Republic of the Philippines

SUPREME 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.
DECISION
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 Corporations (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 Associations (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. RO4000202-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 CLUPSLECCWA), 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 [SLECCs]
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 [SLECCS] 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 [CLUPSLECCWA], 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, appellants 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-SLECCWAs] 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-Arbiters Ruling
In his Order dated 29 July 2002, Med-Arbiter Anastacio L. Bactin dismissed
CLUP-SLECCWAs 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-SLECCWAs 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-Arbiters
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-SLECCWAs appeal. The Secretary held that the subsequent
negotiations and registration of a CBA executed by SLECC with SMSLEC
could not bar CLUP-SLECCWAs petition. CLUP-SLECC and its Affiliates
Workers Union constituted a registered labor organization at the time of
SLECCs voluntary recognition of SMSLEC. The dispositive portion of the
Secretarys Decision reads:
WHEREFORE, the appeal is hereby GRANTED and the Order of the MedArbiter 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 reregistration 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 Secretarys decision. The appellate court agreed with
the Secretarys 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 SMSLECs voluntary recognition on 20 July 2001. Thus,
SMSLECs voluntary recognition was void and could not bar CLUPSLECCWAs 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
Secretarys finding that SLECCs 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 petitioners 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 Unions 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
SLECCs 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.
SLECCs 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, SLECCs
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-SLECCWAs present petition for
certification election.
Employers Participation in a Petition for Certification Election
We find it strange that the employer itself, SLECC, filed a motion to
oppose CLUP-SLECCWAs petition for certification election. In petitions for
certification election, the employer is a mere bystander and cannot
oppose the petition or appeal the Med-Arbiters 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 Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 169754

February 23, 2011

LEGEND INTERNATIONAL RESORTS LIMITED, Petitioner,

vs.
KILUSANG MANGGAGAWA NG LEGENDA (KML-INDEPENDENT),
Respondent.
DECISION
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 petitioners 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 KMLs

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 KMLs appeal thereby reversing and setting aside the
Med-Arbiters Decision. The Office of the Secretary of DOLE held that
KMLs 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 DOLEs Decision
reads:
WHEREFORE, the appeal is hereby GRANTED and the order of the MedArbiter 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 Petition 10 for
Cancellation of Union Registration of KML docketed as Case No. RO3000108-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 LEGENDs 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 Certiorari 14 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
LEGENDs petition for cancellation and upholding KMLs 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
KMLs 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 Decision 17
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 Reconsideration 19 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 LEGENDs 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
PETITIONERS PETITION FOR CERTIORARI.20
Petitioners Arguments
LEGEND submits that the Court of Appeals grievously erred in ruling that
the March 26, 2002 Decision denying its Petition for Cancellation of KMLs
registration has already become final and executory. It asserts that it has
seasonably filed a Petition for Certiorari21 before the CA docketed as CAG.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
KMLs registration.
Finally, LEGEND posits that the cancellation of KMLs certificate of
registration should retroact to the time of its issuance.22 It thus claims that
the petition for certification election and all of KMLs 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 MedArbiter dismissing KMLs petition for certification election be reinstated.24
Respondents 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
LEGENDs 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 LEGENDs 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, KMLs 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 KMLs 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 LEGENDs proposition that the
cancellation of KMLs certificate of registration should retroact to the time
of its issuance. LEGEND claims that KMLs 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 KMLs 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 unions 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 petitioners] 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 LEGENDs assertion that the
cancellation of KMLs certificate of registration should retroact to the time
of its issuance or that it effectively nullified all of KMLs 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 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.

Hence, to raise the issue of the respondent unions 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) appellants 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 Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171153

September 12, 2007

SAN MIGUEL CORPORATION EMPLOYEES UNIONPHILIPPINE

TRANSPORT AND GENERAL WORKERS ORGANIZATION (SMCEU
PTGWO), petitioner,
vs.
SAN MIGUEL PACKAGING PRODUCTS EMPLOYEES UNION
PAMBANSANG DIWA NG MANGGAGAWANG PILIPINO (SMPPEU
PDMP), respondent1.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Revised Rules
of Court, petitioner SAN MIGUEL CORPORATION EMPLOYEES UNIONPHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (SMCEUPTGWO) 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 UNIONPAMBANSANG DIWA NG
MANGGAGAWANG PILIPINO (SMPPEUPDMP); and (b) the Resolution 4 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 noncompliance 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-OD9908-007-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 quasijudicial 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.
xxxx
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-sodesirable 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 UnionPambansang 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 Philippines
SUPREME 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.

DECISION

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 coemployees 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 coemployees, 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 Arbiterthe proximate trier of factsand
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 belowthe Labor Arbiter, the NLRC
and the Court of Appealssaw 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 NLRCRAB 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 3year 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 crossclaims of respondent DMPI and Tabusuares against the respondent ALUTUCP, 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.
xxxx
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 Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 174912

July 24, 2013

BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITYFUBU), Petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS (BPI), and BPI OFFICERS CLARO
M. REYES, CECIL CONANAN and GEMMA VELEZ, Respondents.
DECISION
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 Decision 1 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
BPIs 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, BPIs cashiering function and FEBTCs cashiering,

distribution and bookkeeping functions were handled by BOMC.
Consequently, twelve (12) former FEBTC employees were transferred to
BOMC to complete the latters service complement.
BPI Davaos 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 units
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 latters 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 NLRCs 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 BPIs 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 Unions 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.1wphi1
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 BPIS 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 Unions membership. For the
Union, BPIs 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 BPIs 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 companys 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 Unions 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 Unions

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 Courts 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 Unions 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 banks 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 nonbanking 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
BOMCs service complement, was motivated by ill will, anti-unionism or
bad faith so as to affect or interfere with the employees right to selforganization.
It is to be emphasized that contracting out of services is not illegal
perse.1wphi1 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. 1388 38
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 BPIs 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 Philippines

SUPREME 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.
NESTL PHILIPPINES, INCORPORATED, Respondent.
x-----------------------------------x
G.R. No. 158944-45 August 22, 2006
NESTL PHILIPPINES, INCORPORATED Petitioner,
vs.
UNION OF FILIPRO EMPLOYEES - DRUG, FOOD AND ALLIED
INDUSTRIES UNIONS - KILUSANG MAYO UNO (UFE-DFA-KMU),
Respondent.
DECISION
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
Nestl Philippines, Incorporated (Nestl) seeking the reverse of the Court
of Appeals Decision in so far as the latters failure to adjudge Nestl 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 Nestl 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 Nestl 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 Nestl and UFEDFA-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 Nestl 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, Nestl 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), Nestl 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-DFAKMU 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, Nestl, 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. Nestl
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
Nestls 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, Nestl filed with the
DOLE a Petition for Assumption of Jurisdiction,17 docketed as OS-AJ-002301, 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 Nestl Cabuyao Plant in
Laguna.
On 29 November 2001, Sec. Sto. Tomas issued an Order 18 in OS-AJ-002301, 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 Nestl 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 reconsideration 19 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.
xxxx
As ruled by the Supreme Court in the Philtread case:
Article 263 (g) of the Labor Code does not violate the workers
constitutional right to strike.
xxxxxx

The foregoing article clearly does not interfere with the workers 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 Nestl 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 returnto-work within twenty-four (24) hours from receipt of such Order; (2)
Nestl 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, Nestl and UFE-DFA-KMU filed
their respective position papers. In its position paper,24 Nestl 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-DFAKMU, 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, Nestl 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 Nestl 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 Nestl
Cabuyao Plant is a unilateral grant that the parties have expressly so
recognized subsequent to the Supreme Courts ruling in Nestl, Phils. Inc.
vs. NLRC, G.R. No. 90231, February 4, 1991, and is therefore not a
mandatory subject for bargaining;
b. the Unions 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 Nestl Phils. Inc. and it eight (8) other
bargaining units, and to adopt these as the terms and conditions of the
Nestl 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 Nestl 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 Nestl
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-AJ0023-01 (NCMB-RBIV-CAV-PM-08-035-01, NCMB-RBIV-LAG-NS-10-037-01,
NCMB-RBIV-LAG-NS-11-10-03901) 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 Nestl 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 courts decision in absolving Nestl 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-KMUs 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 NESTLS 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 Nestl 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 LABORS 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, nonnegotiable; 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 Nestl 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 Courts Ruling

Foremost for our resolution is the matter of the non-inclusion of the
Retirement Plan in the CBA negotiations between Nestl 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 Nestl
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. Nestl
justifies such contention by directing the Courts 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 Nestls 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
Nestl.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 Nestl merely speaks of the
improvement38 or the review for the improvement39 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 Nestl 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 Nestls existing "noncontributory" Retirement Plan. The company filed a petition for certiorari
alleging grave abuse of discretion on the part of the NLRC as Nestl was
arguing that since its Retirement Plan is non-contributory, it should be a
non-issue in CBA negotiations. Nestl 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
Nestls position, this Court, through Madame Justice Grio-Aquino,
declared that:

The companys [Nestl] contention that its retirement plan is nonnegotiable, 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 Unions demand to increase the benefits due the
employees under said plan, is a valid CBA issue. x x x
xxxx
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 Nestl 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):
xxxx
6.2. Review for improvement of the COMPANYs 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 Nestl and remove the subject benefit
from the ambit of the CBA. The characterization unilaterally imposed by
Nestl 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--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 Nestl recognizes that the Retirement Plan is part of
the existing Collective Bargaining Agreement.
Nestl 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 Nestl 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 UFEDFA-KMU who first alleged bargaining deadlock as the basis for the filing
of its Notice of Strike. Finally, Nestl 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 Nestl. 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.
xxxx
(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.
xxxx
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
courts reliance on the statement49 of the representative of Nestl 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 Secretarys 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, Nestl free and clear
from any unfair labor practice. UFE-DFA-KMU argues that Nestls "refusal
to bargain on a very important CBA economic provision constitutes unfair
labor practice."52 It explained that Nestl set as a precondition for the
holding of collective bargaining negotiations the non-inclusion of the issue
of Retirement Plan. In its words, "respondent Nestl Phils., Inc. insisted
that the Union should first agree that the retirement plan is not a
bargaining issue before respondent Nestl 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
Nestl 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 UFEDFA-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 attorneys 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, Nestl 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 Nestl committed unfair labor practice by
bargaining in bad faith for supposedly "setting pre-condition in the ground
rules (Retirement issue)."56 On the contrary, Nestl, 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 Nestl, 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 UFEDFA-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 Nestl. 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 Nestl underscored its
position that "unilateral grants, one-time company grants, companyinitiated 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. Nestl, therefore, cannot
be faulted for considering the same benefit as unilaterally granted. To be

sure, it must be shown that Nestl 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 Nestls proposition involves an
appraisal of the exercise of its management prerogative.
Employers are accorded rights and privileges to assure their selfdetermination 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 companys 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-DFAKMU, Nestls 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 Nestl, 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) Nestl is not guilty of
unfair labor practice. As no other issues are availing, this ponencia writes

finis to the protracted labor dispute between Nestl and UFE-DFA-KMU

(Cabuyao Division).
WHEREFORE, in view of the foregoing, the Petition in G.R. No. 158930-31
seeking that Nestl 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 Nestl 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 Philippines
SUPREME 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.
DECISION
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 FAMITs 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
xxxx
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,
petitioners 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 MITs new proposal,
regarding faculty ranking and evaluation, lawful and consistent with the
ratified CBA? and (2) Is MITs 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 MITs 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:
xxxx
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 dutybound 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 FAMITs 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:
xxxx
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. MITs 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 Philippines
SUPREME 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.
DECISION
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 period 2
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 Unions negotiating
panel.7
In a Letter dated February 24, 1993, the Bank, through its Country
Manager Peter H. Harris, took note of the Unions 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 Banks 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 Unions 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 Unions economic proposals was made.
The next meeting, the Bank made a similar presentation. Towards the end
of the Banks presentation, Umali requested the Bank to validate the
Unions "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 Banks insistence, the parties agreed to tackle the economic
package item by item. Upon the Unions 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 Unions 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
2nd Year 850.00

40%
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 Banks
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-06380-93.26
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. 00-0604191-93 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 Banks 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 Unions 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 ones 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 UNIONS 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 Unions choice
of negotiator. It argued that, Dioknos suggestion that the negotiation be
limited as a "family affair" was tantamount to suggesting that Federation
President Jose Umali, Jr. be excluded from the Unions 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 Banks 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
Unions allegations, it was the Union that committed ULP when negotiator
Jose Umali, Jr. hurled invectives at the Banks head negotiator, Cielito
Diokno, and demanded that she be excluded from the Banks 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 latters 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 Courts 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 Unions negotiating panel, when Cielito
Diokno, the Banks Human Resource Manager, suggested to the Unions
President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the
NUBE, be excluded from the Unions 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 Unions 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 Unions
bargaining panel is tantamount to ULP.
In the aforecited cases, the alleged ULP was based on the employers
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 employers 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 selforganization 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
others 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 SELFORGANIZATION. 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, selfemployed 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 selforganization, 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 Unions 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 selforganization and collective bargaining of the employees, especially
considering that such was undertaken previous to the commencement of
the negotiation and simultaneously with Divinagracias 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 Unions 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
Banks 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 partys conduct both at
and away from the bargaining table.51 It involves the question of whether
an employers 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, 196054
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 Banks counterproposals on the noneconomic 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
Banks 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 Unions 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 Banks 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 Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 162957

March 6, 2006

UNITED KIMBERLY-CLARK EMPLOYEES UNION PHILIPPINE

TRANSPORT GENERAL WORKERS ORGANIZATION (UKCEUPTGWO), Petitioner,

vs.
KIMBERLY CLARK PHILIPPINES, INC., Respondent.
DECISION
CALLEJO, SR., J.:
Before the Court is a Petition for Review on Certiorari of the Decision 1 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 Guerreros recommendation
because his nephew was not a member of his (Guerreros) immediate

family. The matter was brought to Voluntary Arbitrator Danilo Lorredo who
ruled that Guerreros 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 KCPIs 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 petitioners 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 employees legitimate children and in default
thereof to the employees 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 employees 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 respondents 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 employers 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 Philippines
SUPREME 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 unions
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
respondents certificate of registration, docketed as NCR-OD-9710-006IRD.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 petitioners 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 Secretarys 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-9710006-IRD, issued an Order denying the petition for cancellation of
respondent unions 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 Workers 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.
xxxxxx
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 AssociationAlliance 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.
xxxxxx
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-NCRs
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.
xxxxxx
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.
xxxxxx
Secondly, We are inclined to agree with the public respondents 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).
xxxxxx
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.
xxxxxx
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-10-45397).

SO ORDERED."
On October 18, 2002, the Court of Appeals issued a Resolution denying
petitioners motion for reconsideration.
Hence, this petition for review on certiorari.
Petitioner contends that its petition for the cancellation of respondent
unions 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 unions 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. L118915."
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 respondents certificate of registration. This Order became final and
executory and recorded in the BLRs 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.
xxxxxx
(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, petitioners 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 Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149763

July 7, 2009

EDUARDO J. MARIO, 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.
DECISION
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 Resolution 3
dated 30 August 2001 of the appellate court in the same case denying
petitioners Motion for Reconsideration.
I
FACTS

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. Mario, Jr., Ma. Melvyn P. Alamis,
Norma P. Collantes, and Fernando Pedrosa were among the executive
officers and directors (collectively called the Mario 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 Mario 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
xxxx
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 members 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 nonteaching 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 SchoolYear 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.
xxxx

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 attorneys 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 attorneys 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 teachers 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. Mario, 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, DOLENational Capital Region (NCR), a Complaint for the expulsion of the Mario
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
Mario 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 attorneys/agency fees worth P4.2 million in the form
of check-off. Respondents prayed that the Mario Group be declared
jointly and severally liable for refunding all collected attorneys/agency
fees from individual members of USTFU and the collective bargaining unit;
and that, after due hearing, the Mario 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 Mario 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 Mario Group for violation of the rights and
conditions of union membership, which was docketed as Case No. NCROD-M-9510-028.13 The Complaint primarily sought to invalidate certain

provisions of the 1993-1998 CBA negotiated by the Mario 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 SecretaryGeneral, 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, DOLENCR, 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 attorneys 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 nonmembers, 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 MedArbiter 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, DOLENCR, a fourth Complaint/Petition against the Mario 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 Mario 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 Mario Group,
particularly, Case No. NCR-OD-M-9412-022, Case No. NCR-OD-M-9510028, 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 Decision 21 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 Mario 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 Mario 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 Mario 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 Mario 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 Mario Group from
their positions as USTFU officers, practically extinguished Case No. NCROD-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 Mario 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 Mario Group] to jointly and severally refund to
USTFU the amount of P4.2 M checked-off as attorneys fees from the
P42 M economic package;
c) Ordering [the Mario 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 Mario 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 Decision 30 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 attorneys 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 Mario 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 Mario
Group. Hence, the P5 million legally belonged to the Mario 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 Mario
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 Mario
Group was in the nature of attorneys 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 Mario 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 Reconsideration 34 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[.]
xxxx
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[.]
xxxx
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 attorneys fees claimed by the Petitioners. x x x.
xxxx
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 attorneys 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[.]
xxxx
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) secretarys 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 attorneys fees was submitted.
Instead, the Petitioners submitted copies of the form for the ratification of
the MOA and the check-off for attorneys fees.
xxxx
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., attorneys fees and labor education fund. x x x.
Patently, the CBL was not complied with.
Worse, the check-off for union dues and attorneys 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
attorneys 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[.]
xxxx

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[.]
xxxx
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.
xxxx
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 reconsideration 42 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 Mario 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.
II
RULING

(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 Mario
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 Mario 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 SchoolYear 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
Mario Group as attorneys/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 attorneys/agency fees
collected by the Mario 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
Mario 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 attorneys 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 attorneys 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 attorneys 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 attorneys/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 attorneys fees,
negotiation fees, or similar charges from the CBA is absurd. Petitioners
reasoning is evidently flawed since the attorneys 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 attorneys 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 attorneys 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 attorneys fees and, thus, "convert" the latter to union funds,
which could then be used to pay for the said attorneys 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 attorneys 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 Mario
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 attorneys 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 attorneys 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 Mario 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
attorneys 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 Mario 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 Mario 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 Mario 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 Mario 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 Mario 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 CAG.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
attorneys 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.