ALEMAR’S SIBAL & SONS, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, NLM-KATIPUNAN (REPRESENTING THE GROUP OF CHARITO ALIMORONG), RESPONDENTS.

Alemar's Sibal and Sons versus National Labor Relations Commission

The Case

This is a petition for certiorari brought by Alemar's Sibal and Sons, Incorporated against the National Labor Relations Commission and NLM Katipunan, which represented the group of Charito Alimorong. The petitioner asks the Supreme Court to set aside the resolutions of the National Labor Relations Commission that dismissed its appeal and upheld the Labor Arbiter's order to proceed with the execution of a judgment for separation pay. The case matters because it confronts two competing concerns: the finality and enforceability of a labor award that the employer itself had agreed to satisfy, and the effect of a corporation's rehabilitation receivership, later converted into liquidation, on the execution of that award.

Procedural History

The dispute began when the private respondent filed a notice of strike with the Department of Labor and Employment, raising unfair labor practice and illegal dismissal charges against the petitioner. The charges were elevated to the National Labor Relations Commission for compulsory arbitration. Labor Arbiter Emilio Peñalosa rendered a decision ordering the petitioner to pay separation pay equivalent to one half month's pay for every year of service. The Research and Information Unit of the Commission later computed the total separation pay due. When the private respondent moved for execution, the parties agreed on the amount and on a schedule of payment, and Labor Arbiter Jose de Vera directed the petitioner to make the first payment. After the petitioner failed to pay, the Labor Arbiter granted the motion for execution. The petitioner's motion for reconsideration was denied, and its appeal to the National Labor Relations Commission was dismissed. Its motion for reconsideration was likewise denied. The petitioner then came to the Supreme Court by petition for certiorari.

Facts

On January 30, 1984, NLM Katipunan, representing the group of Charito Alimorong, filed a notice of strike against the petitioner, raising unfair labor practice and illegal dismissal charges. The matter was elevated to the National Labor Relations Commission for compulsory arbitration. On April 29, 1985, Labor Arbiter Emilio Peñalosa rendered a decision ordering the petitioner to pay separation pay equivalent to one half month's pay for every year of service. On December 23, 1985, the Research and Information Unit of the Commission computed the separation pay due at a total of 207,365 pesos and 33 centavos.

On January 4, 1988, the private respondent filed a motion for execution, and the petitioner filed no opposition. At a hearing on April 19, 1988, the parties agreed on the computation and on a schedule of payment, beginning with a downpayment in May 1988 equivalent to ten percent of the total money judgment. Labor Arbiter Jose de Vera then directed the petitioner to pay the agreed first amount. Instead of paying, the petitioner's Rehabilitation Receiver filed a manifestation with motion on June 10, 1988, stating that the corporation was still under rehabilitation receivership by order of the Securities and Exchange Commission and asking that payment be deferred until the Commission approved the rehabilitation and allowed claims to be filed with the Receiver.

Because the petitioner failed to pay, the Labor Arbiter granted the motion for execution. The petitioner's motion for reconsideration was denied, the Labor Arbiter noting that the petitioner had raised no objection to the computation, had proposed its own manner of payment, had failed to make the agreed first payment, and had filed its motion out of time. The petitioner then filed a motion to suspend execution, citing the Commission's order suspending all actions for claims against the corporation. Its appeal to the National Labor Relations Commission was dismissed, and its motion for reconsideration was denied. Hence, the petition before the Supreme Court. Subsequently, on March 5, 1997, the Securities and Exchange Commission issued an order approving the petitioner's rehabilitation plan and placing it under liquidation, with a liquidator directed to wind up its affairs and ensure orderly payment of claims.

Issues

• Whether or not the order of the Securities and Exchange Commission suspending all claims against the petitioner justified a stay of execution of the Labor Arbiter's monetary award for separation pay.
• Whether or not the petitioner is bound by its agreement with the private respondent as to the amount and manner of payment of the separation pay.
• Whether or not the private respondent must instead present its claim with the rehabilitation receiver and liquidator of the petitioner, subject to the rules on preference of credits.

Applicable Provisions

Presidential Decree 902-A, as cited in the decision, governs the powers of the Securities and Exchange Commission over corporations under rehabilitation and liquidation, and the Court refers to it in explaining the effect of the order placing the petitioner under liquidation:

Subject to the control of the SEC, the liquidator was ordered to wind up the affairs of the corporation, continue to manage the corporation for purposes of liquidation in order to protect the interest of its creditors and avoid dissipation, loss, wastage, or destruction of the remaining assets and other properties of the corporation and to ensure orderly payment of claims against such corporation in accordance with applicable laws.

This provision bears on the case because the conversion of the rehabilitation receivership into liquidation changed the status of the petitioner and removed the legal basis for the suspension of claims.

Ruling

On the first issue, the Court held that while a stay of execution may be warranted by the fact that a petitioner corporation has been placed under rehabilitation receivership, that situation no longer obtained. The Securities and Exchange Commission had issued an order approving the proposed rehabilitation plan and placing the petitioner under liquidation. Since receivership proceedings had ceased and the rehabilitation receiver and liquidator had been given the imprimatur to proceed with corporate liquidation, the cited order suspending all claims was rendered functus officio, meaning it had spent its force and no longer had effect. Thus, there was no legal impediment to the execution of the Labor Arbiter's decision for the payment of separation pay.

On the second issue, the Court held that the petitioner could not delay satisfaction of the private respondent's claim. The monetary obligation was long overdue, and the petitioner had signified its willingness to comply by entering into an agreement with the private respondent as to the amount and manner of payment. Having bound itself to that agreement, it could not now use the suspension order to escape it.

On the third issue, the Court recognized that events subsequent to the filing of the petition had changed the remedy available to the private respondent. Because the corporation was now under liquidation, the private respondent had to present its claim with the rehabilitation receiver and liquidator, subject to the rules on preference of credits. The Court thus dismissed the petition but directed the private respondent to file its claim with the liquidator.

Doctrine

A stay of execution of a labor award may be warranted while the employer corporation is under rehabilitation receivership, because the suspension of claims is necessary to enable the rehabilitation receiver to exercise its powers free from judicial or extrajudicial interference that might unduly hinder the rescue of the distressed company. However, once the Securities and Exchange Commission approves the rehabilitation plan and places the corporation under liquidation, the receivership proceedings cease and the order suspending claims is rendered functus officio, so that no legal impediment remains to the execution of the Labor Arbiter's decision. An employer that has agreed with its employees on the amount and manner of payment of separation pay cannot later delay satisfaction of that long overdue obligation. Where liquidation has supervened, the claimant must present its claim with the rehabilitation receiver and liquidator, subject to the rules on preference of credits.

Disposition

The Supreme Court dismissed the petition and directed the private respondent to file its claim with the rehabilitation receiver and liquidator of the petitioner in the liquidation proceedings pending before the Securities and Exchange Commission, without costs.

Remember This

Memorize this line: rehabilitation receivership may stay execution, but once the Commission approves the plan and places the corporation under liquidation, the suspension order is functus officio and execution may proceed, with claims instead filed with the liquidator subject to preference of credits. Examiners like to use this case to test the effect of corporate rehabilitation and liquidation on the execution of labor awards, and the rule that an employer is bound by its agreement on the amount and manner of paying separation pay.