FILIPINAS PORT SERVICES, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, PATERNO LIBOON, SEGUNDO AQUINO, JOVITO BULAY, DOMINGO NAVOA, DELFIN BERMEJO, CELEDONIO MANGUB…

This is a petition for clarification with prayer for preliminary
injunction filed by Filipinas Port Services, Inc. (hereinafter referred to as Filport) seeking to clarify two conflicting decisions
rendered by this Court in cases involving identical or similar parties, facts
and issues.

The antecedent facts of the case are as follows:

In view of the government policy which ordained that cargo
handling operations should be limited to only one cargo handling
operator-contractor for every port (under Customs Memorandum Order 28075, later
on superseded by General Ports Regulations of the Philippine Ports Authority)
the different stevedoring and arrastre corporations
operating in the Port of Davao were integrated into a
single dockhandlers corporation, known as the Davao Dockhandlers, Inc., which
was registered with the Securities and Exchange Commission on July 13, 1976.

Due to the late receipt of its permit to operate at the Port of Davao from the Bureau of Customs, Davao
Dockhandlers, Inc., which was subsequently renamed Filport, actually started its operation on February 16,
1977.

As a result of the merger, Section 118, Article X of the General
Guidelines on The Integration of Stevedoring/Arrastre
Services (PPA Administrative Order No. 13-77) mandated Filport
to draw its personnel complements from the merging operators, as follows:

“Sec. 118.  Absorption of labor  – Subject to the provisions of the immediate
preceding section, and consistent with the actual operational
requirements of the new management, all
labor force together with its necessary
personnel complement, of the merging operators
shall be absorbed by the merged or
integrated organization to constitute its labor
force.” (Emphasis supplied)

Thus, Filport’s labor force was mostly
taken from the integrating corporations, among them the private respondents.

On February 4, 1987, private respondent Paterno
Liboon and 18 others filed a complaint with the
Department of Labor and Employment Regional Office in Davao
City, alleging that they were employees of Filport
since 1955 through 1958 up to December 31, 1986 when they retired; that they
were paid retirement benefits computed from February 16, 1977 up to December
31, 1986 only; and that taking into consideration their continuous length of
service, they are entitled to be paid retirement benefits differentials from
the time they started working with the predecessors of Filport
up to the time they were absorbed by the latter in 1977 (p. 15, Rollo).

Finding Filport a mere alter ego of the
different integrating corporations, the Labor Arbiter held Filport
liable for retirement benefits due private respondents for services rendered
prior to February 16, 1977.  Said decision was affirmed by the NLRC on
appeal.

Filport filed a petition for certiorari
with the Supreme Court docketed as G.R. No. 85704, claiming that it is an
entirely new corporation with a separate juridical personality from the
integrating corporations; and that Filport is not a
successor?employer, liable for the obligations of private respondents’
previous employers, as shown clearly in the
memorandum dated November 21, 1978 of PPA Assistant General Manager Maximo S. Dumlao, Jr., to wit:

“21 November 1978

“MEMORANDUM

“TO                     :  
The Officer-in-Charge

PMU Davao

“FROM                 : 
 The ACM for Operations

“SUBJECT           :   Clarification of Sec.
116 of PPA Administrative Order No. 13-77
of New Organization ‘s
Liability

“In reply to your telegram dated November 16, 1978, Sec. 116 of
PPA Administrative Order #13-77 is hereby quoted for clarification:

“New Organization’s Liability – The integrated
cargo-handling organization shall be absolutely free from any liability or
obligation of the merging operators who shall continue
to be individually liable for their respective liabilities or obligations, if any.” (underscoring
supplied) x x x

“The new organization’s liability shall be the payment of
salaries, benefits and all other money due the employee as a result of his
employment, starting on the date of
his service in the
newly integrated organization.

“In answer to your query, therefore, the absorption of an
employee into a newly integrated organization does not include the carry over
of his length of service.

s/t MAXIMO
S. DUMLAO, JR.

Asst. General
Manager”

While G.R. No. 85704 was still
pending decision by this Court, Josefino Silva,
another employee of Filport, instituted a suit
against Filport and Damasticor
(one of the defunct stevedoring firms) claiming for retirement benefits for
services rendered prior to February
19, 1977.  The labor arbiter
found for Josefino Silva and said decision was
affirmed by the NLRC.

Filport filed a petition for certiorari
with the Supreme Court docketed as G.R. No. 86026.  On August
31, 1989, this Court, through the First Division, rendered a
decision, holding that:

“Petitioner (Filport) cannot be held liable for the payment of the
retirement pay of private
respondent (Josefino Silva) while in the employ of
DAMASTICOR x x x who is
held responsible for the same as the labor contract is in personam
and cannot be passed on to the petitioner.” (Rollo,
p. 7)

In so ruling, the First Division relied heavily on the case of
Fernando v. Angat Labor Union (5 SCRA 248) where it was held that unless expressly assumed, labor contracts are not enforceable
against a transferee of an
enterprise, labor contracts being in personam.

Per entry of judgment, the aforesaid decision became final and executory on
November 24, 1989 (p. 87, Rollo).

On September 3, 1990,
however, this Court, through the Second Division,
dismissed the petition in G.R. No. 85704 “for failure to
sufficiently show that the questioned judgment is tainted with grave abuse of
discretion.”

Per entry of judgment,
said resolution became final and executory on December 4, 1990 (p. 108, Rollo).

Hence, the instant petition for clarification with prayer for
preliminary injunction to enjoin
the respondents from enforcing the decision in G.R. No. 85704 until further
orders of this Court.

We see no reason to disturb the findings of fact of the public
respondent, supported as they are by substantial evidence in the light of the
well established principle that findings of administrative agencies which have
acquired expertise because their jurisdiction is confined to specific matters
are generally accorded not only respect but at times even finality, and that
judicial review by this Court on labor cases does not go so far as to evaluate
the sufficiency of the evidence upon which the Labor Arbiter and the NLRC based
their determinations but are limited to issues of jurisdiction or grave abuse
of discretion.  (National Federation of
Labor Union v. Ople, 143 SCRA 129).

In the case filed by private respondent Paterno
Liboon et al against Filport,
the findings of the NLRC in its November
27, 1987 decision are categorical:

“In resolving the issues, the Labor Arbiter concludes as
follows:

“The eventual incorporation of the arrastre/stevedoring
firms and their subsequent registration with the Securities and Exchange
Commission on July 13, 1975
brought to the fore the interlocking ownership of the new corporation.

x x x                                  x x x                             x
x x

“Subsequent amendment of its Articles of Incorporation
highlighted by the renaming of the Davao Dockhandlers, Inc. to Filipinas Port Services, Inc. did not
diminish the fact that the ownership and constituency of the new corporation are basically identical
with the previous owners.

“It is, therefore, the considered view of this Office that
respondent Filport being a mere alter ego of the
different merging companies has at the very least, the obligation not only to
absorb into its employ workers
of the dissolved companies, but also to absorb the length of service earned by
the absorbed employees from their former employers.

x x x                                  x x x                             x
x x

“We are in full accord with, and hereby sustain, the findings and conclusions of the Labor Arbiter.  Under the circumstances, respondent-appellant
is a successor?employer.  As a
successor entity, it is answerable to the lawful obligations of the predecessor
employers, herein integrees.  This Commission has so held under the
principle of ‘substitution’ that the successor
firm is liable to (sic) the obligations
of the predecessor employer, notwithstanding the change in management or even personality, of the new contracting
employer.” (Lakas Ng Manggagawang
Filipino [LAKAS] v. Tarlac
Electrical Cooperative, Inc. et al.,
NLRC Case No. RB III-157-75, January 28, 1978, En Banc).  x x x The
Supreme Court earlier upheld the “Substitutionary”
doctrine in the case of Benguet Consolidated,
Inc. vs. BOI Employees
& Workers Union, (G.R. L-24711, April 30, 1968, 23
SCRA 465).  (pp. 35 & 37, Rollo)

Said findings were reiterated in the case filed by Josefino Silva against Filport
where the NLRC, in its decision dated January
19, 1988, further ruled that:

“x x x As We have ruled in the
similar case involving herein appellant, the latter is deemed a survivor entity
because it continued in an essentially unchanged manner the business operators
of the predecessor arrastre and port service
operators, hiring substantially the same workers, including herein appellee, of the integree
predecessors, using substantially the same facilities, with similar working
conditions and line of business, and employing the same corporate control,
although under a new management and corporate personality.” (G.R. No.
86026, p. 35, Rollo)

Thus, granting that Filport had no
contract whatsoever with the private respondents regarding the services
rendered by them prior to February 16,
1977, by the fact of the merger, a succession of employment rights
and obligations had occurred between Filport and the
private respondents.  The law enforced at
the time of the merger was Section 3 of Act No. 2772 which took effect on March 6, 1918.  Said law provides:

“Sec. 3.  Upon the perfecting, as aforesaid, of a
consolidation made in the manner herein provided, the several corporations
parties thereto shall be deemed and taken as one corporation, upon the terms
and conditions set forth in said agreement; or, upon the perfecting of a
merger, the corporation merged shall be deemed and taken as absorbed by the
other corporation and incorporated in it; and all and singular rights,
privileges, and franchises of each of said corporations, and all property, real
and personal, and all debts due on whatever account, belonging to each of such
corporations, shall be taken and deemed as transferred to and vested in the new
corporation formed by the consolidation, or in the surviving corporation in
case of merger, without further act or deed; and the title to real estate,
either by deed or otherwise, under the laws of the Philippine Islands vested in
either corporation, shall not be deemed in any way impaired by reason of this
Act:  Provided, however, That the rights
of creditors and all liens upon the property of either of said corporations
shall be preserved unimpaired; and all debts, liabilities, and duties of said
corporations shall thenceforth attach to the new corporation in case of a
consolidation, or to the surviving corporation in case of a merger, and be
enforced against said new corporation or surviving corporation as if said
debts, liabilities, and duties had been incurred or contracted by it.”

As earlier stated, it was mandated that Filport
shall absorb all labor force and necessary personnel complement of the merging
operators, thus, clearly indicating the intention to continue the
employer-employee relationships of the individual companies with its employees
through Filport.

The alleged memorandum of the PPA Assistant General exonerating Filport from any liability arising from and as a result of
the merger is contrary to public policy and is violative
of the workers’ right to security of tenure. 
Said memorandum was issued in response to a query of the PMU
Officer-in-Charge and was not even published nor made known to the workers who
came to know of its existence only at the hearing before the NLRC.  (G.R. No. 86026, pp. 93-94, Rollo)

The principle involved in the case cited by the First Division
(Fernando v. Angat Labor Union [supra]) applies only
when the transferee is an entirely new corporation with a distinct personality
from the integrating firms and NOT where the transferee was found to be merely
an alter ego of the different merging firms, as in this case.  Thus, Filport has
the obligation not only to absorb the workers of the dissolved companies but
also to include the length of service earned by the absorbed employees with
their former employers as well.  To rule
otherwise would be manifestly less than fair, certainly, less than just and
equitable.

Finally, to deny the private respondents the fruits of their
labor corresponding to the time they worked with their previous employers would
render at naught the constitutional provisions on labor protection.  In interpreting the protection to labor and
social justice provisions of the Constitution and the labor laws, and rules and
regulations implementing the constitutional mandate, the Supreme Court has
always adopted the liberal approach which favors the exercise of labor
rights.  (Euro-Linea,
Phils.,
Inc. v. NLRC, 156 SCRA 83).

WHEREFORE, the Resolution of the Second Division of this
Court in G.R. No. 85704 dated September
3, 1990 is hereby REITERATED.

SO ORDERED.

Fernan, C.J., Melencio-Herrera,
Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Sarmiento, Griño-Aquino, Medialdea, Regalado, and Davide, Jr., JJ., concur.

Narvasa, and Gancayco, JJ.,
in the result.