G.R. No. 175039 - Addition Hills Mandaluyong Civic and Social Organization, Inc. vs. Megaworld Properties and Holdings, Inc.

The petitioner, National Union of Workers in Hotel Restaurant and Allied Industries (NUWHRAIN-APL-IUF), Philippine Plaza Chapter (the Union), is the collective bargaining agent representing the rank-and-file employees of the respondent, Philippine Plaza Holdings, Inc. (PPHI).
The employer–employee relationship is governed by a series of collective bargaining agreements (CBAs), notably the Third Rank-and-File Collective Bargaining Agreement executed on November 24, 1998, which contains provisions on service charge collection and its distribution.

Section 68 of the CBA mandates the collection of a 10% service charge on the sale of food, beverage, transportation, laundry, and rooms.

It explicitly excludes transactions arising from “negotiated contracts” and “special rates.”

Section 69 details the distribution mechanism of the collected service charge, stipulating that the distributable amount is to be shared equally among all hotel employees, with specific shares allocated to PPHI staff and the Union (including national and local funds).
The provisions in the November 24, 1998 CBA reiterated similar terms contained in an earlier agreement executed on August 29, 1995.

On February 25, 1999, the Union’s Service Charge Committee issued its first audit report highlighting uncollected service charges for the last quarter of 1998 amounting to P2,952,467.61, derived from various accounting entries (e.g., Journal Vouchers, Banquet/Other Revenue, Staff and Promo entries).
During a subsequent Labor Management Cooperation Meeting (LMCM) on February 26, 1999, the Union communicated these findings to the PPHI management.
PPHI, through a letter dated June 9, 1999, acknowledged a liability for only P80,063.88 of the claimed amount, denying the remaining sum on the grounds that the disputed transactions either:

Involved special promotions or negotiated contracts (e.g., Maxi-Media agreement, Westin Gold Card sales)
Pertained to revenues not belonging to PPHI but to third-party suppliers, or
Represented expenses or non-revenue generating transactions.

A deadlock ensued during the July 12, 1999 LMCM which led the parties to agree to refer the matter to a third party, considering either voluntary arbitration or judicial action.
The Union modified its claims through subsequent audit reports (second and third audit reports), the latter (dated August 10, 2000) totaling uncollected service charges of P5,566,007.62 for the years 1997, 1998, and 1999.
On May 3, 2001, the Union filed a complaint before the Labor Arbiter (LA) for non-payment of service charges and charged PPHI with an unfair labor practice (ULP) for allegedly violating the CBA.

The LA dismissed the Union’s complaint for failing to prove, by law, contract, and practice, its entitlement to service charges.
It emphasized that the 10% service charge would apply only where collection had occurred on sales of food, beverage, transportation, laundry, and rooms—excluding transactions from negotiated contracts or special rates.

The National Labor Relations Commission (NLRC) reversed the LA’s ruling, holding PPHI liable for P5,566,007.62 on the basis that the disputed transactions were “service chargeable.”
The ruling was premised on the absence of proof that PPHI had remitted or paid the service charges to the employees.

In its January 31, 2007 decision, the CA reversed the NLRC decision.
The CA affirmed the LA’s decision by ordering PPHI to pay only P80,063.88—acknowledging that certain transactions either were exempt as negotiated contracts and special rates or did not involve a bona fide sale as contemplated by Section 68 of the CBA.
A subsequent CA resolution on April 20, 2007 denied the Union’s motion for reconsideration.

The Union filed a petition for review on certiorari, contending that the CA misapprehended and misappreciated the facts and evidence, thereby committing grave abuse of discretion.
The Union argued that:

The disputed entries were revenue-based transactions subject to the 10% service charge under the CBA.
PPHI failed to collect and properly distribute service charges on these transactions.
The interpretation of “negotiated contracts” should be limited to airline contracts, as was understood at the time of the CBA’s execution, thereby entitling the Union to collect service charges from other revenue sources.
The prescriptive period for claims under Article 291 of the Labor Code had been interrupted by its earlier audit report and negotiations.

Whether the disputed transactions (specified entries such as Westin Gold Card revenues, Maxi-Media barter, Business Promotions, Gift Certificates, and others) fall under the collection of a 10% service charge as provided in the CBA or are excluded as “negotiated contracts” and “special rates.”

Whether the NLRC committed grave abuse of discretion by ruling in favor of the Union for uncollected service charges, particularly in light of the fact that no service charges were actually collected on those transactions.

Whether, under Article 291 (as supplemented by Article 1155 of the Civil Code), the Union’s claims for the year 1997 and parts of 1998 had prescribed or were rightfully interrupted by its written extrajudicial demands and negotiations.

Whether PPHI’s practice of not collecting service charges on the specified transactions violates Article 96 of the Labor Code, which governs the collection and distribution of service charges.

Whether the CA correctly applied the rules of statutory construction and the plain language of the CBA provisions in determining that the specified entries/transactions were either not sales as contemplated or fell within the contractual exemptions.