G.R. No. 128003 - Rubberworld [Phils.], Inc. vs. National Labor Relations Commission

Case Summary (G.R. No. 128003)

Factual Background

RUBBERWORLD [PHILS.], INC. was a manufacturer of footwear, bags and garments that filed a notice of temporary shutdown on August 26, 1994 to take effect September 26, 1994 but was forced to close operations earlier. The private respondents, then employees in various capacities, filed a complaint for illegal dismissal and non-payment of separation pay with the NLRC on November 11, 1994. Before the labor proceedings matured, petitioner filed with the Securities and Exchange Commission a petition for declaration of suspension of payments and proposed rehabilitation on November 22, 1994. The SEC issued an order on December 28, 1994 creating a Management Committee and declaring that all actions for claims against Rubberworld pending before any court, tribunal, office, board, body, Commission or sheriff were suspended.

Proceedings Before the Labor Arbiter

Petitioners invoked the SEC suspension order in a motion to suspend the labor proceedings dated January 24, 1995, but the labor arbiter did not act on that motion and instead directed the parties to submit position papers. On December 10, 1995 the labor arbiter ruled that respondents were guilty of illegal shutdown, ordered separation pay equivalent to one month pay for every year of service, and awarded moral damages of P50,000.00, exemplary damages of P30,000.00 for each complainant, and attorney's fees of ten percent of all sums owing.

Proceedings Before the NLRC

Petitioners appealed the labor arbiter's decision to the NLRC on February 5, 1996. On August 30, 1996 the NLRC issued a resolution that affirmed the labor arbiter's decision but modified it by deleting the award of moral and exemplary damages. The NLRC denied petitioners' motion for reconsideration on November 20, 1996. Petitioners thereafter filed a petition for certiorari with the Supreme Court on February 18, 1997.

Issue Presented

The dispositive legal question was whether the Department of Labor and Employment, the labor arbiter and the NLRC could lawfully proceed to hear and decide labor claims filed against a corporation after the Securities and Exchange Commission had placed that corporation under rehabilitation and issued an order suspending all actions pursuant to Presidential Decree No. 902-A, Section 6.

Petitioners' Contentions

Petitioners urged that the SEC rehabilitation order invoked Presidential Decree No. 902-A, Section 6, which mandated that all actions for claims against corporations under management or receivership pending before any court, tribunal or board shall be suspended. Petitioners contended that the automatic stay imposed by PD 902-A was meant to permit the Management Committee to exercise its powers free from judicial or extra-judicial interference and that allowing the labor proceedings to continue would defeat the purpose of the suspension, unduly burden the Management Committee and render any award unenforceable while the corporation remained under rehabilitation.

Respondents' Contentions

The private respondents maintained the complaint filed with the NLRC alleging illegal shutdown and non-payment of separation pay and pursued relief before the labor arbiter and on appeal. The labor arbiter resolved the factual and damage issues in their favor, and the NLRC issued an appellate resolution affirming the decision with the modification deleting moral and exemplary damages.

Ruling of the Supreme Court

The Supreme Court granted the petition. The Court held that the SEC order placing the corporation under a Management Committee effected an automatic suspension of all pending actions against the corporation under Presidential Decree No. 902-A, Section 6, and that this suspension encompassed labor claims. Because the NLRC proceeded to adjudicate the case despite the SEC suspension order, the NLRC acted without or in excess of its jurisdiction. The Court declared that any resolution, decision or order rendered by a tribunal without jurisdiction is a nullity, and therefore set aside the labor arbiter's decision dated December 10, 1995 and the NLRC resolution dated August 30, 1996. The Court imposed no costs.

Legal Basis and Reasoning

The Court reasoned that PD 902-A, Section 6 contains an unqualified directive that "all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly." The statutory purpose of the automatic stay is to enable the Management Committee or rehabilitation receiver to focus on corporate rescue without being diverted by the defense of pending claims. The Court cited prior decisions recognizing that conti

Case Syllabus (G.R. No. 128003)

Parties and Procedural Posture

Rubberworld (Phils.), Inc. and Julie Yao Ong were the petitioners before the Court.
Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Alicia M. San Pedro, and Felomena B. Tolin were the private respondents who filed the labor complaint.
The private respondents filed a complaint docketed as NLRC NCR Case 00-11-08125-94 before the National Labor Relations Commission.
Rubberworld (Phils.), Inc. filed SEC Case No. 11-94-4920 seeking a declaration of suspension of payments with a proposed rehabilitation plan.
The labor arbiter rendered a decision on December 10, 1995, which was appealed to the NLRC and resulted in NLRC CA No. 010142-96 and a resolution dated August 30, 1996.
The petitioners filed a petition for review with the Supreme Court on February 18, 1997, and the Supreme Court gave due course to the petition on September 22, 1999.
The Supreme Court granted the petition and set aside the labor arbiter's decision and the NLRC resolution.

Key Factual Allegations

Rubberworld (Phils.), Inc. was a corporation engaged in manufacturing footwear, bags, and garments since 1965.
The private respondents were employed by Rubberworld (Phils.), Inc. in various capacities as dispatcher, warehouseman, issue monitor, foreman, jacks cementer, and outer sole attacher.
Rubberworld (Phils.), Inc. filed a notice of temporary shutdown on August 26, 1994 to take effect on September 26, 1994 but was forced to effect a premature shutdown.
The private respondents filed their complaint for illegal dismissal and non-payment of separation pay on November 11, 1994.
Rubberworld (Phils.), Inc. filed with the Securities and Exchange Commission on November 22, 1994 a petition for declaration of suspension of payments together with a proposed rehabilitation plan.
The Securities and Exchange Commission issued an order on December 28, 1994 creating a management committee and declaring that all actions for claims against Rubberworld (Phils.), Inc. pending before any court, tribunal, office, board, body, Commission or sheriff were suspended.
Petitioners moved before the labor arbiter on January 24, 1995 to suspend the labor proceedings pursuant to the SEC order, but the labor arbiter did not act on the motion and proceeded to require position papers.
The labor arbiter found an illegal shutdown and awarded separation pay, moral damages of P50,000.00, exemplary damages of P30,000.00, and ten percent attorney's fees to each complainant.

Issues Presented

The principal issue was whether the Department of Labor and Employment, the labor arbiter, and the NLRC could legally act on the private respondents' claims despite the SEC order suspending all actions against a company under rehabilitation.
The antecedent issue was whether the SEC order placing the corporation under a management committee divested labor tribunals of jurisdiction to hear and decide pending labor claims.

Contentions of the Parties

The petitioners contended that Presidential Decree No