21. Sundowner Development Corp. v. Drilon
Sundown, filed a complaint for damages against NUWHRAIN in
Topic: Duty to bargain of successor employer/absorption (accretion)
doctrine
Doctrine:
Labor contracts, employment contracts, cba’s unless expressly
assumed, are not enforceable against a transferee of an enterprise. It
is in personam, hence it is binding only between the parties. It does
not create any real right bound to third parties. This conclusion draws
its force from the right of an employer to select his employees and to
decide when to engage them as protected under our Constitution,
and the same can only be restricted by law through the exercise of
the police power.
Facts:
1. Respondent, Hotel Mabuhay, entered into a lease agreement to
lease the premises of Santiago Syjuco.
2. However, Mabuhay failed to pay rentals and Syjuco filed an
ejectment case in the MTC.
3. Mabuhay agreed to settle by surrendering the premises to Syjuco
and to sell its assets to an interested party.
4. Syjuco entered into a lease agreement with petitioner, Sundown
to commence on May 1, 1987 and to expire on April 30, 1992.
5. Sundown agreed to purchase the assets of Mabuhay and they
entered into a Deed of Assignment of said assets and Syjuco
turned over the premises to Sundown.
6. Respondent National Union of Workers in Hotel, Restaurant and
Allied Services (NUWHRAIN) picketed the leased premises of
petitioner, denying them from entry.
7.
the RTC.
8. Pending litigation, Respondent Secretary of Labor assumed
jurisdiction over the labor dispute and ordered the return of all
striking employees to work and for Mabuhay to accept them as
employees.
9. Mabuhay however submit position papers stating that it had
cease operations and sold all assets to Sundown. As such, a tri-
partite agreement was entered between Sundown, Mabuhay and
NUWHRAIN where Sundown will pay NUWHRAIN the sum of
P638,000.00.
10. However, NUWHRAIN claims that all of Mabuhay’s employees
must be accepted because Mabuhay and Sundown acted in
connivance in selling the assets and closing the hotel.
11. RTC held ordering Sundown to accept those employees
Issue: WON Petitioner as the purchasers of assets of the Respondent
corporation is also the successor employer of the latter's employees?
Held: NO
Labor contracts, employment contracts, cba’s unless expressly
assumed, are not enforceable against a transferee of an enterprise. It
is in personam, hence it is binding only between the parties. It does
not create any real right bound to third parties. This conclusion draws
its force from the right of an employer to select his employees and to
decide when to engage them as protected under our Constitution,
and the same can only be restricted by law through the exercise of
the police power.
General Rule: there is no law requiring a bona fide purchaser of assets
of an employer corporation to absorb in its employment the
employees of the latter.

Exception: However, they may be legally bound to the employees if

the absorption is colored or clothed with bad faith.

Here, there is no apparent Bad Faith.

1. No connivance, When Sundown acquired the lease premises,
it was from Syjuco whom he transacted with and not
Mabuhay. It was only when Mabuhay offered to sell its assets
in the premises to Sundown that dealt with one another.
2. Sundown agreed to purchase said assets of respondent
Mabuhay to enable Mabuhay to pay its obligations to its
striking employees and to Syjuco.
3. The Deed of Assignment states: it is purely for the sale of
assets and property of Mabuhay and in no way involves any
assumption or undertaking of Sundown (petitioner) with any
existing debts or liabilities of Hotel Mabuhay to other parties.
4. The tri-partite agreement merely states: NUWHRAIN shall give
a list of its members to Sundown that it desires to recommend
for employment so that Sundown can consider them for
employment, with no commitment whatsoever on the part of
Sundown to hire them.
5. There is no duty for Sundown to inform NUWHRAIN of its
lease of the premises and its purchase of the assets.
6. No evidence that Sundown and Mabuhay are joint tortfeasors.
7. There is no continuity of business operations by Sundown as
the successor employer since it did not retain control of
Mabuhay’s business. Sundown is a corporation entirely
different from Mabuhay.