Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.Art. 101. Payment by results.

1. The Secretary of Labor and Employment shall regulate the payment of wages by results, including pakyao, piecework, and other non-time work, in order to ensure the payment of fair and reasonable wage rates, preferably through time and motion studies or in consultation with representatives of workers’ and employers’ organizations.

Chapter IIIPAYMENT OF WAGES

Art. 102. Forms of payment. No employer shall pay the wages of an employee by means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even when expressly requested by the employee.Payment of wages by check or money order shall be allowed when such manner of payment is customary on the date of effectivity of this Code, or is necessary because of special circumstances as specified in appropriate regulations to be issued by the Secretary of Labor and Employment or as stipulated in a collective bargaining agreement.

Art. 103. Time of payment. Wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. If on account of force majeure or circumstances beyond the employer’s control, payment of wages on or within the time herein provided cannot be made, the employer shall pay the wages immediately after such force majeure or circumstances have ceased. No employer shall make payment with less frequency than once a month.The payment of wages of employees engaged to perform a task which cannot be completed in two (2) weeks shall be subject to the following conditions, in the absence of a collective bargaining agreement or arbitration award:

1. That payments are made at intervals not exceeding sixteen (16) days, in proportion to the amount of work completed;

2. That final settlement is made upon completion of the work.Art. 104. Place of payment. Payment of wages shall be made at or near the place of undertaking, except as otherwise provided by such regulations as the Secretary of Labor and Employment may prescribe under conditions to ensure greater protection of wages.Art. 105. Direct payment of wages. Wages shall be paid directly to the workers to whom they are due, except:

1. In cases of force majeure rendering such payment impossible or under other special circumstances to be determined by the Secretary of Labor and Employment in appropriate regulations, in which case, the worker may be paid through another person under written authority given by the worker for the purpose; or

2. Where the worker has died, in which case, the employer may pay the wages of the deceased worker to the heirs of the latter without the necessity of intestate proceedings. The claimants, if they are all of age, shall execute an affidavit attesting to their relationship to the deceased and the fact that they are his heirs, to the exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be executed on his behalf by his natural guardian or next-of-kin. The affidavit shall be presented to the employer who shall make payment through the Secretary of Labor and Employment or his representative. The representative of the Secretary of Labor and Employment shall act as referee in dividing the amount paid among the heirs. The payment of wages under this Article shall absolve the employer of any further liability with respect to the amount paid.Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the

1

work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Art. 107. Indirect employer. The provisions of the immediately preceding article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.Art. 108. Posting of bond. An employer or indirect employer may require the contractor or subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the employees should the contractor or subcontractor, as the case may be, fail to pay the same.Art. 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid. (As amended by Section 1, Republic Act No. 6715, March 21, 1989)Art. 111. Attorney’s fees.

1. In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

2. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of wages, attorney’s fees which exceed ten percent of the amount of wages recovered.

A. PNB v. Cruz et. al.

G.R. No. 80593 December 18, 1989

PHILIPPINE NATIONAL BANK, petitioner, vs.TERESITA CRUZ, JOSE AGRIPINO, BERNARDO BAUZON, LUCRECIA BILBAO, MA. LUISA CABRERA, FRANCIS BAACLO GUADALUPE CAMACHO, LUZ DE LEON, MIKE VILLAVERDE, NEPOMUCENO MEDINA, EDGARDO MENDOZA, JENNIFER VELEZ, AMELIA MEDINA, EDUARDO ESPEJO and RICARDO BATTOrespondents.

The Chief Legal Officer for petitioner.

Romualdo C. Delos Santos for respondents.

2

GANCAYCO, J.:

The focus of the instant petition for certiorari is the application of Article 110 of the Labor Code. The said article provides that workers shall enjoy first preference with regard to wages due them in cases of bankruptcy or liquidation of an employer's business.

The antecedent facts of the case are as follows:

Sometime in 1980 Aggregate Mining Exponents (AMEX) laid-off about seventy percent (70%) of its employees because it was experiencing business reverses. The retained employees constituting thirty percent (30%) of the work force however, were not paid their wages. This non-payment of salaries went on until July 1982 when AMEX completely ceased operations and instead entered into an operating agreement with T.M. San Andres Development Corporation whereby the latter would be leasing the equipment and machineries of AMEX.

The unpaid employees sought redress from the Labor Arbiter 1 who, on August 27,1986 rendered a decision finding their claim valid and meritorious. The dispositive part of the said decision, reads:

WHEREFORE, finding the claims of complainants for payment of unpaid wages and separation pay to be valid and meritorious, respondents Aggregate Mining Exponent and its president Luis Tirso Revilla should, as they are hereby ordered to pay the same to said complainants in the following amounts:

Rate Separation Pay Backwages

P1,300.00 P5,200.00 P6,174.96

1,900.00 8,550.00 11,712.85

2,300.00 8,050.00 19,247.00

2,700.00 16,200.00 23,485.70

1,800.00 2,700.00 5,004.35

3,500.00 12,550.00 32,986.90

1,300.00 3,900.00 3,227.15

1,300.00 3,250.00 3,110.85

1,500.00 4,500.00 4,793.80

1,200.00 3,000.00 4,287.10

920.00 1,840.00 832.10

740.00 740.00 4,287.66

740.00 740.00 6,822.81

970.00 1,940.00 234.10

3,000.00 10,500.00 9,874.70

83,360.00 136,092.03

in the total amount of P219,452.03. To properly effectuate the payment of the same, the necessary arrangement should be made between respondents Amex and T.M. San Andres Development Corp. and Philippine National Bank (PNB) on their respective role and participation herein. For

3

should the principal respondent be unable to satisfy these Awards, the same can be satisfied from the proceeds or fruits of its machineries and equipment being operated by respondent T.M. San Andres Dev. Corp. either by operating agreement with respondent Amex or thru lease of the same from PNB.

To obviate any further differences between complainants and their counsel to the latter's attorney's fees which seems to be the cause of their earlier misunderstanding, as can be gleaned from the Charging Lien filed by said counsel, respondents are, moreover, ordered to segregate and pay the same directly to said counsel, the amount of which is to be computed pursuant to their agreement on July 14, 1983 (Annex A of Position to Enter Attorney's Charging Lien in the Record of the Case). 2

AMEX and its President, Tirso Revilla did not appeal from this decision. But PNB, in its capacity as mortgagee-creditor of AMEX interposed an appeal with the respondent Commission, not being satisfied with the outcome of the case. The appeal was primarily based on the allegation that the workers' lien covers unpaid wages only and not the termination or severance pay which the workers likewise claimed they were entitled to. In a resolution 3 dated October 27, 1987, the National Labor Relations Commission affirmed the decision appealed from. Hence the instant petition filed by the petitioner bank based on the following grounds:

I. ARTICLE 110 OF THE LABOR CODE MUST BE READ IN RELATION TO ARTICLES 2241, 2242, 2243, 2244 AND 2245 OF THE CIVIL CODE CONCERNING THE CLASSIFICATION, CONCURRENCE AND PREFERENCE OF CREDITS.

II. ARTICLE 110 OF THE LABOR CODE DOES NOT PURPORT TO CREATE A LIEN IN FAVOR OF WORKERS OR EMPLOYEES FOR UNPAID WAGES EITHER UPON ALL OF THE PROPERTIES

OR UPON ANY PARTICULAR PROPERTY OWNED BY THEIR EMPLOYER. 4

The petition is devoid of merit.

At the outset, petitioner PNB did not question the validity of the workers' claim for unpaid wages with respect to the mortgaged properties of AMEX, provided that the same be limited to the unpaid wages, and to the exclusion of termination pay. In the instant petition however, PNB starts off with the question of whether or not the workers' lien take precedence over any other claim considering that this Court has ruled otherwise in Republic vs. Peralta. 5

This Court cannot allow the petitioner to alter its stance at this stage inasmuch as it is deemed to have acquiesced in the decision of the labor arbiter concerning payment of unpaid wages. The records reveal that the petitioner failed to question the same on appeal. Hence, it is now barred from claiming that the workers' lien applies only to the products of their labor and not to other properties of the employer which are encumbered by mortgage contracts or otherwise.

Notwithstanding the foregoing, an attempt on the part of the petitioner to seek relief from that portion of the decision would still be in vain.

Article 110 of the Labor Code provides that:

Art. 110. Worker preference in case of bankruptcy. In the event of bankcruptcy or liquidation of an employer's business - his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims, shall be paid in full before claims of the government and other creditors may be paid.6

4

This Court must uphold the preference accorded to the private respondents in view of the provisions of Article 110 of the Labor Code which are clear and which admit of no other interpretation. The phrase "any provision of law to the contrary notwithstanding" indicates that such preference shall prevail despite the order set forth in Articles 2241 to 2245 of the Civil Code. 6-a No exceptions were provided under the said article, henceforth, none shall be considered. Furthermore, the Labor Code was signed into Law decades after the Civil Code took effect.

In Herman vs. Radio Corporation of the Philippines, 7 this Court declared that whenever two statutes of different dates and of contrary tenor are of equal theoretical application to a particular case, the statute of later date must prevail being a later expression of legislative will. Applying the aforecited case in the instant petition, the Civil Code provisions cited by the petitioner must yield to Article 110 of the Labor Code.

Moreover, Our pronouncement in A. C. Ransom Labor Union-CCLU vs. NLRC, 8 reinforces the above-mentioned interpretation where this Court, speaking through Associate Justice Melencio-Herrera, explicitly stated that "(t)he worker preference applies even if the employer's properties are encumbered by means of a mortgage contract ... So that, when (the) machinery and equipment of RANSOM were sold to Revelations Manufacturing Corporation for P2M in 1975, the right of the 22 laborers to be paid from the proceeds should have been recognized ... " 9

Reliance by the petitioners on Republic vs. Peralta is without basis. The said case involved a question of workers' preference as against the tax claims of the State. In the said case the Court held that the State must prevail in that instance since "it has been frequently said that taxes are the very lifeblood of government. The effective collection of taxes is a task of highest importance for the sovereign. It is critical indeed for its own survival ." 10

Nevertheless, under Article 110 of the Labor Code as amended, the unpaid wages and other monetary claims of workers should be paid in full before the claims of the Government and other creditors. Thus not even tax claims could have preference over the workers' claim.

Consistent with the ruling of this Court in Volkschel Labor Union vs. Bureau of Labor Relations, 11 this court adopts the doctrine that "(i)n the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration." 12 Bearing this in mind, this Court must reiterate the dictum laid down in A.C. Ransom that the conflict between Article 110 of the Labor Code and Article 2241 to 2245 of the Civil Code must be resolved in favor of the former. A contrary ruling would defeat the purpose for which Article 110 was intended; that is, for the protection of the working class, pursuant to the never-ending quest for social justice.

Petitioner next advances the theory that "even if the worker's lien applies in the instant case, the same should cover only unpaid wages excluding termination or severance pay. 13 To support this contention, petitioner cites Section 7, Rule 1, Book VI of the Rules and Regulations implementing the Labor Code which provides that:

The just causes for terminating the services of an employee shall be those provided under article 283 of the Code. The separation from work of an employee for a just cause does not entitle him to termination pay provided in the Code, emphasis supplied)

Based on that premise, petitioner contends that the claim for termination pay should not be enforced against AMEX properties mortgaged to petitioner PNB because Article 110 of the Labor Code refers only to "wages due them for services rendered during the period prior to bankcruptcy or liquidation." 14 Citing serious financial losses as the basis for the termination of the private respondents, petitioner alleges that the employees are not entitled to the termination pay which they claim.

This contention is, again, bereft of merit.

The respondent Commission noted that "AMEX failed to adduce convincing evidence to prove that the financial reverses were indeed serious." 15 After a

5

careful study of the records of the case, this Court finds no reason to alter the findings of the respondent Commission.

In Garcia vs. National Labor Relations Commission , 16 it was held that "it is essentially required that the alleged losses in business operations must be proved. " 17 This policy was adopted to obviate the possibility of an employer fabricating business reverses in order to ease out employees for no apparent reason. Hence, no departure shall be made by this Court from the ruling in Philippine Commercial and Industrial Bank vs. National Mines and Allied Workers Union (NAMAWU-MIF) 18where it was categorically stated that the term "wages" includes not only remunerations or earnings payable by an employer for services rendered or to be rendered, but also covers all benefits of the employees under a Collective Bargaining Agreement like severance pay, educational allowance, accrued vacation leave earned but not enjoyed, as well as workmen's compensation awards and unpaid salaries for services rendered. All of these benefits fall under the term "wages" which enjoy first preference over all other claims against the employer. 19

Furthermore, in Peralta, this Court held that for purposes of the application of Article 110, "termination pay is reasonably regarded as forming part of the remuneration or other money benefits accruing to employees or workers by reason of their having previously rendered services..." 20 Hence, separation pay must be considered as part of remuneration for services rendered or to be rendered.

Indeed Article 110 of the Labor Code, as amended, aforecited, now provides that the workers' preference covers not only unpaid wages but also other monetary claims.

The respondent Commission was, therefore, not in error when it awarded the termination pay claimed by the private respondents. As far as the latter are concerned, the termination pay which they so rightfully claim is an additional remuneration for having rendered services to their employer for a certain period of time. Noteworthy also is the relationship between termination pay and services rendered by an employee, that in computing the amount to be given to an employee as termination pay, the length of service of such

employee is taken into consideration such that the former must be considered as part and parcel of wages. Under these circumstances then, this Court holds that the termination or severance pay awarded by the respondent Commission to the private respondents is proper and should be sustained.

Lastly, it must be noted that the amount claimed by petitioner PNB for the satisfaction of the obligations of AMEX is relatively insubstantial and is not significant enough as to drain its coffers. By contrast, that same amount could mean subsistence or starvation for the workingman. Quoting further from Philippine Commercial and Industrial Bank, this Court supports the equitable principle that "it is but humane and partakes of the divine that labor, as human beings, must be treated over and above chattels, machineries and other kinds of properties and the interests of the employer who can afford and survive the hardships of life better than their workers. Universal sense of human justice, not to speak of our specific social justice and protection to labor constitutional injunctions dictate the preferential lien that the above provision accord to labor. 21 In line with this policy, measures must be undertaken to ensure that such constitutional mandate on protection to labor is not rendered meaningless by an erroneous interpretation of the applicable laws.

WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit. No costs.

SO ORDERED.

Narvasa, Griño-Aquino and Medialdea, JJ, concur.

B. DBP v. NLRCG.R. No. 86227 January 19, 1994

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.THE NATIONAL LABOR RELATIONS COMMISSION and MALAYANG SAMAHAN NG MGA MANGAGAWA SA ATLAS TEXTILE DEVELOPMENT CORPORATION, respondents.

6

The Chief Legal Counsel, Development Bank of the Philippines for petitioner.

VITUG, J.:

This "petition for review on certiorari" ( in reality a petition for certiorari), filed by the Development Bank of the Philippines ("DBP"), seeks the reversal of the decision of the National Labor Relations Commission ("NLRC"), affirming that of the Labor Arbiter, which holds the petitioner, along with Atlas Textile Development Corporation ("ATLAS"), liable to the private respondents for wage differentials, "illegal" salary deductions, separation pay, and similar money claims.

The private respondents were employees of ATLAS, a textile firm, which hypothecated its certain assets to DBP. After ATLAS defaulted in its obligations, DBP foreclosed on the mortgage in March 1985. The latter acquired the mortgaged assets by virtue of the foreclosure sale.

The private respondents filed their aforementioned claim, on 30 October 1985, against both ATLAS and DBP. The Labor Arbiter ruled for the private respondents. On appeal by DBP, the decision was sustained by the NLRC.

Hence, the instant petition.

The petitioner contends that it is error on the part of the public respondent to consider the workers' preference under Article 110 of the Labor Code over that of DBP's mortgage lien.

The issue has been put to fore in a number of cases brought to and decided by this Court.

In Republic vs. Peralta, 150 SCRA 37, the Court, through Mr. Justice Feliciano, ruled:

Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages does not therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages are already covered by Article 2241, number 6: "claims for laborers' wages, on the goods manufactured or the work done;" or by Article 2242, number 3: "claims of laborers and other workers engaged in the construction, reconstruction or repair of buildings, canals and other works upon said buildings, canals or other works." To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the category of ordinary preferred credits under Article 2244. Applying Article 2241, number 6 to the instant case, the claims of the Unions for separation pay of their members constitute liens attaching to the processed leaf tobacco, cigars and cigarettes and other products produced or manufactured by Insolvent, but not to other assets owned by the Insolvent. And even in respect of such tobacco and tobacco products produced by Insolvent, the claims of the Unions may be given effect only after the Bureau of Internal Revenue's claim for unpaid tobacco inspection fees shall have been satisfied out of the products so manufactured by the Insolvent.

Article 110 of the Labor Code was later amended by Republic ActNo. 6715 which became effective on 21 march 1989. And so modified, the provision thenceforth provided:

Article 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any

7

provision of law to the contrary notwithstanding. Such unpaid wages, and monetary claims shall be paid in full before the claims of the Government and other creditors may be paid.

The effects of the amendatory law were put to issue and passed upon in subsequent cases. In Development Bank of the Philippines vs. National Labor Relations Commission, 183 SCRA 328, the Court, through, Mme. Justice Melencio-Herrera, elucidated:

The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate.

xxx xxx xxx

Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. Does this mean then that liquidation proceedings have been done away with?

We opine in the negative upon the following considerations:

1. Because of its impact on the entire system of credit,Article 110 of the labor Code cannot be viewed in isolation but must be read in relation to the Civil Code scheme on classification and preference of credits.

xxx xxx xxx

2. In the same way that the Civil Code provisions on classification of credits and the Insolvency Law have been brought into harmony, so also must the kindered provisions of the Labor Law be made to harmonize with those laws.

3. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property among his creditors. To accomplish this there must first be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated (De Baretto vs. Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The rationale therefore has been expressed in the recent case of DBP vs. Secretary of Labor (G.R. No. 79351, 28 November 1989), . . .

4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment debtor.

xxx xxx xxx

6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean "absolute preference," the same should be given only prospective effect in line with the cardinal rule that laws have no retroactive effect, unless the contrary is provided (Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on non-impairment of the obligation of contracts (Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by several years the amendatory law, RA No. 6715. To give Article 110

8

retroactive effect would be to wipe out the mortgage in DBP's favor and expose it to a risk which is sought to protect itself against by requiring a collateral in the form of real property.

In fine, the right of preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency, such unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences determined in the course of judicial proceedings which have for their object the subjection of the property of the debtor of the payment of his debts and other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine Savings bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication made will be binding on all parties-in-interest, since those proceedings are proceeding in rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony.

The ruling was reiterated in Development Bank of the Philippines vs. National Labor Relations Commission, 186 SCRA 841, as well as cases thereafter, and just recently in Development Bank of the Philippines vs. NLRC, 218 SCRA 183.

The case at bench concerns monetary claims of workers that are not involved in judicial proceedings in rem in adjudication of claims of creditors vis-a-vis the assets of the debtor, nor have such claims accrued after the effectivity of Republic Act 6715. The petition thus raises issues heretofore squarely resolved in our aforequoted decisions. To recapitulate.

(1) Article 110 of the Labor Code, as amended, must be viewed and read in conjunction with the provisions of the Civil Code on concurrence and preferences of credits;

(2) The aforesaid provisions of the Civil Code, including Article 110 of the Labor Code, require judicial proceedingsin rem in adjudication of creditors' claims against the debtor's assets to become operative;

(3) Republic Act No. 6715 has the effect of expanding the "worker preference" to cover not only unpaid wages but also other monetary claims of laborers, to which even claims of the Government must be deemed subordinate; and

(4) The amendatory provisions of Republic Act 6715, which took effect on 21 march 1989, should only be given prospective application.

WHEREFORE, the petition is GRANTED. The assailed decision of public respondent, National Labor Relations Commission and that of the Labor Arbiter, insofar as the latter holds the petitioner liable for monetary claims of private respondents, are hereby REVERSED and SET ASIDE.

SO ORDERED.

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

C. Ortiz v. San Miguel Corporation

THIRD DIVISION

JOSE MAX S. ORTIZ, Petitioner,

G.R. No. 151983-84

Present:

YNARES-SANTIAGO, J., Chairperson,

AUSTRIA-MARTINEZ,

9

- versus -

SAN MIGUEL CORPORATION, Respondent.

CHICO-NAZARIO,REYES, andDE CASTRO,* JJ.

Promulgated:

July 31, 2008

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

D E C I S I O N

CHICO-NAZARIO, J.:

This case is a Petition for Review on Certiorari under Rule 45 of the

1997 Revised Rules of Civil Procedure seeking to modify or partially reconsider

the Decision[1] dated 22 August 2001 and Resolution[2] dated 9 January 2002 of

the Court of Appeals in CA-G.R. SP No. 54576-77, insofar as the award of

attorney’s fees is concerned. Herein petitioner Jose Max S. Ortiz prays that

this Court affirm the award of attorney’s fees equivalent to 10% of the

monetary award adjudged by the National Labor Relations Commission (NLRC)

in its Decisions dated 21 July 1995 and 25 July 1995 in NLRC Cases No. V-0255-

94[3] and No. V-0068-95,[4] respectively. Petitioner asserts that he is entitled to

the said attorney’s fees.

Petitioner is a member of the Philippine Bar who represented the

complainants in NLRC Cases No. V-0255-94 and No. V-0068-95 instituted

against herein private respondent San Miguel Corporation sometime in 1992

and 1993.

Private respondent, on the other hand, is a corporation duly

organized and existing under and by virtue of the laws of the Republic of

the Philippines. It is primarily engaged in the manufacture and sale of food

and beverage particularly beer products. In line with its business, it operates

breweries and sales offices throughout the Philippines.[5] The complainants in

NLRC Cases No. V-0255-94 and No. V-0068-95were employees at private

respondent’s Sales Offices in the provinces.

 

NLRC Case No. V-0255-94 (Aguirre Cases)

In 1992, several employees from the Bacolod, Cadiz, and Himamaylan

Beer Sales Offices filed with the Labor Arbiter separate complaints against

private respondent for illegal dismissal with prayer for reinstatement with

backwages; elevation of employment status from casual-temporary to regular-

permanent reckoned after six months from the start of complainants’

employment; underpayment of salaries; non-payment of holiday pay, service

incentive leave pay, allowances and sick leaves; non-payment of benefits under

the existing Collective Bargaining Agreements (CBA); attorney’s fees; moral,

exemplary and other damages; and interest. The foregoing complaints were

10

consolidated and initially docketed as RAB Cases No. 06-01-10031-92; 06-01-

10048-92; 06-01-10049-92; 06-02-10210-92; 06-02-10211-92; and 06-03-

10255-92 (hereinafter collectively referred to as the Aguirre   Cases). After

conducting a full-blown trial, the parties were given the opportunity to submit

their respective memoranda. Subsequently, the cases were submitted for

resolution.

On 30 June 1994, Labor Arbiter Reynaldo J. Gulmatico (Labor Arbiter

Gulmatico) rendered a Decision[6] in the Aguirre Cases finding all the

complainants to have been illegally dismissed. He ordered complainants’

reinstatement to their previous or equivalent positions without loss of

seniority rights. He also ordered private respondent to pay the complainants

(1) full backwages and other CBA benefits in the total amount

of P6,197,952.88; (2) rice subsidy or its monetary equivalent; and

(3) attorney’s fees equivalent to 10% of the monetary award or in the

amount of P619,795.28. Labor Arbiter Gulmatico, however, dismissed

complainants’ claim for overtime pay, holiday pay, 13th month pay differential,

service incentive leave pay, moral damages and all other claims for lack of

merit.[7]

Unsatisfied with Labor Arbiter Gulmatico’s monetary and economic

awards, complainants appealed to the NLRC, where the Aguirre

Cases were collectively docketed as NLRC Case No. V-0255-94. The NLRC

would later render a Decision dated 21 July 1995 in the Aguirre Cases affirming

the Decision of Labor Arbiter Gulmatico, with the following modifications: (1)

granting sales commission to the complainants and adopting their computation

thereof in their Appeal Memorandum[8] filed before the NLRC; (2) adjusting

and/or reducing the amounts awarded to complainants Alfredo Gadian, Jr.,

Renato Junsay, Agustines Llacuna, and Florencio de la Piedra depending on the

dates they were employed; (3) determining that Modesto Jabaybay, who

died on 28 December 1993, was to receive only the amount ofP356,128.02; (4)

declaring that all the complainants except Romeo Magbanua, who withdrew

his complaint, were entitled to whatever benefits were given under the CBA;

and (5) that complainants Romeo Magbanua and Modesto Jabaybay shall no

longer be reinstated.[9]

Private respondent moved for the reconsideration of the aforesaid 21

July 1995 NLRC Decision, but its motion was denied by the NLRC in its

Resolution[10] dated 27 February 1996.

NLRC Case No. V-0068-95 (Toquero Case)

While the Aguirre Cases were still pending resolution by Labor Arbiter

Gulmatico, three other employees at the San Carlos Sales Office filed with the

Labor Arbiter a similar complaint for illegal dismissal against private

respondent in 1993. Their complaint was docketed as RAB Case No. 06-07-

10404-93 (hereinafter referred to as the Toquero Case).

11

On 26 December 1994, Labor Arbiter Ray Allan T. Drilon (Labor Arbiter

Drilon) rendered his Decision[11] in the Toquero Case also ruling that the three

complainants were illegally dismissed. Thus, he ordered the complainants’

immediate reinstatement to their former positions without loss of seniority

rights. He ordered private respondent to pay complainants (1) backwages and

other benefits in the amount ofP572,542.50; (2) all benefits, privileges and

rights enjoyed by the private respondent’s regular employees in the total

amount of P339,055.00; (3) a total of 159 sacks of rice ration; (4) sales

commissions based on the monthly sales of beer sold by their office for the last

three years; and (5) attorney’s fees in the amount of P91,159.75.[12]

Again, the complainants were not contented with Labor Arbiter Drilon’s

Decision, and they appealed their case to the NLRC which was then docketed

as NLRC Case No. V-0068-95. On 25 July 1995, the NLRC rendered a Decision

modifying the 26 December 1994 Decision of Labor Arbiter Drilon by ordering

the private respondent to pay the complainants the following: (1) additional

awards of sales commission; (2) tailoring allowance; (3) monetary equivalent of

their uniform for two years consisting of 24 sets of t-shirts and 6 pairs of pants;

and (4) attorney’s fees of 10% of the total monetary award orP198,296.95.[13]

In its Resolution[14] dated 9 October 1995, the NLRC partially granted

private respondent’s motion for reconsideration by allowing the deduction

from the award of backwages any earnings of complainants elsewhere during

the pendency of their case.[15]

CA-G.R. SP No. 54576-77

Failing to get a favorable ruling from the NLRC in both

the Aguirre and Toquero Cases, private respondent elevated the NLRC

Decisions to this Court via a Petition for Certiorari, where they were docketed

as G.R. No. 124426[16] and G.R. No. 122975, respectively.[17] On 15 July 1996,

this Court issued a Resolution[18] consolidating the two cases. In another

Resolution[19] dated 30 June 1999, this Court referred the said cases to the

Court of Appeals conforming to its ruling in St. Martin Funeral Home v. NLRC

and Bienvenido Aricayos.[20] The Court of Appeals accepted the consolidated

cases in its Resolution[21] dated 7 September 1999, and docketed the same as

CA-G.R. SP No. 54576-77.

While the private respondent’s Petitions for Certiorari were pending

before the Court of Appeals, all but one of the remaining complainants in

the Aguirre and Toquero Cases appeared on various dates before Labor

Arbiters Gulmatico and Drilon, and in the presence of two witnesses, signed

separate Deeds of Release, Waiver and Quitclaim[22] in favor of private

respondent. Based on the Deeds they executed, the complainants agreed to

settle their claims against private respondent for amounts less than what the

12

NLRC actually awarded. Private respondent withheld 10% of the total amount

agreed upon by the parties in the said Deeds as attorney’s fees and handed it

over to petitioner.

Private respondent then attached the Deeds of Release, Waiver and

Quitclaim to its Manifestation and Motion[23] filed before the appellate

court. On 22 August 2001, the Court of Appeals rendered a Decision[24] in CA-

G.R. SP No. 54576-77 affirming the NLRC Decision dated 21 July 1995 and

Resolution dated 27 February 1996 in the Aguirre Cases, only insofar as it

concerned complainant Alfredo Gadian, Jr. (complainant Gadian), the only

complainant who did not execute a Deed of Release, Waiver and

Quitclaim. With respect to the other complainants in the Aguirre and Toquero

Cases, their complaints were dismissed on account of their duly executed

Deeds of Release, Waiver and Quitclaim.[25]

Private respondent moved for the partial reconsideration of the 22

August 2001 Decision of the Court of Appeals, seeking the reversal and setting

aside of the 22 August 2001 Decision of the Court of Appeals in CA-G.R. SP. No.

54576-77, which affirmed the 21 July 1995 Decision and 27 February 1996

Resolution of the NLRC in the Aguirre Cases, insofar as complainant Gadian was

concerned; and the dismissal of complainant Gadian’s complaint against

private respondent for lack of merit.[26] Complainant Gadian and his counsel,

herein petitioner, for their part, likewise moved for the partial reconsideration

of the same Decision of the appellate court praying that the award of

attorney’s fees of 10% should be based on the monetary awards adjudged by

the NLRC.[27] In a Resolution[28] dated 9 January 2002, the appellate court

denied both motions.

G.R. No. 151421 and No. 151427

Private respondent appealed before this Court by filing a Petition for

Review, docketed as G.R. No. 151421 and No. 151427. However, private

respondent’s Petition was denied due course by this Court in a

Resolution[29] dated 18 March 2002 for failure of the private respondent to

show that a reversible error had been committed by the appellate court. The

Court also denied private respondent’s motion for reconsideration.[30] The

denial of the private respondent’s Petition in G.R. No. 151421 and No. 151427

became final and executory on 24 July 2002.[31]

G.R. No. 151983-84

Petitioner filed this present Petition for Review on his own behalf,

docketed as G.R. No. 151983-84, praying that this Court grant him attorney’s

fees equivalent to those awarded by the NLRC in theAguirre and Toquero

Cases. He makes the following lone assignment of error in his Petition:

THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS

COMMITTED GRAVE ABUSE OF DISCRETION IN NOT

13

AWARDING ATTORNEY’S FEES BASED ON THE ORIGINAL AWARD MADE BY THE NLRC-FOURTH DIVISON.[32]

In his Memorandum,[33] petitioner posits the following issues:

I. WHETHER THE PRESENT PETITION RAISES A

QUESTION OF LAW.

II. WHETHER PETITIONER IS A REAL PARTY IN INTEREST TO FILE THE PRESENT PETITION.

III. WHETHER PETITIONER IS ENTITLED TO ADDITIONAL

ATTORNEY’S FEES ON TOP OF WHAT WAS ALREADY RECEIVED.[34]

Petitioner alleges that the Decision of the appellate court was

prejudicial only insofar as it failed to grant 10% attorney’s fees based on the

monetary and economic awards adjudged by the NLRC in its Decisions in

the Aguirre and Toquero Cases. Considering that the only complainant who did

not execute a Deed of Release, Waiver and Quitclaim, namely, complainant

Gadian, obtained a favorable judgment from the Court of Appeals, he was no

longer interested in pursuing an appeal; and petitioner is, thus, constrained to

bring the present Petition, with himself as the forced petitioner, for the

purpose of recovering the aforesaid attorney’s fees.

In the instant Petition, petitioner is claiming additional attorney’s

fees, representing the difference between the amount as decreed in the NLRC

Decisions in the Aguirre and Toquero Cases and the amount he already

received from private respondent, equivalent to the 10% attorney’s fees the

latter withheld from the amounts it actually paid to the complainants who

signed the Deeds of Release, Waiver and Quitclaim.

Petitioner avows that he is entitled to attorney’s fees based on the

monetary awards as stated in the Decisions of the NLRC in

the Aguirre and Toquero Cases because (1) the Deeds of Release, Waiver and

Quitclaim executed by all but one of the complainants during the pendency of

CA-G.R. SP. No. 54576-77 before the Court of Appeals were done without his

conformity; (2) he, together with his assistant lawyers, had invested substantial

time and effort for more than seven or eight years and even spent

considerable amounts of personal money for the prosecution of these

consolidated cases from the Labor Arbiter up to this Court; hence, it would be

grossly unfair for the petitioner to receive only 10% of the financial assistance

given to the complainants by virtue of the Deeds of Release, Waiver and

Quitclaim they signed; and (3) petitioner’s right to attorney’s fees has become

vested after rendering painstaking legal services to the complainants, making

him and his collaborating counsels entitled to the full amount of attorney’s

fees as awarded by the NLRC.

While this Court concedes that the instant Petition for Review raises a

question of law, it denies the Petition for lack of merit and lack of

petitioner’s standing to file the same.

14

This Court has consistently ruled that a question of law exists when there

is a doubt or controversy as to what the law is on a certain state of facts. On

the other hand, there is a question of fact when the doubt or difference arises

as to the alleged truth or falsehood of the alleged facts. For a question to be

one of law, it must involve no examination of the probative value of the

evidence presented by the litigants or any of them.[35] The test of whether a

question is one of law or of fact is not the appellation given to such question by

the party raising the same; rather, it is whether the appellate court can

determine the issue raised without reviewing or evaluating the evidence, in

which case, it is a question of law; otherwise, it is a question of fact.[36]

In the case at bar, the core issue presented by the petitioner is with

respect to the amount of attorney’s fees to which he should be

entitled: whether he is entitled to the amount of attorney’s fees as adjudged

by the NLRC in its Decisions in the Aguirre and Toquero Cases or only to the

10% of the amounts actually paid to his clients, the complainants who signed

the Deeds of Release, Waiver and Quitclaim.

The aforesaid issue evidently involves a question of law. In determining

whether the petitioner should be entitled to the attorney’s fees stated in the

NLRC Decisions, this Court does not need to go over the pieces of evidence

submitted by the parties in the proceedings below to determine their

probative value. What it needs to do is ascertain and apply the relevant law

and jurisprudence on the award of attorney’s fees to the prevailing parties in

labor cases.

Article 111 of the Labor Code, as amended, specifically provides:

ART. 111. ATTORNEY’S   FEES. - (a) In cases of unlawful

withholding of wages the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorney’s fees which exceed ten percent of the amount of wages recovered. (Emphasis supplied.)

In PCL Shipping Philippines, Inc. v. National Labor Relations

Commission[37] citing Dr. Reyes v. Court of Appeals,[38] this Court enunciated that

there are two commonly accepted concepts of attorney’s fees, the so-

called ordinary and extraordinary. In its ordinary concept, an attorney’s fee is

the reasonable compensation paid to a lawyer by his client for the legal

services the former has rendered to the latter. The basis of this compensation

is the fact of the attorney’s employment by and his agreement with the

client. In its extraordinary concept, attorney’s fees are deemed indemnity for

damages ordered by the court to be paid by the losing party in a litigation. The

instances in which these may be awarded are those enumerated in Article

2208 of the Civil Code, specifically paragraph 7[39] thereof, which pertains to

15

actions for recovery of wages, and is payable not to the lawyer but to the

client, unless they have agreed that the award shall pertain to the lawyer as

additional compensation or as part thereof.[40] Article 111 of the Labor Code,

as amended, contemplates the extraordinary concept of attorney’s fees.

Still according to PCL Shipping, Article 111 is an exception to the

declared policy of strict construction in the awarding of attorney’s

fees. Although express findings of fact and law are still necessary to prove the

merit of the award, there need not be any showing that the employer acted

maliciously or in bad faith when it withheld the wages. In carrying out and

interpreting the Labor Code’s provisions and implementing regulations, the

employee’s welfare should be the primordial and paramount

consideration. This kind of interpretation gives meaning and substance to the

liberal and compassionate spirit of the law as provided in Article 4 of the Labor

Code, which states that “all doubts in the implementation and interpretation

of the provisions of the Labor Code including its implementing rules and

regulations, shall be resolved in favor of labor”; and Article 1702 of the Civil

Code, which provides that “in case of doubt, all labor legislation and all labor

contracts shall be construed in favor of the safety and decent living for the

laborer.”[41]

Based on the foregoing, the attorney’s fees awarded by the NLRC in its

Decisions in the Aguirre and Toquero Cases pertain to the complainants,

petitioner’s clients, as indemnity for damages; and not to petitioner as

compensation for his legal services. Records show that the petitioner neither

alleged nor proved that his clients, the complainants, willingly agreed that the

award of attorney’s fees would accrue to him as an additional compensation or

part thereof.

What the complainants explicitly agreed to in their individual Deeds

of Release, Waiver, and Quitclaim was that the 10% attorney’s fees of the

petitioner shall be deducted from the amount of the gross

settlement. Provision 8 of the Deeds of Release, Waiver and Quitclaim reads:

8. x x x. As a client, I have the right to decide on the matter of whether to settle my case and the amount of the settlement, which right I am now exercising without prejudice to my counsel’s claim to the legally mandated 10% attorney’s fees. As a matter of fact, I had requested and [herein private respondent] has complied with it, that [private respondent] deduct from the gross settlement 10% representing attorney’s fees of [herein petitioner] and make a check payable to the latter in such amount.[42] (Emphasis supplied.)

The foregoing provision cannot be taken to mean that the complainants

concerned agreed that the attorney’s fees awarded by the NLRC pertained to

petitioner as additional compensation or part thereof since (1) the Deeds were

executed between complainants and private respondent, the petitioner was

not even a party to the said documents; and (2) private complainants’ request

that private respondent withhold 10% attorney’s fees to be payable to

16

petitioner was in relation to the amount of gross settlement under the Deeds

and not to the amounts awarded by the NLRC. In fact, petitioner challenges

the due execution of the Deeds, and may not now take an inconsistent position

by using the provisions of the very same Deeds as proof that complainants

impliedly or expressly agreed that the attorney’s fees awarded by the NLRC

pertained to him under the ordinary concept of attorney’s fees.

Thus, this Court has no recourse but to interpret the award of

attorney’s fees by the NLRC in its extraordinary concept. And since the

attorney’s fees pertained to the complainants as indemnity for damages, it was

totally within the complainants’ right to waive the amount of said attorney’s

fees and settle for a lesser amount thereof in exchange for the immediate end

to litigation. Petitioner cannot prevent complainants from compromising

and/or withdrawing their complaints at any stage of the proceedings just to

protect his anticipated attorney’s fees.

Even assuming arguendo that the complainants in

the Aguirre and Toquero Cases did indeed agree that the attorney’s fees

awarded by the NLRC should be considered in their ordinary concept, i.e., as

compensation for petitioner’s services, we refer back to Article 111 of the

Labor Code, as amended, which provides that the attorney’s fees should be

equivalent to 10% of the amount of wages recovered. Since the complainants

decided to settle their complaints against the private respondent, the amounts

actually received by them pursuant to the Deeds of Release, Waiver and

Quitclaim are the amounts “recovered” and the proper basis for determining

the 10% attorney’s fees.

Petitioner cannot claim further to be a real party in interest herein for

the very same reasons already discussed above.

It is elementary that it is only in the name of a real party in interest that a

civil suit may be prosecuted.[43] Section 2, Rule 3 of the 1997 Revised Rules of

Civil Procedure, as amended, provides:

SEC. 2. Parties in interest. – A real party in interest

is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.

The established rule is that a real party in interest is one who would be

benefited or injured by the judgment, or one entitled to the avails of the suit.

The word “interest,” as contemplated by the Rules, means material interest or

an interest in issue and to be affected by the judgment, as distinguished from

mere interest in the question involved or a mere incidental interest. Stated

differently, the rule refers to a real or present substantial interest as

distinguished from a mere expectancy or a future, contingent, subordinate, or

consequential interest. As a general rule, one who has no right or interest to

17

protect cannot invoke the jurisdiction of the court as party-

plaintiff in an action.[44]

The afore-quoted rule has two requirements: 1) to institute an action,

the plaintiff must be the real party in interest; and 2) the action must be

prosecuted in the name of the real party in interest. Necessarily, the purposes

of this provision are 1) to prevent the prosecution of actions by persons

without any right or title to or interest in the case; 2) to require that the actual

party entitled to legal relief be the one to prosecute the action; 3) to avoid a

multiplicity of suits; and 4) to discourage litigation and keep it within certain

bounds, pursuant to sound public policy.[45]

In the case at bar, it is beyond cavil that the petitioner is not the real

party in interest; hence, he cannot file this Petition to recover the attorney’s

fees as adjudged by the NLRC in its Decisions dated 21 July 1995 and 25 July

1995 in the Aguirre and Toquero Cases, respectively. To reiterate, the award of

attorney’s fees pertain to the prevailing parties in the NLRC cases, namely, the

complainants, all but one of whom no longer pursued their complaints against

private respondent after executing Deeds of Release, Waiver and

Quitclaim. Not being the party to whom the NLRC awarded the attorney’s

fees, neither is the petitioner the proper party to question the non-awarding of

the same by the appellate court.

In addition, as found by the Court of Appeals, when the complainants

executed their respective Deeds of Release, Waiver and Quitclaim, petitioner

already received attorney’s fees equivalent to 10% of the amounts paid to the

complainants in accordance with the Deeds, as evidenced by several cash

vouchers and checks payable to petitioner[46] and signed by his representative.[47] Even petitioner himself admitted this fact.

This would show that petitioner has been compensated for the

services he rendered the complainants. It may do well for petitioner to

remember that as a lawyer, he is a member of an honorable profession,

the primary vision of which is justice. The practice of law is a decent

profession and not a money-making trade. Compensation should be but a

mere incident.[48]

If petitioner earnestly believes that the amounts he already received

are grossly deficient, considering the substantial time and efforts he and his

assistant lawyers invested, as well as the personal money he expended for the

prosecution of complainants’ cases for more than seven or eight years, then

petitioner’s remedy is not against the private respondent, but against his own

clients, the complainants. He should file a separate action for collection of sum

of money against complainants to recover just compensation for his legal

services, and not the present Petition for Review to claim from private

respondent the attorney’s fees which were adjudged by the NLRC in favor of

complainants as the prevailing parties in the Aguirre and Toquero Cases.

18

Finally, as stated earlier, petitioner assails the Deeds of Release,

Waiver and Quitclaim executed by the complainants for being executed

without his conformity and, thus, in violation of the requirements of the Labor

Code. Such argument is specious.

There is no specific provision in the Labor Code, as amended, which

requires the conformity of petitioner, as the complainants’ counsel, to make

their Deeds of Release, Waiver and Quitclaim valid. The only requisites for the

validity of any Deed of Release, Waiver and Quitclaim are the following: (1)

that there was no fraud or deceit on the part of any of the parties; (2) that the

consideration for the quitclaim is credible and reasonable; and (3) that the

contract is not contrary to law, public order, public policy, morals or good

customs or prejudicial to a third person with a right recognized by law. [49] In

this case, it cannot be questioned that those requisites were completely

satisfied, making the Deeds of Release, Waiver and Quitclaim individually

executed by the complainants valid.

Moreover, both the NLRC and the Court of Appeals found the Deeds

of Release, Waiver and Quitclaim to be validly and willfully executed by the

complainants. The Court of Appeals ruled:

Further, as correctly stated by the [herein private respondent], to wit:

‘The separate Deeds of Release, Waiver and Quitclaim were all executed and signed by the private respondents concerned before the Labor Arbiter, Hon. Reynaldo Gulmatico, who handled the case a quo and rendered the decision in favor of [complainants therein]. As a matter of course, a Labor Arbiter asks, and even explains, to the person executing a quitclaim before him about the contents and the implications thereof. It is only after the Labor Arbiter has satisfied himself that the quitclaim involved was voluntarily executed by the person concerned and that there is a substantial consideration involved would he sign it.’

“While quitclaims executed by employees are

commonly frowned upon as contrary to public policy and are ineffective to bar claims for the full measure of the employees’ legal rights, there are legitimate waivers that represent a voluntary and reasonable settlement of laborers’ claims which should be respected by the courts as the law between the parties.”[50]

WHEREFORE, premises considered, the instant Petition is

hereby DENIED. Costs against petitioner.

SO ORDERED.

D. Lingkod Manggagawa sa Rubberworld v. Rubberworld

19

FIRST DIVISION

LINGKOD MANGGAGAWA SA RUBBERWORLD, ADIDAS-ANGLO, its officers and members as represented by SONIA ESPERANZA,

Petitioners,

- versus -

RUBBERWORLD (PHILS.) INC. and ANTONIO YANG, LAYA MANANGHAYA SALGADO & CO., CPA’s (In its capacity as liquidator of Rubberworld (Phils., Inc.),

Respondents.

G.R. No. 153882

Present:

PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ.

Promulgated:

January 29, 2007

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

D E C I S I O N

GARCIA, J.:

Assailed and sought to be set aside in this petition for review under Rule

45 of the Rules of Court is the Decision[1] dated January 18, 2002 of the Court

of Appeals (CA) in CA-G.R. SP No. 53356, as reiterated in its Resolution[2] of

June 5, 2002, denying the petitioners’ motion for reconsideration. The assailed

CA decision annulled and set aside an earlier decision of the Labor Arbiter, as

well as the resolution/order and writ of execution issued by the National Labor

Relations Commission (NLRC) in a labor dispute between the petitioners and

the respondents over which a suspension order had been issued by the

Securities and Exchange Commission (SEC).

Petitioner Lingkod Manggagawa sa Rubberworld, Adidas-Anglo is a

legitimate labor union whose members were employees of the principal

respondent, Rubberworld Philippines, Inc.(Rubberworld, for short), a domestic

corporation engaged in the manufacture of footwear, bags and garments.

The facts:

On August 26, 1994, Rubberworld filed with the Department of Labor and

Employment (DOLE) a Notice of Temporary Partial Shutdown due to severe

financial crisis, therein announcing the formal actualcompany shutdown to

take effect on September 26, 1994. A copy of said

notice was served on the recognized labor union of Rubberworld, the Bisig

Pagkakaisa-NAFLU, the union with which the corporation had a collective

bargaining agreement.

On September 1, 1994, Bisig Pagkakaisa-NAFLU staged a strike. It set up

a picket line in front of the premises of Rubberworld and even welded its gate.

As a result, Rubberworld's premises closed prematurely even before the date

set for the start of its temporary partial shutdown.

20

On September 9, 1994, herein petitioner union, the Lingkod

Manggagawa Sa Rubberworld, Adidas-Anglo (Lingkod, for

brevity), represented by its President, Sonia Esperanza, filed a complaint

against Rubberworld and its Vice Chairperson, Mr. Antonio Yang, for unfair

labor practice (ULP), illegal shutdown, and non-payment of salaries and

separation pay. In its complaint, docketed as NLRC-NCR-Case No. 00-09-06637

(hereinafter referred to as ULP Case, for brevity), petitioner union alleged that

it had filed a petition for certification election during the freedom period,

which petition was granted by the DOLE Regional Director. In the same

complaint, petitioner union claimed that the strike staged by Bisig Pagkakaisa-

NAFLU was company-instigated/supported. The said complaint was referred to

Labor Arbiter Ernesto Dinopol for appropriate action.

On November 22, 1994, while the aforementioned complaint was pending

with Labor Arbiter Dinopol, Rubberworld filed with the SEC a Petition for

Declaration of a State of Suspension of Payments with Proposed Rehabilitation

Plan. The petition, docketed as SEC Case No. 11-94-4920, was granted by the

SEC in its Order[3] dated December 28, 1994, to wit:

Accordingly, with the creation of the Management Committee, all actions for claims against Rubberworld Philippines, Inc. pending before any court, tribunal, office, board, body, Commission or sheriff are hereby deemed SUSPENDED.

Consequently, all pending incidents for preliminary injunctions, writ of attachments, foreclosures and the like are hereby rendered moot and academic. SO ORDERED.

Notwithstanding the SEC's aforementioned suspension order

and despite Rubberworld's submission on January 10, 1995 of a Motion to

Suspend Proceedings,[4] Labor Arbiter Dinopol went ahead with the ULP case

and rendered his decision[5] thereon on August 16, 1995, saying in part, thus:

x x x [I]t is crystal clear that the SEC Order notwithstanding, Labor Arbiters and the National Labor Relations Commission should not abdicate the jurisdiction which Article 217 of the Labor Code has conferred upon them subject to the condition that awards, if any, should be presented to the Management Committee for processing and payment,

and disposing as follows:

WHEREFORE, decision is hereby rendered:

1) denying respondents motion to suspend proceedings;

2) declaring respondent Rubberworld Phils., Inc. to have committed unfair labor practice;

3) declaring the temporary shutdown to

have been officially ended as of March 26, 1995;

21

4) ordering respondent Rubberworld

Phils., Inc. to reinstate complainant-Union's members who indicate their intention to be so reinstated within one month from the receipt of this decision by complainants' counsel;

5) ordering respondent Rubberworld

Phils., Inc. to pay the members of the complainant-Union their backwages computed from April 26, 1995 and separation pay if reinstatement is no longer possible plus 10% of the total award of attorney's.

For purposes of quantifying the backwages and separation pay, and identifying the recipients thereof, Mr. Ricardo Atienza of the Research and Information Unit of this Commission is hereby directed to proceed to the office of the respondent Rubberworld whose responsible officers are ordered to allow Mr. Atienza or his representative access to such records as may be necessary and render a report thereon within 30 days from his receipt of this Decision. For purposes of any appeal, the appeal bond is tentatively set at P500,000.00. SO ORDERED.

On September 21, 1995, Rubberworld went on appeal to the

NLRC, posting therefor a temporary appeal bond in the amount

of P500,000.00 as tentatively fixed by the Labor Arbiter. Meanwhile,

on October 10, 1995, Ricardo Atienza of the NLRC’s Research and Information

Unit submitted his report on the computation of the monetary awards, as

ordered by the Labor Arbiter. He came out with the total amount of Twenty

Seven Million Five Hundred Six Thousand and Two Hundred Fifty-Five Pesos

and 70/100 (P27,506,255.70). Despite Rubberworld’s vigorous opposition, the

First Division of the NLRC, in its Order[6]of January 22, 1996, required

the corporation to post an appeal bond in an amount equivalent to Mr.

Atienza’s computation, with a warning that failure to do so shall result in the

dismissal of its appeal for non-perfection, thus:

Accordingly, respondents-appellants are hereby directed to upgrade or complete their Appeal Bond in the amount equivalent to Twenty Seven Million Five Hundred Six Thousand Two Hundred Fifty-Five Pesos and 70/100 (P27,506,255.70) pursuant to the award as computed by Ricardo O. Atienza within ten (10) days from receipt of this Order. Failure of the respondents-appellants to comply with this directive will give this Commission no choice but to dismiss their appeal for non-perfection thereof.

Its motion for reconsideration of the same Order having been denied by

the NLRC in its Resolution[7] of March 29, 1996, Rubberworld directly went to

this Court on a Petition for Certiorari,[8] interposing the sole issue of whether or

not the NLRC acted without or in excess of jurisdiction or with grave abuse of

discretion amounting to lack or excess of jurisdiction in requiring the

22

corporation to post the upgraded appeal bond of P27,506,255.70 based on the

computation of Mr. Atienza.

Meanwhile, on account of Rubberworld’s failure to upgrade or complete

its appeal bond as indicated in the NLRC’s January 22, 1996 Order,

the Commission, in a decision[9] dated June 28, 1996, did dismiss

Rubberworld’s appeal. Owing to this development, Rubberworld filed with the

Court a Supplemental Petition for Certiorari,[10] therein incorporating its

challenge to the said dismissal order of the NLRC, contending

that the labor tribunal acted without or in excess of jurisdiction.

On April 22, 1998, the SEC issued an Order[11] declaring Rubberworld as

dissolved and lifting its earlier suspension order, to wit:

Finding that the continuance in business [of Rubberworld] would neither be feasible/profitable nor work to the best of interest of the stockholders, parties-litigants, creditors, or the general public, xxx Rubberworld Philippines, Inc. is hereby DISSOLVED under Section 6(d) of P.D. 902-A. Accordingly, the suspension Order is LIFTED. The Laya Mananghaya Salgado & Co., CPA’s is hereby appointed as liquidator to effect the dissolution of the petitioner. SO ORDERED.

On August 18, 1995, a writ of execution[12] was issued by the NLRC in

favor of the petitioner union with a copy thereof served on

the respondent corporation. Faced with this dilemma, Rubberworld filedwith

the Court an Urgent Omnibus Motion to declare null and void the

execution/garnishment made pursuant to the same writ. The motion,

however, was denied by the Court in its Resolution of November 18, 1998.

On February 8, 1999, Rubberworld filed with the Court a Motion

to Admit its Amended Petition for Certiorari[13] and its Supplement,[14] alleging

therein that pursuant to the SEC Order dated December 28, 1994, supra, the

proceedings before the Labor Arbiter should have been suspended. Hence,

since the Labor Arbiter disregarded the SEC’s suspension order, the

subsequent proceedings before it were null and void.

Consistent with its ruling in St. Martin Funeral Homes v. NLRC,[15] the Court, in its Resolution of February 29, 1999,

referred Rubberworld’s amended petition for certiorari and its supplement to

the CA for appropriate action, whereat it was docketed as CA- G.R. SP No.

53356.

For its part, the CA, in its Resolution[16] of May 11, 2000, over the

vehement opposition of the petitioner union, resolved to

admit Rubberworld’s aforementioned amended petition and the

supplementthereto “in the interest of justice.”

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Eventually, in the herein assailed Decision[17] dated January 18, 2002, the

CA granted Rubberworld’s petition in CA–G.R. SP. No. 53356 on the finding

that the Labor Arbiter had indeed committed grave abuse of discretion when it

proceeded with the ULP case despite the SEC’s suspension order of December

28, 1994, and accordingly declared the proceedings before it, including the

subsequent orders by the NLRC dismissing Rubberworld’s appeal and the writ

of execution, null and void.

With their motion for reconsideration having been denied in the CA in

its Resolution[18] of June 5, 2002, petitioners are now with the

Court via the instant recourse, raising the following issues:

1) Whether the CA had committed grave abuse of discretion amounting to lack of jurisdiction or an excess in the exercise thereof when it gave due course to the petition filed by Rubberworld (Phils.), Inc. and annulled and set aside the decisions rendered by the labor arbiter a quo and the NLRC, when the said decisions had become final and executory warranting the outright dismissal of the aforesaid petition;

2) Whether the CA had committed grave abuse of

discretion and reversible error when it applied Section 5(d) and Section 6 (c) of P.D. No. 902-A, as amended, to the case at bar;

3) Whether the CA had committed reversible error

when it adopted and applied the rulings in the cases of Rubberworld (Phils.), Inc., or Julie Yap Ong

v. NLRC, Marilyn F. Arellano, et. al.[19] and Rubberworld (Phils.), Inc. and Julie Y. Ong v. NLRC, Aquino Magsalin, et. al.[20] to the case at bar.

We DENY.

It is the petitioners’ submission that the decision of the Labor Arbiter,

the affirmatory decision of the NLRC and the latter’s dismissal of

Rubberworld’s appeal, as well the writ of execution subsequently issued, can

no longer be annulled and set aside, the same having all become final and

executory. Additionally, petitioners argue that no appeal from the decision of

the Labor Arbiter was ever perfected due toRubberworld's failure to upgrade

or post additional bond as ordered by the NLRC. Hence, they submit that the

CA acted in grave abuse of discretion in even giving due course

to Rubberworld’s petition in CA-G.R. SP No. 53356, let alone rendering a

decision thereon annulling and setting aside the proceedings before the Labor

Arbiter and the NLRC’s dismissal of Rubberworld’s appeal and the writ of

execution issued following the dismissal of said appeal.

The Court disagrees.

While posting an appeal bond is indeed a requirement for the perfection

of an appeal from the decision of the Labor Arbiter to the

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NLRC, Rubberworld’s failure to upgrade its appeal bond cannot bar, in this

particular instance, the review by the CA of the lower court proceedings.

Given the factual milieu obtaining in this case, it cannot be said

that the decision of the Labor Arbiter, or the decision/dismissal order and

writ of execution issued by the NLRC, could ever attain final and executory

status. The Labor Arbiter completely disregarded and violated

Section 6(c) of Presidential Decree 902-A, as amended, which categorically

mandates the suspension of all actions for claims against a corporation placed

under a management committee by the SEC. Thus, the proceedings before

the Labor Arbiter and the order and writ subsequently issued by the NLRC are

all null and void for having been undertaken or issued in violation

of the SEC suspension Order dated December 28, 1994. As such, the Labor

Arbiter’s decision, including the dismissal by the NLRC of Rubberworl’s

appeal, could not have achieved a final and executory status.

Acts executed against the provisions of mandatory or prohibitory laws

shall be void, except when the law itself authorizes their validity.[21] The Labor Arbiter's decision in this case is void ab initio, and therefore, non-

existent.[22] A void judgment is in effect no judgment at all. No rights are

divested by it nor obtained from it. Being worthless in itself, all

proceedings upon which the judgment is founded are equally worthless. It

neither binds nor bars anyone. All acts performed under it and all claims

flowing out of it are void.[23] In other words, a void judgment is regarded as a

nullity, and the situation is the same as it would be if there were no judgment.

It accordingly leaves the party-litigants in the same position they were in

before the trial.[24]

In fact, it is immaterial whether an appeal from the Labor Arbiter's

decision was perfected or not, since a judgment void ab initio is non-existent

and cannot acquire finality.[25] The judgment is vulnerable to attack even when

no appeal has been taken. Hence, such judgment does not become final in the

sense of depriving a party of his right to question its validity. [26] Hence, no grave

abuse of discretion attended the CA's taking cognizance of the petition in CA-

G.R. SP No. 53356.

Besides, the Labor Arbiter, by simultaneously ruling in

his decision of August 16, 1995 on both the merits of the ULP case and the

motion of Rubberworld to suspend the proceedings thereon, effectively

required the respondent corporation to post a surety bond before the same

respondent could have questioned the arbiter’s action in not suspending

the proceedings before him.

A bond is only mandatory from an appeal of the decision itself on the

merits of the laborers' money claims to ensure payment thereof. Had

the Labor Arbiter taken heed of Rubberworld’s motion to suspend proceedings

when that motion was filed, and ruled upon it separately, no bond would have

been required for a review of his resolution thereon. As it were,

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the Labor Arbiter chose to continue to decide the maincase,

then to incorporate in his decision the denial of Rubberworld’s motion to

suspend proceedings, thereby effectively requiring a bond on a question which

would not have ordinarily required one.

We shall now address the more substantial issue in this case, namely, the

applicability of the provisions of Section 5 (d) and Section 6 (c) of P.D. No. 902-

A, as amended, reorganizing the SEC, vesting it with additional powers and

placing it under the Office of the President, which respectively read:

Section 5. In addition to the regulatory adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a rehabilitation receiver or management committee created pursuant to this Decree.

Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

xxx xxx xxx c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing public and creditors: x x x Provided, finally, That upon appointment of a management committee, the rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships, or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. [Emphasis supplied]

As correctly ruled by the CA, the issue of applicability in labor cases of

the aforequoted provisions of PD 902-A, as amended, had already

been resolved by this Court in its earlier decisions inRubberworld (Phils.), Inc.,

or Julie Yap Ong v. NLRC, Marilyn F. Arellano, et. al.[27] and Rubberworld (Phils.),

Inc. and Julie Y. Ong v. NLRC, Aquino, Magsalin, et. al,[28] supra.

In the first Rubberworld case, the Court upheld the applicability of PD

902-A to labor cases pursuant to Section 5(d) and Section 6(c) thereof, with the

following pronouncements:

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It is plain from the foregoing provisions of the law that “upon the appointment [by the SEC] of a management committee or a rehabilitation receiver,” all actions for claims against the corporation pending before any court, tribunal or board shall ipso jure be suspended. The justification for the automatic stay of all pending actions for claims “is to enable the management committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the rescue of the debtor company. To allow such other actions to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation.”[29]

xxx xxx xxx

x x x The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims for actions “shall be suspended accordingly.” No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex   non  distinguit nec nos   distinguere   debemos. Allowing labor cases to proceed clearly defeats the purpose of the automatic stay and severely encumbers the management committee's time and resources. The said committee would need to defend against these suits, to the detriment of its primary and urgent duty to work towards rehabilitating the corporation and making it viable again. To rule otherwise would open the floodgates to other similarly situated claimants and forestall if not defeat the rescue efforts. Besides, even if the NLRC awards the claims of private respondents, its ruling could not be enforced as long as the petitioner is under the management committee.[30]

In Chua v. National Labor Relations Commission, we ruled that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, since these claims “would spawn needless controversy, delays, and confusion.”[31] With more reason, allowing labor claims to continue in spite of a SEC suspension order in a rehabilitation case would merely lead to such results.

xxx xxx xxx

Article 217 of the Labor Code should be construed not in isolation but in harmony with PD 902-A, according to the basic rule in statutory construction that implied repeals are not favored.[32] Indeed, it is axiomatic that each and every statute must be construed in a way that would avoid conflict with existing laws. True, the NLRC has the power to hear and decide labor disputes, but such authority is deemed suspended when PD 902-A is put into effect by the Securities and Exchange Commission. [Emphasis supplied]

The second Rubberworld case reiterates the above pronouncements of

the Court:

Presidential Decree No. 902-A is clear that “all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly.” The law did not make any exception in favor of labor claims.

xxx xxx xxx Thus, when NLRC proceeded to decide the case despite the SEC suspension order, the NLRC acted without

27

or in excess of its jurisdiction to hear and decide cases. As a consequence, any resolution, decision or order that it rendered or issued without jurisdiction is a nullity. [Emphasis supplied]

Petitioners argue, however, that the doctrines laid down in the

two aforecited cases cannot be made to

apply to the instant controversy because the SEC order therein only

mandates that all pending cases against Rubberworld Philippines, Inc. should

be deemed suspended. Petitioners contend that the decision of

the Labor Arbiter in the present case, as well the order of dismissal and writ of

execution issued byNLRC, have become final and executory by

reason of Rubberworld’s failure to perfect its appeal by not upgrading or

completing the required cash or surety bond as ordained by the

NLRC. Petitioners thus conclude that the doctrine of stare decisis cannot

apply to the instant case.

Petitioners are in error.

It is incontrovertible that the denial of Rubberworld’s motion to suspend

proceedings in the principal case was incorporated in the decision of

the Labor Arbiter. Obviously, then, the Labor Arbiter’s decision of August

16, 1995 was rendered at a time when Lingkod’s complaint against

Rubberworld in NLRC-NCR-Case No. 00-09-06637-94 ought to have been

suspended.

In short, at the time the SEC issued its suspension Order of December 28,

1994, the proceedings before the Labor Arbiter were still very much pending.

As such, no final and executory decision could havevalidly

emanated therefrom. Like the CA, we do not see any reason why the doctrine

of stare decisis will not apply to this case.

For being well-grounded in fact and law, the assailed CA decision and

resolution in CA-G.R. SP No. 53356 cannot be said to have been tainted with

grave abuse of discretion or issued in excess or want of jurisdiction. We find no

reason to overturn such rulings.

WHEREFORE, the instant petition is DENIED and the assailed decision and

resolution of the CA are AFFIRMED.

Costs against the petitioner.

SO ORDERED.

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