G.R. No. L-21484 - Agricultural Credit vs. Confederation of Unions in Government Corporations and Offices

Case Summary (G.R. No. L-21484)

Petitioner, Respondent and Organizational Roles

ACCFA/ACA: A government agency created under Republic Act No. 821 and subsequently reorganized under the Land Reform Code (Republic Act No. 3844) to implement credit functions in furtherance of land reform. The ACA was placed under the Land Reform Project Administration (LRPA) by Executive Order No. 75, with personnel subject to civil service rules and appointments ultimately vested in the President.
Unions: Labor organizations composed of supervisors (ASA) and rank-and-file employees (AWA) of the ACCFA/ACA, which negotiated a collective bargaining agreement (CBA) dated September 4, 1961, and later sought certification as exclusive bargaining agents.

Key Dates

September 4, 1961: Execution of the collective bargaining agreement between ACCFA and the Unions (effective July 1, 1961 for one year).
October 25–November 26, 1962: Strike declared by the Unions; strikers returned voluntarily.
October 30, 1962: Unions filed unfair labor practice complaint with CIR (Case No. 3450-ULP).
March 25, 1963: CIR decision ordering ACCFA to implement CBA provisions, pay specified living allowance, cease discouraging union activity, and bargain in good faith.
August 8, 1963: Enactment of the Agricultural Land Reform Code (R.A. No. 3844), reorganizing ACCFA into ACA.
March–May 1964: Petition for certification election filed; CIR certified the Unions as exclusive bargaining representatives (Case No. 1327-MC; order dated May 21, 1964).
Supreme Court appeals followed from both CIR rulings.

Applicable Law and Governing Constitutional Framework

Statutes and executive instruments relied upon in the Court’s analysis: Republic Act No. 821 (creating ACCFA), Republic Act No. 3844 (Land Reform Code, reorganizing ACCFA into ACA), Executive Order No. 75 (implementing LRPA personnel and administrative integration), and Republic Act No. 875 (Labor Code provision referred to re: prohibition of strikes by government employees).
Constitutional framework applicable to this 1969 decision: the 1935 Constitution (the Constitution in force at the time), as the Court’s reasoning addresses the scope of governmental functions and the permissibility of state entry into economic and social activities under constitutional principles then operative.

Procedural History and Core Claims

Two related Supreme Court appeals challenged (1) a CIR decision finding ACCFA guilty of unfair labor practices and ordering compliance with the CBA, and (2) a CIR order certifying the Unions as exclusive bargaining agents for ACA employees after ACCFA had been reorganized. ACCFA/ACA raised jurisdictional defenses (that the agency performed governmental functions and thus CIR lacked jurisdiction or authority to grant certification and compel bargaining), challenged the validity and enforceability of the CBA and its fringe benefits (arguing presidential approval was required), and disputed the factual findings of unfair labor practice.

Facts Relevant to Jurisdiction and Collective Bargaining

The 1961 CBA provided for various fringe benefits and required ratification by the Board of Governors; the Board conditionally ratified the contract but required Office of the President approval for fringe benefits. The Office of the President gave conditional approval on October 23, 1962. The parties later negotiated partial implementation and payment of specified benefits, and the Board ratified that implementation agreement on July 24, 1963 (with reservation as to pending appeal). Executive Order No. 75 integrated ACA into the LRPA and placed its personnel in a single pool under civil service rules; appointments for ACA officials were identified as being ultimately made by the President.

Issues Presented

Whether the CIR had jurisdiction over the unfair labor practice complaint and the certification election petition—i.e., whether ACCFA/ACA was engaged in governmental or proprietary functions.
Whether the September 4, 1961 collective bargaining agreement was valid, had lapsed, and whether its fringe benefits were enforceable absent prior presidential approval.
Whether there was legal or factual basis for the CIR’s finding of unfair labor practice and its remedial orders (cease-and-desist, implementation of CBA, bargaining in good faith).
Whether the CIR could enforce a CBA that had expired.

Court’s Analysis — Jurisdiction: Governmental vs. Proprietary Functions

The Court analyzed the statutory scheme of the Land Reform Code (R.A. No. 3844) and implementing Executive Order No. 75, noting that the ACA’s functions—extending and administering agricultural credit to implement land reform, auditing and supervising farmers’ cooperatives (visitorial powers under Section 113), prosecuting cooperative officials for malfeasance, exemption from duties and taxes, and large appropriations for credit—were integrally connected to a national land reform program and therefore governmental in character. The Court emphasized structural indicia of governmental character: policymaking and program formulation vested in the National Land Reform Council (a government instrumentality), personnel subject to civil service laws and standardized wage/position structures, placement within the LRPA for unified administration, and appointment authority resting with the President. These features, combined with the statute’s express delegation of sovereign-type powers (e.g., auditing with subpoena power), led the Court to conclude that ACA performed governmental, not proprietary, functions.

Court’s Rationale on Certification Election and Section 11 of R.A. No. 875

Applying the conclusion that the ACA’s functions were governmental, the Court held that the Unions were not entitled to the certification election sought before the CIR to secure collective bargaining rights that would include the right to strike. The Court relied on Section 11 of Republic Act No. 875 (as interpreted): employees employed in governmental functions are prohibited from striking for purposes of securing changes in their terms and conditions of employment, and collective bargaining that contemplates the use of strike as a coercive economic weapon is contrary to that statutory policy where governmental functions are involved. Given ACA’s governmental character, the Court ruled that certification as bargaining units for the purpose of collective bargaining (including strikes) was inappropriate and therefore denied the certification sought by the Unions.

Court’s Disposition as to the CIR’s Unfair Labor Practice Decision

Because the reorganization converting ACCFA to ACA and the Court’s determination of governmental character rendered the propriety of collective bargaining with the Unions moot insofar as further bargaining rights and certification were concerned, the Court found the CIR’s order compelling the agency to bargain collectively to be effectively foreclosed. The Court set aside or modified CIR’s prior decisions and en banc resolutions to the extent they ordered collective bargaining and certification inconsistent with the governmental character of ACA.

Collective Bargaining Agreement and Fringe Benefits: Validity and Enforceability

The Court examined the CBA’s ratification clause and subsequent approvals. The contract required Board ratification; the Board ratified the agreement but expressly conditioned the fringe benefits on presidential approval. The Office of the President gave conditional approval stating that salaries and benefits were acceptable provided they were not in conflict with law and were within the corporation’s financial capacity. The parties thereafter negotiated an implementation agreement and ACCFA/ACA paid certain specified benefits (cost-of-living adjustments, longevity pay, night differential for certain categories) and set aside funds for payment. The Court concluded that (1) the condition requiring presidential approval for fringe benefits had been satisfied insofar as the President’s office had expressed approval consistent with the contract’s condition, and (2) the payment of fringe benefits demonstrated that they were financially supportable and thus enforceable. Consequently, the Court declined to set aside the CIR’s decision insofar as it related to fringe benefits already paid; however, because the Unions were not entitled to certification or to collective bargaining for future terms (given ACA’s governmental character), the Unions could not demand further fringe benefits on the basis of collective bargaining.

Final Holding and Relief

The Supreme Court held that (1) the ACA (successor to ACCFA) performs governmental functions; (2) the CIR’s certification of the Unions and order to bargain collectively were inconsistent with that governmental character and therefore could not stand; (3) fringe benefits under the 1961 CBA that had been approved and paid (or paid pursuant to negotiated implementati

Case Syllabus (G.R. No. L-21484)

Procedural Posture and Consolidation of Appeals

Two separate appeals by certiorari were brought to the Supreme Court and considered together because the parties (except CUGCO) and principal issues were practically the same: G.R. No. L-21484 and G.R. No. L-23605, both decided November 29, 1969.
G.R. No. L-21484 arose from an unfair labor practice proceeding (Case No. 3450-ULP) decided by the Court of Industrial Relations (CIR) on March 25, 1963 and affirmed en banc; ACCFA sought review by certiorari.
G.R. No. L-23605 challenged a CIR order (Case No. 1327-MC) dated May 21, 1964, certifying the ACCFA Workers' Association and the ACCFA Supervisors' Association as exclusive bargaining representatives for ACA employees; ACA sought certiorari and obtained a stay from the Supreme Court pending review.
The Supreme Court rendered a single decision addressing the interrelated legal questions raised in both appeals.

Parties and Organizational Identities

Petitioner(s):
- The Agricultural Credit and Cooperative Financing Administration (ACCFA), later reorganized and renamed the Agricultural Credit Administration (ACA) under the Land Reform Code (Republic Act No. 3844).
- In the second appeal the petitioner is referred to as the Agricultural Credit Administration (ACA).
Respondents:
- Confederation of Unions in Government Corporations and Offices (CUGCO) — joined in the ULP complaint in the first case.
- ACCFA Supervisors' Association (ASA) — a labor organization composed of supervisors.
- ACCFA Workers' Association (AWA) — a labor organization composed of rank-and-file employees.
- The Court of Industrial Relations (CIR) — trial and appellate tribunal below in labor matters.
Functional description:
- The Unions (ASA and AWA) are labor organizations representing supervisors and rank-and-file employees of the ACCFA/ACA.

Factual Background — Collective Bargaining Agreement and Strike

On September 4, 1961 the Unions and ACCFA executed a collective bargaining agreement (CBA) intended to be effective for one year from July 1, 1961.
Following the CBA, the Unions protested alleged violations and non-implementation of the agreement.
On October 25, 1962 the Unions declared a strike; the strike ended when strikers voluntarily returned to work on November 26, 1962.
On October 30, 1962 the Unions, joined by CUGCO, filed an unfair labor practice complaint with the CIR alleging:
- Violation of the collective bargaining agreement to discourage union self-organization;
- Discrimination in promotions against union members; and
- Refusal to bargain.
ACCFA denied the charges and raised affirmative and special defenses, notably:
- Lack of CIR jurisdiction (asserting ACCFA exercised governmental functions);
- Illegality and lapse of the bargaining contract;
- Lack of presidential approval of the fringe benefits provided in the CBA.

CIR Proceedings, Ruling in ULP Case (G.R. No. L-21484)

CIR decision dated March 25, 1963 ordered ACCFA:
1. To cease and desist acts discouraging the exercise of union self-organization;
2. To comply with and implement the CBA, including payment of P30.00 monthly living allowance;
3. To bargain in good faith and expeditiously with complainant unions.
ACCFA moved for reconsideration; CIR en banc denied reconsideration in a resolution dated April 25, 1963.
ACCFA brought the CIR decision to the Supreme Court by certiorari, advancing multiple issues of law and fact.

Issues Raised by ACCFA in the ULP Appeal (as framed in petition)

Whether CIR had jurisdiction over the case, which depended on whether ACCFA exercised governmental or proprietary functions.
Whether the CBA was valid; if valid, whether it had already lapsed; and whether its fringe benefits were enforceable.
Whether there was legal and/or factual basis for finding acts of unfair labor practice by the petitioner.
Whether CIR could enforce a collective bargaining agreement that had already expired.

Reorganization of ACCFA into ACA under RA No. 3844 — Facts Relevant to G.R. No. L-23605

During pendency of the ULP case, on August 8, 1963, the President signed the Agricultural Land Reform Code (Republic Act No. 3844), which reorganized ACCFA and changed its name to Agricultural Credit Administration (ACA).
On March 17, 1964 the Unions filed a petition for certification election with CIR (Case No. 1327-MC), asking to be certified as exclusive bargaining agents for supervisors and rank-and-file employees of the ACA.
CIR ordered notice and permitted posting on March 30, 1964; ACA answered alleging the petition was premature, ACA was improper party to be notified, and that employees could not lawfully be members or represented by the Unions; ACA also asserted it performed governmental functions.
On May 7, 1964 the Unions filed a joint manifestation, with conformities by the ACA Administrator and the Agrarian Counsel, agreeing that the unions represented the majority in their bargaining units and that remaining issues were legal and to be decided by the trial court.
CIR ordered on May 21, 1964 that the ACCFA Workers' Association and ACCFA Supervisors' Association be certified as sole and exclusive bargaining representatives of ACA employees; CIR en banc affirmed on August 24, 1964.
ACA filed certiorari in the Supreme Court challenging CIR’s jurisdiction on the ground that ACA performs governmental functions; the Supreme Court initially dismissed for lack of adequate allegations but later reinstated and granted a stay of execution.

Statutory Framework — Powers, Functions, and Appropriations under the Land Reform Code

RA No. 3844 established ACA (reorganizing ACCFA) and defined its role to "extend credit and similar assistance to agriculture" pursuant to national policy articulated in Section 2 of the Code.
Section 2 declared national policy objectives including: establishment of owner-cultivatorships, promotion of social justice, application of labor laws equally to agricultural wage earners, vigorous land resettlement, and strengthening small farmers.
Relevant provisions (Sections 103–118 and 110–112) described ACA powers and financial support:
- Section 110: administrative machinery of ACCFA to be reorganized and known as ACA.
- Section 112: appropriation of P150,000,000 from national funds to finance ACA’s additional credit functions for land reform.
- Section 103: ACA may rediscount with Central Bank, Development Bank of the Philippines, and Philippine National Bank.
- Section 105: ACA loaning activities directed to stimulate farmers' cooperatives, including production, marketing, and cooperative ownership of services/facilities.
- Section 106: extension of credit to small farmers to stimulate agricultural production.
- Sections 107–112: guidelines on loans (security, interest, supervision).
- Sections 113–118: confer special powers to ACA not accorded to non-governmental entities, including:
  - Section 113: auditing powers over farmers' cooperatives; issuance of subpoenas; contempt and suspension/removal remedy.
  - Section 114: authority to file and prosecute actions against officials/employees of cooperatives for misfeasance/malfeasance via provincial/city fiscal.
  - Section 115: free notarial service by justices of the peace ex officio for loan applicants.
  - Section 116: free registration of deeds by registers of deeds for instruments relative to loans made under the Code.
  - Section 117: power to write off unsecured and outstanding loans under prescribed conditions with President's approval.
  - Section 118: exemption from duties, taxes, levies, and fees in performance of functions and exercise of powers under the Code.

Executive Order No. 75 and the Land Reform Project Administration (LRPA)

Executive Order No. 75 (March 19, 1964) implemented the Plan of Reorganization for administrative machinery under the Land Reform Code and created the Land Reform Project Administration (LRPA) structure.
Key provisions of EO No. 75 pertinent to personnel and administration:
- Section 3: LRPA personnel of member agencies (including legal officers of the Office of the Agrarian Counsel) to be regarded as one personnel pool; personnel may be freely assigned among member agencies subject to civil service laws.
- Section 4: LRPA to be treated as one organization for standardization of job descriptions, position classification, and wage/salary structures so positions of equivalent qualifications and responsibilities have same remuneration.
- Section 5: Civil Service laws/rules on promotions to apply to LRPA as a single agency; qualified individuals in one member agency to be considered for promotion in another.
The LRPA a