Co v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: On August 31, 1987, a Labor Arbiter rendered a decision in favor of the Confederation of Labor Unions of the Philippines (CLUP) against Buda Enterprises, ordering reinstatement and payment of backwages. The decision became final and executory. Procedural History: Five parcels of land, allegedly belonging to Buda Enterprises but later found registered under the names of petitioners Co Tuan, Samuel Ang, Jorge Lim, and Edwin Gotamco, were levied upon pursuant to a writ of execution. Petitioners filed an Urgent Motion to Quash the Writ of Execution, claiming valid title to the properties by virtue of an Extra-judicial Settlement and Sale executed on August 25, 1987, by the heirs of Edilberto Soriano, one of whom was Lourdes Soriano, the proprietress and manager of Buda Enterprises. They argued that only Lourdes Soriano was a party to the labor case. The Petition: Petitioners questioned the authority of the National Labor Relations Commission (NLRC) to rule on the validity of the sale of properties between them and Buda Enterprises and to determine if fraud vitiated the sale to evade payment of CLUP's claims. The NLRC directed the Labor Arbiter to implead the movants (petitioners) and conduct a hearing to determine if the sale was made to avoid payment of claims. The Labor Arbiter found himself incompetent to determine if fraud tainted the sale. CLUP appealed, arguing grave abuse of discretion. The NLRC reiterated its order to implead and conduct a hearing, stating that if the allegation of sale to evade payment is proven, the claims could be paid from the proceeds. Petitioners filed a special civil action for Certiorari and Prohibition with Preliminary Injunction before the Supreme Court.
Issue(s)
Whether the National Labor Relations Commission (NLRC) has the authority to determine the validity of the sale of properties between the petitioners and Buda Enterprises, and to ascertain if fraud vitiated the sale to evade payment of labor claims. Whether the NLRC gravely abused its discretion in ordering the impleading of the petitioners and conducting a hearing to determine the validity of the sale and the alleged promise to pay claims from the proceeds. Whether the petitioners are estopped from questioning the jurisdiction of the NLRC after filing a Motion to Quash the Writ of Execution; and whether the petition was premature for not filing a motion for reconsideration.
Ruling
The petition is granted. The decision of the NLRC dated September 12, 1994, is reversed and set aside.
Ratio Decidendi
On the NLRC's Authority to Determine the Validity of the Sale: The Supreme Court reiterated its ruling in Asian Footwear vs. Soriano that if there is suspicion that a sale of properties was made in fraud of creditors, a government functionary like a labor arbiter or the NLRC is incompetent to make such a determination. This task is judicial in nature and requires adversary proceedings. The NLRC's power to execute its judgment extends only to properties unquestionably belonging to the judgment debtor. Therefore, if the property under levy does not belong to the judgment debtor, it cannot be validly levied upon. The Court emphasized that even upon a mere prima facie showing of ownership by a third-party claimant, if the claim does not involve or grow out of a labor dispute, a separate action for injunctive relief against such levy may be maintained in court. The sale of properties between Buda Enterprises and the petitioners, evidenced by a public document and involving heirs of Edilberto Soriano (none of whom, except Lourdes Soriano, were parties to the labor case), constitutes a transaction entirely distinct from the labor dispute. The NLRC Manual of Instructions for Sheriffs, which provides for a hearing to resolve the validity of a third-party claim, applies only to the sheriff and officers of the Commission and only when the third-party claimant chooses to file the claim with the Labor Arbiter or NLRC. It does not limit the procedure for the third-party claimant themselves, who have options under the Revised Rules of Court, including filing a separate action for damages against the sheriff or vindicating their claim to the property in a proper action. On Grave Abuse of Discretion: The NLRC gravely abused its discretion in ordering the impleading of the petitioners and conducting a hearing to determine the validity of the sale and the alleged promise to pay claims from the proceeds. Such a hearing would serve no useful purpose as the commitment, if any, made by Buda Enterprises to pay claims from the proceeds of the sale could not bind the petitioners, who were not parties to that commitment. The NLRC's directive to determine if the sale was made to avoid payment of claims was an overreach of its jurisdiction, as the determination of fraud in a sale requires a judicial process. On Estoppel and Prematurity: The contention that petitioners are estopped from questioning the NLRC's authority after filing a Motion to Quash the Writ of Execution is untenable. The very reason for filing the motion to quash was to put in issue the NLRC's jurisdiction over the properties sought to be levied upon. Petitioners were asserting their ownership and challenging the levy, not submitting to the NLRC's jurisdiction on the validity of the sale itself. The NLRC's submission that the petition was premature for not filing a motion for reconsideration was rejected. The Court held that a prior motion for reconsideration is not indispensable if the errors sought to be corrected have been duly heard and passed upon. In this case, the NLRC's decision was a reiteration of its previous ruling, indicating it had already considered and passed upon the issue of its authority.
Main Doctrine
The National Labor Relations Commission (NLRC) is incompetent to determine the validity of a sale of properties between a judgment debtor and a third party, especially when fraud is alleged to have vitiated the sale to evade payment of labor claims. Such determination requires a judicial proceeding and is beyond the competence of labor arbiters or the NLRC, whose power to execute judgments extends only to properties unquestionably belonging to the judgment debtor.