Benguet Consolidated, Inc. vs. BCI Employees and Workers Union-PAFLU, et al.

A newly certified collective bargaining agent does not automatically assume the personal undertakings — such as a no-strike stipulation — of the union it replaced, and a labor union or its officers and members are liable for illegal strike acts only upon clear proof of actual participation in, or authorization or ratification of, those acts.

Benguet Consolidated, Inc. operated mines and milling establishments at Balatoc, Antamok, and Acupan in Itogon, Mt. Province, where its rank-and-file employees were represented in collective bargaining by the Benguet-Balatoc Workers Union under a collective bargaining contract containing a no-strike, no-lockout clause. The BCI Employees and Workers Union and the Philippine Association of Free Labor Unions were the labor organizations whose liability for a subsequent strike was at issue. Republic Act 875 supplied the statutory framework invoked by the unions for their claimed rights and by the Court for union liability.

Benguet Consolidated, Inc. operated mines and milling establishments at Balatoc, Antamok, and Acupan in Itogon, Mt. Province. On June 23, 1959, the Benguet-Balatoc Workers Union, for and in behalf of all BENGUET employees in those mines and milling establishment, entered into a Collective Bargaining Contract, Exh. "Z," with BENGUET. The CONTRACT was effective for four and a half years, from June 23, 1959 to December 23, 1963, and embodied a No-Strike, No-Lockout clause.

About three years later, on April 6, 1962, a certification election was conducted by the Department of Labor among all rank and file employees of BENGUET in the same collective bargaining units. UNION obtained more than 50% of the total votes, defeating BBWU, and on August 18, 1962, the Court of Industrial Relations certified UNION as the sole and exclusive collective bargaining agent of all BENGUET employees as regards rates of pay, wages, hours of work, and other terms and conditions of employment. Subsequently, separate meetings on November 22, 23, and 24, 1962 at Antamok, Balatoc, and Acupan Mines resulted in UNION members approving a resolution directing its president to file a notice of strike against BENGUET for refusal to grant a monthly living allowance; violation of agreements reached in conciliation meetings, including taking down of investigation and statements of employees without the presence of a union representative; refusal to dismiss an erring executive after affidavits had been presented, showing bias and partiality to company personnel; and discrimination against union members in the enforcement of disciplinary actions. The Notice of Strike was filed on December 28, 1962.

Three months later, in the evening of March 2, 1963, UNION members who were BENGUET employees in the mining camps at Acupan, Antamok, and Balatoc went on strike. According to the trial court, picket lines were formed at strategic points within BENGUET's premises; picketers, by threats and intimidation and in some instances by force and violence, prevented passage through the picket lines by personnel reporting for work. Human blocks were formed at points of entrance to working areas so that even vehicles could not pass, and BENGUET officers were not allowed for sometime to leave the "staff" area. The strikers bore placards with the letters BBWU-PAFLU. As a general rule, the picketers were unruly, aggressive, and uttered threatening remarks to staff members and non-strikers who desired to pass through the picket lines. On some occasions, picketers resorted to violence by pushing back the car wherein staff officers were riding; they lifted one side of the vehicle and were in the act of overturning it when prevented by the timely intervention of PC soldiers, who threw tear gas bombs to disperse the crowd. Many picketers were apprehended by PC soldiers, and criminal charges for grave coercion were filed before the Court of First Instance of Baguio; two strike leaders and twenty-two picketers were found guilty of light coercion, while nineteen other accused were acquitted. There was a complete stoppage of work during the strike in all the mines. After two weeks, repair and maintenance of the water pump was allowed by the strikers, and some staff members were permitted to enter the mines, inspecting the premises in the company of PC soldiers to ascertain the extent of damage to equipment and losses of company property.

On May 2, 1963, the parties agreed to end the dispute. BENGUET and UNION executed the AGREEMENT, Exh. 1; PAFLU placed its conformity thereto, and the agreement was attested to by the Director of the Bureau of Labor Relations. About a year later, on January 29, 1964, a collective bargaining contract was finally executed between UNION-PAFLU and BENGUET. Meanwhile, BENGUET alleged that as a result of the strike it incurred expenses for rehabilitation of mine openings, repair of mechanical equipment, cost of pumping water out of the mines, value of explosives, tools, and supplies lost and/or destroyed, and other miscellaneous expenses, all amounting to P1,911,363.83. BENGUET sued UNION, PAFLU, and their respective Presidents in the Court of First Instance of Manila to recover that amount on the sole premise that defendants breached their undertaking in the existing CONTRACT not to strike during its effectivity.

In their answer, defendants unions and their presidents asserted that they were not bound by the CONTRACT executed by BBWU, the defeated union; that the strike was due, inter alia, to unfair labor practices of BENGUET; and that the strike was lawful and in the exercise of the legitimate rights of UNION-PAFLU under Republic Act 875. They also denied the allegations that they conspired and directed strikers to conduct picketing by force, violence, and intimidation, claiming that the picketing and strike were conducted peacefully, properly, and without fraud or violence, and that BENGUET caused harm by unlawfully violating and breaking up the strike and picketing. The lower court found that some strikers and picketers resorted to intimidation and actual violence, but also found that defendants presented uncontradicted evidence that before and during the strike, the strike leaders had time and again warned the strikers not to resort to violence but to conduct peaceful picketing only.

• Doctrine of Substitution: BENGUET argued that under General Maritime Stevedores' Union vs. South Sea Shipping Lines, L-14689, July 26, 1960, where a bargaining contract runs for more than two years, the principle of substitution applies; if a new bargaining agent is elected, it must respect the existing contract. Thus, UNION-PAFLU automatically became bound by the CONTRACT, including its no-strike clause, upon its certification on August 18, 1962.
• Estoppel: BENGUET maintained that UNION was estopped from denying contractual liability because, in Civil Case No. 1150, entitled "Bobok Lumber Jack Ass'n. vs. Benguet Consolidated, Inc. and BCI Employees Workers Union-PAFLU," UNION filed a motion stating that the Court of Industrial Relations transferred the contractual rights of BBWU to UNION, that the collective bargaining contract would be respected unless the parties acted otherwise, and that UNION by act of subrogation took the place of BBWU. BENGUET also argued that the inclusion of that motion in the record on appeal in G.R. No. L-24729 refuted UNION's claim that it had abandoned its stand.
• Agency: BENGUET contended that because all employees, as principals, continued to be bound by the no-strike stipulation until the CONTRACT's expiration, UNION, as their agent, must necessarily be bound also pursuant to the Law on Agency, citing Clause II in connection with Clause XVIII of the CONTRACT.
• Liability for Illegal Acts and Damages: BENGUET sought to hold defendants labor unions and their respective presidents liable for illegal acts committed during the strike and picketing by some union members, and to recover P1,911,363.83 in damages allegedly incurred as a result of the strike.

• Non-Binding Contract: Defendants countered that they were not bound by the CONTRACT, which BBWU, the defeated union, had executed with BENGUET; they were not signatories nor participants in the CONTRACT.
• Unfair Labor Practices: Defendants asserted that the strike was due, inter alia, to unfair labor practices of BENGUET.
• Lawful Exercise of Rights: Defendants argued that the strike was lawful and in the exercise of the legitimate rights of UNION-PAFLU under Republic Act 875.
• Denial of Illegal Acts: Defendants denied the allegations that they conspired and directed strikers to conduct picketing by force, violence, and intimidation; they claimed that the picketing and strike were conducted peacefully, properly, and without fraud or violence, and that BENGUET caused harm by unlawfully violating and breaking up the strike and picketing.
• No Estoppel / Limited Statement: UNION explained that its statement in Civil Case No. 1150 was directed against Bobok Lumber Jack Ass'n., not BENGUET; UNION and BENGUET were co-defendants, and BENGUET did not rely on the statement. It also denied abandoning its stand in that case.

• Automatic Binding of Successor Union: Whether the Collective Bargaining Contract executed between BENGUET and BBWU on June 23, 1959, and effective until December 23, 1963, automatically bound UNION-PAFLU upon its certification on August 18, 1962, as sole bargaining representative of all BENGUET employees.
• Liability for Illegal Strike Acts: Whether defendants labor unions and their respective presidents are liable for the illegal acts committed during the course of the strike and picketing by some union members.
• Damages: Whether defendants are liable to pay the damages claimed by BENGUET.

• Automatic Binding of Successor Union: No. The no-strike clause did not automatically bind UNION-PAFLU, which was not a signatory or participant in the CONTRACT; the doctrine of substitution does not make a newly certified agent assume the displaced union's personal undertakings. No estoppel or agency-based liability attached.
• Liability for Illegal Strike Acts: No. Under Republic Act 875, vicarious liability was legislated out; liability requires clear proof of actual participation in, or authorization or ratification of, the illegal acts, which was absent.
• Damages: No. Because defendants were not contractually bound by the no-strike clause and were not liable for the illegal acts, they could not be liable for breach of contract or for the damages claimed.

• Automatic Binding of Successor Union: BENGUET's reliance on the "Doctrine of Substitution" from General Maritime Stevedores' Union vs. South Sea Shipping Lines was rejected. The invoked pronouncement was obiter dictum because the only issue there was whether a collective bargaining agreement that had practically run for five years barred certification proceedings; the possible certification of a different union was a mere contingency. The substitutionary doctrine actually means that during the effectivity of a collective bargaining agreement, employees may change their bargaining agent, but the contract continues to bind them until its expiration date; they may bargain for shortening the expiration date. The doctrine protects the employees' interest in the existing agreement, not the displaced agent's personal undertakings. Thus, a newly certified collective bargaining agent does not automatically assume all personal undertakings, such as the no-strike stipulation, made by the deposed union. When BBWU bound itself and its officers not to strike, it could not validly bind rival unions, which have distinct personalities; to hold UNION contractually bound to the no-strike stipulation would violate res inter alios nec prodest nec nocet. UNION could voluntarily assume the displaced agent's personal undertakings, but no showing existed that, prior to the strike, UNION formally adopted the CONTRACT and assumed all liabilities imposed on BBWU. On estoppel, UNION's statement in Civil Case No. 1150 was directed against Bobok Lumber Jack Ass'n., not BENGUET; UNION and BENGUET were co-defendants, and BENGUET did not rely on the statement. BENGUET itself asserted that the defendants had already agreed to continue the modified union shop provision. The inclusion of the motion in the record on appeal was merely compliance with Rule 41, Section 6, Rules of Court, and did not refute UNION's explanation. Article 1704 of the Civil Code provides that in collective bargaining, the labor union or members of the board or committee signing the contract shall be liable for non-fulfillment thereof; defendants were not signatories nor participants. Finally, BENGUET's agency argument failed because everything binding on a duly authorized agent, acting as such, is binding on the principal, not vice-versa, unless there is mutual agency or the agent expressly binds himself to the party with whom he contracts; under Article 1897 of the Civil Code, the agent who acts as such is not personally liable unless he expressly binds himself or exceeds the limits of his authority without giving sufficient notice. The previous agent, BBWU, expressly bound itself to BENGUET; UNION, the new agent, did not assume that undertaking.
• Liability for Illegal Strike Acts: The rule of vicarious liability had, since the passage of Republic Act 875, been expressly legislated out. The standing rule is that for a labor union and/or its officials and members to be liable, there must be clear proof of actual participation in, or authorization or ratification of, the illegal acts. Although the lower court found that some strikers and picketers resorted to intimidation and actual violence, it also found that defendants presented uncontradicted evidence that before and during the strike, the strike leaders had time and again warned the strikers not to resort to violence but to conduct peaceful picketing only. Assuming the strikers did not heed those admonitions, the failure of union officials to proceed against the erring union members pursuant to the UNION and PAFLU constitutions and by-laws exposed, at most, only a flaw or weakness in the defense, which could not be the basis for BENGUET to recover. Paragraph VI of the Answer sufficiently traversed the material allegations in paragraph VI of the Complaint, precluding a fatal admission; the purpose behind the rule requiring specific denial was obtained because defendants set forth the matters relied upon in support of their denial. The paragraph may not have been a model pleading, but it sufficed, and pleadings should be liberally construed under Rule 6, Section 15, Rules of Court.
• Damages: Since defendants were not contractually bound by the no-strike clause in the CONTRACT for the simple reason that they were not parties thereto, they could not be liable for breach of contract to BENGUET. The lower court therefore correctly absolved them from liability.

• Doctrine of Substitution — Under this doctrine, during the effectivity of a collective bargaining agreement executed between an employer and employees through their agent, the employees may change their bargaining agent, but the contract continues to bind them until its expiration date; they may bargain for the shortening of that date. The doctrine protects the employees' interest in the existing agreement and does not mean that a newly certified bargaining agent automatically assumes all personal undertakings of the deposed union, such as a no-strike stipulation. In this case, UNION-PAFLU was not automatically bound by BBWU's no-strike clause.
• Res inter alios nec prodest nec nocet — A contract cannot benefit or prejudice third parties. Because BBWU was the agent of the employees, not of rival unions, its no-strike undertaking could not bind UNION, which had a distinct personality. The maxim was applied to reject the claim that UNION was contractually bound by the CONTRACT.
• Agency liability under Article 1897 — An agent who acts as such is not personally liable to the party with whom he contracts unless he expressly binds himself or exceeds the limits of his authority without giving sufficient notice. The previous agent, BBWU, expressly bound itself to BENGUET, while UNION, the new agent, did not assume that undertaking; moreover, what binds the principal does not necessarily bind the agent vice-versa absent mutual agency or express undertaking.
• Clear proof rule for labor union liability — Under Republic Act 875, vicarious liability for illegal strike acts was legislated out. For a labor union and/or its officials and members to be liable, there must be clear proof of actual participation in, or authorization or ratification of, the illegal acts. No such proof existed; the leaders had warned strikers against violence, and mere failure to discipline erring members did not establish liability.
• Specific denial and liberal construction of pleadings — A defendant must set forth the matters relied upon in support of a denial; a denial need not be a model pleading if it sufficiently traverses the material allegations and satisfies the purpose of the rule. Paragraph VI of the Answer sufficiently denied paragraph VI of the Complaint, precluding a fatal admission, and pleadings should be liberally construed.
• Estoppel — Estoppel requires an assertion made against a party who relies upon it. No estoppel arose because UNION's statement in Civil Case No. 1150 was directed against Bobok Lumber Jack Ass'n., not BENGUET; UNION and BENGUET were co-defendants, and BENGUET did not rely on the statement.

• "The 'substitutionary' doctrine, therefore, cannot be invoked to support the contention that a newly certified collective bargaining agent automatically assumes all the personal undertakings — like the no-strike stipulation here — in the collective bargaining agreement made by the deposed union." — This is the ratio decidendi on the first issue, rejecting automatic assumption of the predecessor union's no-strike clause.
• "The standing rule now is that for a labor union and/or its officials and members to be liable, there must be clear proof of actual participation in, or authorization or ratification of the illegal acts." — This states the controlling standard for union liability after Republic Act 875 and explains why the defendants were not liable for the strike's violent incidents.
• "Since defendants were not contractually bound by the no-strike clause in the CONTRACT, for the simple reason that they were not parties thereto, they could not be liable for breach of contract to plaintiff." — This summarizes the dispositive rationale on contractual and damages liability.
• "In the collective bargaining, the labor union or members of the board or committee signing the contract shall be liable for non-fulfillment thereof." — This is Article 1704 of the Civil Code as quoted in the decision; it supports the holding that defendants, not being signatories, were not liable.

• General Maritime Stevedores' Union vs. South Sea Shipping Lines, L-14689, July 26, 1960 — Cited by BENGUET for the Doctrine of Substitution. The invoked pronouncement was held to be obiter dictum and did not support automatic binding of a successor union to the predecessor's personal no-strike undertaking.
• Buklod ng Saulog Transit vs. Casalla, 99 Phil. 16 — Cited in the decision's footnote in connection with the discussion of the General Maritime Stevedores' Union pronouncement.

• Article 1704, Civil Code — Provides that in collective bargaining, the labor union or members of the board or committee signing the contract shall be liable for non-fulfillment thereof. The provision was applied to hold that defendants, not being signatories or participants in the CONTRACT, were not liable.
• Article 1897, Civil Code — Provides that an agent who acts as such is not personally liable to the party with whom he contracts unless he expressly binds himself or exceeds the limits of his authority without giving sufficient notice. The provision was applied to reject BENGUET's agency argument; BBWU, not UNION, expressly bound itself to the no-strike undertaking.
• Section 9(c), Republic Act 875 — Legislated out the rule of vicarious liability for labor unions. The provision was applied to require clear proof of actual participation in, or authorization or ratification of, illegal acts before a union or its officers and members may be held liable.
• Rule 41, Section 6, Rules of Court — Requires all matters necessary for a proper understanding of the issues involved to be included in the record on appeal. The provision was applied to hold that the inclusion of UNION's motion in the record on appeal in Civil Case No. 1150 did not refute UNION's explanation.
• Rule 6, Section 15, Rules of Court — Governs specific denial and liberal construction of pleadings. The provision was applied to hold that paragraph VI of the Answer sufficiently traversed paragraph VI of the Complaint, precluding a fatal admission.

Dizon, Zaldivar, Sanchez, Castro, Angeles, and Fernando, JJ., concurred. Makalintal, J., reserved his vote; Concepcion, C.J., was on leave; Reyes, J.B.L., Acting C.J., took no part.