SECOND DIVISION

[G.R. No. 56965. March 7, 1984.]

PACIFIC BANKING CORPORATION, Petitioner, v. JACOBO C. CLAVE, Presidential

Executive Assistant, JOAQUIN T. VENUS, JR., Deputy Presidential Executive Assistant,
PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION and JUANITO
M. SAAVEDRA, Respondents.

Sycip, Salazar, Feliciano and Hernandez for Petitioner.

The Solicitor General for public Respondent.

Andres I. Fernandez for Intervenors.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR DISPUTES; APPEALS TO OFFICE OF

THE PRESIDENT; NO JURISDICTION TO ADJUDICATE ON ATTORNEYS FEES WHERE
APPEAL WAS WITH RESPECT TO COLLECTIVE BARGAINING AGREEMENT TERMS
AND CONDITIONS; CASE AT BAR. — Where the case was appealed to the Office of the
President with respect to the CBA terms and conditions, not with respect to attorney’s fees, the
Presidential Executive Assistant had no jurisdiction to make an adjudication on Saavedra’s
attorney’s fees. Although the fees were a mere incident, nevertheless, the jurisdiction to fix the
same and to order the payment thereof was outside the pale of the Office of the President’s
appellate jurisdiction. Presidential Executive Assistant Clave was right in adopting a hands-off
attitude in his first resolution and holding that the payment of the fees was a question between
the lawyer and the union.

2. ID.; LABOR CODE; ATTORNEY’S FEES; RECOVERY THEREOF UNDER ARTICLE III,
LABOR CODE, REFERS TO A PROCEEDING FOR RECOVERY OF WAGES; CASE AT
BAR. — Presidential Executive Assistant Clave should have noticed that Article III which
provides for payment of attorney’s fees refers to a proceeding for the recovery of wages and not
to CBA negotiations. The two are different or distinct proceedings.

3. ID.; ID.; ID.; LIABILITY THEREFOR OF UNION FUNDS IN CASE AT BAR PURSUANT
TO ARTICLE 222, LABOR CODE. — The case is covered squarely by the mandatory and
explicit prescription of article 222 which is another guarantee intended to protect the employee
against unwarranted practices that would diminish his compensation without his knowledge and
consent. (See National Power Corporation Supervisors’ Union v. National Power Corporation, L-
28805, August 10, 1981, 106 SCRA 556). Other provisions of the Labor Code animated by the
same intention are the following: Article 242, paragraphs (n) and (o); 288, PD 442; 291, PD 570-
A; 240, PD 626; 241, PD 850. There is no doubt that lawyer Saavedra is entitled to the payment
of his fees but Article 222 ordains that union funds should be used for that purpose. The amount
of P345,000 does not constitute union funds. It is money of the employees. The union, not the
employees, is obligated to Saavedra.

DECISION

AQUINO, J.:

This case is about the legality of deducting from the monetary benefits awarded in a collective
bargaining agreement the attorney’s fees of the lawyer who assisted the union president in
negotiating the agreement. It also involves the jurisdiction of the Office of the President of the
Philippines to order such deduction.

Since January, 1979, there had been negotiations between the Pacific Banking Corporation and
the Pacific Banking Corporation Employees Organization (PABECO) for a collective bargaining
agreement for 1979 to 1981. Because of a deadlock, the Minister of Labor assumed jurisdiction
over the controversy. On July 10, 1979, the Deputy Minister rendered a decision directing the
parties to execute a CBA in accordance with the terms and conditions set forth in his decision
(pp. 16-01, Rollo).

The union was represented in the negotiations by its president, Paula S. Paug, allegedly assisted
as consultant by Jose P. Umali, Jr., the president of the National Union of Bank Employees
(NUBE) with which it was formerly affiliated (p. 209, Rollo). Lawyer Juanito M. Saavedra’s
earliest recorded participation in the case was on July 15 and 27, 1979 when he filed a motion for
reconsideration and a supplemental motion. No action was taken on said motions (p. 121,
Rollo).chanrobles virtual lawlibrary

The parties appealed to the Office of the President of the Philippines. The CBA negotiations
were resumed. The union president took part in the second phase of the negotiations. Saavedra
filed a memorandum. He claimed he exerted much effort to expedite the decision. The Office of
the President issued on March 18, 1980 a resolution directing the parties to execute a CBA
containing the terms and conditions of employment embodied in the resolution.

The CBA was ultimately finalized on June 3, 1980. Monetary benefits of more than fourteen
million pesos were involved in the three-year CBA, according to the bank’s counsel.

Even before the formalization of the CBA on June 3, 1980, Saavedra on March 24, 1980 filed in
the case his notice of attorney ‘s lien. On May 20, 1980, the bank’s vice-president in a reply to
the letter of the union president stated that he had serious doubts about paying the attorney’s fees
(pp. 144-145, Rollo).

The union officials requested the bank to withhold around P345,000 out of the total benefits as
ten percent attorney’s fees of Saavedra. At first, the bank interposed no objection to the request
in the interest of harmonious labor-management relations (p. 145, Rollo). In theory, the actual
ten percent attorney’s fees may amount to more than one million pesos (p. 281, Rollo).

For nearly a year, the Office of the President in four resolutions wrestled with the propriety of
Saavedra’s ten percent attorney’s fees. In a resolution dated May 29, 1980, Presidential
Executive Assistant Jacobo C. Clave refused to intervene in the matter. He ruled that the
payment of attorney’s fees was a question that should be settled by the union and its lawyer
themselves (p. 24, Rollo).

Then, he "clarified" that ruling in a second resolution wherein he directed that the attorney’s fees
may be deducted from the total benefits and paid to Saavedra in accordance with the following
provisions of the Labor Code: chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

"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 wages, attorney’s fees which exceed ten percent of the amount of
wages recovered." cralaw virtua1aw library

Article 161 is implemented in Rule VIII, Book III of the Implementing Rules and Regulations as
follows: jgc:chanrobles.com.ph

"Sec. 11. Attorney’s fees. — Attorney’s fees in any judicial or administrative proceedings for the
recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from
the total amount due the winning party." cralaw virtua1aw library

Presidential Executive Assistant Clave should have noticed that article 111 refers to a proceeding
for the recovery of wages and not to CBA negotiations. The two are different or distinct
proceedings. Not satisfied with the clarificatory resolution, Clave issued a third resolution
wherein he held that it is the legal obligation of the bank to turn over to the union treasurer ten
percent of the award as Saavedra’s fees.

Finally, in a fourth resolution dated April 13, 1981 Deputy Presidential Executive Assistant
Joaquin T. Venus, Jr. ordered the bank to pay the union treasurer the said attorney’s fees less the
amounts corresponding to the protesting employees. He held that the following article 222 of the
Labor Code, as amended by Presidential Decree No. 1691, effective May 1, 1980 (before the
formalization of the CBA award) had no retroactive effect to the case: jgc:chanrobles.com.ph

"ART. 222. Appearances and Fees. — . . . (b) No attorney’s fees, negotiation fees or similar
charges of any kind arising from any collective bargaining negotiations or conclusion of the
collective agreement shall be imposed on any individual member of the contracting union:
Provided, however, that attorney’s fees may be charged against union funds in an amount to be
agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary
shall be null and void." (271, PD 442; 220, PD 626; 222, PD 1691).

The bank assailed in this Court the said resolutions by means of certiorari. On February 5, 1982,
the NUBE and thirteen employees of the bank, members of the PABECO, (p. 202, Rollo)
intervened in this case and prayed that the said resolutions be declared void and that said sum of
P345,000 be paid directly to the employees or union members (p. 214, Rollo).

We hold that, under the circumstances, the Office of the President had no jurisdiction to make an
adjudication on Saavedra’s attorney’s fees. The case was appealed with respect to the CBA terms
and conditions, not with respect to attorney’s fees. Although the fees were a mere incident,
nevertheless, the jurisdiction to fix the same and to order the payment thereof was outside the
pale of Clave’s appellate jurisdiction. He was right in adopting a hands-off attitude in his first
resolution and holding that the payment of the fees was a question between the lawyer and the
union.

Moreover, the case is covered squarely by the mandatory and explicit prescription of article 222
which is another guarantee intended to protect the employee against unwarranted practices that
would diminish his compensation without his knowledge and consent. (See National Power
Corporation Supervisors’ Union v. National Power Corporation, L-28805, August 10, 1981, 106
SCRA 556). Other provisions of the Labor Code animated by the same intention are the
following: chanrobles virtual lawlibrary

"ART. 242. Rights and conditions of membership in a labor organization. — The following are
the rights and conditions of membership in a labor organization: jgc:chanrobles.com.ph

"x       x       x

"(n) No special assessment or other extraordinary fees may be levied upon the members of a
labor organization unless authorized by a written resolution of a majority of all the members at a
general membership meeting duly called for the purpose. The secretary of the organization shall
record the minutes of the meeting including the list of all members present, the votes cast, the
purpose of the special assessment or fees and the recipient of such assessment or fees. The record
shall be attested to by the president;.

"(o) Other than for mandatory activities under the Code, no special assessment, attorney’s fees,
negotiation fees or any other extraordinary fees may be checked off from any amount due an
employee without an individual written authorization duly signed by the employee. The
authorization should specifically state the amount, purpose and beneficiary of the deduction; and.

. . . (288, PD 442; 291, PD 570-A; 240, PD 626; 241, PD 850).

There is no doubt that lawyer Saavedra is entitled to the payment of his fees but article 222
ordains that union funds should be used for that purpose. The amount of P345,000 does not
constitute union funds. It is money of the employees. The union, not the employees, is obligated
to Saavedra.

WHEREFORE, the petition is granted. The resolutions dated August 12 and December 15, 1980
and April 13, 1981 are reversed and set aside. The questioned amount of about P345,000, with its
increments, if any, should be paid by the bank directly to its employees. No costs.

SO ORDERED
 SECOND DIVISION

KAISAHAN AT KAPATIRAN NG
MGA MANGGAGAWA AT KAWANI G.R. No. 174179
SA MWC-EAST ZONE UNION and
EDUARDO BORELA, representing its  
members,
Present:
Petitioners,  

  CARPIO, J.,
  Chairperson,
- versus - BRION,
  PEREZ,
  SERENO, and
  REYES, JJ.
MANILA WATER COMPANY, INC.,  
Respondent. Promulgated:
   

November 16, 2011

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

 
 

DECISION

BRION, J.:

 
 

We resolve the petition for review on certiorari1[1] filed by the petitioners, Kaisahan at
Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union (Union) and Eduardo
Borela, assailing the decision2[2] and the resolution3[3] of the Court of Appeals (CA) in CA-
G.R. SP No. 83654.4[4]

4
 The Factual Antecedents

The background facts are not disputed and are summarized below.

The Union is the duly-recognized bargaining agent of the rank-and-file

employees of the respondent Manila Water Company, Inc. (Company) while
Borela is the Union President.5[5] On February 21, 1997, the Metropolitan
Waterworks and Sewerage System (MWSS) entered into a Concession Agreement
(Agreement) with the Company to privatize the operations of the MWSS.6[6]
Article 6.1.3 of the Agreement provides that the Concessionaire shall grant [its]
employees benefits no less favorable than those granted to MWSS employees at
the time of [their] separation from MWSS. 7[7] Among the benefits enjoyed by the
employees of the MWSS were the amelioration allowance (AA) and the cost-of-
living allowance (COLA) granted in August 1979, pursuant to Letter of
Implementation No. 97 issued by the Office of the President.8[8]

The payment of the AA and the COLA was discontinued pursuant to

Republic Act No. 6758, otherwise known as the Salary Standardization Law,
which integrated the allowances into the standardized salary. 9[9] Nonetheless, in
2001, the Union demanded from the Company the payment of the AA and the
COLA during the renegotiation of the parties Collective Bargaining Agreement
(CBA).10[10] The Company initially turned down this demand, however, it
subsequently agreed to an amendment of the CBA on the matter, which provides:

10
  

The Company shall implement the payment of the Amelioration

Allowance and Cost of Living [A]llowance retroactive August 1, 1997 should the
MWSS decide to pay its employees and all its former employees or upon award of
a favorable order by the MWSS Regulatory Office or upon receipt of [a] final
court judgment.11[11]
 
 

Thereafter, the Company integrated the AA into the monthly payroll of all
its employees beginning August 1, 2002, payment of the AA and the COLA after
an appropriation was made and approved by the MWSS Board of Trustees. The
Company, however, did not subsequently include the COLA since the Commission
on Audit disapproved its payment because the Company had no funds to cover this
benefit.12[12]

As a result, the Union and Borela filed on April 15, 2003 a complaint against
the Company for payment of the AA, COLA, moral and exemplary damages, legal
interest, and attorneys fees before the National Labor Relations Commission
(NLRC).13[13]

The Compulsory Arbitration Rulings

In his decision of August 20, 2003, Labor Arbiter Aliman D. Mangandog

(LA) ruled in favor of the petitioners and ordered the payment of their AA and
COLA, six percent (6%) interest of the total amount awarded, and ten percent
(10%) attorneys fees.14[14]

 
11

12

13

14
 On appeal by the Company, the NLRC affirmed with modification the LAs
decision.15[15] It set aside the award of the COLA benefits because the claim was
not proven and established, but ordered the Company to pay the petitioners their
accrued AA of about P107,300,000.00 in lump sum and to continue paying the AA
starting August 1, 2002. It also upheld the award of 10% attorneys fees to the
petitioners.

In its Motion for Partial Reconsideration of the NLRCs December 19, 2003
decision, the Company pointed out that the award of ten percent (10%) attorneys
fees to the petitioners is already provided for in their December 19, 2003
Memorandum of Agreement (MOA) which mandated that attorneys fees shall be
deducted from the AA and CBA receivables. 16[16] This compromise agreement,
concluded between the parties in connection with a notice of strike filed by the
Union in 2003,17[17] provides among others that:18[18]

31. Attorneys fees 10% to be deducted from AA and CBA

receivables.
32. All other issues are considered withdrawn.19[19]
 

In their Opposition, the petitioners argued that the MOA only covered the
payment of their share in the contracted attorneys fees, but did not include the
attorneys fees awarded by the NLRC. To support their claim, the petitioners
submitted Borelas affidavit which relevantly stated:

2. On December 19, 2003, in settlement of the notice of Strike for CBA

Deadlock, Manila Water Company, Inc. and the Union entered into an Agreement

15

16

17

18

19
 settling the deadlock issued (sic) of the CBA negotiation including [the] payment
of the AA and the mode of payment thereof.
 
3. Considering that the AA payment was included in the Agreement, the
Union representation deemed it wise, for practical reason, to authorize the
company to immediately deduct from the benefits that will be received by the
member/employees the 10% attorneys fees in conformity with our contract with
our counsel.
 
4. The 10% attorneys fees paid by the members/employees is separate
and distinct from the obligation of the company to pay the 10% awarded
attorneys fees which we also gave to our counsel as part of our contingent fee
agreement.
 
5. There was no agreement that we are going to shoulder the entire
attorneys fees as this would cost us 20% of the amount we would recover. There
was also no agreement that the 10% attorneys fees in the MOA represents the
entire attorneys cost because the said payment represents only our compliance of
our share in the attorneys fees in conformity with our contract. Likewise, we did
not waive the awarded 10% attorneys fees because the same belongs to our
counsel and not to us and beyond our authority.20[20] (emphasis ours)
 
 

The NLRC subsequently denied both parties Motions for Partial

Reconsideration,21[21] prompting the Company to elevate the case to the CA via
a petition for certiorari under Rule 65 of the Rules of Court. It charged the
NLRC of grave abuse of discretion in sustaining the award of attorneys fees on the
grounds that: (1) it is contrary to the MOA 22[22] concerning the payment of
attorneys fees; (2) there was no finding of unlawful withholding of wages or bad
faith on the part of the Company; and (3) the attorneys fees awarded are
unconscionable.

The CA Decision

In its Decision promulgated on March 6, 2006, 23[23] the CA modified the

assailed NLRC rulings by deleting [t]he order for respondent MWCI to pay

20

21

22

23
attorneys fees equivalent to 10% of the total judgment awards. The CA recognized
the binding effect of the MOA between the Company and the Union; it stressed
that any further award of attorneys fees is unfounded considering that it did not
find anything in the Agreement that is contrary to law, morals, good customs,
public policy or public order.

In resolving the issue, the CA cited our ruling in Traders Royal Bank
Employees Union-Independent v. NLRC,24[24] where we distinguished between the
two commonly accepted concepts of attorneys fees the ordinary and the
extraordinary. We held in that case that under its ordinary concept, attorneys fees
are the reasonable compensation paid to a lawyer by his client for legal services
rendered. On the other hand, we ruled that in its extraordinary concept, attorneys
fees represent an indemnity for damages ordered by the court to be paid by the
losing party in a litigation based on what the law provides; it is payable to the
client not to the lawyer, unless there is an agreement to the contrary.

The CA noted that the fees at issue in this case fall under the extraordinary
concept the NLRC having ordered the Company, as losing party, to pay the Union
and its members ten percent (10%) attorneys fees. It found the award without basis
under Article 111 of the Labor Code which provides that attorneys fees equivalent
to ten percent (10%) of the amount of wages recovered may be assessed only in
cases of unlawful withholding of wages.

The CA ruled that the facts of the case do not indicate any unlawful
withholding of wages or bad faith attributable to the Company. It also held that the
additional grant of 10% attorneys fees violates Article 111 of the Labor Code
considering that the MOA between the parties already ensured the payment of 10%
attorneys fees, deductible from the AA and CBA receivables of the Unions

24
members. The CA thus adjudged the NLRC decision awarding attorneys fees to
have been rendered with grave abuse of discretion.

The Union and Borela moved for reconsideration, but the CA denied the
motion in its resolution of August 15, 2006.25[25] Hence, the present petition.

The Petition

The petitioners seek a reversal of the CA rulings on the sole ground that the
appellate court committed a reversible error in reviewing the factual findings of the
NLRC and in substituting its own findings an action that is not allowed under Rule
65 of the Rules of Court. They question the CAs re-evaluation of the evidence,
particularly the MOA, and its conclusion that there was no unlawful withholding of
wages or bad faith attributable to the Company, thereby contradicting the factual
findings of the NLRC. They also submit that a petition for certiorari under Rule 65
is confined only to issues of jurisdiction or grave abuse of discretion, and does not
include the review of the NLRCs evaluation of the evidence and its factual
findings.26[26]

The petitioners argue that in the present case, all the parties arguments and
evidence relating to the award of attorneys fees were carefully studied and weighed
by the NLRC. As a result, the NLRC gave credence to Borelas affidavit claiming
that the attorneys fees paid by the Unions members are separate and distinct from
the attorneys fees awarded by the NLRC. The petitioners stress that whether the
NLRC is correct in giving credence to Borelas affidavit is a question that the CA

25

26
cannot act upon in a petition for certiorari unless grave abuse of discretion can be
shown.27[27]

The Case for the Company

In its Memorandum filed on September 7, 2007,28[28]the Company argues

that the correctness of the NLRCs interpretation of the provision of the MOA, the
reasonableness of the attorneys fees in question, and the application or
interpretation of a provision of the Labor Code on the matter are questions of law
which the CA validly inquired into in the certiorari proceedings. It argues that the
CA correctly ruled that the NLRC acted with grave abuse of discretion when it
affirmed the LAs award of attorneys fees despite the absence of a finding of any
unlawful withholding of wages or bad faith on the part of the Company. It finally
contends that the Unions demand, together with the NLRC award, is
unconscionable as it represents 20% of the amount due or about P21.4 million.

Issues

The core issues posed for our resolution are: (1) whether the CA can review
the factual findings of the NLRC in a Rule 65 petition; and (2) whether the NLRC
gravely abused its discretion in awarding ten percent (10%) attorneys fees to the
petitioners.

The Courts Ruling

 
27

28
 We find the petition and its arguments meritorious.

 
On the CAs Review of the NLRCs Factual Findings

 
We agree with the petitioners that as a rule, the CA cannot undertake a re-
assessment of the evidence presented in the case in certiorari proceedings under
Rule 65 of the Rules of Court. 29[29] However, the rule admits of exceptions. In
Mercado v. AMA Computer College-Paraaque City, Inc.,30[30] we held that the
CA may examine the factual findings of the NLRC to determine whether or not its
conclusions are supported by substantial evidence, whose absence justifies a
finding of grave abuse of discretion. We ruled:
 
We agree with the petitioners that, as a rule in certiorari proceedings
under Rule 65 of the Rules of Court, the CA does not assess and weigh each piece
of evidence introduced in the case.  The CA only examines the factual findings of
the NLRC to determine whether or not the conclusions are supported by
substantial evidence whose absence points to grave abuse of discretion amounting
to lack or excess of jurisdiction.  In the recent case of Protacio v. Laya
Mananghaya & Co., we emphasized that:
 
As a general rule, in certiorari proceedings under Rule 65
of the Rules of Court, the appellate court does not assess and
weigh the sufficiency of evidence upon which the Labor Arbiter
and the NLRC based their conclusion. The query in this
proceeding is limited to the determination of whether or not the
NLRC acted without or in excess of its jurisdiction or with grave
abuse of discretion in rendering its decision. However, as an
exception, the appellate court may examine and measure the
factual findings of the NLRC if the same are not supported by
substantial evidence. The Court has not hesitated to affirm the
appellate courts reversals of the decisions of labor tribunals if
they are not supported by substantial evidence. 31[31] (italics
and emphasis supplied; citation omitted)
 
 
As discussed below, our review of the records and of the CA decision shows
that the CA erred in ruling that the NLRC gravely abused its discretion in awarding
the petitioners ten percent (10%) attorneys fees without basis in fact and in law.
Corollary to the above-cited rule is the basic approach in the Rule 45 review of
Rule 65 decisions of the CA in labor cases which we articulated in Montoya v.

29

30

31
Transmed Manila Corporation32[32] as a guide and reminder to the CA. We laid
down that:
 
In a Rule 45 review, we consider the correctness of the assailed CA decision, in
contrast with the review for jurisdictional error that we undertake under Rule
65.  Furthermore, Rule 45 limits us to the review of questions of law raised
against the assailed CA decision.  In ruling for legal correctness, we have to view
the CA decision in the same context that the petition for certiorari it ruled upon
was presented to it; we have to examine the CA decision from the prism of
whether it correctly determined the presence or absence of grave abuse of
discretion in the NLRC decision before it, not on the basis of whether the
NLRC decision on the merits of the case was correct.  In other words, we have
to be keenly aware that the CA undertook a Rule 65 review, not a review on
appeal, of the NLRC decision challenged before it.  This is the approach that
should be basic in a Rule 45 review of a CA ruling in a labor case.  In question
form, the question to ask is: Did the CA correctly determine whether the
NLRC committed grave abuse of discretion in ruling on the case?33[33]
(italics and emphases supplied)

In the present case, we are therefore tasked to determine whether the CA

correctly ruled that the NLRC committed grave abuse of discretion in awarding
10% attorneys fees to the petitioners.
 
On the Award of Attorneys Fees
 
 

Article 111 of the Labor Code, as amended, governs the grant of attorneys
fees in labor cases:

Art. 111. Attorneys fees.- (a) In cases of unlawful withholding of wages,

the culpable party may be assessed attorneys 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 wages, attorneys fees which
exceed ten percent of the amount of wages recovered.
 
 

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33
 Section 8, Rule VIII, Book III of its Implementing Rules also provides, viz.:

Section 8. Attorneys fees. Attorneys fees in any judicial or administrative

proceedings for the recovery of wages shall not exceed 10% of the amount
awarded. The fees may be deducted from the total amount due the winning party.
 
 

We explained in PCL Shipping Philippines, Inc. v. National Labor Relations

Commission34[34]that there are two commonly accepted concepts of attorneys
fees the ordinary and extraordinary. In its ordinary concept, an attorneys fee is the
reasonable compensation paid to a lawyer by his client for the legal services the
former renders; compensation is paid for the cost and/or results of legal services
per agreement or as may be assessed. In its extraordinary concept, attorneys fees
are deemed indemnity for damages ordered by the court to be paid by the
losing party to the winning party. The instances when these may be awarded are
enumerated in Article 2208 of the Civil Code, specifically in its paragraph 7 on
actions for recovery of wages, and is payable not to the lawyer but to the client,
unless the client and his lawyer have agreed that the award shall accrue to the
lawyer as additional or part of compensation.35[35]

We also held in PCL Shipping that Article 111 of the Labor Code, as
amended, contemplates the extraordinary concept of attorneys fees and that
Article 111 is an exception to the declared policy of strict construction in the
award of attorneys fees. Although an express finding of facts and law is 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 primary and paramount
consideration. This kind of interpretation gives meaning and substance to the
liberal and compassionate spirit of the law as embodied in Article 4 of the Labor

34

35
Code (which provides that "[a]ll 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 "[i]n case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living for the laborer).36[36]

We similarly so ruled in RTG Construction, Inc. v. Facto37[37]and in Ortiz

v. San Miguel Corporation.38[38] In RTG Construction, we specifically stated:

Settled is the rule that in actions for recovery of wages, or where an employee was
forced to litigate and, thus, incur expenses to protect his rights and interests, a
monetary award by way of attorneys fees is justifiable under Article 111 of the
Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules; and
paragraph 7, Article 2208 of the Civil Code. The award of attorneys fees is
proper, and there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need only be a
showing that the lawful wages were not paid accordingly. 39[39] (emphasis
ours)
 
 

In PCL Shipping, we found the award of attorneys fees due and appropriate
since the respondent therein incurred legal expenses after he was forced to file an
action for recovery of his lawful wages and other benefits to protect his rights. 40
[40] From this perspective and the above precedents, we conclude that the CA
erred in ruling that a finding of the employers malice or bad faith in withholding
wages must precede an award of attorneys fees under Article 111 of the Labor
Code. To reiterate, a plain showing that the lawful wages were not paid without
justification is sufficient.

36

37

38

39

40
 In the present case, we find it undisputed that the union members are entitled
to their AA benefits and that these benefits were not paid by the Company. That
the Company had no funds is not a defense as this was not an insuperable cause
that was cited and properly invoked. As a consequence, the union members
represented by the Union were compelled to litigate and incur legal expenses. On
these bases, we find no difficulty in upholding the NLRCs award of ten percent
(10%) attorneys fees.

The more significant issue in this case is the effect of the MOA provision
that attorneys fees shall be deducted from the AA and CBA receivables. In this
regard, the CA held that the additional grant of 10% attorneys fees by the NLRC
violates Article 111 of the Labor Code, considering that the MOA between the
parties already ensured the payment of 10% attorneys fees deductible from the AA
and CBA receivables of the Unions members. In addition, the Company also
argues that the Unions demand, together with the NLRC award, is unconscionable
as it represents 20% of the amount due or about P21.4 million.

In Traders Royal Bank Employees Union-Independent v. NLRC,41[41] we

expounded on the concept of attorneys fees in the context of Article 111 of the
Labor Code, as follows:

In the first place, the fees mentioned here are the extraordinary attorneys
fees recoverable as indemnity for damages sustained by and payable to the
prevailing part[y]. In the second place, the ten percent (10%) attorneys fees
provided for in Article 111 of the Labor Code and Section 11, Rule VIII, Book III
of the Implementing Rules is the maximum of the award that may thus be
granted. Article 111 thus fixes only the limit on the amount of attorneys fees
the victorious party may recover in any judicial or administrative proceedings
and it does not even prevent the NLRC from fixing an amount lower than the ten
percent (10%) ceiling prescribed by the article when circumstances warrant it. 42
[42] (emphases ours; citation omitted)
 

41

42
  

In the present case, the ten percent (10%) attorneys fees awarded by the
NLRC on the basis of Article 111 of the Labor Code accrue to the Unions
members as indemnity for damages and not to the Unions counsel as compensation
for his legal services, unless, they agreed that the award shall be given to their
counsel as additional or part of his compensation; in this case the Union bound
itself to pay 10% attorneys fees to its counsel under the MOA and also gave up the
attorneys fees awarded to the Unions members in favor of their counsel. This is
supported by Borelas affidavit which stated that [t]he 10% attorneys fees paid by
the members/employees is separate and distinct from the obligation of the
company to pay the 10% awarded attorneys fees which we also gave to our counsel
as part of our contingent fee agreement.43[43] The limit to this agreement is that the
indemnity for damages imposed by the NLRC on the losing party (i.e., the
Company) cannot exceed ten percent (10%).

Properly viewed from this perspective, the award cannot be taken to mean an
additional grant of attorneys fees, in violation of the ten percent (10%) limit under
Article 111 of the Labor Code since it rests on an entirely different legal obligation
than the one contracted under the MOA. Simply stated, the attorneys fees
contracted under the MOA do not refer to the amount of attorneys fees
awarded by the NLRC; the MOA provision on attorneys fees does not have
any bearing at all to the attorneys fees awarded by the NLRC under Article
111 of the Labor Code. Based on these considerations, it is clear that the CA erred
in ruling that the LAs award of attorneys fees violated the maximum limit of ten
percent (10%) fixed by Article 111 of the Labor Code.

Under this interpretation, the Companys argument that the attorneys fees are
unconscionable as they represent 20% of the amount due or about P21.4 million is
more apparent than real. Since the attorneys fees awarded by the LA pertained to

43
the Unions members as indemnity for damages, it was totally within their right to
waive the amount and give it to their counsel as part of their contingent fee
agreement. Beyond the limit fixed by Article 111 of the Labor Code, such as
between the lawyer and the client, the attorneys fees may exceed ten percent (10%)
on the basis of quantum meruit, as in the present case.44[44]

WHEREFORE, premises considered, the petition is hereby GRANTED.

The assailed decision dated March 6, 2006 and the resolution dated August 15,
2006 of the Court of Appeals in CA-G.R. SP No. 83654 are REVERSED and SET
ASIDE. The Labor Arbiters award of attorneys fees equivalent to ten percent
(10%) of the total judgment award is hereby REINSTATED.

No pronouncement as to costs.

SO ORDERED.

44
 SECOND DIVISION

[G.R. No. 115949. March 16, 2000]

EVANGELINE J. GABRIEL, TERESITA C. LUALHATI, EVELYN SIA,

RODOLFO EUGENIO, ISAGANI MAKISIG, and DEMETRIO SALAS,
petitioners, vs. THE HONORABLE SECRETARY OF LABOR AND
EMPLOYMENT and SIMEON SARMIENTO, JESUS CARLOS MARTINEZ
III, ALBERT NAPIAL, MARVIN ALMACIN, ROGELIO MATEO, GLENN
SIAPNO, EMILIANO CUETO, SALOME ATIENZA, NORMA V. GO, JUDITH
DUDANG, MONINA DIZON, EUSEBIO ROMERO, ISAGANI MORALES,
ELISEO BUENAVENTURA, CLEMENTE AGCAMARAN, CARMELITA
NOLASCO, JOVITA FERI, LULU ACOSTA, CAROL LAZARO, NIDA
ARRIZA, ROMAN BERNARDO, DOMINGO B. MACALDO, EUGENE
PIDLAOAN, MA. SOCORRO T. ANGOB, JOSEPHINE ALVAREZ,
LOURDES FERRER, JACQUILINE BAQUIRAN, GRACIA R. ESCUADRO,
KRISTINA HERNANDEZ, LOURDES IBEAS, MACARIO GARCIA, BILLY
TECSON, ALEX RECTO III, LEBRUDO, JOSE RICAFORTE, RODOLFO
MORADA, TERESA AMADO, ROSITA TRINIDAD, JEANETTE ONG,
VICTORINO LAS-AY, RANIEL DAYAO, OSCAR SANTOS, CRISTINA
SALAVER, VICTORIA ARINO, A.H. SAJO, MICHAEL BIETE, RED RP,
GLORIA JUAT, ETHELINDA CASILAN, FAMER DIPASUPIL, MA.
HIDELISA POMER, MA. CHARLOTTE TAWATAO, GRACE REYES, ERNIE
COLINA, ZENAIDA MENDOZA, PAULITA ADORABLE, BERNARDO
MADUMBA, NESTOR NAVARRO, EASTER YAP, ALMA LIM, FELISA YU,
TIMOTEO GANASTRA, REVELITA CARTAJENAS, ANGELITO CABUAL,
ROBERTA TAN, DOMINADOR TAPO, GRACE LIM, GADIANE JEMIE,
CHRISTHDY DAUD, BENEDICTO ACOSTA, JESUSA ACOSTA, MA.
AVELINA ARYAP, EVELYN BENITEZ, ESTERITA CHU, EVANGELINE
CHU, BETTY CINCO, RICARDO CONNEJO, MANULITO EVALO, FRANCIS
LEONIDA, GREGORIO NOBLEZA, RODOLFO RIVERAL, ELSA SIA,
CLARA SUGBO, EDGARDO TABAO, MANUEL VELOSO, MARLYN YU,
ABSALON BUENA, WILFREDO PUERTO, FLORENTINA PINGOL,
MARILOU DAR, FE MORALES, MALEN BELLO, LORENA TAMAYO,
CESAR LIM, PAUL BALTAZAR, ALFREDO GAYAGAS, DUMAGUETE
EMPLOYEES, CEBU EMPLOYEES, OZAMIZ EMPLOYEES, TACLOBAN
EMPLOYEES AND ALL OTHER SOLIDBANK UNION MEMBERS,
respondents. C alrsc

DECISION

QUISUMBING, J.:

Before us is a special civil action for certiorari seeking to reverse partially the Order [1] of
45

public respondent dated June 3, 1994, in Case No. OS-MA-A-8-170-92, which ruled that
the workers through their union should be made to shoulder the expenses incurred for
the professional services of a lawyer in connection with the collective bargaining
negotiations and that the reimbursement for the deductions from the workers should be
charged to the unions general fund or account.
45
The records show the following factual antecedents:

Petitioners comprise the Executive Board of the SolidBank Union, the duly recognized
collective bargaining agent for the rank and file employees of Solid Bank Corporation.
Private respondents are members of said union.

Sometime in October 1991, the unions Executive Board decided to retain anew the
service of Atty. Ignacio P. Lacsina (now deceased) as union counsel in connection with
the negotiations for a new Collective Bargaining Agreement (CBA). Accordingly, on
October 19, 1991, the board called a general membership meeting for the purpose. At
the said meeting, the majority of all union members approved and signed a resolution
confirming the decision of the executive board to engage the services of Atty. Lacsina
as union counsel.

As approved, the resolution provided that ten percent (10%) of the total economic
benefits that may be secured through the negotiations be given to Atty. Lacsina as
attorneys fees. It also contained an authorization for SolidBank Corporation to check-off
said attorneys fees from the first lump sum payment of benefits to the employees under
the new CBA and to turn over said amount to Atty. Lacsina and/or his duly authorized
representative. [2]
46

The new CBA was signed on February 21, 1992. The bank then, on request of the
union, made payroll deductions for attorneys fees from the CBA benefits paid to the
union members in accordance with the abovementioned resolution.

On October 2, 1992, private respondents instituted a complaint against the petitioners

and the union counsel before the Department of Labor and Employment (DOLE) for
illegal deduction of attorneys fees as well as for quantification of the benefits in the 1992
CBA. [3] Petitioners, in response, moved for the dismissal of the complaint citing litis
47

pendentia, forum shopping and failure to state a cause of action as their grounds. [4]Sccal r
48

On April 22, 1993, Med-Arbiter Paterno Adap of the DOLE- NCR issued the following
Order:

"WHEREFORE, premises considered, the Respondents Union Officers

and Counsel are hereby directed to immediately return or refund to the
Complainants the illegally deducted amount of attorneys fees from the
package of benefits due herein complainants under the aforesaid new
CBA.

"Furthermore, Complainants are directed to pay five percent (5%) of the

total amount to be refunded or returned by the Respondent Union Officers
and Counsel to them in favor of Atty. Armando D. Morales, as attorneys
fees, in accordance with Section II, Rule VIII of Book II (sic) of the
Omnibus Rules Implementing the Labor Code." [5] 49

On appeal, the Secretary of Labor rendered a Resolution 50

[6] dated December 27, 1993,
stating:

46

47

48

49

50
 "WHEREFORE, the appeal of respondents Evangeline Gabriel, et. al., is
hereby partially granted and the Order of the Med-Arbiter dated 22 April
1993 is hereby modified as follows: (1) that the ordered refund shall be
limited to those union members who have not signified their conformity to
the check-off of attorneys fees; and (2) the directive on the payment of 5%
attorneys fees should be deleted for lack of basis.

SO ORDERED." 51
[7]

On Motion for Reconsideration, public respondent affirmed the said Order with
modification that the unions counsel be dropped as a party litigant and that the workers
through their union should be made to shoulder the expenses incurred for the attorneys
services. Accordingly, the reimbursement should be charged to the unions general
fund/account. [8]
52

Hence, the present petition seeking to partially annul the above-cited order of the public
respondent for being allegedly tainted with grave abuse of discretion amounting to lack
of jurisdiction.

The sole issue for consideration is, did the public respondent act with grave abuse of
discretion in issuing the challenged order? Calrsp ped

Petitioners argue that the General Membership Resolution authorizing the bank to
check-off attorneys fee from the first lump sum payment of the benefits to the
employees under the new CBA satisfies the legal requirements for such assessment. [9] 53

Private respondents, on the other hand, claim that the check-off provision in question is
illegal because it was never submitted for approval at a general membership meeting
called for the purpose and that it failed to meet the formalities mandated by the Labor
Code. [10]
54

In check-off, the employer, on agreement with the Union, or on prior authorization from
employees, deducts union dues or agency fees from the latters wages and remits them
directly to the union. [11] It assures continuous funding for the labor organization. As this
55

Court has acknowledged, the system of check-off is primarily for the benefit of the union
and only indirectly for the individual employees. [12]
56

The pertinent legal provisions on check-offs are found in Article 222 (b) and Article 241
(o) of the Labor Code.

Article 222 (b) states:

"No attorneys fees, negotiation fees or similar charges of any kind arising
from any collective bargaining negotiations or conclusions of the collective
agreement shall be imposed on any individual member of the contracting
union: Provided, however, that attorneys fees may be charged against
union funds in an amount to be agreed upon by the parties. Any contract,

51

52

53

54

55

56
 agreement or arrangement of any sort to the contrary shall be null and
void." (Underscoring ours)

Article 241 (o) provides:

"Other than for mandatory activities under the Code, no special

assessment, attorneys fees, negotiation fees or any other extraordinary
fees may be checked off from any amount due to an employee without an
individual written authorization duly signed by the employee. The
authorization should specifically state the amount, purpose and
beneficiary of the deduction." (Emphasis ours.)

Article 241 has three (3) requisites for the validity of the special assessment for unions
incidental expenses, attorneys fees and representation expenses. These are: 1)
authorization by a written resolution of the majority of all the members at the general
membership meeting called for the purpose; (2) secretarys record of the minutes of the
meeting; and (3) individual written authorization for check off duly signed by the
employees concerned. Sce dp

Clearly, attorneys fees may not be deducted or checked off from any amount due to an
employee without his written consent.

After a thorough review of the records, we find that the General Membership Resolution
of October 19, 1991 of the SolidBank Union did not satisfy the requirements laid down
by law and jurisprudence for the validity of the ten percent (10%) special assessment for
unions incidental expenses, attorneys fees and representation expenses. There were
no individual written check off authorizations by the employees concerned and so the
assessment cannot be legally deducted by their employer.

Even as early as February 1990, in the case of Palacol vs. Ferrer-Calleja [13] we said
57

that the express consent of employees is required, and this consent must be obtained in
accordance with the steps outlined by law, which must be followed to the letter. No
shortcuts are allowed. In Stellar Industrial Services, Inc. vs. NLRC [14] we reiterated that
58

a written individual authorization duly signed by the employee concerned is a condition

sine qua non for such deduction.

These pronouncements are also in accord with the recent ruling of this Court in the case
of ABS-CBN Supervisors Employees Union Members vs. ABS-CBN Broadcasting
Corporation, et. al., [15] which provides:
59

"Premises studiedly considered, we are of the irresistible conclusion and,

so find that the ruling in BPIEU-ALU vs. NLRC that (1) the prohibition
against attorneys fees in Article 222, paragraph (b) of the Labor Code
applies only when the payment of attorneys fees is effected through
forced contributions from the workers; and (2) that no deduction
must be take from the workers who did not sign the check-off
authorization, applies to the case under consideration." (Emphasis ours.)

We likewise ruled in Bank of the Philippine Island Employees Union-Association Labor

Union (BPIEU-ALU) vs. NLRC, [16]60

57

58

59

60
 " the afore-cited provision (Article 222 (b) of the Labor Code) as prohibiting
the payment of attorneys fees only when it is effected through forced
contributions from workers from their own funds as distinguished from the
union funds. The purpose of the provision is to prevent imposition on the
workers of the duty to individually contribute their respective shares in the
fee to be paid the attorney for his services on behalf of the union in its
negotiations with management. The obligation to pay the attorneys
fees belongs to the union and cannot be shunted to the workers as
their direct responsibility. Neither the lawyer nor the union itself may
require the individual worker to assume the obligation to pay
attorneys fees from their own pockets. So categorical is this intent that
the law makes it clear that any agreement to the contrary shall be null and
void ab initio." (Emphasis ours.) Edp sc

From all the foregoing, we are of the considered view that public respondent did not act
with grave abuse of discretion in ruling that the workers through their union should be
made to shoulder the expenses incurred for the services of a lawyer. And accordingly
the reimbursement should be charged to the unions general fund or account. No
deduction can be made from the salaries of the concerned employees other than those
mandated by law.

WHEREFORE, the petition is DENIED. The assailed Order dated June 3, 1994, of
respondent Secretary of Labor signed by Undersecretary Bienvenido E. Laguesma is
AFFIRMED. No pronouncement as to costs.

SO ORDERED.
THIRD DIVISION

EDUARDO J. MARIO, JR., MA.   G.R. No. 149763

MELVYN P. ALAMIS, NORMA P.  
COLLANTES, and FERNANDO  
PEDROSA,
Present:
Petitioners,
 
 
YNARES-SANTIAGO, J.,
 
Chairperson,
- versus - CARPIO,*
  CHICO-NAZARIO,
  VELASCO, JR., and
GIL Y. GAMILLA, RENE LUIS TADLE, NACHURA, JJ.
NORMA S. CALAGUAS, MA.
LOURDES C. MEDINA, EDNA B.  
SANCHEZ, REMEDIOS GARCIA,
MAFEL YSRAEL, ZAIDA GAMILLA,  
and AURORA DOMINGO,
 
Respondents.
Promulgated:

July 7, 2009

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

*
 DECISION

CHICO-NAZARIO, J.:

Assailed in this Petition for Review on Certiorari,61[1] under Rule 45 of the

Rules of Court, are (1) the Decision62[2] dated 16 March 2001 of the Court of
Appeals in CA-G.R. SP No. 60657, dismissing petitioners Petition for Certiorari
under Rule 65 of the Rules of Court; and (2) the Resolution63[3] dated 30 August
2001 of the appellate court in the same case denying petitioners Motion for
Reconsideration.

FACTS

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

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

At the time when the numerous controversies in the instant case first came
about, petitioners Atty. Eduardo J. Mario, Jr., Ma. Melvyn P. Alamis, Norma P.

61

62

63
Collantes, and Fernando Pedrosa were among the executive officers and directors
(collectively called the Mario Group) of the University of Sto. Tomas Faculty Union
(USTFU), a labor union duly organized and registered under the laws of the
Republic of the Philippines and the bargaining representative of the faculty
members of the University of Santo Tomas (UST).64[4]

Respondents Gil Y. Gamilla, Rene Luis Tadle, Norma S. Calaguas, Ma.

Lourdes C. Medina, Edna B. Sanchez, Remedios Garcia, Mafel Ysrael, Zaida
Gamilla, and Aurora Domingo were UST professors and USTFU members.

The 1986 Collective Bargaining Agreement (CBA) between UST and USTFU
expired on 31 May 1988. Thereafter, bargaining negotiations ensued between
UST and the Mario Group, which represented USTFU. As the parties were not able
to reach an agreement despite their earnest efforts, a bargaining deadlock was
declared and USTFU filed a notice of strike. Subsequently, then Secretary of the
Department of Labor and Employment (DOLE) Franklin Drilon assumed
jurisdiction over the dispute, which was docketed as NCMB-NCR-NS-02-117-89.
The DOLE Secretary issued an Order on 19 October 1990, laying the terms and
conditions for a new CBA between the UST and USTFU. In accordance with said
Order, the UST and USTFU entered into a CBA in 1991, which was to be effective
for the period of 1 June 1988 to 31 May 1993 (hereinafter 1988-1993 CBA). In
keeping with Article 253-A65[5] of the Labor Code, as amended, the economic
provisions of the 1988-1993 CBA were subject to renegotiation for the fourth and
fifth years.

64

65
 Accordingly, on 10 September 1992, UST and USTFU executed a
Memorandum of Agreement (MOA),66[6] whereby UST faculty members
belonging to the collective bargaining unit were granted additional economic
benefits for the fourth and fifth years of the 1988-1993 CBA, specifically, the
period from 1 June 1992 up to 31 May 1993. The relevant portions of the MOA
read:

MEMORANDUM OF AGREEMENT

xxxx

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

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

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

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

2.3. In the case of a covered faculty member whose compensation is computed on a

basis other than lecture unit per month, he shall receive salary increases that are
equivalent to those provided in paragraphs 2.1 and 2.2 hereof, with the amount of
salary increases being arrived at by using the usual method of computing the said
faculty members basic pay;

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

66
 

4.0. A portion of the P42,000,000.00 economic package amounting to P2,000,000.00

shall be used to satisfy all obligations that remained outstanding and unpaid in the May
17, 1986 Collective Bargaining Agreement.

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

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

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

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

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

8.1. the University has complied with the requirements of the law relative to the release
and distribution of the incremental proceeds of tuition fee increases as these
incremental proceeds pertain to the faculty share in the tuition fee increase collected
during the School-Year 1991-1992; and,

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

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

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

xxxx

UNIVERSITY OF SANTO TOMAS UST FACULTY UNION

BY: BY:

(signed) (signed)

FR. TERESO M. CAMPILLO, JR., O.P. ATTY. EDUARDO J.

Treasurer MARINO, JR.

President

Attested by[:]

(signed)

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

On 12 September 1992, the majority of USTFU members signed individual

instruments of ratification,67[7] which purportedly signified their consent to the
economic benefits granted under the MOA. Said instruments uniformly recited:

RATIFICATION OF THE UST-USTFU MEMORANDUM OF AGREEMENT DATED SEPTEMBER

10, 1992 GRANTING A PACKAGE OF THE P42 MILLION FACULTY BENEFITS WITH
PROVISION FOR CHECK-OFF.

September 12, 1992

Date

67
  

TO WHOM IT MAY CONCERN:

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

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

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

_________________________

Signature of Faculty Member (Emphasis ours.)

USTFU, through its President, petitioner Atty. Mario, wrote a letter 68[8]
dated 1 October 1992 to the UST Treasurer requesting the release to the union of
the sum of P4.2 million, which was 10% of the P42 million economic benefits
package granted by the MOA to faculty members belonging to the collective
bargaining unit. The P4.2 million was sought by USTFU in consideration of its
efforts in obtaining the said P42 million economic benefits package. UST remitted
the sum of P4.2 million to USTFU on 9 October 1992.69[9]

68

69
  

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

On 15 December 1994, respondents70[10] filed with the Med-Arbiter, DOLE-

National Capital Region (NCR), a Complaint for the expulsion of the Mario Group
as USTFU officers and directors, which was docketed as Case No. NCR-OD-M-
9412-022.71[11] Respondents alleged in their Complaint that the Mario Group
violated the rights and conditions of membership in USTFU, particularly by: 1)
investing the unspent balance of the P42 million economic benefits package given
by UST without prior approval of the general membership; 2) simultaneously
holding elections viva voce; 3) ratifying the CBA involving the P42 million
economic benefits package; and 4) approving the attorneys/agency fees worth
P4.2 million in the form of check-off. Respondents prayed that the Mario Group
be declared jointly and severally liable for refunding all collected
attorneys/agency fees from individual members of USTFU and the collective
bargaining unit; and that, after due hearing, the Mario group be expelled as
USTFU officers and directors.

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

70

71
 On 16 December 1994, UST and USTFU, represented by the Mario Group,
entered into a new CBA, effective 1 June 1993 to 31 May 1998 (1993-1998 CBA).
This new CBA was registered with the DOLE on 20 February 1995.

Respondents72[12] filed with the Med-Arbiter, DOLE-NCR, on 18 October

1995, another Complaint against the Mario Group for violation of the rights and
conditions of union membership, which was docketed as Case No. NCR-OD-M-
9510-028.73[13] The Complaint primarily sought to invalidate certain provisions of
the 1993-1998 CBA negotiated by the Mario Group for USTFU and the registration
of said CBA with the DOLE.

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

On 24 September 1996, petitioner Norma Collantes, as USTFU Secretary-

General, posted notices in some faculty rooms at UST, informing the union
members of a general assembly to be held on 5 October 1996. Part of the agenda
for said date was the election of new USTFU officers. The following day, 25
September 1996, respondents wrote a letter74[14] to the USTFU Committee on
Elections, urging the latter to re-schedule the elections to ensure a free, clean,
honest, and orderly election and to afford the union members the time to prepare
themselves for the same. The USTFU Committee on Elections failed to act
positively on respondents letter, and neither did they adopt and promulgate the
rules and regulations for the conduct of the scheduled election.

72

73

74
 Thus, on 1 October 1996, respondents 75[15] filed with the Med-Arbiter,
DOLE-NCR, an Urgent Ex-Parte Petition/Complaint, which was docketed as Case
No. NCR-OD-M-9610-001.76[16] Respondents alleged in their Petition/Complaint
that the general membership meeting called by the USTFU Board of Directors on
5 October 1996, the agenda of which included the election of union officers, was
in violation of the provisions of the Constitution and By-Laws of USTFU.
Respondents prayed that the DOLE supervise the conduct of the USTFU elections,
and that they be awarded attorneys fees.

On 4 October 1996, the Med-Arbiter DOLE-NCR, issued a Temporary

Restraining Order (TRO) enjoining the holding of the USTFU elections scheduled
the next day.

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

Also on 4 October 1996, the UST Secretary General headed a general

faculty assembly attended by USTFU members, as well as USTFU non-members,
but who were members of the collective bargaining unit. During said assembly,
respondents were among the elected officers of USTFU (collectively referred to as
the Gamilla Group). Petitioners filed with the Med-Arbiter, DOLE-NCR, a Petition
seeking injunctive reliefs and the nullification of the results of the 4 October 1994
election. The Petition was docketed as Case No. NCR-OD-M-9610-016.

In a Decision dated 11 February 1997 in Case No. NCR-OD-M-9610-016, the

Med-Arbiter DOLE-NCR, nullified the election of the Gamilla Group as USTFU
75

76
officers on 4 October 1996 for having been conducted in violation of the
Constitution and By-Laws of the union. This ruling of the Med-Arbiter was
affirmed on appeal by the Bureau of Labor Relations (BLR) in a Resolution issued
on 15 August 1997. Respondents were, thus, prompted to file a Petition for
Certiorari before this Court, docketed as G.R. No. 131235.

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

On 16 November 1999, the Court promulgated its Decision in G.R. No.

131235, affirming the BLR Resolution dated 15 August 1997 which ruled that the
purported election of USTFU officers held on 4 October 1996 was void for
violating the Constitution and By-Laws of the union.77[17]

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

On 15 November 1996, respondents 78[18] filed before the Med-Arbiter,

DOLE-NCR, a fourth Complaint/Petition against the Mario Group, as well as the
Philippine Foundation for the Advancement of the Teaching Profession, Inc.,
Security Bank Corporation, and Bank of the Philippine Islands, which was
docketed as Case No. NCR-OD-M-9611-009.79[19] Respondents claimed in their
latest Complaint/Petition that they were the legitimate USTFU officers, having
been elected on 4 October 1996. They prayed for an order directing the Mario

77

78

79
Group to cease and desist from using the name of USTFU and from performing
acts for and on behalf of the USTFU and the rest of the members of the collective
bargaining unit.

DOLE Department Order No. 9 took effect on 21 June 1997, amending the
Rules Implementing Book V of the Labor Code, as amended. Thereunder,
jurisdiction over the complaints for any violation of the union constitution and by-
laws and the conditions of union membership was vested in the Regional Director
of the DOLE.80[20] Pursuant to said Department Order, all four
Petitions/Complaints filed by respondents against the Mario Group, particularly,
Case No. NCR-OD-M-9412-022, Case No. NCR-OD-M-9510-028, Case No. NCR-OD-
M-9610-001, and Case No. NCR-OD-M-9611-009 were consolidated and indorsed
to the Office of the Regional Director of the DOLE-NCR.

On 27 May 1999, the DOLE-NCR Regional Director rendered a Decision 81[21]

in the consolidated cases in respondents favor.

In Case No. NCR-OD-M-9412-022 and Case No. NCR-OD-M-9510-028, the

DOLE-NCR Regional Director adjudged the Mario Group, as the executive officers
of USTFU, guilty of violating the provisions of the USTFU Constitution and By-laws
by failing to collect union dues and to conduct a general assembly every three
months. The DOLE-NCR Regional Director also ruled that the Mario Group
violated Article 241(c)82[22] and (l)83[23] of the Labor Code when they did not
submit a list of union officers to the DOLE; when they did not submit/provide

80

81

82

83
DOLE and the USTFU members with copies of the audited financial statements of
the union; and when they invested in a bank, without prior consent of USTFU
members, the sum of P9,766,570.01, which formed part of the P42 million
economic benefits package.

Additionally, the DOLE-NCR Regional Director declared that the check-off of

P4.2 million collected by the Mario Group, as negotiation fees, was invalid.
According to the MOA executed on 10 September 1992 by UST and USTFU, the
P42 million economic benefits package was chargeable against the share of the
faculty members in the incremental proceeds of tuition fees collected and still to
be collected. Under Republic Act No. 6728, 84[24] 70% of the tuition fee increases
should be allotted to academic and non-academic personnel. Given that the
records were silent as to how much of the P42 million economic benefits package
was obtained through negotiations and how much was from the statutory
allotment of 70% of the tuition fee increases, the DOLE-NCR Regional Director
held that the entire amount was within the statutory allotment, which could not
be the subject of negotiation and, thus, could not be burdened by negotiation
fees.

The DOLE-NCR Regional Director further found that the principal subject of
Case No. NCR-OD-M-9610-001 (i.e., violation by the Mario Group of the provisions
on election of officers in the Labor Code and the USTFU Constitution and By-Laws)
had been superseded by the central event in Case No. NCR-OD-M-9611-009 (i.e.,
the subsequent election of another set of USTFU officers consisting of the Gamilla
Group). While there were two sets of USTFU officers vying for legitimacy, the
eventual ruling of the DOLE-NCR Regional Director, for the expulsion of the Mario
Group from their positions as USTFU officers, practically extinguished Case No.
NCR-OD-M-9611-009.
84
  

The decretal portion of the 27 May 1999 Decision of the DOLE-NCR

Regional Director reads:

WHEREFORE, premises considered, judgment is hereby rendered:

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

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

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

c.1. P2.0 M paid to USTFU in satisfaction of the remaining

obligation of the University under the 1986 CBA;

c.2. P7.0 M as consideration of the Compromise Agreement

entered into by USTFU involving certain labor cases;

c.3. Interest/earnings of the P9,766,570.01 balance of the P42

M invested/deposited by [the Mario Group] with the PCI
Capital Corporation.

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

Department.85[25]

Petitioners interposed an appeal86[26] before the BLR, which was docketed

as BLR-A-TR-52-25-10-99.

85

86
 In the meantime, the election of USTFU officers was held as scheduled on
14 January 2000,87[27] in which the Gamilla Group claimed victory. 88[28] On 3
March 2000, the Gamilla group, as the new USTFU officers, entered into a
Memorandum of Agreement89[29] with the UST, which provided for the economic
benefits to be granted to the faculty members of the UST for the years 1999-2001.
Said Agreement was ratified by the USTFU members on 9 March 2000.

On the same day, 9 March 2000, the BLR promulgated its Decision 90[30] in
BLR-A-TR-52-25-10-99, the fallo of which provides:

WHEREFORE, the appeal is GRANTED IN PART. Accordingly, the decision

appealed from is hereby MODIFIED to the effect that appellant USTFU officers are
hereby ordered to return to the general membership the amount of P4.2 million they
have collected by way of attorneys fees.

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

The BLR found no basis for the order of the DOLE-NCR Regional Director to
the Mario Group to account for the amounts of P2 million and P7 million
supposedly paid by UST to USTFU. The BLR clarified that UST paid USTFU a lump
sum of P7 million. The P2 million of this lump sum was the payment by UST of its
outstanding obligations to USTFU under the 1986 CBA. This amount was
subsequently donated by USTFU members to the Philippine Foundation for the
Advancement of the Teaching Profession, Inc. The remaining P5 million of the

87

88

89

90
lump sum was the consideration for the settlement of an illegal dismissal case
between UST and the Mario Group. Hence, the P5 million legally belonged to the
Mario Group, and there was no need to make it account for the same. As to the
interest earnings of the sum of P9,766,570.01 that was invested by the Mario
Group in a bank, the BLR ruled that the same was included in the amount of
P6,389,145.04 that was distributed to the faculty members on 18 November
1994.

The BLR, however, agreed in the finding of the DOLE-NCR Regional Director
that the P42 million economic benefits package was sourced from the faculty
members share in the tuition fee increases under Republic Act No. 6728. Under
said law, 70% of tuition fee increases shall go to the payment of salaries, wages,
allowances, and other benefits of teaching and non-teaching personnel. As was
held in the decision91[31] and subsequent resolution92[32] of the Supreme Court in
Cebu Institute of Technology v. Ople, the law has already provided for the
minimum percentage of tuition fee increases to be allotted for teachers and other
school personnel. This allotment is mandatory and cannot be diminished,
although it may be increased by collective bargaining. It follows that only the
amount beyond that mandated by law shall be subject to negotiation fees and
attorney's fees for the simple reason that it was only this amount that the school
employees had to bargain for.

The BLR further reasoned that the P4.2 million collected by the Mario
Group was in the nature of attorneys fees or negotiation fees and, therefore, fell
under the general prohibition against such fees in Article 222(b) 93[33] of the Labor
Code, as amended. Also, the exception to charging against union funds was not

91

92

93
applicable because the P42 million economic benefits package under the 10
September 1992 MOA was not union fund, as the same was intended not for the
union coffers, but for the members of the entire bargaining unit. The fact that the
P4.2 million check-off was approved by the majority of USTFU members was
immaterial in view of the clear command of Article 222(b) that any contract,
agreement, or arrangement of any sort, contrary to the prohibition contained
therein, shall be null and void.

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

Petitioners Motion for Partial Reconsideration 94[34] of the foregoing

Decision was denied by the BLR in a Resolution95[35] dated 13 June 2000.

Aggrieved once again, petitioners filed with the Court of Appeals a Petition
for Certiorari96[36] under Rule 65 of the Rules of Court, which was docketed as
CA-G.R. SP No. 60657. In a Resolution dated 26 September 2000, the Court of
Appeals directed respondents to file their Comment; and, in order not to render
moot and academic the issues in the Petition, enjoined respondents and all those
acting for and on their behalf from enforcing, implementing, and effecting the BLR
Decision dated 9 March 2000.

94

95

96
 On 16 March 2001, the Court of Appeals rendered its Decision in CA-G.R. SP
No. 60657, favoring respondents.

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

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

xxxx

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

xxxx

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

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

xxxx

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

Section 5. Special assessments or other extraordinary fees such as for

payment of attorneys fees shall be made only upon such a resolution
duly ratified by the general membership by secret balloting. x x x.

Also, Article 241(n)97[37] of the Labor Code, as amended, provides that no

special assessment shall be levied upon the members of the union unless authorized by
a written resolution of a majority of all the members at a general membership meeting
duly called for the purpose[.]

xxxx

In ABS-CBN Supervisors-Employees Union Members versus ABS-CBN

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

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

xxxx

The aforementioned ratification with check-off form embodied the: (a)

ratification of the MOA; (b) check-off of union dues; and (c) check-off of a special
assessment, i.e., attorneys fees and labor education fund. x x x. Patently, the CBL was
not complied with.

Worse, the check-off for union dues and attorneys fees were included in the
ratification of the MOA. The members were thus placed in a situation where, upon

97
 ratification of the MOA, not only the check-off of union dues and special assessment for
labor education fund but also the payment of attorneys fees were (sic) authorized. 98[38]

In like manner, the Court of Appeals found no grave abuse of discretion,

amounting to lack or excess of jurisdiction, on the part of the BLR in ordering the
conduct of elections under the control and supervision of the DOLE-NCR. Said the
appellate court:

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

xxxx

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

xxxx

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

xxxx

We are thus faced with a situation where one set of officers claim to be the
legitimate and incumbent officers of the Union, pursuant to the CBL of the Union, and
another set of officers who claim to have been elected by the members of the faculty of

98
 the Union thru an election alleged to have been supervised by the DOLE which situation
partakes of and is akin to the nature of an intra-union dispute[.] x x x.

Undeniably, the CBL gives the Board of Officers the right to create and appoint
members of the Comelec. However, the CBL has no application to a situation where
there are two (2) sets of officers, one set claiming to be the legitimate incumbent
officers holding over to their positions who have not exercised their powers and
functions therefor and another claiming to have been elected in an election supervised
by the DOLE and, at the same time, exercising the powers and functions appended to
their positions. In such a case, the BLR, which has jurisdiction over the intra-union
dispute, can validly order the immediate conduct of election of officers, otherwise,
internecine disputes and blame-throwing will derail an orderly and fair election. Indeed,
Section 1(b), [Rule XV], Book V of the Implementing Rules and Regulations of the Labor
Code, as amended, by Department Order No. 09, Series of 1997, 99[39] provides that, in
the absence of any agreement among the members or any provision in the constitution
and by-laws of the labor organization, in an election ordered by the Regional Director,
the chairman of the committee shall be a representative of the Labor Relations Division
of the Regional Office[.]100[40]

Ultimately, the Court of Appeals decreed:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is denied due course and is
hereby DISMISSED.101[41]

Petitioners moved for reconsideration102[42] of the Decision dated 16

March 2001 of the Court of Appeals, but it was denied by the said court in its
Resolution103[43] dated 30 August 2001.

Petitioners elevated the case to this Court via the instant Petition, invoking
the following assignment of errors:
99

100

101

102

103
  

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR

AND GRAVELY ABUSED ITS DISCRETION WHEN IT UPHELD THE APPLICATION BY THE
HONORABLE DIRECTOR OF THE BUREAU OF LABOR RELATIONS OF THE PROVISIONS OF
REPUBLIC ACT NO. 6728 TO THE P42 MILLION CBA PACKAGE OF ECONOMIC BENEFITS
OBTAINED BY THE UST FACULTY UNION FROM THE UNIVERSITY OF SANTO TOMAS.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR

AND GRAVELY ABUSED ITS DISCRETION WHEN IT DISALLOWED THE LUMP-SUM CHECK-
OFF AMOUNTING TO P4.2 MILLION BY RULING THAT THE P42 MILLION CBA ECONOMIC
PACKAGE OBTAINED BY THE UST FACULTY UNION WAS MERELY AN ALLOCATION OF THE
SEVENTY PER CENT (70%) OF THE TUITION INCREASES AUTHORIZED BY LAW AND THE
DEPARTMENT OF EDUCATION, CULTURE AND SPORTS.

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR

AND GRAVELY ABUSED ITS DISCRETION WHEN IT DISREGARDED THE PROVISIONS ON
ELECTION OF UNION OFFICERS IN THE CONSTITUTION AND BY-LAWS OF THE UST
FACULTY UNION AND INSTEAD UPHELD THE DIRECTIVE OF THE HONORABLE DIRECTOR
OF THE BUREAU OF LABOR RELATIONS TO CONDUCT THE ELECTION OF UNION OFFICERS
UNDER THE CONTROL AND SUPERVISION OF THE REGIONAL DIRECTOR FOR THE
NATIONAL CAPITAL REGION OF THE DEPARTMENT OF LABOR AND EMPLOYMENT.

Essentially, in order to arrive at a final disposition of the instant case, this

Court is tasked to determine the following: (1) the nature of the P42 million
economic benefits package granted by UST to USTFU; (2) the legality of the 10%
check-off collected by the Mario Group from the P42 million economic benefits
package; and (3) the validity of the BLR order for USTFU to conduct election of
union officers under the control and supervision of the DOLE-NCR Regional
Director.
 

II

RULING

(1) The P42 million economic benefits package

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

The Court disagrees with petitioners stance.

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

7.0. It is clearly understood and agreed upon that the aggregate sum of P42 million is
chargeable against the share of the faculty members in the incremental proceeds of
tuition fees collected and still to be collected[;] Provided, however, that he (sic)
commitment of the UNIVERSITY to pay the aggregate sum of P42 million shall subsist
even if the said amount exceeds the proportionate share that may accrue to the faculty
members in the tuition fee increases that the UNIVERSITY may be authorized to collect
in SchoolYear 1992-1993, and, Provided, finally, that the covered faculty members shall
still be entitled to their proportionate share in any undistributed portion of the
incremental proceeds of the tuition fee increases in School-Year 1992-1993, and which
incremental proceeds are, by law and pertinent Department of Education Culture and
Sports (DECS) regulations, required to be allotted for the payment of salaries, wages,
allowances and other benefits of teaching and non-teaching personnel for the
UNIVERSITY.104[44] (Emphases supplied.)

The law in the aforequoted Section 7 of the MOA can only refer to Republic
Act No. 6728, otherwise known as the Government Assistance to Students and
Teachers in Private Education Act." Republic Act No. 6728 was enacted in view of
the declared policy of the State, in conformity with the mandate of the
Constitution, to promote and make quality education accessible to all Filipino
citizens, as well as the recognition of the State of the complementary roles of
public and private educational institutions in the educational system and the
invaluable contribution that the private schools have made and will make to
education.105[45] The said statute primarily grants various forms of financial aid to
private educational institutions such as tuition fee supplements, assistance funds,
and scholarship grants.106[46]

104

105

106
  

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

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

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

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

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

(2)  Assistance under paragraph (1), subparagraphs (a) and (b) shall be granted and
tuition fees under subparagraph (c) may be increased, on the condition that seventy
percent (70%) of the amount subsidized, allotted for tuition fee or of the tuition fee
increases shall go to the payment of salaries, wages, allowances and other benefits of
teaching and non-teaching personnel except administrators who are principal
stockholders of the school, and may be used to cover increases as provided for in the
collective bargaining agreements existing or in force at the time when this Act is
approved and made effective: Provided, That government subsidies are not used
directly for salaries of teachers of nonsecular subjects. At least twenty percent (20%)
shall go to the improvement or modernization of buildings, equipment, libraries,
laboratories, gymnasia and similar facilities and to the payment of other costs of
operation. For this purpose, schools shall maintain a separate record of accounts for all
assistance received from the government, any tuition fee increase, and the detailed
disposition and use thereof, which record shall be made available for periodic inspection
as may be determined by the State Assistance Council, during business hours, by the
faculty, the non-teaching personnel, students of the school concerned, and Department
 of Education, Culture and Sports and other concerned government agencies. (Emphases
ours.)

Although Section 5 of Republic Act No. 6728 does speak of government

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

Contrary to petitioners argument, the right of private schools to increase

their tuition fee -- with their corresponding obligation to allocate 70% of said
increase to the payment of the salaries, wages, allowances, and other benefits of
their employees -- is not limited to private high schools. Section 9 107[47] of
Republic Act No. 6728, on Further Assistance to Students in Private Colleges and
Universities, is crystal clear in providing that:

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

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

107
that 70% percent of the incremental tuition fee increase goes to the payment of
salaries, wages, allowances and other benefits of teaching and non-teaching
personnel.108[48]

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

Given the lack of evidence to the contrary, it can be conclusively presumed

that the entire P42 million economic benefits package extended to USTFU came
from the 70% allotment from tuition fee increases of UST. Preceding from this
presumption, any deduction from the P42 million economic benefits package,
such as the P4.2 million claimed by the Mario Group as attorneys/agency fees,
should not be allowed, because it would ultimately result in the reduction of the
statutorily mandated 70% allotment from the tuition fee increases of UST.

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

(2) The P4.2 Million Check-off

108
 

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

Again, the Court is not persuaded.

The pertinent legal provisions on a check-off are found in Articles 222(b)

and 241(n) and (o) of the Labor Code, as amended.

Article 222(b) states:

 
 
(b) No attorney's fees, negotiation fees or similar charges of any kind
arising from any collective bargaining negotiations or conclusion of the collective
agreement shall be imposed on any individual member of the contracting union:
Provided, however, that attorney's fees may be charged against unions funds in an
amount to be agreed upon by the parties. Any contract, agreement or arrangement
of any sort to the contrary shall be null and void.
 
 
Article 241(n) reads:
 
 
(n) No special assessment or other extraordinary fees may be levied upon the
members of a labor organization unless authorized by a written resolution of a majority
of all the members at a general membership meeting duly called for the purpose. The
secretary of the organization shall record the minutes of the meeting including the list of
all members present, the votes cast, the purpose of the special assessment or fees and
the recipient of such assessment or fees. The record shall be attested to by the
president.

And Article 241(o) provides:

 
 
(o) Other than for mandatory activities under the Code, no special
assessments, attorney's fees, negotiation fees or any other extraordinary fees may
be checked off from any amount due to an employee without an individual written
authorization duly signed by the employee. The authorization should specifically
state the amount, purpose and beneficiary of the deduction.

Article 222(b) of the Labor Code, as amended, prohibits the payment of

attorney's fees only when it is effected through forced contributions from the
employees from their own funds as distinguished from union funds.109[49] Hence,
the general rule is that attorneys fees, negotiation fees, and other similar charges
may only be collected from union funds, not from the amounts that pertain to
individual union members. As an exception to the general rule, special assessments
or other extraordinary fees may be levied upon or checked off from any amount
due an employee for as long as there is proper authorization by the employee.
 

A check-off is a process or device whereby the employer, on agreement with

the Union, recognized as the proper bargaining representative, or on prior
109
authorization from the employees, deducts union dues or agency fees from the
latter's wages and remits them directly to the Union. Its desirability in a labor
organization is quite evident. The Union is assured thereby of continuous funding.
As this Court has acknowledged, the system of check-off is primarily for the
benefit of the Union and, only indirectly, for the individual employees.110[50]

 
The Court finds that, in the instant case, the P42 million economic benefits
package granted by UST did not constitute union funds from whence the P4.2
million could have been validly deducted as attorneys fees. The P42 million
economic benefits package was not intended for the USTFU coffers, but for all the
members of the bargaining unit USTFU represented, whether members or non-
members of the union. A close reading of the terms of the MOA reveals that after
the satisfaction of the outstanding obligations of UST under the 1986 CBA, the
balance of the P42 million was to be distributed to the covered faculty members of
the collective bargaining unit in the form of salary increases, returns on paycheck
deductions; and increases in hospitalization, educational, and retirement benefits,
and other economic benefits. The deduction of the P4.2 million, as alleged
attorneys/agency fees, from the P42 million economic benefits package effectively
decreased the share from said package accruing to each member of the collective
bargaining unit.
 
Petitioners line of argument that the amount of P4.2 million became union
funds after its deduction from the P42 million economic benefits package and,
thus, could already be used to pay attorneys fees, negotiation fees, or similar
charges from the CBA is absurd. Petitioners reasoning is evidently flawed since the
attorneys fees may only be paid from union funds; yet the amount to be used in
paying for the same does not become union funds until it is actually deducted as
attorneys fees from the benefits awarded to the employees. It is just a roundabout
argument. What the law requires is that the funds be already deemed union funds
even before the attorneys fees are deducted or paid therefrom; it does not become
union funds after the deduction or payment. To rule otherwise will also render the

110
general prohibition stated in Article 222(b) nugatory, because all that the union
needs to do is to deduct from the total benefits awarded to the employees the
amount intended for attorneys fees and, thus, convert the latter to union funds,
which could then be used to pay for the said attorneys fees.
 
The Court further determines that the requisites for a valid levy and check-
off of special assessments, laid down by Article 241(n) and (o), respectively, of the
Labor Code, as amended, have not been complied with in the case at bar. To recall,
these requisites are: (1) an authorization by a written resolution of the majority of
all the union members at the general membership meeting duly called for the
purpose; (2) secretary's record of the minutes of the meeting; and (3) individual
written authorization for check-off duly signed by the employee concerned.111[51]

Additionally, Section 5, Rule X of the USTFU Constitution and By-Laws

mandates that:

Section 5. Special assessments or other extraordinary fees such as for payment

of attorneys fees shall be made only upon a resolution duly ratified by the general
membership by secret balloting.

In an attempt to comply with the foregoing requirements, the Mario Group

caused the majority of the general membership of USTFU to individually sign a
document, which embodied the ratification of the MOA between UST and USTFU,
dated 10 September 1992, as well as the authorization for the check-off of P4.2
million, from the P42 million economic benefits package, as payment for
attorneys fees. As held by the Court of Appeals, however, the said documents
constitute unsatisfactory compliance with the requisites set forth in the Labor
Code, as amended, and in the USTFU Constitution and By-Laws, even though
individually signed by a majority of USTFU members.
111
  

The inclusion of the authorization for a check-off of union dues and special
assessments for the Labor Education Fund and attorneys fees, in the same
document for the ratification of the 10 September 1992 MOA granting the P42
million economic benefits package, necessarily vitiated the consent of USTFU
members. For sure, it is fairly reasonable to assume that no individual member of
USTFU would casually turn down the substantial and lucrative award of P42
million in economic benefits under the MOA. However, there was no way for any
individual union member to separate his or her consent to the ratification of the
MOA from his or her authorization of the check-off of union dues and special
assessments. As it were, the ratification of the MOA carried with it the automatic
authorization of the check-off of union dues and special assessments in favor of
the union. Such a situation militated against the legitimacy of the authorization
for the P4.2 million check-off by a majority of USTFU membership. Although the
law does not prescribe a particular form for the written authorization for the levy
or check-off of special assessments, the authorization must, at the very least,
embody the genuine consent of the union member.

The failure of the Mario Group to strictly comply with the requirements set
forth by the Labor Code, as amended, and the USTFU Constitution and By-Laws,
invalidates the questioned special assessment. Substantial compliance is not
enough in view of the fact that the special assessment will diminish the
compensation of the union members. Their express consent is required, and this
consent must be obtained in accordance with the steps outlined by law, which
must be followed to the letter. No shortcuts are allowed.112[52]

112
 Viewed in this light, the Court does not hesitate to declare as illegal the
check-off of P4.2 million, from the P42 million economic benefits package, for
union dues and special assessments for the Labor Education Fund and attorneys
fees. Said amount rightfully belongs to and should be returned by petitioners to
the intended beneficiaries thereof, i.e., members of the collective bargaining unit,
whether or not members of USTFU. This directive is without prejudice to the right
of petitioners to seek reimbursement from the other USTFU officers and
directors, who were part of the Mario Group, and who were equally responsible
for the illegal check-off of the aforesaid amount.

(3) Election of new officers

Having been overtaken by subsequent events, the Court need no longer

pass upon the issue of the validity of the order of BLR for USTFU to conduct its
long overdue election of union officers, under the control and supervision of the
DOLE-NCR Regional Director.

The BLR issued such an order since USTFU then had two groups, namely,
the Mario Group and the Gamilla Group, each claiming to be the legitimate
officers of USTFU.

The DOLE-NCR Regional Director, in his Decision dated 27 May 1999,

decreed that the Mario Group be expelled from their positions as USTFU officers.
But then, the BLR, in its Decision promulgated on 9 March 2000, declared that the
change of officers could best be decided, not by expulsion, but by the general
membership of the union through the conduct of election, under the control and
supervision of the DOLE-NCR Regional Director. In its assailed Decision dated 16
March 2001, the Court of Appeals agreed with the BLR judgment in its ruling that
the conduct of an election, under the control and supervision of the DOLE-NCR
Regional Director, is necessary to settle the question of who, as between the
officers of the Mario Group and of the Gamilla Group, are the legitimate officers
of the USTFU.

The Court points out, however, that neither the Decision of the BLR nor of
the Court of Appeals took into account the fact that an election of USTFU officers
was already conducted on 14 January 2000, which was won by the Gamilla Group.
There is nothing in the records to show that the said election was contested or
made the subject of litigation. The Gamilla Group had exercised their powers as
USTFU officers during their elected term. Since the term of union officers under
the USTFU Constitution and By-Laws was only for three years, then the term of
the Gamilla Group already expired in 2003. It is already beyond the jurisdiction of
this Court, in the present Petition, to still look into the subsequent elections of
union officers held after 2003.

The election of the Gamilla Group as union officers in 2000 should have
already been recognized by the BLR and the Court of Appeals. The order for
USTFU to conduct another election was only a superfluity. The issue of who
between the officers of the Mario Group and of the Gamilla Group are the
legitimate USTFU officers has been rendered moot by the succeeding events in
the case.

WHEREFORE, premises considered, the Petition for Review under Rule 45

of the Rules of Court is hereby DENIED. The Decision dated 16 March 2001 and
the Resolution dated 30 August 2001 of the Court of Appeals in CA-G.R. SP No.
60657, are hereby AFFIRMED WITH MODIFICATIONS. Petitioners are hereby
ORDERED to reimburse, jointly and severally, to the faculty members of the
University of Sto. Tomas, belonging to the collective bargaining unit, the amount
of P4.2 million checked-off as union dues and special assessments for the Labor
Education Fund and attorneys fees, with legal interest of 6% per annum from 15
December 1994, until the finality of this decision. The order for the conduct of
election for the officers of the University of Sto. Tomas Faculty Union, under the
control and supervision of the Regional Director of the Department of Labor and
Employment-National Capital Region, is hereby DELETED. No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 74453 May 5, 1989

AMBROCIO VENGCO, RAMON MOISES, EUGENIA REYES, RAFAEL WAGAS and

80 others per attached list, petitioners
vs.
HON. CRESENCIANO B. TRAJANO, in his capacity as Director of the Bureau of
Labor Relations and EMMANUEL TIMBUNGCO, respondents.

Jose T. Maghari for petitioners.

Benjamin C. Sebastian for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari which seeks to annul: (1) the Order of respondent Director
of the Bureau of Labor Relations dated May 23, 1983 in BLR Case No. A-0179-82
entitled "Ambrocio Vengco, et al. vs. Emmanuel Timbungco" setting aside the decision
dated December 29, 1982; and (2) the Order dated April 2, 1986 denying the motion for
reconsideration of the Order dated May 23, 1983.

The antecedent facts are as follows:

Sometime in the latter part of 1981, the Management of the Anglo-American Tobacco
Corporation and the Kapisanan ng Manggagawa sa Anglo-American Tobacco
Corporation (FOITAF) entered into a compromise agreement whereby the company will
pay to the union members the sum of P150,000.00 for their claims arising from the
unpaid emergency cost of living allowance (ECOLA) and other benefits which were the
subject of their complaint before the Ministry of Labor. Respondent Emmanuel
Timbungco (Timbungco, for short) who is the union president received the money which
was paid in installments. Thereafter, he distributed the amount among the union
members. Petitioners Ambrocio Vengco, Ramon Moises, Rafael Wagas and 80 others
(Vengco, et al., for short) who are union members noted that Timbungco was not
authorized by the union workers to get the money; and that ten percent (10%) of the
P150,000.00 had been deducted to pay for attorney's fees without their written
authorization in violation of Article 242(o) of the Labor Code. So, they demanded from
Timbungco an accounting of how the P150,000.00 was distributed to the members.
Timbungco did not give in to their demand. Thus Vengco, et al. filed a complaint with
the Ministry of Labor praying for: "(1) the expulsion of Emmanuel Timbungco as
president of the union for violation of (the) union constitution and by-laws and the rights
and conditions of union members under the Labor Code; (2) an order to require
Timbungco to render an accounting of how the P150,000.00 was distributed; and (3) an
order to require private respondent to publish in the bulletin board the list of the
members and the corresponding amount they each received from the P150,000.00."
(Memorandum for Petitioners, p. 150, (Rollo).

In his answer with counterclaim, Timbungco alleged among others, that he was
authorized by a resolution signed by the majority of the union members to receive and
distribute the P150,000.00 among the workers; that the computation of the benefits was
based on the payroll of the company; that the ten percent (10%) attorney's fees was in
relation to the claim of the local union for payment of emergency cost of living allowance
before the Ministry of Labor which is totally distinct and separate from the negotiation of
the CBA; and that the ten percent (10%) deduction was in accordance with Section II,
Rule No. VIII, Book No. III of the Rules and Regulations implementing the Labor Code
and therefore, no authorization from the union members is required.

On July 19, 1982, Med-Arbiter Willie B. Rodriguez issued an Order dismissing the
complaint for lack of merit. (p. 33, Rollo)

Vengco, et al. appealed the aforesaid order to the Bureau of Labor Relations.

On December 29, 1982, respondent Director of the Bureau of Labor Relations

Cresenciano B. Trajano (Trajano, for short) rendered a decision, the dispositive portion
of which states:

Wherefore, premises considered, the instant appeal is hereby granted and

the Med-Arbiter's Order dated 19 July 1982 hereby set aside. Accordingly,
respondent Emmanuel Timbungco is hereby ordered to render a full
accounting of the One Hundred Fifty Thousand Pesos (P150,000.00) he
received from the management of Anglo-American Tobacco Corporation
in behalf of the members of the Kapisanan ng mga Manggagawa sa
Associated Anglo-American Tobacco Corporation (FOITAF) and to publish
in the union's bulletin board the list of all recipient union members and the
respective amounts they have received, within ten (10) days from receipt
hereof. Further, respondent is hereby expelled as president of the
Kapisanan ng Manggagawa sa Anglo American Tobacco Corporation
(FOITAF). Lastly, the counterclaim interposed by the respondent's
counsel, Atty. Benjamin Sebastian is hereby ordered dismissed.

So decided. (P. 50, Rollo.)

Timbungco filed a motion for reconsideration of the abovequoted decision while
Vengco, et al. filed their opposition to the said motion.

On May 23, 1983, Officer-in-Charge Victoriano R. Calaycay issued an Order which held,
thus:

Wherefore premises considered, our resolution dated 29 December 1982

is hereby set aside. However, an audit examination of the Books of
Account of Kapisanan ng Manggagawa sa Associated Anglo-American
Tobacco Corporation (FOITAF) is hereby ordered.

SO RESOLVED. (p. 62, Rollo)

Vengco, et al, sought reconsideration of the aforementioned order. They contended that
the examination of the books of accounts of the union is irrelevant considering that the
issue involved in the case does not consist of union funds but back pay received by the
union members from the company. Likewise, they pointed out that Timbungco did not
give the money to the union treasurer and consequently, the amount was not entered in
the records of the union.

On April 2, 1986, Trajano issued an order which affirmed the resolution of May 23, 1983
and denied the motion for reconsideration for lack of merit. (p. 58, Rollo)

Hence, the present recourse by Vengco, et al.

The issues raised in this case are as follows:

(1) Whether or not Timbungco is guilty of illegally deducting 10%

attorneys' fees from petitioners' backwages; and

(2) Whether or not Trajano gravely abused his discretion amounting to

lack of jurisdiction in ordering examination of union books instead of
affirming his previous Order expelling Timbungco from the union and
ordering him to render an accounting of P150,000.00 received by him. (p.
151, Rollo)

In the resolution of June 4, 1986, We required the respondents to comment on the

petition.

In his comment, Timbungco reiterates the defenses he raised in his answer to the
complaint filed against him before the Med-Arbiter In addition, he claims that he already
filed an accounting report on the P150,000.00 with the Bureau of Labor Relations which
enumerated the names of the workers and the corresponding amounts they received
with their respective signatures opposite their names, the sub-total of the amount of
benefits received per department and the grand total of the amount distributed duly
certified by the Union Treasurer and Secretary and duly noted by Timbungco as Union
President. (p. 73, Rollo)

The Solicitor General, in his comment, agrees with Vengco, et al. and recommends that
the petition be given due course. (p. 100, Rollo)

Timbungco filed a reply to the aforesaid comment of the solicitor General which restates
the arguments raised in his comment. (p. 121, Rollo)

The petition is meritorious.

Article 241 (o) of the Labor Code provides:

 ART. 241. Rights and conditions of membership in a labor organization. —
The following are the rights and conditions of membership in a labor
organization.

x x x.

(o) Other than for mandatory activities under the Code, no special
assessment, attorney's fees, negotiation fees or any other extraordinary
fees may be checked off from any amount due an employee without an
individual written authorization duly signed by an employee. The
authorization should specifically state the amount, purpose and
beneficiary of the deduction.

x x x.

It is very clear from the above-quoted provision that attorney's fees may not be
deducted or checked off from any amount due to an employee without his written
consent except for mandatory activities under the Code. A mandatory activity has been
defined as a judicial process of settling dispute laid down by the law. (Carlos P.
Galvadores, et al. vs. Cresenciano B. Trajano, Director of the Bureau of Labor
Relations, et al., G.R. No. L-70067, September 15, 1986, 144 SCRA 138). In the instant
case, the amicable settlement entered into by the management and the union can not
be considered as a mandatory activity under the Code. It is true that the union filed a
claim for emergency cost of living allowance and other benefits before the Ministry of
Labor. But this case never reached its conclusion in view of the parties' agreement. It is
not also shown from the records that Atty. Benjamin Sebastian was instrumental in
forging the said agreement on behalf of the union members.

Timbungco maintains that the "Kapasiyahan" gave him the authority to make the
deduction This contention is unfounded. Contrary to his claim, the undated
"Kapasiyahan" or resolution did not confer upon him the power to deduct 10% of the
P150,000.00 despite the alleged approval of the majority of the union workers. A
reading of the said resolution (p. 75, Rollo) yields the same conclusion arrived at by
Trajano who declared it defective. We quote with approval Trajano's findings on this
point:

Further, a cursory examination of the alleged resolution shows that it is

quite defective. Not only that it is not dated but also that, with the
exception of the first page, the remaining pages were not captioned and
did not state the very purpose for which it was prepared. Thus, the alleged
signatories were not properly apprised thereof. There is, therefore, truth in
complainant's contention that they never authorized, more so, they had no
knowledge of the deduction of 10% attorney's fees until it was actually
effected. Consequently, the deduction was not valid. (p. 45, Rollo)

Moreover, the law is explicit. It requires the individual written authorization of each
employee concerned, to make the deduction of attorney's fees valid. Likewise, We find
that the other "Kapasiyahan" dated September 18,1981 submitted by Timbungco belied
his claim that he was authorized by the union workers to receive the sum of
P150,000.00 on their behalf The pertinent portion of the said "Kapasiyahan" provides:

3. Na sa dahilang hindi bigla ang pagbabayad sa nasabing "CLAIM"

bukod pa sa marami kaming naghati-hati sa nasabing halaga ipinapasiya
naming na kusang-loob na kunin ang aming bahagi sa aming kapisanan
sa unang linggo ng Disyembre, 1981 at ito'y ipinaalam namin sa Pangulo
ng Kapisanan na si Ginoong Emmanuel Timbungco. (p. 47, Rollo)
The above-quoted statement merely indicated the intention of the workers to get their
claim on the first week of December, 1981 and to inform Timbungco of their intention.
Clearly, this statement can not be construed to confer upon Timbungco the authority to
receive the fringe benefits for the workers. Absent such authority, Timbungco should not
have kept the money to himself but should have turned it over to the Union Treasurer.
He, therefore, exceeded his authority as President of the Union.

Moreover, Book III, Rule VIII, Section II of the Implementing Rules cited by Timbungco
which dispenses with the required written authorization from the employees concerned
does not apply in this case. This provision envisions a situation where there is a judicial
or administrative proceedings for recovery of wages. Upon termination of the
proceedings, the law allows a deduction for attorney's fees of 10% from the total amount
due to a winning party. In the herein case, the fringe benefits received by the union
members consist of back payments of their unpaid emergency cost of living allowances
which are totally distinct from their wages. Allowances are benefits over and above the
basic salaries of the employees (University of Pangasinan Faculty Union vs. University
of Pangasinan, G.R. No. L-63122, February 20, 1984, 127 SCRA 691). We have held
that such allowances are excluded from the concept of salaries or wages (Cebu Institute
of Technology (CIT) vs. Ople, G.R. No. L-58870, December 18, 1987, 156 SCRA 629).
In addition, the payment of the fringe benefits were effected through an amicable
settlement and not in an administrative proceeding.

The submission by Timbungco of an accounting report on the distribution of P

150,000.00 is of no moment in the face of our findings that the deduction of 10% for
attorney's fees is illegal and void for failure to comply with the requirements of the law.

Considering the aforestated violations of Timbungco, there can be no question that he

should bear the consequences of his acts. We find that the penalty of expulsion from
the union presidency imposed upon Timbungco is justified.

In view of the foregoing, We hold that the Orders dated May 23, 1983 and April 2, 1986
were issued with grave abuse of discretion. The herein controversy involves the
propriety of the 10% deduction from the fringe benefits of the union workers which they
received from the management in settlement of their claims. Such issue does not touch
on union dues or funds. Besides, the sum of P150,000.00 was not entered into the
records of the Union since, as earlier stated, the money was not turned over by
Timbungco to the Union Treasurer. Consequently the said Orders have no basis.

ACCORDINGLY, the petition is granted. The assailed Orders dated May 23, 1983 of
Officer-in-Charge Victoriano R. Calaycay of the Bureau of Labor Relations, and April 2,
1986 of respondent Director Cresenciano B. Trajano of the same Bureau are
REVERSED and SET ASIDE and the latter's decision dated December 29, 1982 is
hereby reinstated. No costs.

SO ORDERED.