissed employee may now be paid his back wages, allowances, and other benefits for the entire period he was out of work subject to the rule enunciated before the Mercury Drug Rule, which is that the employer may, however, deduct any amount which the employee may have earned during the period of his illegal termination (East Asiatic Company, Ltd. vs. Court of Industrial Relations, 40 SCRA 521 [1971]). Computation of full back wages and presentation of proof as to

income earned elsewhere by the illegally dismissed employee after his termination and before actual reinstatement should be ventilated in the execution proceedings before the Labor Arbiter concordant with Section 3, Rule 8 of the 1990 New Rules of Procedure of the National Labor Relations Commission.

Inasmuch as we have ascertained in the text of this discourse that the OFC whimsically dismissed petitioners without proper hearing and has thus opened OFC to a charge of unfair labor practice, it ineluctably follows that petitioners can receive their back wages computed from the moment their compensation was withheld after their dismissal in 1989 up to the date of actual reinstatement. In such a scenario, the award of back wages can extend beyond the 3-year period fixed by the Mercury Drug Rule depending, of course, on when the employer will reinstate the employees.

It may appear that Article 279 of the Labor Code, as amended by Republic Act No. 6715, has made the employer bear a heavier burden than that pronounced in the Mercury Drug Rule, but perhaps Republic Act No. 6715 was enacted precisely for the employer to realize that the employee must be immediately restored to his former position, and to impress the idea that immediate reinstatement is tantamount to a cost-saving measure in terms of overhead expense plus incremental productivity to the company which lies in the hands of the employer.45

The Labor Arbiter's ruling, which entitled Timbal to claim full backwages and other allowances, "without qualifications and diminutions, computed from the time [she was] illegally dismisse[d] up to the time [she] will be actually reinstated," conforms to Article 279 of the Labor Code. Hence, the Court of Appeals was correct in affirming the Labor Arbiter insofar as Timbal was concerned.

Finally, we address the claim that the Court of Appeals erred when it did not rule on Del Monte's claim for reimbursement against ALU. We do observe that Section 5 of the CBA stipulated that "[ALU] assumes full responsibility of any such termination [of any member of the bargaining unit who loses his membership in ALU] and hereby agrees to hold [Del Monte] free from any liability by judgment of a competent authority for claims arising out of dismissals made upon demand of [ALU], and latter shall reimburse the former of such sums as it shall have paid therefore."46

This stipulation does present a cause of action in Del Monte's favor should it be held financially liable for the dismissal of an employee by reason of expulsion from ALU. Nothing in this decision should preclude the operation of this provision in the CBA. At the same time, we are unable to agree with Del Monte that the Court of Appeals, or this Court, can implement this provision of the CBA and accordingly directly condemn ALU to answer for the financial remuneration due Timbal.

Before the Labor Arbiter, Del Monte had presented its cross-claim against ALU for reimbursement should it be made liable for illegal dismissal or unfair labor practice, pursuant to the CBA. The Labor Arbiter had actually passed upon this claim for reimbursement, stating that "[as] for the cross-claims of respondent DMPI and Tabusuares

against the respondent ALU-TUCP, this Branch cannot validly entertain the same in the absence of employer-employee relationship between the former and the latter."47 We have examined Article 217 of the Labor Code,48 which sets forth the original jurisdiction of the Labor Arbiters. Article 217(c) states:

Cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. [Emphasis supplied.]

In contrast, Article 261 of the Labor Code indubitably vests on the Voluntary Arbitrator or panel of Voluntary Arbitrators the "original and exclusive jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining Agreement."49 Among those areas of conflict traditionally within the jurisdiction of Voluntary Arbitrators are contract-interpretation and contract-implementation,50 the questions precisely involved in Del Monte's claim seeking enforcement of the CBA provision mandating restitution by ALU should the company be held financially liable for dismissals pursuant to the union security clause.

In reconciling the grants of jurisdiction vested under Articles 261 and 217 of the Labor Code, the Court has pronounced that "the original and exclusive jurisdiction of the Labor Arbiter under Article 217(c) for money claims is limited only to those arising from statutes or contracts other than a Collective Bargaining Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators will have original and exclusive jurisdiction over money claims 'arising from the interpretation or implementation of the Collective Bargaining Agreement and, those arising from the interpretation or enforcement of company personnel policies', under Article 261."51

Our conclusion that the Labor Arbiter in the instant case could not properly pass judgment on the cross-claim is further strengthened by the fact that Del Monte and ALU expressly recognized the jurisdiction of Voluntary Arbitrators in the CBA. Section 2, Article XXXI of the CBA provides:

Section 2. In the event a dispute arises concerning the application of, or interpretation of this Agreement which cannot be settled pursuant to the [grievance procedure set forth in the] preceding Section, the dispute shall be submitted to an arbitrator agreed to by [Del Monte] and [ALU].

Should the parties fail to agree on the arbitrator, the same shall be drawn by lottery from a list of arbitrators furnished by the Bureau of Labor Relations of the Department of Labor and Employment.

x x x x

Thus, as the law indubitably precludes the Labor Arbiter from enforcing money claims arising from the implementation of the CBA, the CBA herein complementarily recognizes

that it is the Voluntary Arbitrators which have jurisdiction to hear the claim. The Labor Arbiter correctly refused to exercise jurisdiction over Del Monte's cross-claim, and the Court of Appeals would have no basis had it acted differently. At the same time, even as we affirm the award of backwages against Del Monte, our ruling should not operate to prejudice in any way whatever causes of action Del Monte may have against ALU, in accordance with the CBA.

WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals dated 26 August 2002 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 174912 July 24, 2013

BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU), Petitioner, vs.BANK OF THE PHILIPPINE ISLANDS (BPI), and BPI OFFICERS CLARO M. REYES, CECIL CONANAN and GEMMA VELEZ, Respondents.

D E C I S I O N

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the April 5, 2006 Decision1 and August 17, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 74595 affirming the December 21, 20013 and August 23, 20024 Resolutions of the National Labor Relations Commission (NLRC) in declaring as valid and legal the action of respondent Bank of the Philippine Islands-Davao City (BPI-Davao) in contracting out certain functions to BPI Operations Management Corporation (BOMC).

The Factual Antecedents

BOMC, which was created pursuant to Central Bank5 Circular No. 1388, Series of 1993 (CBP Circular No. 1388, 1993), and primarily engaged in providing and/or handling support services for banks and other financial institutions, is a subsidiary of the Bank of Philippine Islands (BPI) operating and functioning as an entirely separate and distinct entity.

A service agreement between BPI and BOMC was initially implemented in BPI’s Metro Manila branches. In this agreement, BOMC undertook to provide services such as check clearing, delivery of bank statements, fund transfers, card production, operations accounting and control, and cash servicing, conformably with BSP Circular No. 1388. Not a

single BPI employee was displaced and those performing the functions, which were transferred to BOMC, were given other assignments.

The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a complaint for unfair labor practice (ULP). The Labor Arbiter (LA) decided the case in favor of the union. The decision was, however, reversed on appeal by the NLRC. BPIEU-Metro Manila-FUBU filed a petition for certiorari before the CA which denied it, holding that BPI transferred the employees in the affected departments in the pursuit of its legitimate business. The employees were neither demoted nor were their salaries, benefits and other privileges diminished.6

On January 1, 1996, the service agreement was likewise implemented in Davao City. Later, a merger between BPI and Far East Bank and Trust Company (FEBTC) took effect on April 10, 2000 with BPI as the surviving corporation. Thereafter, BPI’s cashiering function and FEBTC’s cashiering, distribution and bookkeeping functions were handled by BOMC. Consequently, twelve (12) former FEBTC employees were transferred to BOMC to complete the latter’s service complement.

BPI Davao’s rank and file collective bargaining agent, BPI Employees Union-Davao City-FUBU (Union), objected to the transfer of the functions and the twelve (12) personnel to BOMC contending that the functions rightfully belonged to the BPI employees and that the Union was deprived of membership of former FEBTC personnel who, by virtue of the merger, would have formed part of the bargaining unit represented by the Union pursuant to its union shop provision in the CBA.7

The Union then filed a formal protest on June 14, 2000 addressed to BPI Vice Presidents Claro M. Reyes and Cecil Conanan reiterating its objection. It requested the BPI management to submit the BOMC issue to the grievance procedure under the CBA, but BPI did not consider it as "grievable." Instead, BPI proposed a Labor Management Conference (LMC) between the parties.8

During the LMC, BPI invoked management prerogative stating that the creation of the BOMC was to preserve more jobs and to designate it as an agency to place employees where they were most needed. On the other hand, the Union charged that BOMC undermined the existence of the union since it reduced or divided the bargaining unit. While BOMC employees perform BPI functions, they were beyond the bargaining unit’s coverage. In contracting out FEBTC functions to BOMC, BPI effectively deprived the union of the membership of employees handling said functions as well as curtailed the right of those employees to join the union.

Thereafter, the Union demanded that the matter be submitted to the grievance machinery as the resort to the LMC was unsuccessful. As BPI allegedly ignored the demand, the Union filed a notice of strike before the National Conciliation and Mediation Board (NCMB) on the following grounds:

a) Contracting out services/functions performed by union members that interfered with, restrained and/or coerced the employees in the exercise of their right to self-organization;

b) Violation of duty to bargain; and

c) Union busting.9

BPI then filed a petition for assumption of jurisdiction/certification with the Secretary of the Department of Labor and Employment (DOLE), who subsequently issued an order certifying the labor dispute to the NLRC for compulsory arbitration. The DOLE Secretary directed the parties to cease and desist from committing any act that might exacerbate the situation.

On October 27, 2000, a hearing was conducted. Thereafter, the parties were required to submit their respective position papers. On November 29, 2000, the Union filed its Urgent Omnibus Motion to Cease and Desist with a prayer that BPI-Davao and/or Mr. Claro M. Reyes and Mr. Cecil Conanan be held in contempt for the following alleged acts of BPI:

1. The Bank created a Task Force Committee on November 20, 2000 composed of six (6) former FEBTC employees to handle the Cashiering, Distributing, Clearing, Tellering and Accounting functions of the former FEBTC branches but the "task force" conducts its business at the office of the BOMC using the latter’s equipment and facilities.

2. On November 27, 2000, the bank integrated the clearing operations of the BPI and the FEBTC. The clearing function of BPI, then solely handled by the BPI Processing Center prior to the labor dispute, is now encroached upon by the BOMC because with the merger, differences between BPI and FEBTC operations were diminished or deleted. What the bank did was simply to get the total of all clearing transactions under BPI but the BOMC employees process the clearing of checks at the Clearing House as to checks coming from former FEBTC branches. Prior to the labor dispute, the run-up and distribution of the checks of BPI were returned to the BPI processing center, now all checks whether of BPI or of FEBTC were brought to the BOMC. Since the clearing operations were previously done by the BPI processing center with BPI employees, said function should be performed by BPI employees and not by BOMC.10

On December 21, 2001, the NLRC came out with a resolution upholding the validity of the service agreement between BPI and BOMC and dismissing the charge of ULP. It ruled that the engagement by BPI of BOMC to undertake some of its activities was clearly a valid exercise of its management prerogative.11 It further stated that the spinning off by BPI to BOMC of certain services and functions did not interfere with, restrain or coerce employees in the exercise of their right to self-organization.12 The Union did not present even an iota of evidence showing that BPI had terminated employees, who were its members. In fact, BPI exerted utmost diligence, care and effort to see to it that no union member was terminated.13 The NLRC also stressed that Department Order (D.O.) No. 10 series of 1997, strongly relied upon by the Union, did not apply in this case as BSP Circular No. 1388, series of 1993, was the applicable rule.

After the denial of its motion for reconsideration, the Union elevated its grievance to the CA via a petition for certiorari under Rule 65. The CA, however, affirmed the NLRC’s December 21, 2001 Resolution with modification that the enumeration of functions listed under BSP Circular No. 1388 in the said resolution be deleted. The CA noted at the outset that the petition must be dismissed as it merely touched on factual matters which were beyond the ambit of the remedy availed of.14 Be that as it may, the CA found that the factual findings of the NLRC were supported by substantial evidence and, thus, entitled to great respect and finality. To the CA, the NLRC did not act with grave abuse of discretion as to merit the reversal of the resolution.15

Furthermore, the CA ratiocinated that, considering the ramifications of the corporate merger, it was well within BPI’s prerogatives "to determine what additional tasks should be performed, who should best perform it and what should be done to meet the exigencies of business."16 It pointed out that the Union did not, by the mere fact of the merger, become the bargaining agent of the merged employees17 as the Union’s right to represent said employees did not arise until it was chosen by them.18

As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said order did not apply as BPI, being a commercial bank, its transactions were subject to the rules and regulations of the BSP.

Not satisfied, the Union filed a motion for reconsideration which was, however, denied by the CA.1âwphi1

Hence, the present petition with the following

ASSIGNMENT OF ERRORS:

A. THE PETITION BEFORE THE COURT OF APPEALS INVOLVED QUESTIONS OF LAW AND ITS DECISION DID NOT ADDRESS THE ISSUE OF WHETHER BPI’S ACT OF OUTSOURCING FUNCTIONS FORMERLY PERFORMED BY UNION MEMBERS VIOLATES THE CBA.

B. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT DOLE DEPARTMENT ORDER NO. 10 DOES NOT APPLY IN THIS CASE.

The Union is of the position that the outsourcing of jobs included in the existing bargaining unit to BOMC is a breach of the union-shop agreement in the CBA. In transferring the former employees of FEBTC to BOMC instead of absorbing them in BPI as the surviving corporation in the merger, the number of positions covered by the bargaining unit was decreased, resulting in the reduction of the Union’s membership. For the Union, BPI’s act of arbitrarily outsourcing functions formerly performed by the Union members and, in fact, transferring a number of its members beyond the ambit of the Union, is a violation of the CBA and interfered with the employees’ right to self organization. The Union insists that the CBA covers the agreement with respect, not only to wages and hours of work, but to all other terms and conditions of work. The union shop clause, being part of these conditions, states that the regular employees belonging to the bargaining unit, including those

absorbed by way of the corporate merger, were required to join the bargaining union "as a condition for employment." Simply put, the transfer of former FEBTC employees to BOMC removed them from the coverage of unionized establishment. While the Union admitted that BPI has the prerogative to determine what should be done to meet the exigencies of business in accordance with the case of Sime Darby Pilipinas, Inc. v. NLRC,19 it insisted that the exercise of management prerogative is not absolute, thus, requiring good faith and adherence to the law and the CBA. Citing the case of Shell Oil Workers’ Union v. Shell Company of the Philippines, Ltd.,20 the Union claims that it is unfair labor practice for an employer to outsource the positions in the existing bargaining unit.

Position of BPI-Davao

For its part, BPI defended the validity of its service agreement with BOMC on three (3) grounds: 1] that it was pursuant to the prevailing law at that time, CBP Circular No. 1388; 2] that the creation of BOMC was within management prerogatives intended to streamline the operations and provide focus for BPI’s core activities; and 3] that the Union recognized, in its CBA, the exclusive right and prerogative of BPI to conduct the management and operation of its business.21

BPI argues that the case of Shell Oil Workers’ Union v. Shell Company of the Philippines, Ltd.,22 cited by the Union, is not on all fours with the present case. In said case, the company dissolved its security guard section and replaced it with an outside agency, claiming that such act was a valid exercise of management prerogative. The Court, however, ruled against the said outsourcing because there was an express assurance in the CBA that the security guard section would continue to exist. Having failed to reserve its right to effect a dissolution, the company’s act of outsourcing and transferring security guards was invalidated by the Court, ruling that the unfair labor practice strike called by the Union did have the impression of validity. In contrast, there is no provision in the CBA between BPI and the Union expressly stipulating the continued existence of any position within the bargaining unit. For BPI, the absence of this peculiar fact is enough reason to prevent the application of Shell to this case.

BPI likewise invokes settled jurisprudence,23 where the Court upheld the acts of management to contract out certain functions held by employees, and even notably those held by union members. In these cases, the decision to outsource certain functions was a justifiable business judgment which deserved no judicial interference. The only requisite of this act is good faith on the part of the employer and the absence of malicious and arbitrary action in the outsourcing of functions to BOMC.

On the issue of the alleged curtailment of the right of the employees to self-organization, BPI refutes the Union’s allegation that ULP was committed when the number of positions in the bargaining was reduced. It cites as correct the CA ruling that the representation of the Union’s prospective members is contingent on the choice of the employee, that is, whether or not to join the Union. Hence, it was premature for the Union to claim that the rights of its prospective members to self-organize were restrained by the transfer of the former FEBTC employees to BOMC.

The Court’s Ruling

In essence, the primordial issue in this case is whether or not the act of BPI to outsource the cashiering, distribution and bookkeeping functions to BOMC is in conformity with the law and the existing CBA. Particularly in dispute is the validity of the transfer of twelve (12) former FEBTC employees to BOMC, instead of being absorbed in BPI after the corporate merger. The Union claims that a union shop agreement is stipulated in the existing CBA. It is unfair labor practice for employer to outsource the positions in the existing bargaining unit, citing the case of Shell Oil

Workers’ Union v. Shell Company of the Philippines, Ltd.24

The Union’s reliance on the Shell Case is misplaced. The rule now is covered by Article 261 of the Labor Code, which took effect on November 1, 1974.25 Article 261 provides:

ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. – x x x 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 Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement. [Emphases supplied]

Clearly, only gross violations of the economic provisions of the CBA are treated as ULP. Otherwise, they are mere grievances.

In the present case, the alleged violation of the union shop agreement in the CBA, even assuming it was malicious and flagrant, is not a violation of an economic provision in the agreement. The provisions relied upon by the Union were those articles referring to the recognition of the union as the sole and exclusive bargaining representative of all rank-and-file employees, as well as the articles on union security, specifically, the maintenance of membership in good standing as a condition for continued employment and the union shop clause.26 It failed to take into consideration its recognition of the bank’s exclusive rights and prerogatives, likewise provided in the CBA, which included the hiring of employees, promotion, transfers, and dismissals for just cause and the maintenance of order, discipline and efficiency in its operations.27

The Union, however, insists that jobs being outsourced to BOMC were included in the existing bargaining unit, thus, resulting in a reduction of a number of positions in such unit. The reduction interfered with the employees’ right to self-organization because the power of a union primarily depends on its strength in number.28

It is incomprehensible how the "reduction of positions in the collective bargaining unit" interferes with the employees’ right to self-organization because the employees themselves were neither transferred nor dismissed from the service. As the NLRC clearly stated:

In the case at hand, the union has not presented even an iota of evidence that petitioner bank has started to terminate certain employees, members of the union. In fact, what appears is that the Bank has exerted utmost diligence, care and effort to see to it that no

union member has been terminated. In the process of the consolidation or merger of the two banks which resulted in increased diversification of functions, some of these non-banking functions were merely transferred to the BOMC without affecting the union membership.29

BPI stresses that not a single employee or union member was or would be dislocated or terminated from their employment as a result of the Service Agreement.30 Neither had it resulted in any diminution of salaries and benefits nor led to any reduction of union membership.31

As far as the twelve (12) former FEBTC employees are concerned, the Union failed to substantially prove that their transfer, made to complete BOMC’s service complement, was motivated by ill will, anti-unionism or bad faith so as to affect or interfere with the employees’ right to self-organization.

It is to be emphasized that contracting out of services is not illegal perse.1âwphi1 It is an exercise of business judgment or management prerogative. Absent proof that the management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.32 In this case, bad faith cannot be attributed to BPI because its actions were authorized by CBP Circular No. 1388, Series of 199333 issued by the Monetary Board of the then Central Bank of the Philippines (now Bangko Sentral ng Pilipinas). The circular covered amendments in Book I of the Manual of Regulations for Banks and Other Financial Intermediaries, particularly on the matter of bank service contracts. A finding of ULP necessarily requires the alleging party to prove it with substantial evidence. Unfortunately, the Union failed to discharge this burden.

Much has been said about the applicability of D.O. No. 10. Both the NLRC and the CA agreed with BPI that the said order does not apply. With BPI, as a commercial bank, its transactions are subject to the rules and regulations of the governing agency which is the Bangko Sentral ng Pilipinas.34 The Union insists that D.O. No. 10 should prevail.

The Court is of the view, however, that there is no conflict between D.O. No. 10 and CBP Circular No. 1388. In fact, they complement each other.

Consistent with the maxim, interpretare et concordare leges legibus est optimus interpretandi modus, a statute should be construed not only to be consistent with itself but also to harmonize with other laws on the same subject matter, as to form a complete, coherent and intelligible system of jurisprudence.35 The seemingly conflicting provisions of a law or of two laws must be harmonized to render each effective.36 It is only when harmonization is impossible that resort must be made to choosing which law to apply.37

In the case at bench, the Union submits that while the Central Bank regulates banking, the Labor Code and its implementing rules regulate the employment relationship. To this, the Court agrees. The fact that banks are of a specialized industry must, however, be taken into account. The competence in determining which banking functions may or may not be outsourced lies with the BSP. This does not mean that banks can simply outsource banking

functions allowed by the BSP through its circulars, without giving regard to the guidelines set forth under D.O. No. 10 issued by the DOLE.

While D.O. No. 10, Series of 1997, enumerates the permissible contracting or subcontracting activities, it is to be observed that, particularly in Sec. 6(d) invoked by the Union, the provision is general in character – "x x x Works or services not directly related or not integral to the main business or operation of the principal… x x x." This does not limit or prohibit the appropriate government agency, such as the BSP, to issue rules, regulations or circulars to further and specifically determine the permissible services to be contracted out. CBP Circular No. 138838 enumerated functions which are ancillary to the business of banks, hence, allowed to be outsourced. Thus, sanctioned by said circular, BPI outsourced the cashiering (i.e., cash-delivery and deposit pick-up) and accounting requirements of its Davao City branches.39 The Union even described the extent of BPI’s actual and intended contracting out to BOMC as follows:

"As an initiatory move, the functions of the Cashiering Unit of the Processing Center of BPI, handled by its regular rank and file employees who are members of the Union, xxx [were] transferred to BOMC with the Accounting Department as next in line. The Distributing, Clearing and Bookkeeping functions of the Processing Center of the former FEBTC were likewise contracted out to BOMC."40

Thus, the subject functions appear to be not in any way directly related to the core activities of banks. They are functions in a processing center of BPI which does not handle or manage deposit transactions. Clearly, the functions outsourced are not inherent banking functions, and, thus, are well within the permissible services under the circular.

The Court agrees with BPI that D.O. No. 10 is but a guide to determine what functions may be contracted out, subject to the rules and established jurisprudence on legitimate job contracting and prohibited labor-only contracting.41 Even if the Court considers D.O. No. 10 only, BPI would still be within the bounds of D.O. No. 10 when it contracted out the subject functions. This is because the subject functions were not related or not integral to the main business or operation of the principal which is the lending of funds obtained in the form of deposits.42 From the very definition of "banks" as provided under the General Banking Law, it can easily be discerned that banks perform only two (2) main or basic functions – deposit and loan functions. Thus, cashiering, distribution and bookkeeping are but ancillary functions whose outsourcing is sanctioned under CBP Circular No. 1388 as well as D.O. No. 10. Even BPI itself recognizes that deposit and loan functions cannot be legally contracted out as they are directly related or integral to the main business or operation of banks. The CBP's Manual of Regulations has even categorically stated and emphasized on the prohibition against outsourcing inherent banking functions, which refer to any contract between the bank and a service provider for the latter to supply, or any act whereby the latter supplies, the manpower to service the deposit transactions of the former.43

In one case, the Court held that it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature.44 What is of primordial importance is that the service agreement does not violate the employee's right to security of tenure and payment of benefits to which he is entitled under the law.

Furthermore, the outsourcing must not squarely fall under labor-only contracting where the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal or if any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.45

WHEREFORE, the petition is DENIED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 158930-31 August 22, 2006

UNION OF FILIPRO EMPLOYEES - DRUG, FOOD AND ALLIED INDUSTRIES UNIONS - KILUSANG MAYO UNO (UFE-DFA-KMU), Petitioner,vs.NESTLÉ PHILIPPINES, INCORPORATED, Respondent.

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

G.R. No. 158944-45 August 22, 2006

NESTLÉ PHILIPPINES, INCORPORATED Petitioner, vs.UNION OF FILIPRO EMPLOYEES - DRUG, FOOD AND ALLIED INDUSTRIES UNIONS - KILUSANG MAYO UNO (UFE-DFA-KMU), Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

The Case

Before the Court are two (2) petitions for review on certiorari under Rule 45 of the Rules of Court, as amended. Both seek to annul and set aside the joint: (1) Decision1 dated 27 February 2003, and (2) Resolution2 dated 27 June 2003, of the Court of Appeals in CA-G.R. SP No. 698053 and No. 71540.4

G.R. No. 158930-31 was filed by Union of Filipro Employees – Drug, Food and Allied Industries Unions – Kilusang Mayo Uno (UFE-DFA-KMU) against Nestlé Philippines, Incorporated (Nestlé) seeking the reverse of the Court of Appeals Decision in so far as the latter’s failure to adjudge Nestlé guilty of unfair labor practice is concerned, as well as the Resolution of 27 June 2003 denying its Partial Motion for Reconsideration; G.R. No. 158944-45 was instituted by Nestlé against UFE-DFA-KMU similarly seeking to annul and set aside the Decision and Resolution of the Court of Appeals declaring 1) the Retirement Plan a valid collective bargaining issue; and 2) the scope of assumption of jurisdiction power of the Secretary of the DOLE to be limited to the resolution of questions and matters pertaining merely to the ground rules of the collective bargaining negotiations to be conducted between the parties.

In as much as the cases involve the same set of parties; arose from the same set of circumstances, i.e., from several Orders issued by then Secretary of the Department of Labor and Employment (DOLE), Hon. Patricia A. Sto. Tomas, respecting her assumption of jurisdiction over the labor dispute between Nestlé and UFE-DFA-KMU, Alabang and Cabuyao Divisions;5 and likewise assail the same Decision and Resolution of the Court of Appeals, the Court ordered the consolidation of the two petitions.6

The Facts

From the record and the pleadings filed by the parties, we cull the following material facts in this case:

On 4 April 2001, in consideration of the impending expiration of the existing collective bargaining agreement (CBA) between Nestlé and UFE-DFA-KMU7 on 5 June 2001,8 in a letter denominated as a Letter of Intent, the Presidents of the Alabang and Cabuyao Divisions of UFE-DFA-KMU, Ernesto Pasco and Diosdado Fortuna, respectively, informed Nestlé of their intent to "open our new Collective Bargaining Negotiation for the year 2001-2004 x x x as early as June 2001."9

In a letter10 dated 10 April 2001, Nestlé acknowledged receipt of the aforementioned letter. It also informed UFE-DFA-KMU that it was preparing its own counter-proposal and proposed ground rules that shall govern the conduct of the collective bargaining negotiations.

On 29 May 2001, in another letter addressed to the UFE-DFA-KMU (Cabuyao Division), Nestlé underscored its position that "unilateral grants, one-time company grants, company-initiated policies and programs, which include, but are not limited to the Retirement Plan, Incidental Straight Duty Pay and Calling Pay Premium, are by their very nature not proper subjects of CBA negotiations and therefore shall be excluded therefrom."11 In addition, it clarified that with the closure of the Alabang Plant, the CBA negotiations will only be applicable to the covered employees of the Cabuyao Plant; hence, the Cabuyao Division of UFE-DFA-KMU became the sole bargaining unit involved in the subject CBA negotiations.

Thereafter, dialogue between the company and the union ensued.

In a letter dated 14 August 2001, Nestlé, claiming to have reached an impasse in said dialogue, requested12 the National Conciliation and Mediation Board (NCMB), Regional Office No. IV, Imus, Cavite, to conduct preventive mediation proceedings between it and UFE-DFA-KMU. Nestlé alleged that despite fifteen (15) meetings between them, the parties failed to reach any agreement on the proposed CBA. The request was docketed as NCMB-RBIV-CAB-PM-08-035-01.

Conciliation proceedings nevertheless proved ineffective. Complaining, in essence, of bargaining deadlock – pertaining to economic issues, i.e., "retirement (plan), panel composition, costs and attendance, and CBA,"13 UFE-DFA-KMU filed a Notice of Strike14 on 31 October 2001 with the NCMB docketed as NCMB-RBIV-LAG-NS-10-037-01. One week later, or on 07 November 2001, another Notice of Strike15 was filed by the UFE-DFA-KMU docketed as NCMB-RBIV-LAG-NS-11-10-039-01, this time predicated on Nestlé’s alleged unfair labor practices i.e., bargaining in bad faith in that it was setting pre-conditions in the ground rules by refusing to include the issue of the Retirement Plan in the CBA negotiations. A strike vote was then conducted by UFE-DFA-KMU on 22 November 2001. The result was an overwhelming approval of the decision to hold a strike.16

On 26 November 2001, in view of the looming strike, Nestlé filed with the DOLE a Petition for Assumption of Jurisdiction,17 docketed as OS-AJ-0023-01, fundamentally praying that the Secretary of the DOLE, Hon. Patricia A. Sto. Tomas, assume jurisdiction over the current labor dispute as mandated by Article 263 (g) of the Labor Code, as amended, thereby effectively enjoining any impending strike at the Nestlé Cabuyao Plant in Laguna.

On 29 November 2001, Sec. Sto. Tomas issued an Order18 in OS-AJ-0023-01, NCMB-RBIV-CAV-PM-08-035-01, NCMB-RBIV-LAG-NS-10-037-01 & NCMB-RBIV-LAG-NS-11-10-039-01 assuming jurisdiction over the subject labor dispute between the parties, the fallo thereof stating that:

CONSIDERING THE FOREGOING, this Office hereby assumes jurisdiction over the labor dispute at the Nestlé Philippines, Inc. (Cabuyao Plant) pursuant to Article 263 (g) of the Labor Code, as amended.

Accordingly, any strike or lockout is hereby enjoined. The parties are directed to cease and desist from committing any act that might lead to the further deterioration of the current labor relations situation.

The parties are further directed to meet and convene for the discussion of the union proposals and company counter-proposals before the National Conciliation and Mediation Board (NCMB) who is hereby designated as the delegate/facilitator of this Office for this purpose. The NCMB shall report to this Office the results of this attempt at conciliation and delimitation of the issues within thirty (30) days from the parties’ receipt of this Order, in no case later than December 31, 2001. If no settlement of all the issues is reached, this Office shall thereafter define the outstanding issues and order the filing of position papers for a ruling on the merits.

UFE-DFA-KMU sought reconsideration19 of the abovequoted Assumption of Jurisdiction Order on the assertion that:

i. Article 263 (g) of the Labor Code, as amended, is invalid and unconstitutional as it is in derogation of the provisions dealing on protection to labor, social justice, the bill of rights, and, generally accepted principle of international law;

ii. compulsory arbitration as a mode of dispute settlement provided for in the Labor Code and sourced from the 1935 and 1973 constitutions has been discarded and deleted by the New Charter which instituted in its stead free collective bargaining;

iii. that ILO condemns the continuous exercise by the Secretary of Labor of the power of compulsory arbitration;

iv. granting that the law is valid, the Secretary has unconstitutionally applied the law;

v. that the company is a business enterprise not belonging to an industry indispensable to the national interest considering that it is only one among a number of companies in the country producing milk and nutritional products; that the Cabuyao plant is only one of the six (6) Nestle plants in the country and could rely on its highly automated Cagayan de Oro plant for buffer stocks;

vi. that the Secretary acted with grave abuse of discretion in issuing the assailed order without the benefit of a prior notice and inquiry.

In the interregnum, the union interposed a motion for extension of time20 to file its position paper as directed by the Assumption of Jurisdiction Order of 29 November 2001.

In an Order21 dated 14 January 2002, Sec. Sto. Tomas denied the aforequoted motion for reconsideration in this wise:

This is not the first time that this Office had occasion to resolve the grounds and arguments now being raised x x x. In a more recent case – In re: labor dispute at Toyota Motor Philippines Corporation x x x this Office ruled:

The constitutionality of the power of the Secretary of Labor under Article 263 (g) of the Labor Code to assume jurisdiction over a labor dispute in an industry indispensable to the national interest has been upheld as an exercise of police power of the constitution. x x x.

x x x x

As ruled by the Supreme Court in the Philtread case:

Article 263 (g) of the Labor Code does not violate the worker’s constitutional right to strike.

x x x x x x

The foregoing article clearly does not interfere with the worker’s right to strike but merely regulates it, when in the exercise of such right, national interests will be affected.

On 15 January 2002, despite the injunction22 contained in Sec. Sto. Tomas’ Assumption of Jurisdiction Order and conciliation efforts by the NCMB, the employee members of UFE-DFA-KMU at the Nestlé Cabuyao Plant went on strike.

On 16 January 2002, in consideration of the above, Sec. Sto. Tomas issued yet another Order23 directing: (1) the members of UFE-DFA-KMU to return-to-work within twenty-four (24) hours from receipt of such Order; (2) Nestlé to accept back all returning workers under the same terms and conditions existing preceding to the strike; (3) both parties to cease and desist from committing acts inimical to the on-going conciliation proceedings leading to the further deterioration of the situation; and (4) the submission of their respective position papers within ten (10) days from receipt thereof.

Notwithstanding the Return-To-Work Order, the members of UFE-DFA-KMU continued with their strike and refused to go back to work as instructed. Thus, Sec. Sto. Tomas sought the assistance of the Philippine National Police (PNP) for the enforcement of said order.

At the hearing called on 7 February 2002, Nestlé and UFE-DFA-KMU filed their respective position papers. In its position paper,24 Nestlé addressed several issues allegedly pertaining to the current labor dispute, i.e., economic provisions of the CBA as well as the non-inclusion of the issue of the Retirement Plan in the collective bargaining negotiations. UFE-DFA-KMU, in contrast, limited itself to tackling the solitary issue of whether or not the retirement plan was a mandatory subject in its CBA negotiations with the company on the contention "that the Order of Assumption of Jurisdiction covers only the issue of Retirement Plan."25

On 8 February 2002, Nestlé moved that UFE-DFA-KMU be declared to have waived its right to present arguments respecting the other issues raised by the company on the ground that the latter chose to limit itself to discussing only one (1) issue. Sec. Sto. Tomas, in an Order26 dated 11 February 2002, however, did not see fit to grant said motion. She instead allowed UFE-DFA-KMU the chance to tender its stand on the other issues raised by Nestlé but not covered by its initial position paper paper by way of a Supplemental Position Paper.

UFE-DFA-KMU afterward filed several pleadings: (1) an Urgent Motion to File a Reply dated 13 February 2002; (2) a Motion for Time to File Supplemental Position Paper dated 22 February 2002; and (3) a Manifestation with Motion for Reconsideration of the Order dated February 11, 2002 dated 27 February 2002. The latter pleading was an absolute contradiction of the second one praying for additional time to file the subject supplemental position paper. In said Manifestation, UFE-DFA-KMU explained that it "realized that the Order of February 11, 2002 appears to be contrary to law and jurisprudence and is not in conformity with existing laws and the evidence on record,"27 as the Secretary of the DOLE "could only assume jurisdiction over the issues mentioned in the notice of strike subject of the current dispute."28 UFE-DFA-KMU then went on to clarify that the Amended Notice of Strike did not cite, as one of the grounds, the CBA deadlock.

On 8 March 2002, Sec. Sto. Tomas denied the motion for reconsideration of UFE-DFA-KMU.

Frustrated with the foregoing turn of events, UFE-DFA-KMU filed a petition for certiorari29 with application for the issuance of a temporary restraining order or a writ of preliminary injunction before the Court of Appeals. The petition was predicated on the question of whether or not the DOLE Secretary committed grave abuse of discretion in issuing the Orders of 11 February 2002 and 8 March 2002.

Meanwhile, in an attempt to finally resolve the crippling labor dispute between the parties, then Acting Secretary of the DOLE, Hon. Arturo D. Brion, came out with an Order30 dated 02 April 2002, in the main, ruling that:

a. we hereby recognize that the present Retirement Plan at the Nestlé Cabuyao Plant is a unilateral grant that the parties have expressly so recognized subsequent to the Supreme Court’s ruling in Nestlé, Phils. Inc. vs. NLRC, G.R. No. 90231, February 4, 1991, and is therefore not a mandatory subject for bargaining;

b. the Union’s charge of unfair labor practice against the Company is hereby dismissed for lack of merit;

c. the parties are directed to secure the best applicable terms of the recently concluded CBs between Nestlé Phils. Inc. and it eight (8) other bargaining units, and to adopt these as the terms and conditions of the Nestlé Cabuyao Plant CBA;

d. all union demands that are not covered by the provisions of the CBAs of the other eight (8) bargaining units in the Company are hereby denied;

e. all existing provisions of the expired Nestlé Cabuyao Plant CBA without any counterpart in the CBAs of the other eight bargaining units in the Company are hereby ordered maintained as part of the new Nestlé Cabuyao Plant CBA;

f. the parties shall execute their CBA within thirty (30) days from receipt of this Order, furnishing this Office a copy of the signed Agreement;

g. this CBA shall, in so far as representation is concerned, be for a term of five (5) years; all other provisions shall be renegotiated not later than three (3) years after its effective date which shall be December 5, 2001 (or on the first day six months after the expiration on June 4, 2001 of the superceded CBA).

Not surprisingly, UFE-DFA-KMU moved to reconsider the aforequoted position of the DOLE.

On 6 May 2002, the Secretary of the DOLE, Hon. Sto. Tomas, issued the last of the assailed Orders.31 This order resolved to deny the preceding motion for reconsideration of UFE-DFA-KMU.

Undaunted still, UFE-DFA-KMU, for the second time, went to the Court of Appeals likewise via a petition for certiorari seeking to annul, on the ground of grave abuse of discretion, the Orders of 02 April 2002 and 06 May 2002 of the Secretary of the DOLE.

The Court of Appeals, acting on the twin petitions for certiorari, determined the issues in favor of UFE-DFA-KMU in a joint Decision dated 27 February 2003. The dispositive part thereof states that:

WHEREFORE, in view of the foregoing, there being grave abuse on the part of the public respondent in issuing all the assailed Orders, both petitions are hereby GRANTED. The assailed Orders dated February 11, 2001, and March 8, 2001 (CA-G.R. SP No. 69805), as well as the Orders dated April 2, 2002 and May 6, 2002 (CA-G.R. SP No. 71540) of the Secretary of Labor and Employment in the case entitled: "IN RE: LABOR DISPUTE AT NESTLE PHILIPPINES INC. (CABUYAO FACTORY)" under OS-AJ-0023-01 (NCMB-RBIV-CAV-PM-08-035-01, NCMB-RBIV-LAG-NS-10-037-01, NCMB-RBIV-LAG-NS-11-10-039—01) are hereby ANNULLED and SET ASIDE. Private respondent is hereby directed to resume the CBA negotiations with the petitioner.32

Dissatisfied, both parties separately moved for the reconsideration of the abovequoted decision – with Nestlé basically assailing that part of the decision finding the DOLE Secretary to have gravely abused her discretion when she ruled that the Retirement Plan is not a valid issue for collective bargaining negotiations; while UFE-DFA-KMU questions, in essence, the appellate court’s decision in absolving Nestlé of the charge of unfair labor practice.

The parties’ efforts were all for naught as the Court of Appeals stood pat in its earlier pronouncements and denied the motions for reconsideration in a joint Resolution dated 27 June 2003.

Hence, these petitions for review on certiorari separately filed by the parties. Said petitions were ordered consolidated in a Supreme Court Resolution dated 29 March 2004.

The Issues

UFE-DFA-KMU’s petition for review docketed as G.R. No. 158930-31, is predicated on the following alleged errors:

I.

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN NOT HOLDING THAT RESPONDENT IS GUILTY OF UNFAIR LABOR PRACTICE IN REFUSING TO PROCEED WITH THE CBA NEGOTIATIONS UNLESS PETITIONER FIRST ADMITS THAT THE RETIREMENT PLAN IN THE COMPANY IS A NON-CBA MATTER; and

II.

THE CONTENTION THAT THERE IS NO EVIDENCE OF UNFAIR LABOR PRACTICE ON RESPONDENT NESTLÉ’S PART AND THAT PETITIONER DID NOT RAISE THE ISSUE OF ULP IN

ITS ARGUMENTS BEFORE THE COURT OF APPEALS IS GROSSLY ERRONEOUS.33

Whereas in G.R. No. 158944-45, petitioner Nestlé challenges the conclusion of the Court of Appeals on the basis of the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT THE POWERS GRANTED TO THE SECRETARY OF LABOR TO RESOLVE NATIONAL INTEREST DISPUTES UNDER ARTICLE 263 (G) OF THE LABOR CODE MAY BE LIMITED BY A (SECOND) NOTICE OF STRIKE; and

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN ANNULING THE SECRETARY OF LABOR’S JUDGMENT ON THE RETIREMENT PLAN ISSUE WHICH WAS MERELY

A PART OF THE COMPLETE RESOLUTION OF THE LABOR DISPUTE.34

On the whole, the consolidated cases only raise three (3) fundamental issues for deliberation by this Court, that is, whether or not the Court of Appeals committed reversible error, first, in finding the Secretary of Labor and Employment to have gravely abused her discretion in her pronouncement that the Retirement Plan was not a proper subject to be included in the CBA negotiations between the parties; hence, non-negotiable; second, in holding that the assumption powers of the Secretary of Labor and Employment should have been limited merely to the grounds alleged in the second Notice of Strike; and third, in not ruling that Nestlé was guilty of unfair labor practice despite allegedly setting a pre-condition to bargaining – the non-inclusion of the Retirement Plan as an issue in the collective bargaining negotiations.

The Court’s Ruling

Foremost for our resolution is the matter of the non-inclusion of the Retirement Plan in the CBA negotiations between Nestlé and UFE-DFA-KMU (Cabuyao Division).

In finding the Secretary of the DOLE to have gravely abused her discretion in holding that the Retirement Plan is not a valid CBA issue, the Court of Appeals explained that:

Although the Union, thru its President Diosdado Fortuna, signed a Memorandum of Agreement dated October 8, 1998 together with the private respondent which clearly states that the "Company agree to extend the following unilateral grants which shall not form part of the CBA" (citation omitted) however, the same document made a proviso that "reference on the Retirement Plan in the CBA signed on July 4, 1995, shall be maintained," x x x thus, this Court is of the belief and so holds that the Retirement Plan is still a valid CBA issue, hence, it could not be argued that the true intention of the parties is that the Retirement Plan, although referred in the CBA, would not in any way form part of the CBA (citation omitted) as it could be clearly inferred by this Court that it is to be used as an integral part of the CBA and to be used as a topic for future bargaining, in consonance with the ruling of the Supreme Court in the previous Nestlé Case that "the Retirement Plan was a collective bargaining issue right from the start."35

In filing the present petition, Nestle is of the view that after the 1991 Supreme Court Decision was promulgated, there was obviously an agreement by the parties to no longer consider the Retirement Plan as a negotiable item subject to bargaining. Rather, said benefit

would be regarded as a unilateral grant outside the ambit of negotiation. Nestlé justifies such contention by directing the Court’s attention to the Ground Rules for 1998 Alabang/Cabuyao Factories’ CBA Negotiation (citation omitted) signed by it and the representatives of UFE-DFA-KMU where both sides "expressly" recognized Nestlé’s prerogative to initiate unilateral grants which are ‘not negotiable.’ It likewise cited the Memorandum of Agreement36 entered into by the parties on 08 October 1998, which also "categorically" referred to the Retirement Plan as one of the unilateral grants alluded to in the aforementioned Ground Rules. Nestle then concluded that:

Indeed, the foregoing uncontroverted documents very clearly established the clear agreement of the parties, after the 1991 Supreme Court Decision, to remove the Retirement Plan from the scope of bargaining negotiation, and leave the matter upon the sole initiative and discretion of Nestlé.37

In contrast, UFE-DFA-KMU posits that there is nothing in either of the documents aboveclaimed that proves that it agreed "to treat the Retirement Plan as a unilateral grant of the company which is outside the scope of the CBA and hence, not a proper subject of bargaining." It explained that the MOA alluded to by Nestlé merely speaks of the improvement 38 or the review for the improvement 39 of the current Retirement Plan and nothing else. UFE-DFA-KMU rationalizes that:

Had the objective of the parties been to consider the Retirement Plan as not a subject for collective bargaining, they would have stated so in categorical terms. Or, they could have deleted the said benefit from the CBA.

Unfortunately for petitioner, the documents relied upon by it do not state that the Retirement Plan is no longer a bargainable item. The said benefit was not also removed or deleted from the CBA.

If ever, what was "unilaterally granted" by petitioner company as appearing on the above-stated letter and MOA were the "improvements" on the Retirement Plan. The Retirement Plan could not have been unilaterally granted by the said letter and MOA since the said Plan predates the said letter and MOA by over two decades.

UFE-DFA-KMU concludes that "[s]ince the Retirement Plan did not derive its existence from the letter and MOA x x x, the nature of the Retirement Plan was not altered or changed by the subsequent issuance by petitioner company of the said letter and MOA. The Retirement Plan remained a CBA item which is a proper subject of collective bargaining pursuant to the 1991 ruling of this Honorable Court."40

We agree.

The present issue is not one of first impression. In Nestlé Philippines, Inc. v. NLRC,41 ironically involving the same parties herein, this Court has had the occasion to affirm that a retirement plan is consensual in nature.

By way of background, the parties therein resorted to a "slowdown" and walked out of the factory prompting the management to shut down its operations. Collective bargaining

negotiations were conducted but a deadlock was subsequently declared. The Secretary of Labor assumed jurisdiction over the labor dispute and issued a return-to-work order. The NLRC thereafter issued its resolution modifying Nestlé’s existing "non-contributory" Retirement Plan. The company filed a petition for certiorari alleging grave abuse of discretion on the part of the NLRC as Nestlé was arguing that since its Retirement Plan is non-contributory, it should be a non-issue in CBA negotiations. Nestlé had the sole and exclusive prerogative to define the terms of the plan as the employees had no vested and demandable rights thereon – the grant of such not being a contractual obligation but simply gratuitous. In a ruling contrary to Nestlé’s position, this Court, through Madame Justice Griño-Aquino, declared that:

The company’s [Nestlé] contention that its retirement plan is non-negotiable, is not well-taken. The NLRC correctly observed that the inclusion of the retirement plan in the collective bargaining agreement as part of the package of economic benefits extended by the company to its employees to provide them a measure of financial security after they shall have ceased to be employed in the company, reward their loyalty, boost their morale and efficiency and promote industrial peace, gives "a consensual character" to the plan so that it may not be terminated or modified at will by either party (citation omitted).

The fact that the retirement plan is non-contributory, i.e., that the employees contribute nothing to the operation of the plan, does not make it a non-issue in the CBA negotiations. As a matter of fact, almost all of the benefits that the petitioner has granted to its employees under the CBA – salary increases, rice allowances, midyear bonuses, 13th and 14th month pay, seniority pay, medical and hospitalization plans, health and dental services, vacation, sick & other leaves with pay – are non-contributory benefits. Since the retirement plan has been an integral part of the CBA since 1972, the Union’s demand to increase the benefits due the employees under said plan, is a valid CBA issue. x x x

x x x x

x x x [E]mployees do have a vested and demandable right over existing benefits voluntarily granted to them by their employer. The latter may not unilaterally withdraw, eliminate or diminish such benefits (Art. 100, Labor Code; other citation omitted). [Emphases supplied.]42

In the case at bar, it cannot be denied that the CBA that was about to expire at that time contained provisions respecting the Retirement Plan. As the latter benefit was already subject of the existing CBA, the members of UFE-DFA-KMU were only exercising their prerogative to bargain or renegotiate for the improvement of the terms of the Retirement Plan just like they would for all the other economic, as well as non-economic benefits previously enjoyed by them. Precisely, the purpose of collective bargaining is the acquisition or attainment of the best possible covenants or terms relating to economic and non-economic benefits granted by employers and due the employees. The Labor Code has actually imposed as a mutual obligation of both parties, this duty to bargain collectively. The duty to bargain collectively is categorically prescribed by Article 252 of the said code. It states:

ART. 252. MEANING OF DUTY TO BARGAIN COLLECTIVELY. – The duty to bargain collectively means the performance of a mutual obligation to meet and confer promptly and expeditiously and in good faith for the purpose of negotiating an agreement with respect to wages, hours of work, and 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 agreement if requested by either party, but such duty does not compel any party to agree to a proposal or to make any concession.

Further, Article 253, also of the Labor Code, defines the parameter of said obligation when there already exists a CBA, viz:

ART. 253. DUTY TO BARGAIN COLLECTIVELY WHEN THERE EXISTS A COLLECTIVE BARGAINING AGREEMENT. – The duty to bargain collectively shall also mean that either party shall not terminate nor 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 sixty day period and/or until a new agreement is reached by the parties.

And, in demanding that the terms of the Retirement Plan be opened for renegotiation, the members of UFE-DFA-KMU are acting well within their rights as we have, indeed, declared that the Retirement Plan is consensual in character; and so, negotiable.

Contrary to the claim of Nestlé that the categorical mention of the terms ‘unilateral agreement’ in the letter and the MOA signed by the representatives of UFE-DFA-KMU, had, for all intents and purposes worked to estop UFE-DFA-KMU from raising it as an issue in the CBA negotiations, our reading of the same, specifically Paragraph 6 and subparagraph 6.2:

6. Additionally, the COMPANY agree to extend the following unilateral grants which shall not form part of the Collective Bargaining Agreement (CBA):

x x x x

6.2. Review for improvement of the COMPANY’s Retirement Plan and the reference on the Retirement Plan in the Collective Bargaining Agreement signed on 4 July 1995 shall be maintained. 43

hardly persuades us that the members of UFE-DFA-KMU have agreed to treat the Retirement Plan as a benefit the terms of which are solely dependent on the inclination of the Nestlé and remove the subject benefit from the ambit of the CBA. The characterization unilaterally imposed by Nestlé on the Retirement Plan cannot operate to divest the employees of their "vested and demandable right over existing benefits voluntarily granted by their employer."44 Besides, the contention that UFE-DFA-KMU has "abandoned" or forsaken our earlier pronouncement vis-à-vis the consensual nature of a retirement plan is quite inconsistent with, nay, is negated by its conduct in doggedly asking for a renegotiation of said benefit.

Worth noting, at this point, is the fact that the aforequoted paragraph 6 and its subparagraphs, particularly subparagraph 6.2, highlights an undeniable fact – that Nestlé recognizes that the Retirement Plan is part of the existing Collective Bargaining Agreement.

Nestlé further rationalizes that a ruling declaring the Retirement Plan a valid CBA negotiation issue will inspire other bargaining units to demand for greater benefits in accordance with their respective appetites. Suffice it to say that the consensual nature of the Retirement Plan neither gives the union members the unfettered right nor the unbridled prerogative to demand more than what the company can viably give.

As regards the scope of the assumption powers of the Secretary of the DOLE, the appellate court ruled that Sec. Sto. Tomas’ assumption of jurisdiction powers should have been limited to the disagreement on the ground rules of the collective bargaining negotiations. The Court of Appeals referred to the minutes of the meeting held on 30 October 2001. That the representative Nestlé was recorded to have stated that "we are still discussing ground rules and not yet on the CBA negotiations proper, a deadlock cannot be declared,"45 was a telling fact. The Court of Appeals, thus, declared that the Secretary "should not have ruled on the questions and issues relative to the substantive aspect of the CBA simply because there was no conflict on the CBA yet."46

UFE-DFA-KMU agrees in the above and contends that the requisites of judicial inquiry require, first and foremost the presence of an actual case controversy. It then concludes that "[i]f the courts of law cannot act and decide in the absence of an actual case or controversy, so should be (sic) also the Honorable DOLE Secretary."47

Nestle, however, contradicts the preceding disquisitions on the ground that such referral to the minutes of the meeting was erroneous and misleading. It avers that the Court of Appeals failed to consider the circumstance surrounding said utterance – that the statement was made during the preventive mediation proceedings and the UFE-DFA-KMU had not yet filed any notice of strike. It further emphasizes that it was UFE-DFA-KMU who first alleged bargaining deadlock as the basis for the filing of its Notice of Strike. Finally, Nestlé clarifies that before the first Notice of Strike was filed, several conciliation conferences had already been undertaken where both parties had exchanges of their respective CBA proposals.

In this, we agree with Nestlé. Declaring the Secretary of the DOLE to have acted with grave abuse of discretion for ruling on substantial matters or issues and not restricting itself merely on the ground rules, the appellate court and UFE-DFA-KMU would have us treat the subject labor dispute in a piecemeal fashion.

The power granted to the Secretary of the DOLE by Paragraph (g) of Article 263 of the Labor Code, to wit:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS. –

x x x x

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and

Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same.

x x x x

authorizes her to assume jurisdiction over a labor dispute, causing or likely to cause a strike or lockout in an industry indispensable to the national interest, and correlatively, to decide the same.

In the case at bar, the Secretary of the DOLE simply relied on the Notices of Strike that were filed by UFE-DFA-KMU as stated in her Order of 08 March 2002, to wit:

x x x The records disclose that the Union filed two Notices of Strike. The First is dated October 31, 2001 whose grounds are cited verbatim hereunder:

"A. Bargaining Deadlock

1. Economic issues (specify)

1. Retirement

2. Panel Composition

3. Costs and Attendance

4. CBA"

The second Notice of Strike is dated November 7, 2001 and the cited ground is like quoted verbatim below:

"B. Unfair Labor Practices (specify)

Bargaining in bad faith –

Setting pre-condition in the ground rules (Retirement issue)"

Nowhere in the second Notice of Strike is it indicated that this Notice is an amendment to and took the place of the first Notice of Strike. In fact, our Assumption of Jurisdiction Order dated November 29, 2001 specifically cited the two (2) Notices of Strike without any objection on the part of the Union x x x.48

Thus, based on the Notices of Strike filed by UFE-DFA-KMU, the Secretary of the DOLE rightly decided on matters of substance. Further, it is a fact that during the conciliation meetings before the NCMB, but prior to the filing of the notices of strike, the parties had already delved into matters affecting the meat of the collective bargaining agreement. The appellate court’s reliance on the statement49 of the representative of Nestlé in ruling that the labor dispute had yet to progress from the discussion of the ground rules of the CBA negotiations is clearly misleading; hence, erroneous.

Nevertheless, granting for the sake of argument that the meetings undertaken by the parties had not gone beyond the discussion of the ground rules, the issue of whether or not the Secretary of the DOLE could decide issues incidental to the subject labor dispute had already been answered in the affirmative. The Secretary’s assumption of jurisdiction power necessarily includes matters incidental to the labor dispute, that is, issues that are necessarily involved in the dispute itself, not just to those ascribed in the Notice of Strike; or, otherwise submitted to him for resolution. As held in the case of International Pharmaceuticals, Inc. v. Sec. of Labor and Employment,50 "x x x [t]he Secretary was explicitly granted by Article 263 (g) of the Labor Code the authority to assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, and decide the same accordingly. Necessarily, this authority to assume jurisdiction over the said labor dispute must include and extend to all questions and controversies arising therefrom, including cases over which the Labor Arbiter has exclusive jurisdiction."51 Accordingly, even if not exactly on the ground upon which the Notice of Strike is based, the fact that the issue is incidental to the resolution of the subject labor dispute or that a specific issue had been submitted to the Secretary of the DOLE for her resolution, validly empowers the latter to take cognizance of and resolve the same.

Secretary Sto. Tomas correctly assumed jurisdiction over the questions incidental to the current labor dispute and those matters raised by the parties. In any event, the query as to whether or not the Retirement Plan is to be included in the CBA negotiations between the parties ineluctably dictates upon the Secretary of the DOLE to go into the substantive matter of the CBA negotiations.

Lastly, the third issue pertains to the alleged reversible error committed by the Court of Appeals in holding, albeit impliedly, Nestlé free and clear from any unfair labor practice. UFE-DFA-KMU argues that Nestlé’s "refusal to bargain on a very important CBA economic provision constitutes unfair labor practice."52 It explained that Nestlé set as a precondition for the holding of collective bargaining negotiations the non-inclusion of the issue of Retirement Plan. In its words, "respondent Nestlé Phils., Inc. insisted that the Union should first agree that the retirement plan is not a bargaining issue before respondent Nestlé would agree to discuss other issues in the CBA."53 It then concluded that "the Court of Appeals committed a legal error in not ruling that respondent company is guilty of unfair labor practice. It also committed a legal error in failing to award damages to the petitioner for the ULP committed by the respondent."54

Nestlé refutes the above argument and asserts that it was only before the Court of Appeals, and in the second Petition for Certiorari at that, did UFE-DFA-KMU raise the matter of unfair labor practice. It reasoned that the subject of unfair labor practice should have been

threshed out with the appropriate labor tribunal. In justifying the failure of the Court of Appeals to find it guilty of unfair labor practice, it stated that:

Under the circumstances, therefore, there was no way for the Court of Appeals to make a ruling on the issues of unfair labor practice and damages, simply because there was nothing to support or justify such action. Although petitioner was afforded by the Secretary the opportunity to be heard and more, it simply chose to omit the said issues in the proceedings below.55

We are persuaded.

The concept of "unfair labor practice" is defined by the Labor Code as:

ART. 247. CONCEPT OF UNFAIR LABOR PRACTICE AND PROCEDURE FOR PROSECUTION THEREOF. – Unfair labor practices violate the constitutional right of workers and employees to self-organization, are inimical to the legitimate interests of both labor and management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.

x x x x.

The same code likewise provides the acts constituting unfair labor practices committed by employers, to wit:

ART. 248. UNFAIR LABOR PRACTICES OF EMPLOYERS. – It shall be unlawful for an employer to commit any of the following unfair labor practices:

(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization;

(b) To require as a condition of employment that a person or an employee shall not join a labor organization or shall withdraw from one to which he belongs;

(c) To contract out services or functions being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their right to self-organization;

(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;

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or discourage membership in any labor organization. Nothing in this Code or in any other law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the signing of the collective bargaining agreement.

Employees of an appropriate collective bargaining unit who are not members of the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such non-union members accept the benefits under the collective agreement. Provided, That the individual authorization required under Article 242, paragraph (o) of this Code shall not apply to the nonmembers of the recognized collective bargaining agent; [The article referred to is 241, not 242. – CAA]

(f) To dismiss, discharge, or otherwise prejudice or discriminate against an employee for having given or being about to give testimony under this Code;

(g) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attorney’s fees to the union or its officers or agents as part of the settlement of any issue in collective bargaining or any other dispute; or

(i) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers and agents of corporations associations or partnerships who have actually participated, authorized or ratified unfair labor practices shall be held criminally liable. [Emphasis supplied.]

Herein, Nestlé is accused of violating its duty to bargain collectively when it purportedly imposed a pre-condition to its agreement to discuss and engage in collective bargaining negotiations with UFE-DFA-KMU.

A meticulous review of the record and pleadings of the cases at bar shows that, of the two notices of strike filed by UFE-DFA-KMU before the NCMB, it was only on the second that the ground of unfair labor practice was alleged. Worse, the 7 November 2001 Notice of Strike merely contained a general allegation that Nestlé committed unfair labor practice by bargaining in bad faith for supposedly "setting pre-condition in the ground rules (Retirement issue)."56 On the contrary, Nestlé, in its Position Paper, did not confine itself to the issue of the non-inclusion of the Retirement Plan but extensively discussed its stance on other economic matters pertaining to the CBA.

Basic is the principle that good faith is presumed and he who alleges bad faith has the duty to prove the same.57 By imputing bad faith unto the actuations of Nestlé, it was UFE-DFA-KMU, therefore, who had the burden of proof to present substantial evidence to support the allegation of unfair labor practice. A perusal of the allegations and arguments raised by UFE-DFA-KMU in the Memorandum (in G.R. Nos. 158930-31) will readily disclose that it failed to discharge said onus probandi as there is still a need for the presentation of evidence other than its bare contention of unfair labor practice in order to make certain the propriety or impropriety of the unfair labor practice charge hurled against Nestlé. Under Rule XIII, Sec. 4, Book V of the Implementing Rules of the Labor Code:

x x x. In cases of unfair labor practices, the notice of strike shall as far as practicable, state the acts complained of and the efforts to resolve the dispute amicably." [Emphasis supplied.]

Except for the assertion put forth by UFE-DFA-KMU, neither the second Notice of Strike nor the records of these cases substantiate a finding of unfair labor practice. It is not enough that the union believed that the employer committed acts of unfair labor practice when the circumstances clearly negate even a prima facie showing to warrant such a belief.58 In its letter59 to UFE-DFA-KMU of 29 May 2001, though Nestlé underscored its position that "unilateral grants, one-time company grants, company-initiated policies and programs, which include, but are not limited to the Retirement Plan, Incidental Straight Duty Pay and Calling Pay Premium, are by their very nature not proper subjects of CBA negotiations and therefore shall be excluded therefrom," such attitude is not tantamount to refusal to bargain. This is especially true when it is viewed in the light of the fact that eight out of nine bargaining units have allegedly agreed to treat the Retirement Plan as a unilateral grant. Nestlé, therefore, cannot be faulted for considering the same benefit as unilaterally granted. To be sure, it must be shown that Nestlé was motivated by ill will, "bad faith, or fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy, and, of course, that social humiliation, wounded feelings, or grave anxiety resulted x x x"60 in disclaiming unilateral grants as proper subjects in their collective bargaining negotiations.

There is no per se test of good faith in bargaining.61 Good faith or bad faith is an inference to be drawn from the facts,62 to be precise, the crucial question of whether or not a party has met his statutory duty to bargain in good faith typically turns on the facts of the individual case. Necessarily, a determination of the validity of the Nestlé’s proposition involves an appraisal of the exercise of its management prerogative.

Employers are accorded rights and privileges to assure their self-determination and independence and reasonable return of capital.63 This mass of privileges comprises the so-called management prerogatives.64 In this connection, the rule is that good faith is always presumed. As long as the company’s exercise of the same is in good faith to advance its interest and not for purpose of defeating or circumventing the rights of employees under the law or a valid agreement, such exercise will be upheld.65

Construing arguendo that the content of the aforequoted letter of 29 May 2001 laid down a pre-condition to its agreement to bargain with UFE-DFA-KMU, Nestlé’s inclusion in its Position Paper of its proposals affecting other matters covered by the CBA contradicts the claim of refusal to bargain or bargaining in bad faith. Accordingly, since UFE-DFA-KMU failed to proffer substantial evidence that would overcome the legal presumption of good faith on the part of Nestlé, the award of moral and exemplary damages is unavailing.

It must be remembered at all times that the Philippine Constitution, while inexorably committed towards the protection of the working class from exploitation and unfair treatment, nevertheless mandates the policy of social justice so as to strike a balance between an avowed predilection for labor, on the one hand, and the maintenance of the legal rights of capital, the proverbial hen that lays the golden egg, on the other. Indeed, we should not be unmindful of the legal norm that justice is in every case for the deserving, to be dispensed with in the light of established facts, the applicable law, and existing jurisprudence.66

In sum, from the facts and evidence extant in the records of these consolidated petitions, this Court finds that 1) the Retirement Plan is still a valid issue for herein parties collective bargaining negotiations; 2) the Court of Appeals committed reversible error in limiting to the issue of the ground rules the scope of the power of the Secretary of Labor to assume jurisdiction over the subject labor dispute; and 3) Nestlé is not guilty of unfair labor practice. As no other issues are availing, this ponencia writes finis to the protracted labor dispute between Nestlé and UFE-DFA-KMU (Cabuyao Division).

WHEREFORE, in view of the foregoing, the Petition in G.R. No. 158930-31 seeking that Nestlé be declared to have committed unfair labor practice in allegedly setting a precondition to bargaining is DENIED. The Petition in G.R. No. 158944-45, however, is PARTLY GRANTED in that we REVERSE the ruling of the Court of Appeals in CA G.R. SP No. 69805 in so far as it ruled that the Secretary of the DOLE gravely abused her discretion in failing to confine her assumption of jurisdiction power over the ground rules of the CBA negotiations; but the ruling of the Court of Appeals on the inclusion of the Retirement Plan as a valid issue in the collective bargaining negotiations between UFE-DFA-KMU and Nestlé is AFFIRMED. The parties are directed to resume negotiations respecting the Retirement Plan and to take action consistent with the discussions hereinabove set forth. No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 164060 June 15, 2007

FACULTY ASSOCIATION OF MAPUA INSTITUTE OF TECHNOLOGY (FAMIT), petitioner, vs.HON. COURT OF APPEALS, and MAPUA INSTITUTE OF TECHNOLOGY, respondents.

D E C I S I O N

QUISUMBING, J.:

This is an appeal to reverse and set aside the Decision1 dated August 21, 2003 and the Resolution2 dated June 3, 2004 of the Court of Appeals in CA-G.R. SP No. 71479. The appellate court had reversed the Decision of the Office of the Voluntary Arbitrators. It held that the incorporation of the new faculty ranking to the 2001 Collective Bargaining Agreement (CBA) between petitioner and private respondent has been the intention of the parties to the CBA.

The facts in this case are undisputed.

In July 2000, private respondent Mapua Institute of Technology (MIT) hired Arthur Andersen to develop a faculty ranking and compensation system. On January 29, 2001, in the 5th CBA

negotiation meeting, MIT presented the new faculty ranking instrument to petitioner Faculty Association of Mapua Institute of Technology (FAMIT).3 The latter agreed to the adoption and implementation of the instrument, with the reservation that there should be no diminution in rank and pay of the faculty members.

On April 17, 2001, FAMIT and MIT entered into a new CBA effective June 1, 2001.4 It incorporated the new ranking for the college faculty in Section 8 of Article V which states that, "A new faculty ranking shall be implemented in June 2001. However, there shall be no diminution in the existing rank and the policy ‘same rank, same pay’ shall apply."5

The faculty ranking sheet was annexed to the CBA as Annex "B," while the college faculty rates sheet for permanent faculty and which included the point ranges and corresponding pay rates per faculty level was added as Annex "C."

When the CBA took effect, the Vice President for Academic Affairs issued a memorandum to all deans and subject chairs to evaluate and re-rank the faculty under their supervision using the new ranking instrument. Eight factors were to be considered and given their corresponding weights/points according to levels attained per factor. Among these were: (1) educational attainment; (2) professional honors received; (3) relevant training; (4) relevant professional experience; (5) scholarly work and creative efforts; (6) award winning works; (7) officership in relevant technical and professional organizations; and (8) administrative positions held at MIT.6

After a month, MIT called FAMIT’s attention to what it perceived to be flaws or omissions in the CBA signed by the parties. In a letter7 dated July 5, 2001 to FAMIT, MIT requested for an amendment of the following CBA annexes – Annex "B" (Faculty Ranking Sheet); Annex "C" (College Faculty Rates for Permanent Faculty Only); and Annex "D" (H.S. Faculty Rates for Permanent Faculty Only). MIT claimed that with respect to Annexes "C" and "D," these contained data under the heading "TOTAL POINTS" that were not germane to the two other columns in both annexes. With regard to the Faculty Ranking Point Range sheet of the new faculty ranking instrument, MIT avers that this was inadvertently not attached to the CBA.

FAMIT rejected the proposal. It said that these changes would constitute a violation of the ratified 2001 CBA and result in the diminution of rank and benefits of FAMIT college faculty. It argued that the proposed amendment in the ranking system for the college faculty revised the point ranges earlier agreed upon by the parties and expands the 19 faculty ranks to 23.

Meanwhile, MIT instituted some changes in the curriculum during the school year 2000-2001 which resulted in changes in the number of hours for certain subjects. Thus, MIT adopted a new formula for determining the pay rates of the high school faculty: Rate/Load x Total Teaching Load = Salary where total teaching load equals number of classes multiplied by hours of service per week divided by 3 hours (as practiced, one unit subject is equal to 3 hours service).

Upon learning of the changes, FAMIT opposed the formula. It averred that unknown to FAMIT, MIT has not been implementing the relevant provisions of the 2001 CBA. In particular, FAMIT cites Section 2 of Article VI, which states as follows:

ARTICLE VI

General Wage Clause

x x x x

Section 2. The INSTITUTE shall pay the following rate per load for high school faculty according to corresponding faculty rank, to wit:

· 25% increase in per rate/load for all high school faculty members effective November 2000;

· 10% increase in per rate/load for all permanent high school faculty members effective June 2001.8 (Emphasis supplied.)

On July 20, 2001, FAMIT met with MIT to settle this second issue but to no avail. MIT maintained that it was within its right to change the pay formula used.

Hence, together with the issue pertaining to the ranking of the college faculty, FAMIT brought the matter to the National Conciliation and Mediation Board for mediation. Proceedings culminated in the submission of the case to the Panel of Voluntary Arbitrators for resolution.

The Panel of Voluntary Arbitrators ruled in favor of the petitioner. It ordered the private respondent to:

1. Implement the agreed upon point range system with 19 faculty ranks, along with the corresponding pay levels for the college faculty, consistent with the provisions of Article V, Section 8 of the 2001 CB[A] and Annex C of the said CBA, and

2. Comply with the provisions of Article VI, Section 2 of the existing CBA, using past practices or formula in computing the pay of high school faculty based on rate per load and to pay the faculty their corresponding rates on this basis,

Both actions of which (sic) should be made concurrent with the effectivity of the current CBA.

SO ORDERED.9

On appeal, the Court of Appeals reversed the ruling of the Panel of Voluntary Arbitrators and decreed as follows:

WHEREFORE, the petition is hereby GRANTED. The assailed decision of the voluntary arbitrators is REVERSED. Accordingly, petitioner’s proposal to include the faculty point range sheet in Annex "B" of the 2001 CBA, as well as to replace Annex "C" with the document on the 23-level faculty ranking instrument and replace the column containing the heading "Total Points" which is attached in Annexes "C" and "D" of the 2001 CBA with the correct data is also GRANTED.

SO ORDERED.10

Hence, the instant petition.

The petitioner enumerated issues for resolution, to wit:

I

WHETHER THE PRIVATE RESPONDENT MAY PROPERLY, LEGALLY AND VALIDLY ALTER, CHANGE AND/OR MODIFY UNILATERAL[L]Y PROVISIONS OF THE COLLECTIVE [BARGAINING] AGREEMENT (CBA) IT HAD NEGOTIATED, ENTERED INTO AND SIGNED WITH THE PETITIONER AND SUBSEQUENTLY RATIFIED AND ENFORCED BY THE PARTIES; AND

II

WHETHER PRIVATE RESPONDENT MAY PROPERLY, LEGALLY AND VALIDLY CHANGE[,] ALTER AND/OR REPLACE UNILATERAL[L]Y A PROVISION OR FORMULA EMBODIED IN A PERFECTED, EXISTING AND ALREADY ENFORCED CBA TO THE PREJUDICE, OR MORE SPECIFICALLY TO THE DIMINUTION OF SALARY/BENEFITS AND DOWNGRADING OF RANKS, OF ITS COLLEGE AND HIGH SCHOOL FACULTY.11

Simply put, the issues for our determination are: (1) Is MIT’s new proposal, regarding faculty ranking and evaluation, lawful and consistent with the ratified CBA? and (2) Is MIT’s development of a new pay formula for the high school department, without the knowledge of FAMIT, lawful and consistent with the ratified CBA?

On the first issue, FAMIT avers that MIT’s new proposal on faculty ranking and evaluation for the college faculty is an unlawful modification, alteration or amendment of the existing CBA without approval of the contracting parties.

On the other hand, MIT argues that the new faculty ranking instrument was made in good faith and in the exercise of its inherent prerogative to freely regulate according to its own discretion and judgment all aspects of employment.

Considering the submissions of the parties, in the light of the existing CBA, we find that the new point range system proposed by MIT is an unauthorized modification of Annex "C" of the 2001 CBA. It is made up of a faculty classification that is substantially different from the one originally incorporated in the current CBA between the parties. Thus, the proposed system contravenes the existing provisions of the CBA, hence, violative of the law between the parties.

As observed by Office of the Voluntary Arbitrators, the evaluation system differs from past evaluation practices (e.g., those that give more weight to tenure and faculty load) such that the system can lead to a demotion in rank for a faculty member. A perfect example of this scenario was cited by FAMIT in its Memorandum:

x x x x

Take the case of a faculty member with 17 years of teaching experience who has a Phd. Degree. For school year 2000-2001 his corresponding rank is Professor 3 with 4001-4500 points using the previous CBA. If the college faculty member is ranked based on the ratified 2001 CBA, his/her corresponding rank would increase to Professor 5 with 5001-5500 points.

But if the proposal of private respondent is used, the professor, would be ranked as Associate Professor 5 with 5001-5749 points, instead of Professor 5 as recognized by the 2001 CBA. True, there may be an increase in points but there is also a resulting diminution in rank from Professor 3 based on the previous CBA to Associate Professor 5. This would translate to a reduction of the salary increase he is entitled to under the 2001 CBA.12

According to FAMIT, this patently is a violation of Section 8, Article V of the 2001 CBA.

Noteworthy, Article 253 of the Labor Code states:

ART. 253. Duty to bargain collectively when there exists a collective bargaining agreement.–When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor 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.

REVISED PAGE

Until a new CBA is executed by and between the parties, they are duty-bound to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement. The law does not provide for any exception nor qualification on which economic provisions of the existing agreement are to retain its force and effect. Therefore, it must be understood as encompassing all the terms and conditions in the said agreement.13

The CBA during its lifetime binds all the parties. The provisions of the CBA must be respected since its terms and conditions "constitute the law between the parties." Those who are entitled to its benefits can invoke its provisions. In the event that an obligation therein imposed is not fulfilled, the aggrieved party has the right to go to court and ask redress.14 The CBA is the norm of conduct between petitioner and private respondent and compliance therewith is mandated by the express policy of the law.15

On the second issue, FAMIT avers that MIT unilaterally modified the CBA formula in determining the salary of a high school faculty. MIT counters that it is entitled to consider the actual number of teaching hours to arrive at a fair and just salary of its high school faculty.

Again, we are in agreement with FAMIT’s submission. We rule that MIT cannot adopt its unilateral interpretation of terms in the CBA. It is clear from the provisions of the 2001 CBA

that the salary of a high school faculty member is based on a rate per load and not on a rate per hour basis. Section 2, Article VI of the 2001 CBA provides:

x x x x

Section 2. The INSTITUTE shall pay the following rate per load for high school faculty according to corresponding faculty rank, to wit:

· 25% increase in per rate/load for all high school faculty members effective November 2000.

· 10% increase in per rate/load for all permanent high school faculty members effective June 2001.16 (Emphasis supplied.)

In our view, there is no room for unilateral change of the formula by MIT. Needless to stress, the Labor Code is specific in enunciating that in case of doubt in the interpretation of any law or provision affecting labor, such should be interpreted in favor of labor.17 The appellate court committed a grave error in the interpretation of the CBA provision and the governing law.

WHEREFORE, the instant petition is GRANTED. The Decision dated August 21, 2003 and the Resolution dated June 3, 2004 of the Court of Appeals denying the motion for reconsideration are REVERSED and SET ASIDE. The decision of the Office of the Voluntary Arbitrators is REINSTATED. MIT’s unilateral change in the ranking of college faculty from 19 levels to 23 levels, and the computation of high school faculty salary from rate per load to rate per hour basis is DECLARED NULL AND VOID for being violative of the parties’ CBA and the applicable law.

Costs against private respondent MIT.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 114974 June 16, 2004

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), petitioner, vs.The Honorable MA. NIEVES R. CONFESOR, in her capacity as SECRETARY OF LABOR AND EMPLOYMENT; and the STANDARD CHARTERED BANK, respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for certiorari under Rule 65 of the Rules of Court filed by the Standard Chartered Bank Employees Union, seeking the nullification of the October 29, 1993 Order1 of then Secretary of Labor and Employment Nieves R. Confesor and her resolutions dated December 16, 1993 and February 10, 1994.

The Antecedents

Standard Chartered Bank (the Bank, for brevity) is a foreign banking corporation doing business in the Philippines. The exclusive bargaining agent of the rank and file employees of the Bank is the Standard Chartered Bank Employees Union (the Union, for brevity).

In August of 1990, the Bank and the Union signed a five-year collective bargaining agreement (CBA) with a provision to renegotiate the terms thereof on the third year. Prior to the expiration of the three-year period2 but within the sixty-day freedom period, the Union initiated the negotiations. On February 18, 1993, the Union, through its President, Eddie L. Divinagracia, sent a letter3 containing its proposals4 covering political provisions5 and thirty-four (34) economic provisions.6 Included therein was a list of the names of the members of the Union’s negotiating panel.7

In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H. Harris, took note of the Union’s proposals. The Bank attached its counter-proposal to the non-economic provisions proposed by the Union.8 The Bank posited that it would be in a better position to present its counter-proposals on the economic items after the Union had presented its justifications for the economic proposals.9 The Bank, likewise, listed the members of its negotiating panel.10 The parties agreed to set meetings to settle their differences on the proposed CBA.

Before the commencement of the negotiation, the Union, through Divinagracia, suggested to the Bank’s Human Resource Manager and head of the negotiating panel, Cielito Diokno, that the bank lawyers should be excluded from the negotiating team. The Bank acceded.11 Meanwhile, Diokno suggested to Divinagracia that Jose P. Umali, Jr., the President of the National Union of Bank Employees (NUBE), the federation to which the Union was affiliated, be excluded from the Union’s negotiating panel.12 However, Umali was retained as a member thereof.

On March 12, 1993, the parties met and set the ground rules for the negotiation. Diokno suggested that the negotiation be kept a "family affair." The proposed non-economic provisions of the CBA were discussed first.13 Even during the final reading of the non-economic provisions on May 4, 1993, there were still provisions on which the Union and the Bank could not agree. Temporarily, the notation "DEFERRED" was placed therein. Towards the end of the meeting, the Union manifested that the same should be changed to "DEADLOCKED" to indicate that such items remained unresolved. Both parties agreed to place the notation "DEFERRED/DEADLOCKED."14

On May 18, 1993, the negotiation for economic provisions commenced. A presentation of the basis of the Union’s economic proposals was made. The next meeting, the Bank made a similar presentation. Towards the end of the Bank’s presentation, Umali requested the Bank

to validate the Union’s "guestimates," especially the figures for the rank and file staff.15 In the succeeding meetings, Umali chided the Bank for the insufficiency of its counter-proposal on the provisions on salary increase, group hospitalization, death assistance and dental benefits. He reminded the Bank, how the Union got what it wanted in 1987, and stated that if need be, the Union would go through the same route to get what it wanted.16

Upon the Bank’s insistence, the parties agreed to tackle the economic package item by item. Upon the Union’s suggestion, the Bank indicated which provisions it would accept, reject, retain and agree to discuss.17 The Bank suggested that the Union prioritize its economic proposals, considering that many of such economic provisions remained unresolved. The Union, however, demanded that the Bank make a revised itemized proposal.

In the succeeding meetings, the Union made the following proposals:

Wage Increase:

1st Year – Reduced from 45% to 40%

2nd Year - Retain at 20%

Total = 60%

Group Hospitalization Insurance:

Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness annually

Death Assistance:

For the employee – Reduced from P50,000.00 to P45,000.00

For Immediate Family Member – Reduced from P30,000.00 to P25,000.00

Dental and all others – No change from the original demand.18

In the morning of the June 15, 1993 meeting, the Union suggested that if the Bank would not make the necessary revisions on its counter-proposal, it would be best to seek a third party assistance.19 After the break, the Bank presented its revised counter-proposal20 as follows:

Wage Increase : 1st Year – from P1,000 to P1,050.00

2nd Year – P800.00 – no change

Group Hospitalization Insurance

From: P35,000.00 per illness

To : P35,000.00 per illness per year

Death Assistance – For employee

From: P20,000.00

To : P25,000.00

Dental Retainer – Original offer remains the same21

The Union, for its part, made the following counter-proposal:

Wage Increase: 1st Year - 40%

2nd Year - 19.5%

Group Hospitalization Insurance

From: P60,000.00 per year

To : P50,000.00 per year

Dental:

Temporary Filling/ – P150.00

Tooth Extraction

Permanent Filling – 200.00

Prophylaxis – 250.00

Root Canal – From P2,000 per tooth

To: 1,800.00 per tooth

Death Assistance:

For Employees: From P45,000.00 to P40,000.00

For Immediate Family Member: From P25,000.00 to P20,000.00.22

The Union’s original proposals, aside from the above-quoted, remained the same.

Another set of counter-offer followed:

Management Union

Wage Increase

1st Year – P1,050.00 40%

2nd Year - 850.00 19.0%23

Diokno stated that, in order for the Bank to make a better offer, the Union should clearly identify what it wanted to be included in the total economic package. Umali replied that it was impossible to do so because the Bank’s counter-proposal was unacceptable. He furthered asserted that it would have been easier to bargain if the atmosphere was the same as before, where both panels trusted each other. Diokno requested the Union panel to refrain from involving personalities and to instead focus on the negotiations.24 He suggested that in order to break the impasse, the Union should prioritize the items it wanted to iron out. Divinagracia stated that the Bank should make the first move and make a list of items it wanted to be included in the economic package. Except for the provisions on signing bonus and uniforms, the Union and the Bank failed to agree on the remaining economic provisions of the CBA. The Union declared a deadlock25 and filed a Notice of Strike before the National Conciliation and Mediation Board (NCMB) on June 21, 1993, docketed as NCMB-NCR-NS-06-380-93.26

On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP) and Damages before the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, docketed as NLRC Case No. 00-06-04191-93 against the Union on June 28, 1993. The Bank alleged that the Union violated its duty to bargain, as it did not bargain in good faith. It contended that the Union demanded "sky high economic demands," indicative of blue-sky bargaining.27 Further, the Union violated its no strike- no lockout clause by filing a notice of strike before the NCMB. Considering that the filing of notice of strike was an illegal act, the Union officers should be dismissed. Finally, the Bank alleged that as a consequence of the illegal act, the Bank suffered nominal and actual damages and was forced to litigate and hire the services of the lawyer.28

On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R. Confesor, pursuant to Article 263(g) of the Labor Code, issued an Order assuming jurisdiction over the labor dispute at the Bank. The complaint for ULP filed by the Bank before the NLRC was consolidated with the complaint over which the SOLE assumed jurisdiction. After the parties submitted their respective position papers, the SOLE issued an Order on October 29, 1993, the dispositive portion of which is herein quoted:

WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank Employees Union – NUBE are hereby ordered to execute a collective bargaining agreement incorporating the dispositions contained herein. The CBA shall be retroactive to 01 April 1993 and shall remain effective for two years thereafter, or until such time as a new CBA has superseded it. All provisions in the expired CBA not expressly modified or not passed upon herein are deemed retained while all new provisions which are being demanded by either party are deemed denied, but without prejudice to such agreements as the parties may have arrived at in the meantime.

The Bank’s charge for unfair labor practice which it originally filed with the NLRC as NLRC-NCR Case No. 00-06-04191-93 but which is deemed consolidated herein, is dismissed for lack of merit. On the other hand, the Union’s charge for unfair labor practice is similarly dismissed.

Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR Case No. 00-06-04191-93 is pending for his guidance and appropriate action.29

The SOLE gave the following economic awards:

1. Wage Increase:

a) To be incorporated to present salary rates:

Fourth year : 7% of basic monthly salary

Fifth year : 5% of basic monthly salary based on the 4th year adjusted salary

b) Additional fixed amount:

Fourth year : P600.00 per month

Fifth year : P400.00 per month

2. Group Insurance

a) Hospitalization : P45,000.00

b) Life : P130,000.00

c) Accident : P130,000.00

3. Medicine Allowance

Fourth year : P5,500.00

Fifth year : P6,000.00

4. Dental Benefits

Provision of dental retainer as proposed by the Bank, but without diminishing existing benefits

5. Optical Allowance

Fourth year: P2,000.00

Fifth year : P2,500.00

6. Death Assistance

a) Employee : P30,000.00

b) Immediate Family Member : P5,000.00

7. Emergency Leave – Five (5) days for each contingency

8. Loans

a) Car Loan : P200,000.00

b) Housing Loan : It cannot be denied that the costs attendant to having one’s own home have tremendously gone up. The need, therefore, to improve on this benefit cannot be overemphasized. Thus, the management is urged to increase the existing and allowable housing loan that the Bank extends to its employees to an amount that will give meaning and substance to this CBA benefit.30

The SOLE dismissed the charges of ULP of both the Union and the Bank, explaining that both parties failed to substantiate their claims. Citing National Labor Union v. Insular-Yebana Tobacco Corporation,31 the SOLE stated that ULP charges would prosper only if shown to have directly prejudiced the public interest.

Dissatisfied, the Union filed a motion for reconsideration with clarification, while the Bank filed a motion for reconsideration. On December 16, 1993, the SOLE issued a Resolution denying the motions. The Union filed a second motion for reconsideration, which was, likewise, denied on February 10, 1994.

On March 22, 1994, the Bank and the Union signed the CBA.32 Immediately thereafter, the wage increase was effected and the signing bonuses based on the increased wage were distributed to the employees covered by the CBA.

The Present Petition

On April 28, 1994, the Union filed this petition for certiorari under Rule 65 of the Rules of Procedure alleging as follows:

A. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE UNION’S CHARGE OF UNFAIR LABOR PRACTICE IN VIEW OF THE CLEAR EVIDENCE OF RECORD AND ADMISSIONS PROVING THE UNFAIR LABOR PRACTICES CHARGED.33

B. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON OTHER UNFAIR LABOR PRACTICES CHARGED.34

C. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE CHARGES OF UNFAIR LABOR PRACTICES ON THE GROUND THAT NO PROOF OF INJURY TO THE PUBLIC INTEREST WAS PRESENTED.35

The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it found that the Bank did not commit unfair labor practice when it interfered with the Union’s choice of negotiator. It argued that, Diokno’s suggestion that the negotiation be limited as a "family affair" was tantamount to suggesting that Federation President Jose Umali, Jr. be excluded from the Union’s negotiating panel. It further argued that contrary to the ruling of the public respondent, damage or injury to the public interest need not be present in order for unfair labor practice to prosper.

The Union, likewise, pointed out that the public respondent failed to rule on the ULP charges arising from the Bank’s surface bargaining. The Union contended that the Bank merely went through the motions of collective bargaining without the intent to reach an agreement, and made bad faith proposals when it announced that the parties should begin from a clean slate. It argued that the Bank opened the political provisions "up for grabs," which had the effect of diminishing or obliterating the gains that the Union had made.

The Union also accused the Bank of refusing to disclose material and necessary data, even after a request was made by the Union to validate its "guestimates."

In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped, considering that it signed the Collective Bargaining Agreement (CBA) on April 22, 1994. It asserted that contrary to the Union’s allegations, it was the Union that committed ULP when negotiator Jose Umali, Jr. hurled invectives at the Bank’s head negotiator, Cielito Diokno, and demanded that she be excluded from the Bank’s negotiating team. Moreover, the Union engaged in blue-sky bargaining and isolated the no strike-no lockout clause of the existing CBA.

The Office of the Solicitor General, in representation of the public respondent, prayed that the petition be dismissed. It asserted that the Union failed to prove its ULP charges and that the public respondent did not commit any grave abuse of discretion in issuing the assailed order and resolutions.

The Issues

The issues presented for resolution are the following: (a) whether or not the Union was able to substantiate its claim of unfair labor practice against the Bank arising from the latter’s alleged "interference" with its choice of negotiator; surface bargaining; making bad faith non-economic proposals; and refusal to furnish the Union with copies of the relevant data; (b) whether or not the public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction when she issued the assailed order and resolutions; and, (c) whether or not the petitioner is estopped from filing the instant action.

The Court’s Ruling

The petition is bereft of merit.

"Interference" under Article

248 (a) of the Labor Code

The petitioner asserts that the private respondent committed ULP, i.e., interference in the selection of the Union’s negotiating panel, when Cielito Diokno, the Bank’s Human Resource Manager, suggested to the Union’s President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the NUBE, be excluded from the Union’s negotiating panel. In support of its claim, Divinagracia executed an affidavit, stating that prior to the commencement of the negotiation, Diokno approached him and suggested the exclusion of Umali from the Union’s negotiating panel, and that during the first meeting, Diokno stated that the negotiation be kept a "family affair."

Citing the cases of U.S. Postal Service36 and Harley Davidson Motor Co., Inc., AMF,37 the Union claims that interference in the choice of the Union’s bargaining panel is tantamount to ULP.

In the aforecited cases, the alleged ULP was based on the employer’s violation of Section 8(a)(1) and (5) of the National Labor Relations Act (NLRA),38 which pertain to the interference, restraint or coercion of the employer in the employees’ exercise of their rights to self-organization and to bargain collectively through representatives of their own choosing; and the refusal of the employer to bargain collectively with the employees’ representatives. In both cases, the National Labor Relations Board held that upon the employer’s refusal to engage in negotiations with the Union for collective-bargaining contract when the Union includes a person who is not an employee, or one who is a member or an official of other labororganizations, such employer is engaged in unfair labor practice under Section 8(a)(1) and (5) of the NLRA.

The Union further cited the case of Insular Life Assurance Co., Ltd. Employees Association – NATU vs. Insular Life Assurance Co. Ltd.,39 wherein this Court said that the test of whether an employer has interfered with and coerced employees in the exercise of their right to self-organization within the meaning of subsection (a)(1) is whether the employer has engaged in conduct which it may reasonably be said, tends to interfere with the free exercise of employees’ rights under Section 3 of the Act.40 Further, it is not necessary that there be direct evidence that any employee was in fact intimidated or coerced by statements of threats of the employer if there is a reasonable inference that anti-union conduct of the employer does have an adverse effect on self-organization and collective bargaining.41

Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF ASSOCIATION AND PROTECTION OF THE RIGHT TO ORGANIZE to which the Philippines is a signatory, "workers and employers, without distinction whatsoever, shall have the right to establish and, subject only to the rules of the organization concerned, to job organizations of their own choosing without previous authorization."42

Workers’ and employers’ organizations shall have the right to draw up their constitutions and rules, to elect their representatives in full freedom to organize their administration and activities and to formulate their programs.43 Article 2 of ILO Convention No. 98 pertaining to the Right to Organize and Collective Bargaining, provides:

Article 2

1. Workers’ and employers’ organizations shall enjoy adequate protection against any acts or interference by each other or each other’s agents or members in their establishment, functioning or administration.

2. In particular, acts which are designed to promote the establishment of workers’ organizations under the domination of employers or employers’ organizations or to support workers’ organizations by financial or other means, with the object of placing such organizations under the control of employers or employers’ organizations within the meaning of this Article.

The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article 243 thereof, which provides:

ART. 243. COVERAGE AND EMPLOYEES’ RIGHT TO SELF-ORGANIZATION. – All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational institutions whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-employed people, rural workers and those without any definite employers may form labor organizations for their mutual aid and protection.

and Articles 248 and 249 respecting ULP of employers and labor organizations.

The said ILO Conventions were ratified on December 29, 1953. However, even as early as the 1935 Constitution,44 the State had already expressly bestowed protection to labor as part of the general provisions. The 1973 Constitution,45 on the other hand, declared it as a policy of the state to afford protection to labor, specifying that the workers’ rights to self-organization, collective bargaining, security of tenure, and just and humane conditions of work would be assured. For its part, the 1987 Constitution, aside from making it a policy to "protect the rights of workers and promote their welfare,"46 devotes an entire section, emphasizing its mandate to afford protection to labor, and highlights "the principle of shared responsibility" between workers and employers to promote industrial peace.47

Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer interferes, restrains or coerces employees in the exercise of their right to self-organization or the right to form association. The right to self-organization necessarily includes the right to collective bargaining.

Parenthetically, if an employer interferes in the selection of its negotiators or coerces the Union to exclude from its panel of negotiators a representative of the Union, and if it can be

inferred that the employer adopted the said act to yield adverse effects on the free exercise to right to self-organization or on the right to collective bargaining of the employees, ULP under Article 248(a) in connection with Article 243 of the Labor Code is committed.

In order to show that the employer committed ULP under the Labor Code, substantial evidence is required to support the claim. Substantial evidence has been defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.48 In the case at bar, the Union bases its claim of interference on the alleged suggestions of Diokno to exclude Umali from the Union’s negotiating panel.

The circumstances that occurred during the negotiation do not show that the suggestion made by Diokno to Divinagracia is an anti-union conduct from which it can be inferred that the Bank consciously adopted such act to yield adverse effects on the free exercise of the right to self-organization and collective bargaining of the employees, especially considering that such was undertaken previous to the commencement of the negotiation and simultaneously with Divinagracia’s suggestion that the bank lawyers be excluded from its negotiating panel.

The records show that after the initiation of the collective bargaining process, with the inclusion of Umali in the Union’s negotiating panel, the negotiations pushed through. The complaint was made only on August 16, 1993 after a deadlock was declared by the Union on June 15, 1993.

It is clear that such ULP charge was merely an afterthought. The accusation occurred after the arguments and differences over the economic provisions became heated and the parties had become frustrated. It happened after the parties started to involve personalities. As the public respondent noted, passions may rise, and as a result, suggestions given under less adversarial situations may be colored with unintended meanings.49 Such is what appears to have happened in this case.

The Duty to Bargain

Collectively

If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the normal relations and innocent communications, which are all part of the friendly relations between the Union and Bank.

The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under Article 248(g) when it engaged in surface bargaining. It alleged that the Bank just went through the motions of bargaining without any intent of reaching an agreement, as evident in the Bank’s counter-proposals. It explained that of the 34 economic provisions it made, the Bank only made 6 economic counterproposals. Further, as borne by the minutes of the meetings, the Bank, after indicating the economic provisions it had rejected, accepted, retained or were open for discussion, refused to make a list of items it agreed to include in the economic package.

Surface bargaining is defined as "going through the motions of negotiating" without any legal intent to reach an agreement.50 The resolution of surface bargaining allegations never presents an easy issue. The determination of whether a party has engaged in unlawful surface bargaining is usually a difficult one because it involves, at bottom, a question of the intent of the party in question, and usually such intent can only be inferred from the totality of the challenged party’s conduct both at and away from the bargaining table.51 It involves the question of whether an employer’s conduct demonstrates an unwillingness to bargain in good faith or is merely hard bargaining.52

The minutes of meetings from March 12, 1993 to June 15, 1993 do not show that the Bank had any intention of violating its duty to bargain with the Union. Records show that after the Union sent its proposal to the Bank on February 17, 1993, the latter replied with a list of its counter-proposals on February 24, 1993. Thereafter, meetings were set for the settlement of their differences. The minutes of the meetings show that both the Bank and the Union exchanged economic and non-economic proposals and counter-proposals.

The Union has not been able to show that the Bank had done acts, both at and away from the bargaining table, which tend to show that it did not want to reach an agreement with the Union or to settle the differences between it and the Union. Admittedly, the parties were not able to agree and reached a deadlock. However, it is herein emphasized that the duty to bargain "does not compel either party to agree to a proposal or require the making of a concession."53 Hence, the parties’ failure to agree did not amount to ULP under Article 248(g) for violation of the duty to bargain.

We can hardly dispute this finding, for it finds support in the evidence. The inference that respondents did not refuse to bargain collectively with the complaining union because they accepted some of the demands while they refused the others even leaving open other demands for future discussion is correct, especially so when those demands were discussed at a meeting called by respondents themselves precisely in view of the letter sent by the union on April 29, 1960…54

In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank made bad-faith provisions has no leg to stand on. The records show that the Bank’s counterproposals on the non-economic provisions or political provisions did not put "up for grabs" the entire work of the Union and its predecessors. As can be gleaned from the Bank’s counterproposal, there were many provisions which it proposed to be retained. The revisions on the other provisions were made after the parties had come to an agreement. Far from buttressing the Union’s claim that the Bank made bad-faith proposals on the non-economic provisions, all these, on the contrary, disprove such allegations.

We, likewise, find that the Union failed to substantiate its claim that the Bank refused to furnish the information it needed.

While the refusal to furnish requested information is in itself an unfair labor practice, and also supports the inference of surface bargaining,55 in the case at bar, Umali, in a meeting dated May 18, 1993, requested the Bank to validate its guestimates on the data of the rank

and file. However, Umali failed to put his request in writing as provided for in Article 242(c) of the Labor Code:

Article 242. Rights of Legitimate Labor Organization…

(c) To be furnished by the employer, upon written request, with the 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 representatives 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 negotiation;

The Union, did not, as the Labor Code requires, send a written request for the issuance of a copy of the data about the Bank’s rank and file employees. Moreover, as alleged by the Union, the fact that the Bank made use of the aforesaid guestimates, amounts to a validation of the data it had used in its presentation.

No Grave Abuse of Discretion

On the Part of the Public Respondent

The special civil action for certiorari may be availed of when the tribunal, board, or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law for the purpose of annulling the proceeding.56 Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility which must be so patent and gross as to amount to an invasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. Mere abuse of discretion is not enough.57

While it is true that a showing of prejudice to public interest is not a requisite for ULP charges to prosper, it cannot be said that the public respondent acted in capricious and whimsical exercise of judgment, equivalent to lack of jurisdiction or excess thereof. Neither was it shown that the public respondent exercised its power in an arbitrary and despotic manner by reason of passion or personal hostility.

Estoppel not Applicable

In the Case at Bar

The respondent Bank argues that the petitioner is estopped from raising the issue of ULP when it signed the new CBA.

Article 1431 of the Civil Code provides:

Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.

A person, who by his deed or conduct has induced another to act in a particular manner, is barred from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to another.58

In the case, however, the approval of the CBA and the release of signing bonus do not necessarily mean that the Union waived its ULP claim against the Bank during the past negotiations. After all, the conclusion of the CBA was included in the order of the SOLE, while the signing bonus was included in the CBA itself. Moreover, the Union twice filed a motion for reconsideration respecting its ULP charges against the Bank before the SOLE.

The Union Did Not Engage

In Blue-Sky Bargaining

We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky bargaining or making exaggerated or unreasonable proposals.59 The Bank failed to show that the economic demands made by the Union were exaggerated or unreasonable. The minutes of the meeting show that the Union based its economic proposals on data of rank and file employees and the prevailing economic benefits received by bank employees from other foreign banks doing business in the Philippines and other branches of the Bank in the Asian region.

In sum, we find that the public respondent did not act with grave abuse of discretion amounting to lack or excess of jurisdiction when it issued the questioned order and resolutions. While the approval of the CBA and the release of the signing bonus did not estop the Union from pursuing its claims of ULP against the Bank, we find the latter did not engage in ULP. We, likewise, hold that the Union is not guilty of ULP.

IN LIGHT OF THE FOREGOING, the October 29, 1993 Order and December 16, 1993 and February 10, 1994 Resolutions of then Secretary of Labor Nieves R. Confesor are AFFIRMED. The Petition is hereby DISMISSED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 162957 March 6, 2006

UNITED KIMBERLY-CLARK EMPLOYEES UNION – PHILIPPINE TRANSPORT GENERAL WORKERS’ ORGANIZATION (UKCEU-PTGWO), Petitioner,

vs.KIMBERLY – CLARK PHILIPPINES, INC., Respondent.

D E C I S I O N

CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) which partially reversed and set aside the March 19, 2001 Resolution2 of the Voluntary Arbitrator (VA).

Following are the factual antecedents:

United Kimberly-Clark Employees Union (UKCEU), a local chapter affiliate of the Philippine Transport General Workers’ Organization (PTGWO), is the certified collective bargaining agent of all rank-and-file employees of the San Pedro milling plant of Kimberly-Clark Philippines, Inc. (KCPI), a multinational corporation engaged in the manufacture of bathroom and facial tissues, paper napkins, feminine care products, disposable diapers and absorbent cotton.

Way back in 1980, KCPI and the UKCEU executed a Collective Bargaining Agreement (CBA). Article XX, Section 1 of the CBA reads:

Section 1. The Company agrees to employ, regardless of sex, the immediate member of the family of an employee provided qualified, upon the employee's resignation, retirement, disability or death. In case of resignation, however, employment of an immediate member of the family of an employee may be allowed provided the employee has rendered a service of ten (10) years and above and the resignation is not a forced resignation. For the purpose of this section, the phrase "immediate member of the family of an employee" shall refer to the employee's legitimate children and in default thereof to the employee's collateral relative within the third civil degree. The recommendee of the retired/resigned employee shall, if qualified, be hired on probationary status. (Emphasis added)3

However, KCPI did not set any other employment qualifying standards for the recommendees of retired, resigned, deceased or disabled employees and agreed to hire such recommendees who were high school graduates as an act of liberality and generosity. The provision remained unchanged.4 Through the years, several UKCEU members who resigned or were disabled availed of the said benefits and recommended their successors. Although such recommendees were merely high school graduates, KCPI nonetheless employed them.

Sometime in 1991, Danilo L. Guerrero retired and recommended his nephew as his replacement. KCPI rejected Guerrero’s recommendation because his nephew was not a member of his (Guerrero’s) immediate family. The matter was brought to Voluntary Arbitrator Danilo Lorredo who ruled that Guerrero’s nephew should be employed as his replacement in accordance with the CBA. KCPI brought the matter to the Court. On September 21, 1993, the Court affirmed the ruling of the VA in Kimberly Clark Philippines v. Lorredo,5 where it was held that:

As we see it, the phrase "in default thereof" has not been intended or contemplated by the parties as having a preclusive effect within the group. It simply sets a priority on who can possibly be recommendees for employment. The employee, in fine, need not be childless at all for him to be allowed to nominate a third degree collateral relative; otherwise, his ability to designate such relative is all but suddenly lost by the birth of an only child and regained by the latter's demise. This situation could not have been intended.6

However, the Court also ruled that KCPI was not obliged to unconditionally accept the recommendee since the latter must still meet the required employment standard theretofore set by it. Even a qualified recommendee would be hired only on a "probationary status." As such, KCPI was not left without its own safeguards under the agreement.7

On November 7, 1995, KCPI issued Guidelines on the Hiring of Replacements of Retired/Resigned Employees8 for the effective implementation of Article XX, Section 1 of the existing CBA, to take effect on January 1, 1996. The Guidelines require, among others, that: (a) such recommendees must be at least 18 years of age but not more than 30 years old at the time of the hiring, and (b) have completed, after graduating from high school, at least a two-year technical/vocational course or a third year level of college education. Moreover, where both husband and wife are employees of the company, they shall be treated as one family; hence, only one of the spouses would be allowed to avail of the benefit.9

UKCEU, through its President, Reynaldo B. Hermoso, requested for a grievance meeting, which was held on November 22, 1995.10 During the meeting, UKCEU specifically requested the deferment of the implementation of the Guidelines until January 1, 1997, after the next CBA negotiations in 1997 during which the matter will be taken up. KCPI agreed to postpone the implementation of the Guidelines until January 1, 1997 but only with respect to the educational qualification.11

During the negotiation for the 1997 CBA, UKCEU proposed the amendment of Article XX, Section 1 of the existing CBA. After the negotiation, KCPI and UKCEU executed a CBA to cover the period from July 1, 1997 to June 30, 1999. The educational qualifications contained in the Guidelines prepared and issued by KCPI were not incorporated in the CBA. Neither were the proposed amendment of UKCEU. Article XX, Section 1 of the preceding CBA was retained without any modification.12 KCPI continued to hire employees pursuant to the CBA up to 1998. It had employed 44 employees from 1995 to 1998.13

However, in the second half of 1998, KCPI started to suspend the implementation of the CBA. This was partly due to the depressed economic conditions then prevailing in the Philippines, and in compliance with the freeze hiring policy of its Asia-Pacific headquarters.14

It refused to hire, as regular employees, 80 recommendees of retiring employees.15 KCPI and UKCEU failed to settle the matter through the existing grievance machinery.

On April 23, 1999, the parties filed before the National Conciliation and Mediation Board (NCMB), a Submission Agreement referring to arbitration the issue of whether KCPI violated Article XX, Section 1 of the CBA. The parties agreed not to appeal any resolution/decision of the VA.16

Meantime, in August 1999, KCPI and UKCEU executed a new CBA. Article XX, Section 1 of the preceding CBA was incorporated in the new CBA, governing the relation of the parties up to June 30, 2002.17

UKCEU averred in its pleadings that the "qualification in terms of education," that is, admitting recommendees who were at least high school graduates, had been an established practice of KCPI since 1980. They appended to their position paper as Annexes "A," "A-1" to "A-5" thereof, a list of such recommendees who were hired by KCPI.18 This being the case, KCPI could not just unilaterally revoke such practice without its (UKCEU) consent and approval. UKCEU explained that while KCPI, in general, had the discretion to raise the educational qualification of its applicants for employment, this did not apply to recommendees due to the manner by which Article XX, Section 1 was implemented in the past. UKCEU emphasized that its benefits had already been institutionalized in the CBAs executed by the parties through the years. Thus, in refusing to hire the 80 recommendees as regular employees, KCPI violated its CBA with the union,19 equivalent to breach of contract and unfair labor practice. It was further pointed out that contrary to its claim that KCPI was implementing a freeze hiring policy, KCPI even hired more or less 400 casuals, most of whom were only high school graduates who performed activities necessary and desirable to KCPI’s regular and usual business. They averred that the hiring of such employees was continuous, and on a five-month contract without extension or rehiring. UKCEU insisted that it was not estopped to question the move to "upgrade the academic standards" of recommendees, and that KCPI should have indicated its counter-proposal during the 1997 and 1999 CBA negotiations. Since KCPI preferred to retain Article XX, Section 1 where the dispute and ambiguity developed, the union opined that such provision should be strictly construed against the company.

UKCEU averred that either the husband or wife had the "right of replacement," and to the benefits offered by Article XX, Section 1; to deny them the right would be a clear discrimination and violation of the CBA, since both are paying members of union dues and individually vote for any policy determination.

In its pleadings, KCPI maintained that pursuant to its management prerogative, it had the right to determine hiring standards under Article XX, Section 1 of the CBA without the consent or approval of UKCEU. It argued that like applicants for regular positions, recommendees of retiring employees must also be college graduates, in accordance with its November 7, 1995 Guidelines. It explained that such recommendees are applying for regular positions and not as casual, who are hired on a temporary basis. KCPI averred that the employment educational standards in the Guidelines it issued on November 7, 1995 took effect on January 1, 1997 and that after its implementation was deferred, the union did not take any action. Hence, UKCEU was estopped from questioning the implementation of Article XX, Section 1 in the 1999 CBA. In fact, such upgraded educational qualifications under the November 7, 1995 Guidelines were never brought up by UKCEU, and were never discussed during the 1997 CBA negotiations. It asserted, however, that it was justified to temporarily suspend the implementation because the freeze hiring policy of its Asia-Pacific headquarters had affected both existing and new regular positions in the company. It pointed out that, in order to enforce the CBA provision, it normally fills up two regular positions because the recommendee of a union member who resigns, retires, dies or is

disabled does not usually possess the same qualifications and skills of his/her predecessor. KCPI averred that it never anticipated this undue burden and was not in a position to sustain the practice, considering the lower volume in sales and a reduction in the number of working days in some areas of its operations.

With respect to spouses who are both employed in KCPI, it was maintained that the policy regarding the availment of their benefits had always been consistent since 1980: only one of the spouses is entitled thereto, like the CBA provisions on the employees’ medical and funeral benefits. It pointed out that at the time Article XX, Section 1 was adopted, there was already an existing policy in KCPI prohibiting the hiring of a relative of an employee within the fourth civil degree of consanguinity or affinity. Thus, if the interpretation of UKCEU would be considered, an unwarranted and anomalous situation would result, since children of spouses who are both employed in the company fall within the second degree of consanguinity. Moreover, spouses should be treated as one family, much like the tax treatment on the claim for additional dependents. KCPI stressed that, as stated in the guidelines, the rationale for the policy is to maintain fairness and equality since the intended or actual beneficiary is the child of an employee.

On May 8, 1999, the VA visited the premises of KCPI with prior notice to the parties, and discovered that KCPI employed casuals who performed the work of certain regular employees covered by the CBA.20

On March 19, 2001, the VA issued a Resolution in favor of UKCEU. The dispositive portion of the resolution reads:

WHEREFORE, premises considered, this Voluntary Arbitrator, finds that (a) the Company cannot suspend implementation of Section 1, Article XX of the existing CBA unilaterally by upgrading the educational qualifications of "applicants-replacements" than are required previously, and (b) the husband and the wife, under the said provision, are each entitled separately to recommend an applicant-replacement.

SO ORDERED.21

The VA ruled that since the CBA is the law between the parties, KCPI could not just unilaterally change or suspend the implementation of the existing employment requirements, even in the light of the business situation then prevailing in the Philippines. Moreover, an unambiguous CBA provision must be interpreted according to its literal meaning and not beyond the parties' actual intendment, and, in case of doubts, the same should be resolved in favor of labor. The VA declared that management prerogative does not give license to a company to set aside or ignore what had been agreed upon through negotiation. According to the VA, since KCPI failed to explain why it continued to hire casual workers doing the jobs of regular employees, it failed to substantiate its contention that the economic crisis did not warrant the hiring of regular employees.22

As to the applicability of Article XX, Section 1 to spouses employed by KCPI, the VA referred to Article I of the CBA, which provides that the Agreement covers all regular rank-and-file employees. Had the intention of the parties been to grant husband and wife employees the

privilege of recommending only one applicant-replacement, it should have been stated in unequivocal terms.23

KCPI assailed the decision of the VA via petition for review24 before the CA. It alleged that:

A. Contrary to the ruling of the Honorable Voluntary Arbitrator, petitioner may validly suspend the implementation of Section 1, Article XX, by reason of economic difficulty.

B. Contrary to the ruling of the Honorable Voluntary Arbitrator, law and jurisprudence [recognize] management's prerogative to set the qualifications for [the] hiring of employees, including those hired as replacements under Section 1, Article XX.

C. Contrary to the ruling of the Honorable Voluntary Arbitrator, reasonable application of statutory and contractual interpretation supports only one conclusion - that, in case of both spouses being KCPI employees, only one of them may avail himself or herself of the benefits of Section 1, Article XX.25

On July 23, 2003, the CA partially set aside the Resolution of the VA.26 The fallo of the decision reads:

WHEREFORE, the petition is PARTIALLY GRANTED, and the Resolution of Voluntary Arbitrator Jose A. Cabatuando, Jr. dated March 19, 2001 is PARTIALLY REVERSED AND SET ASIDE. Petitioner may not suspend the implementation of Section 1, Article XX of the Collective Bargaining Agreement on account of alleged economic distress. Petitioner, however, may require that recommendees under the said provision must have completed at least a two-year technical/vocational course or reached the third year of any college-level course, as a valid exercise of management prerogative. And when spouses are both employed by petitioner, each may recommend a replacement in case of his death, disability, retirement or voluntary resignation pursuant to Section 1, Article XX of the Collective Bargaining Agreement.

SO ORDERED.27

The CA ruled that KCPI may validly exercise its management prerogative and impose the requirement that recommendees should have at least completed a two-year technical/vocational course or reached the third year of any college-level course. While the right of KCPI to set hiring standards for recommendees under the disputed provision of the CBA is apparent in the ruling of the Court in Kimberly Clark Philippines v. Lorredo,28 the CA concluded that the right of retired, resigned, disabled or deceased employees to recommend their replacements is not absolute. It emphasized that the recommendees must still meet the standard set by petitioner. The CA further opined that Article XX, Section 1 is not an inheritance the right to which attaches immediately upon an employee's death, disability, retirement or voluntary resignation. However, as to whether spouses employed by petitioner may separately recommend a replacement, the CA affirmed the observation of the VA that the provision was literally made to apply to "all" employees, and does not mean that only one of the spouses may avail of said benefit.29

The CA rejected the claim of KCPI that it (the court) should take judicial notice of the adverse effects of the Asian economic crisis to the operation of its business in the Philippines. As in the case of retrenchment, it was ruled that the company must still prove financial distress by sufficient and convincing evidence. Moreover, the CA held that for the theory of rebus sic stantibus to apply, it must be shown that the economic crisis made it extremely difficult for the company to comply with Article XX, Section 1 of the CBA, and that the change in the circumstances of the parties must be one which could not be foreseen at the time the contract was executed.30

Only UKCEU moved for a partial reconsideration of the CA Decision with respect to its ruling on the upgraded educational qualification of the recommendees.31 The CA denied the motion in a Resolution32 dated March 23, 2004.

UKCEU, now petitioner, seeks relief from this Court in the instant petition.

The issue in this case is whether or not the CA erred in ruling that, under Article XX, Section 1 of the 1997 CBA, respondent is required to hire only those recommendees of retired/resigned, deceased or disabled members of petitioner who had completed at least a two-year technical/vocational course or a third-year level of college education. This is anchored on the resolution of the issue of whether the November 7, 1995 Guidelines issued by respondent took effect on January 1, 1997.

Petitioner avers that the CA erred in holding that, under Article XX, Section 1 of the 1997 CBA and the ruling of this Court in Kimberly Clark Philippines v. Lorredo, respondent is required to hire recommendees of retired/resigned, deceased or disabled employees who possess the educational qualification standards for employees contained in the November 7, 1995 Guidelines issued by respondent.

Petitioner asserts that the employment qualification standards in Article XX, Section 1 of the CBA requiring the recommendees to be at least high school graduates is contrary to the practice that had been followed by respondent since 1980 up to 1998. Petitioner further avers that such practice, which had been established by respondent in implementing the CBA, cannot be unilaterally revoked by it. Petitioner argues that to allow respondent to set higher educational standards for employment of such recommendees is to render nugatory the right granted to them under the CBA and would defeat the ruling of the Court in Kimberly Clark Philippines v. Lorredo. Petitioner avers that 70% of the employees of respondent are mere high school graduates who did not finish any technical or vocational course. This, notwithstanding, respondent had a profit of P527,000,000.00 in 1999. Petitioner stresses that the exercise of management prerogative must be circumscribed by the CBA of the parties.

For its part, respondent maintains that under Article XX, Section 1 of its CBA with petitioner, a recommendee of retired/resigned, deceased or disabled members of petitioner must also be qualified for the position. Respondent also invokes Kimberly Clark Philippines v. Lorredo, insisting that the Court ruled therein that such recommendees must meet the employment standards set by respondent; conformably with such ruling, it issued said Guidelines on November 7, 1995. Thus, it is not proscribed from setting out higher qualification standards

for said recommendees, such as those set forth in said Guidelines. Contrary to petitioner’s claim of employing recommendees who were only high school graduates, was not an established practice, as its policy had always been to hire college graduates for regular employment. Finally, respondent avers that the implementation of qualifications for the recommendees is a valid exercise of its management prerogative.

Respondent also points out during their 1997 CBA negotiations, petitioner proposed the following revisions of Article XX, Section 1:

Section 1. A replacement of a deceased employee or recommendee of a retiring or resigning employee with at least 10 years of service, when at least High School Graduate and able bodied, shall be hired by the Company as Trainee for the first six (6) months, and then probationary employee to a permanent position and if passed to qualifications made known to him shall be hired as a regular employee of the Company. Recommendee entitled to this right shall be limited to up to the third civil degree only.33

However, said proposal was not incorporated in the CBA of the parties since by then, the November 7, 1995 Guidelines had already taken effect.

We rule against petitioner.

As a general proposition, an arbitrator is confined to the interpretation and application of the collective bargaining agreement. He does not sit to dispense his own brand of industrial justice: his award is legitimate only in so far as it draws its essence from the CBA,34 i.e., when there is a rational nexus between the award and the CBA under consideration.35 It is said that an arbitral award does not draw its essence from the CBA; hence, there is an unauthorized amendment or alteration thereof, if:

1. It is so unfounded in reason and fact;

2. It is so unconnected with the working and purpose of the agreement;

3. It is without factual support in view of its language, its context, and any other indicia of the parties' intention;36

4. It ignores or abandons the plain language of the contract;37

5. It is mistakenly based on a crucial assumption which concededly is a nonfact;38

6. It is unlawful, arbitrary or capricious;39 and

7. It is contrary to public policy.40

A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen cannot wholly anticipate. It covers the whole employment relationship and prescribes the rights and duties of the parties. It is a system of industrial self-government with the grievance machinery at the very heart of the system.41 The parties solve their problems by molding a system of private law for all the problems which may arise and to

provide for their solution in a way which will generally accord with the variant needs and desires of the parties.

If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall prevail.42 However, if, in a CBA, the parties stipulate that the hirees must be presumed of employment qualification standards but fail to state such qualification standards in said CBA, the VA may resort to evidence extrinsic of the CBA to determine the full agreement intended by the parties. When a CBA may be expected to speak on a matter, but does not, its sentence imports ambiguity on that subject.43 The VA is not merely to rely on the cold and cryptic words on the face of the CBA but is mandated to discover the intention of the parties. Recognizing the inability of the parties to anticipate or address all future problems, gaps may be left to be filled in by reference to the practices of the industry, and the step which is equally a part of the CBA although not expressed in it.44 In order to ascertain the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.45 The VA may also consider and rely upon negotiating and contractual history of the parties, evidence of past practices interpreting ambiguous provisions. The VA has to examine such practices to determine the scope of their agreement,46 as where the provision of the CBA has been loosely formulated.47 Moreover, the CBA must be construed liberally rather than narrowly and technically and the Court must place a practical and realistic construction upon it.

In the present case, the parties are in agreement that, on its face, Article XX, Section 1 of their 1997 CBA does not contain any provision relative to the employment qualification standards of recommendees of retired/resigned, deceased or disabled employees of respondent who are members of petitioner. However, in determining the employment qualification standards for said recommendees, the VA should have relied on the November 7, 1995 Guidelines issued by respondent, which reads:

D. Definition of the phrase "immediate member of the family of an employee"

1. The phrase "immediate member of the family of an employee" shall refer to the employee’s legitimate children and in default thereof to the employee’s collateral relatives within the third civil degree.

2. A resigned/retired employee may be allowed to recommend a collateral relative within the third civil degree (e.g., brother, sister, nephew or niece) as his/her replacement only in the following cases:

a. Where the retired/resigned employee is single or if married has no legitimate children.

b. Where the retired/resigned employee’s children are still minors (below 18 years old) at the time of his/her separation from the company. (Emphasis added)

E. General Provisions

1. The privilege to recommend a replacement can be exercised by the employee concerned only once. Thus, in the following cases, a recommendee who has been hired on probationary status can no longer be substituted with another recommendee.

a. where the recommendee fails to pass in his performance evaluation.

b. where the recommendee resigns without completing his probationary period.

c. where the recommendee is dismissed for cause.

d. where the recommendee dies during his probationary period.48

Respondent issued said Guidelines in light of the ruling of this Court in Kimberly Clark Philippines v. Lorredo. Respondent saw it imperative to do away with its practice of accommodating recommendees who were mere high school graduates, and to require higher employment standards for them.

By agreement of the parties, the implementation of the Guidelines was deferred until January 1, 1997, unless revoked or amended by the 1997 CBA. Petitioner proposed that the practice of hiring recommendees of retired/resigned, deceased or disabled employees who were union members, who were at least high school graduates, be included in their CBA, but respondent did not agree. Hence, Article XX, Section 1 of the 1997 CBA of the parties remained intact. There was thus no more legal bar for respondent to implement the November 7, 1995 Guidelines. By executing the 1997 CBA, in its present form, petitioner is bound by the terms and conditions therein set forth.

The VA, however, ignored the plain language of the 1997 CBA of the parties, as well as the Guidelines issued by respondent. He capriciously based his resolution on the respondent’s practice of hiring which, however, by agreement of petitioner and respondent, was discontinued.

The Court has recognized in numerous instances the undoubted right of the employer to regulate, according to his own discretion and best judgment, all aspects of employment, including but not limited to, work assignments and supervision, working methods and regulations, time, place and manner of work, processes to be followed, and hiring, supervision, transfer, discipline, lay off, dismissal and recall of workers. Encompassing though it could be, the exercise of this right is not absolute. Management prerogative must be 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, valid agreements such as the individual contract of employment and the collective bargaining agreement, and general principles of justice and fair play.49 In this case, the Court finds that respondent acted in accord with the CBA and the November 7, 1995 Guidelines, which, by agreement of the parties, may be implemented by respondent after January 1, 1997.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 155690 June 30, 2005

CAPITOL MEDICAL CENTER, INC., petitioner, vs.HON. CRESENCIANO B. TRAJANO, in his capacity as Secretary of the Department of Labor and Employment, and CAPITOL MEDICAL CENTER EMPLOYEES ASSOCIATION-AFW, respondents.

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision1 dated September 20, 2001 and the Resolution2 dated October 18, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 53479, entitled "Capitol Medical Center, Inc. vs. Hon. Cresenciano B. Trajano, in his capacity as Secretary of the Department of Labor and Employment and Capitol Medical Center Employees Association-AFW."

The factual antecedents as gleaned from the records are:

Capitol Medical Center, Inc., petitioner, is a hospital with address at Panay Avenue corner Scout Magbanua Street, Quezon City. Upon the other hand, Capitol Medical Center Employees Association-Alliance of Filipino Workers, respondent, is a duly registered labor union acting as the certified collective bargaining agent of the rank-and-file employees of petitioner hospital.

On October 2, 1997, respondent union, through its president Jaime N. Ibabao, sent petitioner a letter requesting a negotiation of their Collective Bargaining Agreement (CBA).

In its reply dated October 10, 1997, petitioner, challenging the union’s legitimacy, refused to bargain with respondent. Subsequently or on October 15, 1997, petitioner filed with the Bureau of Labor Relations (BLR), Department of Labor and Employment, a petition for cancellation of respondent’s certificate of registration, docketed as NCR-OD-9710-006-IRD.3

For its part, on October 29, 1997, respondent filed with the National Conciliation and Mediation Board (NCMB), National Capital Region, a notice of strike, docketed as NCMB-NCR-NS-10-453-97. Respondent alleged that petitioner’s refusal to bargain constitutes unfair labor practice. Despite several conferences and efforts of the designated conciliator-mediator, the parties failed to reach an amicable settlement.

On November 28, 1997, respondent staged a strike.

On December 4, 1997, former Labor Secretary Leonardo A. Quisumbing, now Associate Justice of this Court, issued an Order assuming jurisdiction over the labor dispute and ordering all striking workers to return to work and the management to resume normal operations, thus:

"WHEREFORE, this Office assumes jurisdiction over the labor disputes at Capitol Medical Center pursuant to Article 263 (g) of the Labor Code, as amended. Consequently, all striking workers are directed to return to work within twenty-four (24) hours from the receipt of this Order and the management to resume normal operations and accept back all striking workers under the same terms and conditions prevailing before the strike. Further, parties are directed to cease and desist from committing any act that may exacerbate the situation.

Moreover, parties are hereby directed to submit within 10 days from receipt of this Order proposals and counter-proposals leading to the conclusion of the collective bargaining agreement in compliance with aforementioned Resolution of the Office as affirmed by the Supreme Court.

SO ORDERED."

Petitioner then filed a motion for reconsideration but was denied in an Order dated April 27, 1998.

On June 23, 1998, petitioner filed with this Court a petition for certiorari assailing the Labor Secretary’s Orders. Pursuant to our ruling in St. Martin Funeral Home vs.The National Labor Relations Commission, et al.,4 we referred the petition to the Court of Appeals for its appropriate action and disposition.

Meantime, on October 1, 1998, the Regional Director, in NCR-OD-9710-006-IRD, issued an Order denying the petition for cancellation of respondent union’s certificate of registration.5

On September 20, 2001, the Appellate Court rendered a Decision affirming the Orders of the Secretary of Labor. The Court of Appeals held:

"Anent the first issue raised by the petitioner, We find the same untenable. The public respondent acted well within his duty to order the petitioner hospital to bargain collectively, for it was the surest way to end the dispute. In LMG Chemicals Corporation vs. Secretary of the Department of Labor and Employment, the Hon. Leonardo A. Quisumbing and Chemical Worker’s Union (G.R. No. 127422, April 17, 2001), the Supreme Court made the following pronouncement, to wit:

‘It is well settled in our jurisprudence that the authority of the Secretary of Labor to assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to national interest includes and extends to all questions and controversies arising therefrom. The power is plenary and discretionary in nature to enable him to effectively and efficiently dispose of the primary dispute.

x x x x x x

Indeed, We find no grave abuse of discretion on the part of respondent Secretary of Labor whose power is plenary and includes the resolution of all controversies arising from the labor dispute. In fact, he was merely following the directive laid down by the Supreme Court (Decision dated February 4, 1997) in the case of Capitol Medical Center Alliance of Concerned Employees-Unified Filipino Service Workers (CMC-ACE-UFSW) vs. Hon. Bienvenido E. Laguesma, Undersecretary of the Department of Labor and Employment, Capitol Medical Center Employees Association-Alliance of Filipino Workers and Capitol Medical Center Incorporated and Dra. Thelma Clemente, President, ordering petitioner hospital to collectively bargain with the Capitol Medical Center Employees Association-Alliance of Filipino Workers (private respondent herein) – the certified bargaining agent.

As earlier mentioned, the petition for cancellation was dismissed by the regional director in a decision dated September 30, 1998. x x x.

x x x x x x

Said decision by the regional director was affirmed by the Director of the Bureau of Labor Relations in a resolution dated December 29, 1998, dismissing the appeal of the petitioner hospital from the said DOLE-NCR’s decision.

Finally, the petition for certiorari (docketed as CA-G.R. SP No. 52736) entitled – Capitol Medical Center, Inc. vs. Hon. Benedictor R. Bitonio, Jr., in his capacity as Director of the Bureau of Labor Relations, Department of Labor and Employment; Hon. Maximo B. Lim in his capacity as Regional Director, National Capital Region, Department of Labor and Employment and Capitol Medical Center Employees Association (CMCEA-AFW), was dismissed in a decision dated January 11, 2001. The motion for reconsideration which was subsequently filed was denied on March 23, 2001.

x x x x x x

In order to allow an employer to validly suspend the bargaining process, there must be a valid petition for certification election. The mere filing of a petition does not ipso facto justify the suspension of negotiation by the employer (Colegio de San Juan de Letran vs. Association of Employees and Faculty of Letran and Eleanor Ambas, G.R. No. 141471, September 18, 2000). If pending a petition for certification, the collective bargaining is allowed by the Supreme Court to proceed, with more reason should the collective bargaining (in this case) continue since the High Court had recognized the respondent as the certified bargaining agent in spite of several petitions for cancellation filed against it.

x x x x x x

Secondly, We are inclined to agree with the public respondent’s statement that ‘the primary assumption of jurisdiction may be exercised by this Office even without the necessity of prior notice or hearing given to any of the parties disputants.’ (page 56 of the Rollo).

x x x x x x

We are also not convinced by the arguments raised by the petitioner with respect to its third assigned error. This Court fails to see any supervening event that would render the execution of the decision of public respondent impossible. The petitioner asserts that the respondent union has lost its legitimacy, but at every turn it has been ruled by the various labor administrative officials that the respondent union is legitimate. It has failed to convince the labor administrative officials, We are likewise not persuaded. Unless and until the Certificate of Registration of the union is cancelled, it (union) remains the certified bargaining agent and the Hospital has the duty to enter into a collective bargaining agreement with it.

x x x x x x

WHEREFORE, premises considered, the instant petition is DENIED, hereby AFFIRMING the two assailed orders, dated December 4, 1997 and April 27, 1998, of the public respondent in OS-AJ-0024-97 (NCMB-NCR-NS-10-453-97).

SO ORDERED."

On October 18, 2002, the Court of Appeals issued a Resolution denying petitioner’s motion for reconsideration.

Hence, this petition for review on certiorari.

Petitioner contends that its petition for the cancellation of respondent union’s certificate of registration involves a prejudicial question that should first be settled before the Secretary of Labor could order the parties to bargain collectively.

We are not persuaded.

As aptly stated by the Solicitor General in his comment on the petition, the Secretary of Labor correctly ruled that the pendency of a petition for cancellation of union registration does not preclude collective bargaining, thus:

"That there is a pending cancellation proceedings against the respondent Union is not a bar to set in motion the mechanics of collective bargaining. If a certification election may still be ordered despite the pendency of a petition to cancel the union’s registration certificate (National Union of Bank Employees vs. Minister of Labor, 110 SCRA 274), more so should the collective bargaining process continue despite its pendency. We must emphasize that the majority status of the respondent Union is not affected by the pendency of the Petition for Cancellation pending against it. Unless its certificate of registration and its status as the certified bargaining agent are revoked, the Hospital is, by express provision of the law, duty bound to collectively bargain with the Union. Indeed, no less than the Supreme Court already ordered the Hospital to collectively bargain with the Union when it affirmed the resolution of this Office dated November 18, 1994 directing the management of the Hospital to negotiate a collective bargaining agreement with the Union. That was the categorical directive of the High Court in its Resolution dated February 4, 1997 in Capitol Medical Center Alliance of Concerned Employees-United Filipino Service Worker vs. Hon. Bienvenido E. Laguesma, et al., G.R. No. L-118915."

Moreover, as mentioned earlier, during the pendency of this case before the Court of Appeals, the Regional Director, in NCR-OD-9710-006-IRD, issued an Order on October 1, 1998 denying the petition for cancellation of respondent’s certificate of registration. This Order became final and executory and recorded in the BLR’s Book of Entries of Judgments on June 3, 1999.

Petitioner also maintains that the Secretary of Labor cannot exercise his powers under Article 263 (g) of the Labor Code without observing the requirements of due process.

Article 263 (g) of the Labor Code, as amended, provides:

"ART. 263. Strikes, Picketing and Lockouts. –

x x x x x x

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same.

x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it shall be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce of medical and other health personnel, whose movement and services shall be unhampered and unrestricted, as are necessary to insure the proper and adequate protection of the life and health of its patients, most especially emergency cases, for the duration of the strike or lockout. In such cases, therefore, the Secretary of Labor and Employment is mandated to immediately assume, within twenty-four (24) hours from knowledge of the occurrence of such a strike or lockout, jurisdiction over the same or certify it to the Commission for compulsory arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders, prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the Commission, under pain of immediate disciplinary action, including dismissal or loss of employment status or payment by the locking-out employer of backwages, damages and other affirmative relief, even criminal prosecution against either or both of them.

The foregoing notwithstanding, the President of the Philippines shall not be precluded from determining the industries that, in his opinion, are indispensable to the national interest, and from intervening at any time and assuming jurisdiction over any such labor dispute in order to settle or terminate the same.

x x x x x x."

In Magnolia Poultry Employees Union vs. Sanchez,6 we held that the discretion to assume jurisdiction may be exercised by the Secretary of Labor and Employment without the necessity of prior notice or hearing given to any of the parties. The rationale for his primary assumption of jurisdiction can justifiably rest on his own consideration of the exigency of the situation in relation to the national interests.

In sum, petitioner’s submissions are bereft of merit.

WHEREFORE, the petition is DENIED. The assailed Decision dated September 20, 2001 and the Resolution dated October 18, 2002 of the Court of Appeals in CA-G.R. SP No. 53479 are AFFIRMED. Costs against petitioner.

SO ORDERED.

epublic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 149763 July 7, 2009

EDUARDO J. MARIÑO, JR., MA. MELVYN P. ALAMIS, NORMA P. COLLANTES, and FERNANDO PEDROSA, Petitioners, vs.GIL Y. GAMILLA, RENE LUIS TADLE, NORMA S. CALAGUAS, MA. LOURDES C. MEDINA, EDNA B. SANCHEZ, REMEDIOS GARCIA, MAFEL YSRAEL, ZAIDA GAMILLA, and AURORA DOMINGO, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Assailed in this Petition for Review on Certiorari,1 under Rule 45 of the Rules of Court, are (1) the Decision2 dated 16 March 2001 of the Court of Appeals in CA-G.R. SP No. 60657, dismissing petitioners’ Petition for Certiorari under Rule 65 of the Rules of Court; and (2) the Resolution3 dated 30 August 2001 of the appellate court in the same case denying petitioners’ Motion for Reconsideration.

IFACTS

The Petition at bar arose from the following factual and procedural antecedents.

(1) Case No. NCR-OD-M-9412-022

At the time when the numerous controversies in the instant case first came about, petitioners Atty. Eduardo J. Mariño, Jr., Ma. Melvyn P. Alamis, Norma P. Collantes, and Fernando Pedrosa were among the executive officers and directors (collectively called the Mariño Group) of the University of Sto. Tomas Faculty Union (USTFU), a labor union duly organized and registered under the laws of the Republic of the Philippines and the bargaining representative of the faculty members of the University of Santo Tomas (UST).4

Respondents Gil Y. Gamilla, Rene Luis Tadle, Norma S. Calaguas, Ma. Lourdes C. Medina, Edna B. Sanchez, Remedios Garcia, Mafel Ysrael, Zaida Gamilla, and Aurora Domingo were UST professors and USTFU members.

The 1986 Collective Bargaining Agreement (CBA) between UST and USTFU expired on 31 May 1988. Thereafter, bargaining negotiations ensued between UST and the Mariño Group, which represented USTFU. As the parties were not able to reach an agreement despite their earnest efforts, a bargaining deadlock was declared and USTFU filed a notice of strike. Subsequently, then Secretary of the Department of Labor and Employment (DOLE) Franklin Drilon assumed jurisdiction over the dispute, which was docketed as NCMB-NCR-NS-02-117-89. The DOLE Secretary issued an Order on 19 October 1990, laying the terms and conditions for a new CBA between the UST and USTFU. In accordance with said Order, the UST and USTFU entered into a CBA in 1991, which was to be effective for the period of 1 June 1988 to 31 May 1993 (hereinafter 1988-1993 CBA). In keeping with Article 253-A5 of the Labor Code, as amended, the economic provisions of the 1988-1993 CBA were subject to renegotiation for the fourth and fifth years.

Accordingly, on 10 September 1992, UST and USTFU executed a Memorandum of Agreement (MOA),6 whereby UST faculty members belonging to the collective bargaining unit were granted additional economic benefits for the fourth and fifth years of the 1988-1993 CBA, specifically, the period from 1 June 1992 up to 31 May 1993. The relevant portions of the MOA read:

MEMORANDUM OF AGREEMENT

x x x x

1.0. The University hereby grants additional benefits to Faculty Members belonging to the collective bargaining unit as defined in Article I, Section 1 of the Collective Bargaining Agreement entered into between the parties herein over and above the benefits now enjoyed by the said faculty members, which additional benefits shall amount in the aggregate to P42,000,000.00[.]

2.0. Under this Agreement the University shall grant salary increases, to wit:

2.1. THIRTY (P30.00) PESOS per lecture unit per month to covered faculty members retroactive to June 1, 1991;

2.2. Additional THIRTY (P30.00) PESOS per lecture unit per month on top of the salary increase granted in [paragraph] 2.1 hereof to the said faculty members effective June 1, 1992;

2.3. In the case of a covered faculty member whose compensation is computed on a basis other than lecture unit per month, he shall receive salary increases that are equivalent to those provided in paragraphs 2.1 and 2.2 hereof, with the amount of salary increases being arrived at by using the usual method of computing the said faculty member’s basic pay;

3.0. The UNIVERSITY shall likewise restore to the faculty members the amounts corresponding to the deductions in salary that were taken from the pay checks in the second half of June, 1989 and in the first half of July, 1989, provided that said deductions in salary relate to the union activities that were held in the aforestated payroll periods, and provided further that the amounts involved shall be taken from the P42 Million (sic) economic package.

4.0. A portion of the P42,000,000.00 economic package amounting to P2,000,000.00 shall be used to satisfy all obligations that remained outstanding and unpaid in the May 17, 1986 Collective Bargaining Agreement.

5.0. Any unspent balance of the aggregate of P42,000,000.00 as of October 15, 1992, shall, within two weeks, be remitted to the Union[:]

5.1. The unspent balance mentioned in paragraph 5.0 inclusive of earnings but exclusive of check-offs, shall be used for the salary increases herein granted up to May 31, 1993, for increases in hospitalization, educational and retirement benefits, and for other economic benefits.

6.0. The benefits herein granted constitute the entire and complete package of economic benefits granted by the UNIVERSITY to the covered faculty members for the balance of the term of the existing collective bargaining agreement.

7.0. It is clearly understood and agreed upon that the aggregate sum of P42 million is chargeable against the share of the faculty members in the incremental proceeds of tuition fees collected and still to be collected; Provided, however, that he (sic) commitment of the UNIVERSITY to pay the aggregate sum of P42 million shall subsist even if the said amount exceeds the proportionate share that may accrue to the faculty members in the tuition fee increases that the UNIVERSITY may be authorized to collect in School-Year 1992-1993, and, Provided, finally, that the covered faculty members shall still be entitled to their proportionate share in any undistributed portion of the incremental proceeds of the tuition fee increases in School-Year 1992-1993, and incremental proceeds are, by law and pertinent Department of Education Culture and Sports (DECS) regulations, required to be allotted for the payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel for the UNIVERSITY.

8.0. With this Agreement, the parties confirm that[:]

8.1. the University has complied with the requirements of the law relative to the release and distribution of the incremental proceeds of tuition fee increases as these

incremental proceeds pertain to the faculty share in the tuition fee increase collected during the School-Year 1991-1992; and,

8.2. the economic benefits herein granted constitute the full and complete financial obligation of the UNIVERSITY to the members of its faculty for the period June 1, 1991 to May 31, 1993, pursuant to the provisions of the existing Collective Bargaining Agreement.

9.0. Subject to the provisions of law, and without reducing the amounts of salary increases granted under paragraphs 2.0, 2.1, 2.2 and 2.3[,] the UNION shall have the right to a pro-rata lump sum check-off of all sums of money due and payable to it from the package of economic benefits granted under this Agreement, provided that there is an authorization of a majority of the members of the UNION and provided, further, that the P42 million economic package herein granted shall not in any way be exceeded.

10.0. This Agreement shall be effective for a period of two (2) years, starting June 1, 1991 and ending on May 31, 1993, provided, however, that if for any reason no new collective bargaining agreement is entered into at the expiration date hereof, this Agreement, together with the March 18, 1991 Collective Bargaining Agreement, shall remain in full force and effect until such time as a new collective bargaining agreement shall have been executed by the parties.

x x x x

UNIVERSITY OF SANTO TOMAS UST FACULTY UNION

BY: BY:

(signed)FR. TERESO M. CAMPILLO, JR., O.P.Treasurer

(signed)ATTY. EDUARDO J. MARINO, JR.President

Attested by[:]

(signed)REV. FR. ROLANDO DELA ROSA, O.P. (Emphasis ours.)

On 12 September 1992, the majority of USTFU members signed individual instruments of ratification,7 which purportedly signified their consent to the economic benefits granted under the MOA. Said instruments uniformly recited:

RATIFICATION OF THE UST-USTFU MEMORANDUM OF AGREEMENT DATED SEPTEMBER 10, 1992 GRANTING A PACKAGE OF THE P42 MILLION FACULTY BENEFITS WITH PROVISION FOR CHECK-OFF.

September 12, 1992 Date

TO WHOM IT MAY CONCERN:

I, the undersigned UST faculty member, aware that the law requires ratification and that without ratification by majority of all faculty members belonging to the collective bargaining unit, the Memorandum of Agreement between the University of Santo Tomas and the UST Faculty Union (or USTFU) dated September 10, 1992 may be questioned and all the faculty benefits granted therein may be cancelled, do hereby ratify the said agreement.

Under the Agreement, the University shall pay P42 million over a period of two (2) years from June 1, 1991 up to May 31, 1992.

In consideration of the efforts of the UST Faculty Union as the faculty members’ sole and exclusive collective bargaining representative in obtaining the said P42 million package of economic benefits, a check-off of ten percent thereof covering union dues, and special assessment for Labor Education Fund and attorney’s fees from USTFU members and agency fee from non-members for the period of the Agreement is hereby authorized to be made in one lump sum effective immediately, provided that two per cent (sic) shall be for [the] administration of the Agreement and the balance of eight per cent (sic) shall be for attorney’s fees to be donated, as pledged by the USTFU lawyer to the Philippine Foundation for the Advancement of the Teaching Profession, Inc. whose principal purpose is the advancement of the teaching profession and teacher’s welfare, and provided further that the deductions shall not be taken from my individual monthly salary but from the total package of P42 million due under the Agreement.

_________________________Signature of Faculty Member (Emphasis ours.)

USTFU, through its President, petitioner Atty. Mariño, wrote a letter8 dated 1 October 1992 to the UST Treasurer requesting the release to the union of the sum of P4.2 million, which was 10% of the P42 million economic benefits package granted by the MOA to faculty members belonging to the collective bargaining unit. The P4.2 million was sought by USTFU in consideration of its efforts in obtaining the said P42 million economic benefits package. UST remitted the sum of P4.2 million to USTFU on 9 October 1992.9

After deducting from the P42 million economic benefits package the P4.2 million check-off to USTFU, the amounts owed to UST, and the salary increases and bonuses of the covered faculty members, a net amount of P6,389,145.04 remained. The remaining amount was distributed to the faculty members on 18 November 1994.

On 15 December 1994, respondents10 filed with the Med-Arbiter, DOLE-National Capital Region (NCR), a Complaint for the expulsion of the Mariño Group as USTFU officers and directors, which was docketed as Case No. NCR-OD-M-9412-022.11 Respondents alleged in their Complaint that the Mariño Group violated the rights and conditions of membership in USTFU, particularly by: 1) investing the unspent balance of the P42 million economic benefits package given by UST without prior approval of the general membership; 2) simultaneously holding elections viva voce; 3) ratifying the CBA involving the P42 million economic benefits package; and 4) approving the attorney’s/agency fees worth P4.2 million

in the form of check-off. Respondents prayed that the Mariño Group be declared jointly and severally liable for refunding all collected attorney’s/agency fees from individual members of USTFU and the collective bargaining unit; and that, after due hearing, the Mariño group be expelled as USTFU officers and directors.

(2) Case No. NCR-OD-M-9510-028

On 16 December 1994, UST and USTFU, represented by the Mariño Group, entered into a new CBA, effective 1 June 1993 to 31 May 1998 (1993-1998 CBA). This new CBA was registered with the DOLE on 20 February 1995.

Respondents12 filed with the Med-Arbiter, DOLE-NCR, on 18 October 1995, another Complaint against the Mariño Group for violation of the rights and conditions of union membership, which was docketed as Case No. NCR-OD-M-9510-028.13 The Complaint primarily sought to invalidate certain provisions of the 1993-1998 CBA negotiated by the Mariño Group for USTFU and the registration of said CBA with the DOLE.

(3) Case No. NCR-OD-M-9610-001

On 24 September 1996, petitioner Norma Collantes, as USTFU Secretary-General, posted notices in some faculty rooms at UST, informing the union members of a general assembly to be held on 5 October 1996. Part of the agenda for said date was the election of new USTFU officers. The following day, 25 September 1996, respondents wrote a letter14 to the USTFU Committee on Elections, urging the latter to re-schedule the elections to ensure a free, clean, honest, and orderly election and to afford the union members the time to prepare themselves for the same. The USTFU Committee on Elections failed to act positively on respondents’ letter, and neither did they adopt and promulgate the rules and regulations for the conduct of the scheduled election.

Thus, on 1 October 1996, respondents15 filed with the Med-Arbiter, DOLE-NCR, an Urgent Ex-Parte Petition/Complaint, which was docketed as Case No. NCR-OD-M-9610-001.16 Respondents alleged in their Petition/Complaint that the general membership meeting called by the USTFU Board of Directors on 5 October 1996, the agenda of which included the election of union officers, was in violation of the provisions of the Constitution and By-Laws of USTFU. Respondents prayed that the DOLE supervise the conduct of the USTFU elections, and that they be awarded attorney’s fees.

On 4 October 1996, the Med-Arbiter DOLE-NCR, issued a Temporary Restraining Order (TRO) enjoining the holding of the USTFU elections scheduled the next day.

(4) Case No. NCR-OD-M-9610-016

Also on 4 October 1996, the UST Secretary General headed a general faculty assembly attended by USTFU members, as well as USTFU non-members, but who were members of the collective bargaining unit. During said assembly, respondents were among the elected officers of USTFU (collectively referred to as the Gamilla Group). Petitioners filed with the Med-Arbiter, DOLE-NCR, a Petition seeking injunctive reliefs and the nullification of the

results of the 4 October 1994 election. The Petition was docketed as Case No. NCR-OD-M-9610-016.

In a Decision dated 11 February 1997 in Case No. NCR-OD-M-9610-016, the Med-Arbiter DOLE-NCR, nullified the election of the Gamilla Group as USTFU officers on 4 October 1996 for having been conducted in violation of the Constitution and By-Laws of the union. This ruling of the Med-Arbiter was affirmed on appeal by the Bureau of Labor Relations (BLR) in a Resolution issued on 15 August 1997. Respondents were, thus, prompted to file a Petition for Certiorari before this Court, docketed as G.R. No. 131235.

While G.R. No. 131235 was pending, the term of office of the Gamilla Group as USTFU officers expired on 4 October 1999. The Gamilla Group then scheduled the next election of USTFU officers on 14 January 2000.

On 16 November 1999, the Court promulgated its Decision in G.R. No. 131235, affirming the BLR Resolution dated 15 August 1997 which ruled that the purported election of USTFU officers held on 4 October 1996 was void for violating the Constitution and By-Laws of the union.17

(5) Case No. NCR-OD-M-9611-009

On 15 November 1996, respondents18 filed before the Med-Arbiter, DOLE-NCR, a fourth Complaint/Petition against the Mariño Group, as well as the Philippine Foundation for the Advancement of the Teaching Profession, Inc., Security Bank Corporation, and Bank of the Philippine Islands, which was docketed as Case No. NCR-OD-M-9611-009.19 Respondents claimed in their latest Complaint/Petition that they were the legitimate USTFU officers, having been elected on 4 October 1996. They prayed for an order directing the Mariño Group to cease and desist from using the name of USTFU and from performing acts for and on behalf of the USTFU and the rest of the members of the collective bargaining unit.

DOLE Department Order No. 9 took effect on 21 June 1997, amending the Rules Implementing Book V of the Labor Code, as amended. Thereunder, jurisdiction over the complaints for any violation of the union constitution and by-laws and the conditions of union membership was vested in the Regional Director of the DOLE.20 Pursuant to said Department Order, all four Petitions/Complaints filed by respondents against the Mariño Group, particularly, Case No. NCR-OD-M-9412-022, Case No. NCR-OD-M-9510-028, Case No. NCR-OD-M-9610-001, and Case No. NCR-OD-M-9611-009 were consolidated and indorsed to the Office of the Regional Director of the DOLE-NCR.

On 27 May 1999, the DOLE-NCR Regional Director rendered a Decision21 in the consolidated cases in respondents’ favor.

In Case No. NCR-OD-M-9412-022 and Case No. NCR-OD-M-9510-028, the DOLE-NCR Regional Director adjudged the Mariño Group, as the executive officers of USTFU, guilty of violating the provisions of the USTFU Constitution and By-laws by failing to collect union dues and to conduct a general assembly every three months. The DOLE-NCR Regional Director also ruled that the Mariño Group violated Article 241(c)22 and (l)23 of the Labor Code

when they did not submit a list of union officers to the DOLE; when they did not submit/provide DOLE and the USTFU members with copies of the audited financial statements of the union; and when they invested in a bank, without prior consent of USTFU members, the sum of P9,766,570.01, which formed part of the P42 million economic benefits package.

Additionally, the DOLE-NCR Regional Director declared that the check-off of P4.2 million collected by the Mariño Group, as negotiation fees, was invalid. According to the MOA executed on 10 September 1992 by UST and USTFU, the P42 million economic benefits package was chargeable against the share of the faculty members in the incremental proceeds of tuition fees collected and still to be collected. Under Republic Act No. 6728,24 70% of the tuition fee increases should be allotted to academic and non-academic personnel. Given that the records were silent as to how much of the P42 million economic benefits package was obtained through negotiations and how much was from the statutory allotment of 70% of the tuition fee increases, the DOLE-NCR Regional Director held that the entire amount was within the statutory allotment, which could not be the subject of negotiation and, thus, could not be burdened by negotiation fees.

The DOLE-NCR Regional Director further found that the principal subject of Case No. NCR-OD-M-9610-001 (i.e., violation by the Mariño Group of the provisions on election of officers in the Labor Code and the USTFU Constitution and By-Laws) had been superseded by the central event in Case No. NCR-OD-M-9611-009 (i.e., the subsequent election of another set of USTFU officers consisting of the Gamilla Group). While there were two sets of USTFU officers vying for legitimacy, the eventual ruling of the DOLE-NCR Regional Director, for the expulsion of the Mariño Group from their positions as USTFU officers, practically extinguished Case No. NCR-OD-M-9611-009.

The decretal portion of the 27 May 1999 Decision of the DOLE-NCR Regional Director reads:

WHEREFORE, premises considered, judgment is hereby rendered:

a) Expelling [the Mariño Group] from their positions as officers of USTFU, and hereby order them under pain of contempt, to cease and desist from performing acts as such officers;

b) Ordering [the Mariño Group] to jointly and severally refund to USTFU the amount of P4.2 M checked-off as attorney’s fees from the P42 M economic package;

c) Ordering [the Mariño Group] to account for:

c.1. P2.0 M paid to USTFU in satisfaction of the remaining obligation of the University under the 1986 CBA;

c.2. P7.0 M as consideration of the Compromise Agreement entered into by USTFU involving certain labor cases;

c.3. Interest/earnings of the P9,766,570.01 balance of the P42 M invested/deposited by [the Mariño Group] with the PCI Capital Corporation.

d) Ordering conduct of election of Union officers under the supervision of this Department.25

Petitioners interposed an appeal26 before the BLR, which was docketed as BLR-A-TR-52-25-10-99.

In the meantime, the election of USTFU officers was held as scheduled on 14 January 2000,27

in which the Gamilla Group claimed victory.28 On 3 March 2000, the Gamilla group, as the new USTFU officers, entered into a Memorandum of Agreement29 with the UST, which provided for the economic benefits to be granted to the faculty members of the UST for the years 1999-2001. Said Agreement was ratified by the USTFU members on 9 March 2000.

On the same day, 9 March 2000, the BLR promulgated its Decision30 in BLR-A-TR-52-25-10-99, the fallo of which provides:

WHEREFORE, the appeal is GRANTED IN PART. Accordingly, the decision appealed from is hereby MODIFIED to the effect that appellant USTFU officers are hereby ordered to return to the general membership the amount of P4.2 million they have collected by way of attorney’s fees.

Let the entire records of this case be remanded to the Regional Office of origin for the immediate conduct of election of officers of USTFU. The election shall be held under the control and supervision of the Regional Office, in accordance with Section 1 (b), Rule XV of Department Order No. 9, unless the parties mutually agree to a different procedure consistent with ensuring integrity and fairness in the electoral exercise.

The BLR found no basis for the order of the DOLE-NCR Regional Director to the Mariño Group to account for the amounts of P2 million and P7 million supposedly paid by UST to USTFU. The BLR clarified that UST paid USTFU a lump sum of P7 million. The P2 million of this lump sum was the payment by UST of its outstanding obligations to USTFU under the 1986 CBA. This amount was subsequently donated by USTFU members to the Philippine Foundation for the Advancement of the Teaching Profession, Inc. The remaining P5 million of the lump sum was the consideration for the settlement of an illegal dismissal case between UST and the Mariño Group. Hence, the P5 million legally belonged to the Mariño Group, and there was no need to make it account for the same. As to the interest earnings of the sum of P9,766,570.01 that was invested by the Mariño Group in a bank, the BLR ruled that the same was included in the amount of P6,389,145.04 that was distributed to the faculty members on 18 November 1994.

The BLR, however, agreed in the finding of the DOLE-NCR Regional Director that the P42 million economic benefits package was sourced from the faculty members’ share in the tuition fee increases under Republic Act No. 6728. Under said law, 70% of tuition fee increases shall go to the payment of salaries, wages, allowances, and other benefits of teaching and non-teaching personnel. As was held in the decision31 and subsequent resolution32 of the Supreme Court in Cebu Institute of Technology v. Ople, the law has already provided for the minimum percentage of tuition fee increases to be allotted for teachers and other school personnel. This allotment is mandatory and cannot be

diminished, although it may be increased by collective bargaining. It follows that only the amount beyond that mandated by law shall be subject to negotiation fees and attorney's fees for the simple reason that it was only this amount that the school employees had to bargain for.

The BLR further reasoned that the P4.2 million collected by the Mariño Group was in the nature of attorney’s fees or negotiation fees and, therefore, fell under the general prohibition against such fees in Article 222(b)33 of the Labor Code, as amended. Also, the exception to charging against union funds was not applicable because the P42 million economic benefits package under the 10 September 1992 MOA was not union fund, as the same was intended not for the union coffers, but for the members of the entire bargaining unit. The fact that the P4.2 million check-off was approved by the majority of USTFU members was immaterial in view of the clear command of Article 222(b) that any contract, agreement, or arrangement of any sort, contrary to the prohibition contained therein, shall be null and void.

Lastly, as to the alleged failure of the Mariño Group to perform some of its duties, the BLR held that the change of USTFU officers can best be decided, not by outright expulsion, but by the general membership through the actual conduct of elections.

Petitioners’ Motion for Partial Reconsideration34 of the foregoing Decision was denied by the BLR in a Resolution35 dated 13 June 2000.

Aggrieved once again, petitioners filed with the Court of Appeals a Petition for Certiorari36 under Rule 65 of the Rules of Court, which was docketed as CA-G.R. SP No. 60657. In a Resolution dated 26 September 2000, the Court of Appeals directed respondents to file their Comment; and, in order not to render moot and academic the issues in the Petition, enjoined respondents and all those acting for and on their behalf from enforcing, implementing, and effecting the BLR Decision dated 9 March 2000.

On 16 March 2001, the Court of Appeals rendered its Decision in CA-G.R. SP No. 60657, favoring respondents.

According to the Court of Appeals, the BLR did not commit grave abuse of discretion, amounting to lack or excess of jurisdiction, in ruling that the P42 million economic benefits package was merely the share of the faculty members in the tuition fee increases pursuant to Republic Act No. 6728. The appellate court explained:

It is too plain to see that the 60% of the proceeds is to be allocated specifically for increase in salaries or wages of the members of the faculty and all other employees of the school concerned. Under Section 5(2) of Republic Act 6728, the amount had been increased to 70% of the tuition fee increases which was specifically allocated to the payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel of the school[,] except administrators who are principal stockholders of the school and to cover increases as provided for in the collective bargaining agreements existing or in force at the time the law became effective[.]

x x x x

It is too plain to see, too, that under the "Memorandum of Agreement" between UST and the Union, x x x, the P42,000,000.00 economic package granted by the UST to the Union was in compliance with the mandates of the law and pertinent Department of Education, Culture and Sports regulation (sic) required to be allotted following the payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel of the University[.]

x x x x

Whether or not UST implemented the mandate of Republic Act 6728 voluntarily or through the efforts and prodding of the Union does not and cannot change or alter a whit the nature of the economic package or the purpose or purposes of the allocation of the said amount. For, if we acquiesced to and sustained Petitioners’ stance, we will thereby be leaving the compliance by the private educational institutions of the mandate of Republic Act 6728 at the will, mercy, whims and caprices of the Union and the private educational institution. This cannot and should not come to pass.

With our foregoing findings and disquisitions, We thus agree with the [BLR] that the aforesaid amount of P42,000,000.00 should not answer for any attorney’s fees claimed by the Petitioners. x x x.

x x x x

Moreover, [Section 5 of Rule X of] the CBL of the Union provides that:

Section 5. Special assessments or other extraordinary fees such as for payment of attorney’s fees shall be made only upon such a resolution duly ratified by the general membership by secret balloting. x x x.

Also, Article 241(n)37 of the Labor Code, as amended, provides that no special assessment shall be levied upon the members of the union unless authorized by a written resolution of a majority of all the members at a general membership meeting duly called for the purpose[.]

x x x x

In "ABS-CBN Supervisors-Employees Union Members versus ABS-CBN Broadcasting Corporation, 304 SCRA 489", our Supreme Court declared that Article 241(n) of the Labor Code, as amended, speaks of three (3) requisites, to wit: (1) authorization by a written resolution of the majority of all members at the general membership meeting called for the purpose; (2) secretary’s record of the minutes of the meeting; and (3) individual written authorization for check-off duly signed by the employee concerned.

Contrary to the provisions of Articles 222(b) and 241(n) of the Labor Code, as amended, and Section 5, Rule X of [the] CBL of the Union, no resolution ratified by the general membership of [the] USTFU through secret balloting which embodied the award of attorney’s fees was submitted. Instead, the Petitioners submitted copies of the form for the ratification of the MOA and the check-off for attorney’s fees.

x x x x

The aforementioned "ratification with check-off" form embodied the: (a) ratification of the MOA; (b) check-off of union dues; and (c) check-off of a special assessment, i.e., attorney’s fees and labor education fund. x x x. Patently, the CBL was not complied with.

Worse, the check-off for union dues and attorney’s fees were included in the ratification of the MOA. The members were thus placed in a situation where, upon ratification of the MOA, not only the check-off of union dues and special assessment for labor education fund but also the payment of attorney’s fees were (sic) authorized.38

In like manner, the Court of Appeals found no grave abuse of discretion, amounting to lack or excess of jurisdiction, on the part of the BLR in ordering the conduct of elections under the control and supervision of the DOLE-NCR. Said the appellate court:

We agree with the Petitioners that the elections of officers of the Union, before the Decision of the [BLR], had been unfettered by any intervention of the DOLE. However, We agree with the Decision of the [BLR] for two (2) specific reasons, namely: (a) the parties are given an opportunity to first agree on a different procedure to ensure the integrity and fairness of the electoral exercise, before the DOLE, may supervise the election[.]

x x x x

Under Article IX of the CBL, the Board of Officers of the Union shall create a Committee on Elections, Comelec for brevity, composed of a chairman and two (2) members appointed by the Board of Officers[.]

x x x x

It, however, appears that the term of office of the Petitioners had already expired in September of 1996. In fact, an election of officers was scheduled on October 6, 1996. However, on October 4, 1996, [respondents] and the members of the faculty of UST, both union member and non-union member, elected [respondents] as the new officers of the USTFU. The same was, however, (sic) nullified by the Supreme Court, on November 16, 1999. However, as the term of office of the [respondents] had expired, on October 4, 1999, there is nothing to nullify anymore. By virtue of an election, held on January 14, 2000, the [respondents] were elected as the new officers of the Union, which election was not contested by the Petitioners or any other group in the union.

x x x x

We are thus faced with a situation where one set of officers claim to be the legitimate and incumbent officers of the Union, pursuant to the CBL of the Union, and another set of officers who claim to have been elected by the members of the faculty of the Union thru an election alleged to have been supervised by the DOLE which situation partakes of and is akin to the nature of an intra-union dispute[.] x x x.

Undeniably, the CBL gives the Board of Officers the right to create and appoint members of the Comelec. However, the CBL has no application to a situation where there are two (2) sets of officers, one set claiming to be the legitimate incumbent officers holding over to their positions who have not exercised their powers and functions therefor and another claiming to have been elected in an election supervised by the DOLE and, at the same time, exercising the powers and functions appended to their positions. In such a case, the BLR, which has jurisdiction over the intra-union dispute, can validly order the immediate conduct of election of officers, otherwise, internecine disputes and blame-throwing will derail an orderly and fair election. Indeed, Section 1(b), [Rule XV], Book V of the Implementing Rules and Regulations of the Labor Code, as amended, by Department Order No. 09, Series of 1997,39 provides that, in the absence of any agreement among the members or any provision in the constitution and by-laws of the labor organization, in an election ordered by the Regional Director, the chairman of the committee shall be a representative of the Labor Relations Division of the Regional Office[.]40

Ultimately, the Court of Appeals decreed:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is denied due course and is hereby DISMISSED.41

Petitioners moved for reconsideration42 of the Decision dated 16 March 2001 of the Court of Appeals, but it was denied by the said court in its Resolution43 dated 30 August 2001.

Petitioners elevated the case to this Court via the instant Petition, invoking the following assignment of errors:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR AND GRAVELY ABUSED ITS DISCRETION WHEN IT UPHELD THE APPLICATION BY THE HONORABLE DIRECTOR OF THE BUREAU OF LABOR RELATIONS OF THE PROVISIONS OF REPUBLIC ACT NO. 6728 TO THE P42 MILLION CBA PACKAGE OF ECONOMIC BENEFITS OBTAINED BY THE UST FACULTY UNION FROM THE UNIVERSITY OF SANTO TOMAS.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR AND GRAVELY ABUSED ITS DISCRETION WHEN IT DISALLOWED THE LUMP-SUM CHECK-OFF AMOUNTING TO P4.2 MILLION BY RULING THAT THE P42 MILLION CBA ECONOMIC PACKAGE OBTAINED BY THE UST FACULTY UNION WAS MERELY AN ALLOCATION OF THE SEVENTY PER CENT (70%) OF THE TUITION INCREASES AUTHORIZED BY LAW AND THE DEPARTMENT OF EDUCATION, CULTURE AND SPORTS.

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR AND GRAVELY ABUSED ITS DISCRETION WHEN IT DISREGARDED THE PROVISIONS ON ELECTION OF UNION OFFICERS IN THE CONSTITUTION AND BY-LAWS OF THE UST FACULTY UNION

AND INSTEAD UPHELD THE DIRECTIVE OF THE HONORABLE DIRECTOR OF THE BUREAU OF LABOR RELATIONS TO CONDUCT THE ELECTION OF UNION OFFICERS UNDER THE CONTROL AND SUPERVISION OF THE REGIONAL DIRECTOR FOR THE NATIONAL CAPITAL REGION OF THE DEPARTMENT OF LABOR AND EMPLOYMENT.

Essentially, in order to arrive at a final disposition of the instant case, this Court is tasked to determine the following: (1) the nature of the P42 million economic benefits package granted by UST to USTFU; (2) the legality of the 10% check-off collected by the Mariño Group from the P42 million economic benefits package; and (3) the validity of the BLR order for USTFU to conduct election of union officers under the control and supervision of the DOLE-NCR Regional Director.

IIRULING

(1) The P42 million economic benefits package

Petitioners argue that the P42 million economic benefits package granted to the covered faculty members were additional benefits, which resulted from a long and arduous process of negotiations between the Mariño Group and UST. The BLR and the Court of Appeals were in error for considering the said amount as purely sourced from the allocation by UST of 70% percent of the incremental proceeds of tuition fee increases, in accordance with Republic Act No. 6728. Said law was improperly applied as a general law that decrees the allocation by all private schools of 70% of their tuition fee increases to the payment of salaries, wages, allowances and other benefits of their teaching & non-teaching personnel. It is clear from the title of the law itself that it only covers government assistance to students and teachers in private education. Section 5 of Republic Act No. 6728 unequivocally limits the scope of the law to tuition fee supplements and subsidies extended by the Government to students in private high schools. Thus, the petitioners maintain that Republic Act No. 6728 has no application to the MOA executed on 10 September 1992 between UST and USTFU, through the efforts of the Mariño Group.

The Court disagrees with petitioners’ stance.

The provisions of Republic Act No. 6728 were not arbitrarily applied by the DOLE-NCR Regional Director, the BLR, or the Court of Appeals to the P42 million economic benefits package granted by UST to USTFU, considering that the parties themselves stipulated in Section 7 of the MOA they signed on 10 September 1992 that:

7.0. It is clearly understood and agreed upon that the aggregate sum of P42 million is chargeable against the share of the faculty members in the incremental proceeds of tuition fees collected and still to be collected[;] Provided, however, that he (sic) commitment of the UNIVERSITY to pay the aggregate sum of P42 million shall subsist even if the said amount exceeds the proportionate share that may accrue to the faculty members in the tuition fee increases that the UNIVERSITY may be authorized to collect in School–Year 1992-1993, and, Provided, finally, that the covered faculty members shall still be entitled to their proportionate share in any undistributed portion of the incremental proceeds of the tuition

fee increases in School-Year 1992-1993, and which incremental proceeds are, by law and pertinent Department of Education Culture and Sports (DECS) regulations, required to be allotted for the payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel for the UNIVERSITY.44 (Emphases supplied.)

The "law" in the aforequoted Section 7 of the MOA can only refer to Republic Act No. 6728, otherwise known as the "Government Assistance to Students and Teachers in Private Education Act." Republic Act No. 6728 was enacted in view of the declared policy of the State, in conformity with the mandate of the Constitution, to promote and make quality education accessible to all Filipino citizens, as well as the recognition of the State of the complementary roles of public and private educational institutions in the educational system and the invaluable contribution that the private schools have made and will make to education.45 The said statute primarily grants various forms of financial aid to private educational institutions such as tuition fee supplements, assistance funds, and scholarship grants.46

One such form of financial aid is provided under Section 5 of Republic Act No. 6728, which states:

SEC. 5. Tuition Fee Supplement for Student in Private High School. –

(1) Financial assistance for tuition for students in private high schools shall be provided by the government through a voucher system in the following manner:

(a) For students enrolled in schools charging less than one thousand five hundred pesos (P1,500) per year in tuition and other fees during school year 1988-89 or such amount in subsequent years as may be determined from time to time by the State Assistance Council: The Government shall provide them with a voucher equal to two hundred ninety pesos P290.00: Provided, That the student pays in the 1989-1990 school year, tuition and other fees equal to the tuition and other fees paid during the preceding academic year: Provided, further, That the Government shall reimburse the vouchers from the schools concerned within sixty (60) days from the close of the registration period: Provided, furthermore, That the student's family resides in the same city or province in which the high school is located unless the student has been enrolled in that school during the previous academic year.

(b) For students enrolled in schools charging above one thousand five hundred pesos (P1,500) per year in tuition and other fees during the school year 1988-1989 or such amount in subsequent years as may be determined from time to time by the State Assistance Council, no assistance for tuition fees shall be granted by the Government: Provided, however, That the schools concerned may raise their tuition fee subject to Section 10 hereof.

(2) Assistance under paragraph (1), subparagraphs (a) and (b) shall be granted and tuition fees under subparagraph (c) may be increased, on the condition that seventy percent (70%) of the amount subsidized, allotted for tuition fee or of the tuition fee

increases shall go to the payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel except administrators who are principal stockholders of the school, and may be used to cover increases as provided for in the collective bargaining agreements existing or in force at the time when this Act is approved and made effective: Provided, That government subsidies are not used directly for salaries of teachers of nonsecular subjects. At least twenty percent (20%) shall go to the improvement or modernization of buildings, equipment, libraries, laboratories, gymnasia and similar facilities and to the payment of other costs of operation. For this purpose, schools shall maintain a separate record of accounts for all assistance received from the government, any tuition fee increase, and the detailed disposition and use thereof, which record shall be made available for periodic inspection as may be determined by the State Assistance Council, during business hours, by the faculty, the non-teaching personnel, students of the school concerned, and Department of Education, Culture and Sports and other concerned government agencies. (Emphases ours.)

Although Section 5 of Republic Act No. 6728 does speak of government assistance to students in private high schools, it is not limited to the same. Contrary to petitioners’ puerile claim, Section 5 likewise grants an unmistakable authority to private high schools to increase their tuition fees, subject to the condition that seventy (70%) percent of the tuition fee increases shall go to the payment of the salaries, wages, allowances, and other benefits of their teaching and non-teaching personnel. The said allocation may also be used to cover increases in the salaries, wages, allowances, and other benefits of school employees as provided for in the CBAs existing or in force at the time when Republic Act No. 6728 was approved and made effective.

Contrary to petitioners’ argument, the right of private schools to increase their tuition fee -- with their corresponding obligation to allocate 70% of said increase to the payment of the salaries, wages, allowances, and other benefits of their employees -- is not limited to private high schools. Section 947 of Republic Act No. 6728, on "Further Assistance to Students in Private Colleges and Universities," is crystal clear in providing that:

d) Government assistance and tuition increases as described in this Section shall be governed by the same conditions as provided under Section 5 (2).

Indeed, a private educational institution under Republic Act No. 6728 still has the discretion on the disposition of 70% of the tuition fee increase. It enjoys the privilege of determining how much increase in salaries to grant and the kind and amount of allowances and other benefits to give. The only precondition is that 70% percent of the incremental tuition fee increase goes to the payment of salaries, wages, allowances and other benefits of teaching and non-teaching personnel.48

In this case, UST and USTFU stipulated in their 10 September 1992 MOA that the P42 million economic benefits package granted by UST to the members of the collective bargaining unit represented by USTFU, was chargeable against the 70% allotment from the proceeds of the tuition fee increases collected and still to be collected by UST. As observed by the DOLE-NCR Regional Director, and affirmed by both the BLR and the Court of Appeals, there is no

showing that any portion of the P42 million economic benefits package was derived from sources other than the 70% allotment from tuition fee increases of UST.

Given the lack of evidence to the contrary, it can be conclusively presumed that the entire P42 million economic benefits package extended to USTFU came from the 70% allotment from tuition fee increases of UST. Preceding from this presumption, any deduction from the P42 million economic benefits package, such as the P4.2 million claimed by the Mariño Group as attorney’s/agency fees, should not be allowed, because it would ultimately result in the reduction of the statutorily mandated 70% allotment from the tuition fee increases of UST.

The other reasons for disallowing the P4.2 million attorney’s/agency fees collected by the Mariño Group from the P42 million economic benefits package are discussed in the immediately succeeding paragraphs.

(2) The P4.2 Million Check-off

Petitioners contend that the P4.2 million check-off, from the P42 million economic benefits package, was lawfully made since the requirements of Article 222(b) of the Labor Code, as amended, were complied with by the Mariño Group. The individual paychecks of the covered faculty employees were not reduced and the P4.2 million deducted from the P42 million economic benefits package became union funds, which were then used to pay attorney’s fees, negotiation fees, and similar charges arising from the CBA. In addition, the P4.2 million constituted a special assessment upon the USTFU members, the requirements for which were properly observed. The special assessment was authorized in writing by the general membership of USTFU during a meeting in which it was included as an item in the agenda. Petitioners fault the Court of Appeals for disregarding the authorization of the special assessment by USTFU members. There is no law that prohibits the insertion of a written authorization for the special assessment in the same instrument for the ratification of the 10 September 1992 MOA. Neither is there a law prescribing a particular form that needs to be accomplished for the authorization of the special assessment. The faculty members who signed the ratification of the MOA, which included the authorization for the special assessment, have high educational attainment, and there is ample reason to believe that they affixed their signatures thereto with full comprehension of what they were doing.

Again, the Court is not persuaded.

The pertinent legal provisions on a check-off are found in Articles 222(b) and 241(n) and (o) of the Labor Code, as amended.

Article 222(b) states:

(b) No attorney's fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or conclusion of the collective agreement shall be imposed on any individual member of the contracting union: Provided, however, that attorney's fees may be charged against unions funds in an amount to be agreed upon by the

parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void.

Article 241(n) reads:

(n) No special assessment or other extraordinary fees may be levied upon the members of a labor organization unless authorized by a written resolution of a majority of all the members at a general membership meeting duly called for the purpose. The secretary of the organization shall record the minutes of the meeting including the list of all members present, the votes cast, the purpose of the special assessment or fees and the recipient of such assessment or fees. The record shall be attested to by the president.

And Article 241(o) provides:

(o) Other than for mandatory activities under the Code, no special assessments, attorney's fees, negotiation fees or any other extraordinary fees may be checked off from any amount due to an employee without an individual written authorization duly signed by the employee. The authorization should specifically state the amount, purpose and beneficiary of the deduction.

Article 222(b) of the Labor Code, as amended, prohibits the payment of attorney's fees only when it is effected through forced contributions from the employees from their own funds as distinguished from union funds.49 Hence, the general rule is that attorney’s fees, negotiation fees, and other similar charges may only be collected from union funds, not from the amounts that pertain to individual union members. As an exception to the general rule, special assessments or other extraordinary fees may be levied upon or checked off from any amount due an employee for as long as there is proper authorization by the employee.

A check-off is a process or device whereby the employer, on agreement with the Union, recognized as the proper bargaining representative, or on prior authorization from the employees, deducts union dues or agency fees from the latter's wages and remits them directly to the Union. Its desirability in a labor organization is quite evident. The Union is assured thereby of continuous funding. As this Court has acknowledged, the system of check-off is primarily for the benefit of the Union and, only indirectly, for the individual employees.50

The Court finds that, in the instant case, the P42 million economic benefits package granted by UST did not constitute union funds from whence the P4.2 million could have been validly deducted as attorney’s fees. The P42 million economic benefits package was not intended for the USTFU coffers, but for all the members of the bargaining unit USTFU represented, whether members or non-members of the union. A close reading of the terms of the MOA reveals that after the satisfaction of the outstanding obligations of UST under the 1986 CBA, the balance of the P42 million was to be distributed to the covered faculty members of the collective bargaining unit in the form of salary increases, returns on paycheck deductions; and increases in hospitalization, educational, and retirement benefits, and other economic benefits. The deduction of the P4.2 million, as alleged attorney’s/agency fees, from the P42

million economic benefits package effectively decreased the share from said package accruing to each member of the collective bargaining unit.

Petitioners’ line of argument – that the amount of P4.2 million became union funds after its deduction from the P42 million economic benefits package and, thus, could already be used to pay attorney’s fees, negotiation fees, or similar charges from the CBA – is absurd. Petitioners’ reasoning is evidently flawed since the attorney’s fees may only be paid from union funds; yet the amount to be used in paying for the same does not become union funds until it is actually deducted as attorney’s fees from the benefits awarded to the employees. It is just a roundabout argument. What the law requires is that the funds be already deemed union funds even before the attorney’s fees are deducted or paid therefrom; it does not become union funds after the deduction or payment. To rule otherwise will also render the general prohibition stated in Article 222(b) nugatory, because all that the union needs to do is to deduct from the total benefits awarded to the employees the amount intended for attorney’s fees and, thus, "convert" the latter to union funds, which could then be used to pay for the said attorney’s fees.

The Court further determines that the requisites for a valid levy and check-off of special assessments, laid down by Article 241(n) and (o), respectively, of the Labor Code, as amended, have not been complied with in the case at bar. To recall, these requisites are: (1) an authorization by a written resolution of the majority of all the union members at the general membership meeting duly called for the purpose; (2) secretary's record of the minutes of the meeting; and (3) individual written authorization for check-off duly signed by the employee concerned.51

Additionally, Section 5, Rule X of the USTFU Constitution and By-Laws mandates that:

Section 5. Special assessments or other extraordinary fees such as for payment of attorney’s fees shall be made only upon a resolution duly ratified by the general membership by secret balloting.

In an attempt to comply with the foregoing requirements, the Mariño Group caused the majority of the general membership of USTFU to individually sign a document, which embodied the ratification of the MOA between UST and USTFU, dated 10 September 1992, as well as the authorization for the check-off of P4.2 million, from the P42 million economic benefits package, as payment for attorney’s fees. As held by the Court of Appeals, however, the said documents constitute unsatisfactory compliance with the requisites set forth in the Labor Code, as amended, and in the USTFU Constitution and By-Laws, even though individually signed by a majority of USTFU members.1avvphi1

The inclusion of the authorization for a check-off of union dues and special assessments for the Labor Education Fund and attorney’s fees, in the same document for the ratification of the 10 September 1992 MOA granting the P42 million economic benefits package, necessarily vitiated the consent of USTFU members. For sure, it is fairly reasonable to assume that no individual member of USTFU would casually turn down the substantial and lucrative award of P42 million in economic benefits under the MOA. However, there was no way for any individual union member to separate his or her consent to the ratification of the

MOA from his or her authorization of the check-off of union dues and special assessments. As it were, the ratification of the MOA carried with it the automatic authorization of the check-off of union dues and special assessments in favor of the union. Such a situation militated against the legitimacy of the authorization for the P4.2 million check-off by a majority of USTFU membership. Although the law does not prescribe a particular form for the written authorization for the levy or check-off of special assessments, the authorization must, at the very least, embody the genuine consent of the union member.

The failure of the Mariño Group to strictly comply with the requirements set forth by the Labor Code, as amended, and the USTFU Constitution and By-Laws, invalidates the questioned special assessment. Substantial compliance is not enough in view of the fact that the special assessment will diminish the compensation of the union members. Their express consent is required, and this consent must be obtained in accordance with the steps outlined by law, which must be followed to the letter. No shortcuts are allowed.52

Viewed in this light, the Court does not hesitate to declare as illegal the check-off of P4.2 million, from the P42 million economic benefits package, for union dues and special assessments for the Labor Education Fund and attorney’s fees. Said amount rightfully belongs to and should be returned by petitioners to the intended beneficiaries thereof, i.e., members of the collective bargaining unit, whether or not members of USTFU. This directive is without prejudice to the right of petitioners to seek reimbursement from the other USTFU officers and directors, who were part of the Mariño Group, and who were equally responsible for the illegal check-off of the aforesaid amount.

(3) Election of new officers

Having been overtaken by subsequent events, the Court need no longer pass upon the issue of the validity of the order of BLR for USTFU to conduct its long overdue election of union officers, under the control and supervision of the DOLE-NCR Regional Director.

The BLR issued such an order since USTFU then had two groups, namely, the Mariño Group and the Gamilla Group, each claiming to be the legitimate officers of USTFU.

The DOLE-NCR Regional Director, in his Decision dated 27 May 1999, decreed that the Mariño Group be expelled from their positions as USTFU officers. But then, the BLR, in its Decision promulgated on 9 March 2000, declared that the change of officers could best be decided, not by expulsion, but by the general membership of the union through the conduct of election, under the control and supervision of the DOLE-NCR Regional Director. In its assailed Decision dated 16 March 2001, the Court of Appeals agreed with the BLR judgment in its ruling that the conduct of an election, under the control and supervision of the DOLE-NCR Regional Director, is necessary to settle the question of who, as between the officers of the Mariño Group and of the Gamilla Group, are the legitimate officers of the USTFU.

The Court points out, however, that neither the Decision of the BLR nor of the Court of Appeals took into account the fact that an election of USTFU officers was already conducted on 14 January 2000, which was won by the Gamilla Group. There is nothing in the records to show that the said election was contested or made the subject of litigation. The Gamilla

Group had exercised their powers as USTFU officers during their elected term. Since the term of union officers under the USTFU Constitution and By-Laws was only for three years, then the term of the Gamilla Group already expired in 2003. It is already beyond the jurisdiction of this Court, in the present Petition, to still look into the subsequent elections of union officers held after 2003.

The election of the Gamilla Group as union officers in 2000 should have already been recognized by the BLR and the Court of Appeals. The order for USTFU to conduct another election was only a superfluity. The issue of who between the officers of the Mariño Group and of the Gamilla Group are the legitimate USTFU officers has been rendered moot by the succeeding events in the case.

WHEREFORE, premises considered, the Petition for Review under Rule 45 of the Rules of Court is hereby DENIED. The Decision dated 16 March 2001 and the Resolution dated 30 August 2001 of the Court of Appeals in CA-G.R. SP No. 60657, are hereby AFFIRMED WITH MODIFICATIONS. Petitioners are hereby ORDERED to reimburse, jointly and severally, to the faculty members of the University of Sto. Tomas, belonging to the collective bargaining unit, the amount of P4.2 million checked-off as union dues and special assessments for the Labor Education Fund and attorney’s fees, with legal interest of 6% per annum from 15 December 1994, until the finality of this decision. The order for the conduct of election for the officers of the University of Sto. Tomas Faculty Union, under the control and supervision of the Regional Director of the Department of Labor and Employment-National Capital Region, is hereby DELETED. No costs.

SO ORDERED.