J.A.B. Bulao & Associates

LEGAL NOTE 0054: VOIDABLE CONTRACTS

SOURCE: CORNELIA M. HERNANDEZ VS. CECILIO F. HERNANDEZ (G.R. NO. 158576, 9 MARCH 2011, PEREZ, J.) SUBJECTS: QUITCLAIM; WHEN CONSENT IN CONTRACT IS VOIDABLE. (BRIEF TITLE: HERNANDEZ VS. HERNANDEZ).

WHEN IS A CONTRACT VOIDABLE?

A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.^[35] 

HOW DOES THE COURT DETERMINE WHETHER CONSENT TO A CONTRACT IS VITIATED?

In determining whether consent is vitiated by any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in their favor what they believe to have actually occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of the parties at the time of the making of the contract and subsequent thereto, irrespective of whether the contract is in public or private writing.^[36] 

HOW  WILL MISTAKE INVALIDATE CONSENT?

And, in order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or those conditions which have principally moved one or both parties to enter the contract.^[37] 

^[1]               Under Rule 45 of the Rules of Court.

^[2]               Rollo, pp. 37-51.

^[3]               Decision of the RTC Branch 150, id. at 52-56.

^[4]               Transfer Certificate of Title, Annex “C,” id. at 57.

^[5]               TSN, 8 December 2000, pp. 4-6.

^[6]               Petition.  Rollo, p. 10.

^[7]               Brief for the Appellant.  CA rollo, p.72

^[8]               Id.

^[9]               Id.

^[10]             Id.

^[11]             Rollo, p. 58.

^[12]             Id. at 59.

^[13]             Id. at 60-62.

^[14]             Id. at 63-68.

^[15]             Just Compensation = (Area of land) * (Value per m²)

^[16]             Rollo, p. 67.

^[17]             Revocation of Special Power of Attorney, Annex “I.” Id. at 69-70.

^[18]             Order of Judge Voltaire Rosales, Branch 83.  Id. at 74.

^[19]             Petition.  Id. at 14.

^[20]             Id.

^[21]             Id. at 81-82.

^[22]             TSN, 8 December 2000, p. 10.

^[23]             Id. at 12-13.

^[24]             Id. at 13.

^[25]             Rollo, pp. 83-84.

^[26]             Complaint, Annex “O,” id. at 85-90.

^[27]             Id. at 15.

^[28]             Id. at 56.

^[29]             Decision of the Court of Appeals in CA G.R. CV. No. 70184, id. at 50.

^[30]             Id. at 18.

^[31]             Petition – Arguments and Discussion.  Id. at 66.

^[32]             Decision, RTC Branch 83.  Id. at 121.

^[33]             Art. 1868, Civil Code.

^[34]             Brief for the Appellant (Cecilio), CA rollo, p. 73.

^[35]             Art. 1330, Civil Code.

^[36]             TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1991, Art. 1330, p. 475 citing Transporte v. Beltran, 51 Off. Gaz. 1434, March, 1955.

^[37]             Art. 1331, Civil Code.

^[38]             Sec. 4, Rule 67 of the Rules of Court.

^[39]             Decision, RTC Branch 83, Tanauan Batangas in Civil Case No. C-023.  Rollo, p. 65.

^[40]             The computation herein is the correct application of the formula in the service contract. There was an error in the computation made by Cecilio in its Appellant’s Brief (CArollo, p. 172).  

^[41]             Thomas v. Pineda, G.R. No. L-2411, 28 June 1951, citing Severino v. Severino, 44 Phil. 343.

^[42]             Roget’s Thesaurus, Fourth ed., 2001, adj.: impartial, unbiased, neutral, free from bias, unprejudiced, fair, impersonal, outside, uninvolved, dispassionate, free from self-interest.

^[43]             Petition.  Rollo, p. 22.

^[44]             Decision, RTC Branch 83 in Civil Case No. C-023.  Rollo, p. 67.

^[45]             G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.

LEGAL NOTE 0054: WHEN QUITCLAIM IS DECLARED VOID.

 SOURCE: CORNELIA M. HERNANDEZ VS. CECILIO F. HERNANDEZ (G.R. NO. 158576, 9 MARCH 2011, PEREZ, J.) SUBJECTS: QUITCLAIM; WHEN CONSENT IN CONTRACT IS VOIDABLE. (BRIEF TITLE: HERNANDEZ VS. HERNANDEZ).

STORY OF THE CASE:

DPWH NEGOTIATED WITH THE HERNANDEZ FAMILY TO PURCHASE PORTION OF THEIR LAND FOR EXPANSION OF SLEX. PRICE OFFERED WITH P35.00 PER SQ.M. RAISED TO P70.00 PER SQ.M.. HERANDEZES DID NOT AGREE. DPWH FILED EXPROPRIATION CASE. THE HERNANDEZES BY WAY OF LETTER APPOINTED CECILIO TO REPRESENT THEM AND AS COMPENSATION HE GETS 20% OF THE PRICE AND THE EXCESS BEYOND THE PRICE OF P300.00 PER SQ.M. LATER THE HERNANDEZES EXECUTED AN IRREVOCABLE SPA IN FAVOR OF CECILIO.  DURING THE PROCEEDINGS, CECILIO WAS APPOINTED AS ONE OF THE COMMISSIONERS TO DETERMINE JUST COMPENSATION. RTC FIXED THE PRICE AT P1,500.00 PER SQ.M. SHARE OF CORNELIA HERNANDEZ  WAS P7,321,500.00.  CORNELIA ASKED FOR AN ACCOUNTING. CECILIO, INSTEAD OF GIVING AN ACCOUNTING GAVE CORNELIA CHECK FOR P1,123,000.00 AND WAIVER AND QUITCLAIM.  CORNELIA SIGNED THE WAIVER AND QUITCLAIM AND RECEIVED THE CHECK BECAUSE SHE BADLY NEEDED THE MONEY FOR  medical expenses due to her frail condition. SHE THEN FILED THIS CASE AGAINST CECILIO FOR ANNULMENT OF QUITCLAIM AND TO RECOVER HER JUST SHARE FROM CECILIO. RTC RULED IN CORNELIA’S FAVOR BECAUSE CECILIO WAS IN DEFAULT FOR NOT FILING AN ANSWER ON TIME. CA REVERSED RTC DECISION.

CAN THE  QUITCLAIM EXECUTED BY CORNELIA BE ANNULLED AND CAN CORNELIA RECOVER HER SHARE FROM CECILIO?

THE QUITCLAIM CAN BE ANNULLED.  CONSENT TO THE QUITCLAIM IS VITIATED BY THE CONDUCT OF THE PARTIES AT THE TIME OF THE MAKING OF THE CONTRACT AND SUBSEQUENT THERETO. CORNELIA CANNOT BE SAID TO HAVE VOLUNTARILY AGREED TO THE QUITCLAIM BECAUSE SHE SIGNED THE  SAME ONLY BECAUSE OF HER DESPERATE CONDITION.

CORNELIA CAN RECOVER HER SHARE. THE BASIS OF CECILIO THAT HE IS ENTITLED TO THE BALANCE OF 83.07% OF CORNELIA’S SHARE ARE: THE LETTER-AGREEMENT, THE QUITCLAIM AND THE SPA. CONSENT TO THE LETTER AGREEMENT WAS GIVEN BY MISTAKE. THERE WAS NOTHING IN THE CIRCUMSTANCES TO SHOW THAT CORNELIA COULD HAVE AGREED TO PART WITH 83.07% OF HER SHARE AT P1,500.00 PER SQ.M. THE QUITCLAIM WAS FRAUDULENT, THEREFORE VOID. AS AGENT CECILIO SHOULD HAVE PRESENTED AN ACCOUNTING AS REQUESTED BY HIS PRINCIPAL. INSTEAD HE PRESENTED A QUITCLAIM. THE SPA IS IMPROPER. FIRST, IT DID NOT SPECIFY THE COMPENSATION OF CECILIO. SECOND IT WAS EXECUTED AFTER CECILIO WAS APPOINTED AS COMMISSIONER. CECILIO  COULD NOT HAVE BEEN A HEARING OFFICER  AND ACT FOR THE  DEFENDANT AT THE SAME TIME.  CECILIO FOISTED FRAUD ON BOTH THE COURT AND THE HERNANDEZES WHEN, AFTER HIS APPOINTMENT AS COMMISSIONER, HE ACCEPTED THE APPOINTMENT BY THE HERNANDEZES TO “REPRESENT” AND “SUE FOR” THEM.

THE RULING OF THE COURT:

 The compensation scheme of 20% of any amount over P70.00 per square meter and everything above P300.00 per square meter was granted in favor of Cecilio by the Hernandezes on 11 November 1993.  At that time, the Hernandezes had just rejected the government’s offer of P35.00 per square meter, which offer last stood at P70.00 per square meter.  It was the rejection likewise of the last offer that led to the filing of the expropriation case on 9 August 1993.  It was in this case, and for Cecilio’s representation in it of the Hernandezes, that he was granted the compensation scheme.  Clear as day, the conditions that moved the parties to the contract were the base price at P70.00 per square meter, the increase of which would be compensated by 20% of whatever may be added to the base price; and the ceiling price of P300.00 per square meter, which was considerably high reckoned from the base atP70.00, which would therefore, allow Cecilio to get all that which would be in excess of the elevated ceiling.  The ceiling was, from the base, extraordinarily high, justifying the extraordinary grant to Cornelio of all that would exceed the ceiling.

          It was on these base and ceiling prices, conditions which principally moved both parties to enter into the agreement on the scheme of compensation, that an obvious mistake was made.  The trial court, deviating from the principle that just compensation is determined by the value of the land at the time either of the taking or filing,^[38] which was in 1993, determined the compensation as the 1998 value of P1,500.00 per square meter. The trial court ratiocinated that the 1998 value was considered for the reason, among others that:

3.  It is common knowledge that prices of real estate in Batangas, including and/or particularly in Sto.Tomas and Tanauan have skyrocketed in the past two years;^[39] (Emphasis ours).

          This 1998 “skyrocketed” price of P1,500.00 per square meter was pounced upon by Cecilio as the amount against which the 1993 ceiling of P300.00 per square meter should be compared, thereby giving him the amount computed^[40] as follows:

CECILIO’S FEES    = (20% of anything over P70.00) + (everything in        excess of P300)

*If the land value is at P1,500.00 per square meter, then,

                                    = (20% of  P230.00) + (P1,500.00 – P300.00)

                                    = P46.00 + P1,200.00

= P1,246.00 per square meter

CORNELIA’S SHARE        = (land value at 1,500 less Cecilio’s fees)

                                                = P254.00 per square meter

*The total expropriated property is at 14,643 m², thus, Cecilio will get a   total of

                                    = P1,246.00 * 14,643

                                    = P18,245,178.00 total compensatinon

*One Third of the above value shows that Cecilio will get, from Cornelia

                             = P6,081,726.00

It must be noted that:

*The Hernandez’ family gets P21,964,500 for 14,643 m², at P1,500.00 per m²

*One-third (1/3) of that is P7,321,500 representing the share of a co-owner like Cornelia

*What will be left of Cornelia’s share if she pays Cecilio will be:

P1,239,774  less: 124,953.60 (Nominal Cost of Litigation as averred by Cecilio)

1,500.00 (Nominal payment for preparation of pleadings)

OVERALL TOTAL AMOUNT CORNELIA WILL RECEIVE:

P 1,113,320.4

As opposed to:

OVERALL TOTAL AMOUNT CECILIO WILL RECEIVE:  P6,081,726.00

          Cecilio’s position would give him 83.07% of the just compensation due Cornelia as a co-owner of the land.  No evidence on record would show that Cornelia agreed, by way of the 11 November 1993 letter, to give Cecilio 83.07% of the proceeds of the sale of her land.

          What is on record is that Cornelia asked for an accounting of the just compensation from Cecilio several times, but the request remained unheeded. Right at that point, it can be already said that Cecilio violated the fiduciary relationship of an agent and a principal. The relation of an agent to his principal is fiduciary and it is elementary that in regard to property subject matter of the agency, an agent is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust.^[41]

          Instead of an accounting, what Cornelia received was a receipt and quitclaim document that was ready for signing.  As testified to by Cornelia, due to her frail condition and urgent need of money in order to buy medicines, she nevertheless signed the quitclaim in Cornelio’s favor.  Quitclaims are also contracts and can be voided if there was fraud or intimidation that leads to lack of consent.  The facts show that a simple accounting of the proceeds of the just compensation will be enough to satisfy the curiosity of Cornelia.  However, Cecilio did not disclose the truth and instead of coming up with the request of his aunt, he made a contract intended to bar Cornelia from recovering any further sum of money from the sale of her property.

          The preparation by Cecilio of the receipt and quitclaim document which he asked Cornelia to sign, indicate that even Cecilio doubted that he could validly claim 83.07% of the price of Cornelia’s land on the basis of the 11 November 1993 agreement.  Based on the attending circumstances, the receipt and quitclaim document is an act of fraud perpetuated by Cecilio.  Very clearly, both the service contract of 11 November 1993 letter- agreement, and the later receipt and quitclaim document, the first vitiated by mistake and the second being fraudulent, are void.

          Cecilio’s last source of authority to collect payment from the proceeds of the expropriation is the SPA executed on 18 October 1996 by the Hernandezes in favor of Cecilio as their “true and lawful” attorney with respect to the expropriation of the Hernandez property.  At the outset, it must be underscored that the SPA did not specify the compensation of Cecilio as attorney-in-fact of the Hernandezes. 

          The SPA, however, must be appreciated in the light of the fact that Cecilio was appointed and acted as appraisal commissioner in the expropriation case under the provisions of Section 5, Rule 67 of the Rules of Court, which provides:

SEC. 5. Ascertainment of compensation. — Upon the rendition of the order of expropriation, the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken.   The order of appointment shall designate the time and place of the first session of the hearing to be held by the commissioners and specify the time within which their report shall be submitted to the court. (Emphasis ours).

The commissioner to be appointed is specifically required to be disinterested.  As defined, such person must be free frombias, prejudice or partiality.^[42]  The record of performance by Cecilio of his duties as commissioner shows: (1) Order dated 13 September 1996 appointing Cecilio and three others as court commissioners; (2) Agreement on the course of action of the commissioners appointed 13 September 1996 whereby respondent Cecilio signed as a court commissioner; (3) Appraisal Commission Report dated 10 January 1997 signed by respondent and his fellow court commissioners; (4) Dissenting Opinion on the Lone Minority Report dated 14 February 1997 signed by respondent and two other court commissioners; and (5) Decision dated 7 February 1997 which sets the fees of the court commissioners.^[43]

When Cecilio accepted the position as commissioner and proceeded to perform the duties of such commissioner until the completion of his mandate as such, he created a barrier that prevented his performance of his duties under the SPA.  Due to the nature of his duties and functions as commissioner, Cecilio became an officer of the court. As stated in Section 5, Rule 67 of the Rules of Court, the commissioner’s duty is to “ascertain and report to the court the just compensation for the property to be taken.” The undertaking of a commissioner is further stated under the rules, to wit:

SEC. 6. Proceedings by commissioners.—Before entering upon the performance of their duties, the commissioners shall take and subscribe an oath that they will faithfully perform their duties as commissioners, which oath shall be filed in court with the other proceedings in the case. Evidence may be introduced by either party before the commissioners who are authorized to administer oaths on hearings before them, and the commissioners shall, unless the parties consent to the contrary, after due notice to the parties to attend, view and examine the property sought to be expropriated and its surroundings, and may measure the same, after which either party may, by himself or counsel, argue the case. The commissioners shall assess the consequential damages to the property not taken and deduct from such consequential damages the consequential benefits to be derived by the owner from the public use or purpose of the property taken, the operation of its franchise by the corporation or the carrying on of the business of the corporation or person taking the property.  But in no case shall the consequential benefits assessed exceed the consequential damages assessed, or the owner be deprived of the actual value of his property so taken.

Cecilio acted for the expropriation court.  He cannot be allowed to consider such action as an act for or in behalf of the defendant in the same case.  Cecilio could not have been a hearing officer and a defendant at the same time.  Indeed, Cecilio foisted fraud on both the Court and the Hernandezes when, after his appointment as commissioner, he accepted the appointment by the Hernandezes to “represent” and “sue for” them.

^[1]               Under Rule 45 of the Rules of Court.

^[2]               Rollo, pp. 37-51.

^[3]               Decision of the RTC Branch 150, id. at 52-56.

^[4]               Transfer Certificate of Title, Annex “C,” id. at 57.

^[5]               TSN, 8 December 2000, pp. 4-6.

^[6]               Petition.  Rollo, p. 10.

^[7]               Brief for the Appellant.  CA rollo, p.72

^[8]               Id.

^[9]               Id.

^[10]             Id.

^[11]             Rollo, p. 58.

^[12]             Id. at 59.

^[13]             Id. at 60-62.

^[14]             Id. at 63-68.

^[15]             Just Compensation = (Area of land) * (Value per m²)

^[16]             Rollo, p. 67.

^[17]             Revocation of Special Power of Attorney, Annex “I.” Id. at 69-70.

^[18]             Order of Judge Voltaire Rosales, Branch 83.  Id. at 74.

^[19]             Petition.  Id. at 14.

^[20]             Id.

^[21]             Id. at 81-82.

^[22]             TSN, 8 December 2000, p. 10.

^[23]             Id. at 12-13.

^[24]             Id. at 13.

^[25]             Rollo, pp. 83-84.

^[26]             Complaint, Annex “O,” id. at 85-90.

^[27]             Id. at 15.

^[28]             Id. at 56.

^[29]             Decision of the Court of Appeals in CA G.R. CV. No. 70184, id. at 50.

^[30]             Id. at 18.

^[31]             Petition – Arguments and Discussion.  Id. at 66.

^[32]             Decision, RTC Branch 83.  Id. at 121.

^[33]             Art. 1868, Civil Code.

^[34]             Brief for the Appellant (Cecilio), CA rollo, p. 73.

^[35]             Art. 1330, Civil Code.

^[36]             TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1991, Art. 1330, p. 475 citing Transporte v. Beltran, 51 Off. Gaz. 1434, March, 1955.

^[37]             Art. 1331, Civil Code.

^[38]             Sec. 4, Rule 67 of the Rules of Court.

^[39]             Decision, RTC Branch 83, Tanauan Batangas in Civil Case No. C-023.  Rollo, p. 65.

^[40]             The computation herein is the correct application of the formula in the service contract. There was an error in the computation made by Cecilio in its Appellant’s Brief (CArollo, p. 172).  

^[41]             Thomas v. Pineda, G.R. No. L-2411, 28 June 1951, citing Severino v. Severino, 44 Phil. 343.

^[42]             Roget’s Thesaurus, Fourth ed., 2001, adj.: impartial, unbiased, neutral, free from bias, unprejudiced, fair, impersonal, outside, uninvolved, dispassionate, free from self-interest.

^[43]             Petition.  Rollo, p. 22.

^[44]             Decision, RTC Branch 83 in Civil Case No. C-023.  Rollo, p. 67.

^[45]             G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.

LEGAL NOTE 0052: CERTIFICATION ELECTION

 SOURCE: SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS JERRY VICTORIO – UNION PRESIDENT VS. CHARTER CHEMICAL AND COATING CORPORATION (G.R. NO.  169717, 16 MARCH 2011, DEL CASTILLO, J.) SUBJECTS: CERTIFICATION ELECTION; LEGITIMACY OF RANK AND FILE LABOR UNION. (BRIEF TITLE: SAMAHANG MANGGAGAWA ET AL VS. CHARTER CHEMICAL). 

WHAT IS THE PURPOSE OF CERTIFICATION ELECTION PROCEEDING?

TO DETERMINE WHICH ORGANIZATION WILL REPRESENT THE EMPLOYEES IN THEIR COLLECTIVE BARGAINING WITH THE EMPLOYER.

CAN THE EMPLOYER QUESTION THE LEGITIMACY OF THE LABOR UNION IN SUCH PROCEEDINGS?

NO. THE EMPLOYER IS A MERE BYSTANDER. THE CHOICE OF THE EMPLOYEES’ REPRESENTATIVE IS THE EXCLUSIVE CONFERN OF THE EMPLOYEES AND THE EMPLOYER CANNOT HAVE A PARTISAN INTEREST THEREIN. IT CANNOT THEREFORE INTERFERE WITH OR OPPOSE THE PROCESS. ITS ONLY RIGHT IS TO BE NOTIFIED OR INFORMED THEREOF.

Petitioner union correctly argues that its legal personality cannot be collaterally attacked in the certification election proceedings. As we explained in Kawashima:

                Except when it is requested to bargain collectively, an employer is a mere bystander to any petition for certification election; such proceeding is non-adversarial and merely investigative, for the purpose thereof is to determine which organization will represent the employees in their collective bargaining with the employer. The choice of their representative is the exclusive concern of the employees; the employer cannot have any partisan interest therein; it cannot interfere with, much less oppose, the process by filing a motion to dismiss or an appeal from it; not even a mere allegation that some employees participating in a petition for certification election are actually managerial employees will lend an employer legal personality to block the certification election. The employer’s only right in the proceeding is to be notified or informed thereof.

The amendments to the Labor Code and its implementing rules have buttressed that policy even more.^[33]

UNDER THE 1997 RULES WHAT ARE THE REQUISITES FOR CREATION BY A NATIONAL FEDERATION OF A LOCAL CHAPTER?

The then prevailing Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9, series of 1997, provides:

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 [are] the same as [those] 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.

THE CHARTER CERTIFICATE WAS SUBMITTED BUT NOT UNDER OATH? DOES THIS INVALIDATE THE REGISTRATION OF THE  LOCAL CHAPTER?

NO.  SUCH CERTIFICATE IS PREPARED BY THE NATIONAL UNION. IT WOULD NOT BE PROPER FOR THE LOCAL CHAPTER TO CERTIFY ON A DOCUMENT IT DID NOT PREPARE.

However, in San Miguel Corporation (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel Corporation Monthlies Rank-and-File Union-FFW (MPPP-SMPP-SMAMRFU-FFW),^[22] which was decided under the auspices of D.O. No. 9, Series of 1997, we ruled – 

In San Miguel Foods-Cebu B-Meg Feed Plant v. Hon. Laguesma, 331 Phil. 356 (1996), the Court ruled that it was not necessary for the charter certificate to be certified and attested by the local/chapter officers. Id. While this ruling was based on the interpretation of the previous Implementing Rules provisions which were supplanted by the 1997 amendments, we believe that the same doctrine obtains in this case. Considering that the charter certificate is prepared and issued by the national union and not the local/chapter, it does not make sense to have the local/chapter’s officers x x x certify or attest to a document which they had no hand in the preparation of.^[23] (Emphasis supplied) 

In accordance with this ruling, petitioner union’s charter certificate need not be executed under oath. Consequently, it validly acquired the status of a legitimate labor organization upon submission of (1) its charter certificate,^[24] (2) the names of its officers, their addresses, and its principal office,^[25] and (3) its constitution and by-laws^[26]— the last two requirements having been executed under oath by the proper union officials as borne out by the records.

THE EMPLOYER CONTENDS THAT THE LABOR UNION CANNOT BE CONSIDERED LEGITIMATE BECAUSE IT HAS BOTH RANK AND FILE AND SUPERVISORY EMPLOYEES. IS  THE EMPLOYER CORRECT?

NO. UNDER THE PRESENT RULES, A MIXTURE OF RANK AND FILE AND SUPERVISORY EMPLOYEES IN A LABOR UNION DOES NOT NULLIFY ITS LEGAL PERSONALITY BECAUSE IT IS NO LONGER A GROUND FOR CANCELLATION OF THE REGISTRATION OF A  LABOR UNION.

Then came Tagaytay Highlands Int’l. Golf Club, Inc. v. Tagaytay Highlands Employees Union-PGTWO in which the core issue was whether mingling affects the legitimacy of a labor organization and its right to file a petition for certification election. This time, given the altered legal milieu, the Court abandoned the view in Toyota and Dunlop and reverted to its pronouncement in Lopez that while there is a prohibition against the mingling of supervisory and rank-and-file employees in one labor organization, the Labor Code does not provide for the effects thereof. Thus, the Court held that after a labor organization has been registered, it may exercise all the rights and privileges of a legitimate labor organization. Any mingling between supervisory and rank-and-file employees in its membership cannot affect its legitimacy for that is not among the grounds for cancellation of its registration, unless such mingling was brought about by misrepresentation, false statement or fraud under Article 239 of the Labor Code.

In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel Packaging Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW, the Court explained that since the 1997 Amended Omnibus Rules does not require a local or chapter to provide a list of its members, it would be improper for the DOLE to deny recognition to said local or chapter on account of any question pertaining to its individual members.

More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which involved a petition for cancellation of union registration filed by the employer in 1999 against a rank-and-file labor organization on the ground of mixed membership: the Court therein reiterated its ruling in Tagaytay Highlands that the inclusion in a union of disqualified employees is not among the grounds for cancellation, unless such inclusion is due to misrepresentation, false statement or fraud under the circumstances enumerated in Sections (a) and (c) of Article 239 of the Labor Code.

All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as interpreted by the Court in Tagaytay Highlands,San Miguel and Air Philippines, had already set the tone for it. Toyota and Dunlop no longer hold sway in the present altered state of the law and the rules.^[32] [Underline supplied]

CAN  THOSE HOLDING  SUPERVISORY POSITIONS  AND SECURITY GUARDS JOIN THE RANK AND FILE LABOR UNION?

NO. BUT THEY CAN FORM THEIR OWN UNION.

R.A. No. 6715 omitted specifying the exact effect any violation of the prohibition [on the co-mingling of supervisory and rank-and-file employees] would bring about on the legitimacy of a labor organization.

It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules) which supplied the deficiency by introducing the following amendment to Rule II (Registration of Unions):

“Sec. 1. Who may join unions. – x x x Supervisory employees and security guards shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own; Provided, that those supervisory employees who are included in an existing rank-and-file bargaining unit, upon the effectivity of Republic Act No. 6715, shall remain in that unit x x x. (Emphasis supplied)

^[1]       Rollo, pp. 29-36; penned by Associate Justice Estela M. Perlas-Bernabe and concurred in by Associate Justices Elvi John S. Asuncion and Hakim S. Abdulwahid.

^[2]       Id. at 74-75.

^[3]       Id. at 38.

^[4]       Id. at 214-223.

^[5]       Id. at 215-220.

^[6]       Id. at 40-50.

^[7]       PRESIDENTIAL DECREE NO. 442, as amended.

^[8]       Rollo, pp. 52-54.

^[9]       Id. at 75.

^[10]     Id. at 36.

^[11]     335 Phil. 1045 (1997).

^[12]     Rollo, pp. 12-13.

^[13]     443 Phil. 841 (2003).

^[14]     Supra note 11.

^[15]     Upon reconsideration, the DOLE noted that the other union which allegedly filed a prior petition for certification election was prevented from doing so because its petition for certification election was filed out of time. Thus, there was no obstacle to the conduct of a certification election in respondent company.

^[16]     “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.”

^[17]     Republic v. Kawashima Textile Mfg., Philippines, Inc., G.R. No. 160352, July 23, 2008, 559 SCRA 386, 396.

^[18]     “An Act to Extend Protection to Labor, Strengthen the Constitutional Rights of Workers to Self-Organization, Collective Bargaining and Peaceful Concerted Activities, and Foster Industrial Peace and Harmony.”  Effective March 21, 1989.

^[19]     Approved on May 24, 1989.

^[20]     Effective: June 21, 1997.

^[21]     Supra note 17 at 396-397.

^[22]     504 Phil. 376 (2005).

^[23]     Id. at 400.

^[24]     DOLE records, p. 51.

^[25]     Id. at 43-44.

^[26]     Id. at 25-40.

^[27]     Article 245. Ineligibility of Managerial Employees to Join Any Labor Organization; Right of Supervisory Employees.— x x x Supervisory employees shall not be eligible for membership in the collective bargaining unit of the rank-and-file employees but may join, assist or form separate collective bargaining units and/or legitimate labor organizations of their own. x x x

^[28]     Supra note 11.

^[29]     Respondent company claimed that the batchman, mill operator and leadman perform, among others, the following functions:

        Prepares, coordinates and supervises work schedules and activities of subordinates or helpers in their respective area of responsibility.

1.       Recommends the reduction, increase, transfer and number of employees assigned to them.

2.       Sees to it that daily production schedules and outputs are carried on time.

3.       Coordinates with their respective managers the needed raw materials and the quality of finished products. (Rollo, p. 220)

^[30]     Article 212(m) of the Labor Code, states in part: “Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. x x x”

^[31]     Supra note 17.

^[32]     Id. at 402-407.

^[33]     Id. at 408.