Legend International Resorts Limited vs. Kilusang Manggagawa ng Legenda (KML-Independent)

The cancellation of a labor organization's certificate of registration does not retroact to the time of its issuance, and acts done by the union while it possessed legal personality—such as filing a petition for certification election—remain valid. A union's legal personality cannot be collaterally attacked in a certification election proceeding but may be questioned only in an independent petition for cancellation of registration.

Legend International Resorts Limited (LEGEND) is an employer, and Kilusang Manggagawa ng Legenda (KML) is a labor organization claiming to represent LEGEND's rank and file employees. The dispute arises under Article 245 of the Labor Code, which prohibits supervisory employees from joining rank and file unions, and under Department Order No. 9, series of 1997, which governs the registration of labor organizations and the conduct of certification elections. The case involves two related proceedings: a petition for certification election filed by KML and a separate petition for cancellation of KML's registration filed by LEGEND.

KML filed a Petition for Certification Election with the Med-Arbitration Unit of the DOLE, San Fernando, Pampanga on June 6, 2001, alleging that it was a legitimate labor organization of the rank and file employees of LEGEND, having been issued Certificate of Registration No. RO300-0105-UR-002 on May 18, 2001. LEGEND moved to dismiss the petition, alleging that KML's membership was a mixture of rank and file and supervisory employees in violation of Article 245 of the Labor Code, and that KML committed fraud and misrepresentation by making it appear that certain employees attended its general membership meeting on April 5, 2001 when some were at work, had resigned, or were abroad.

KML countered that even if 41 of its members were supervisory employees, the certification election could still proceed because the required number of rank and file employees was still sustained. KML also argued that its legitimacy could not be collaterally attacked in certification election proceedings but only through a separate action for cancellation of union registration.

On September 20, 2001, the Med-Arbiter dismissed the petition for certification election, finding that several supervisory employees were in KML's membership and that KML had fraudulently procured its registration by misrepresenting that 70 employees attended its organizational meeting. KML appealed to the Office of the Secretary of DOLE.

On May 22, 2002, the Office of the Secretary of DOLE reversed the Med-Arbiter's Decision and ordered the conduct of a certification election, holding that KML's legitimacy could not be collaterally attacked and that mixed membership does not ipso facto render a labor organization illegal. LEGEND filed a Motion for Reconsideration, alleging that it had filed a Petition for Cancellation of Union Registration on August 24, 2001, which was granted by the DOLE Regional Office No. III on November 7, 2001. The Office of the Secretary denied the motion, noting that the November 7, 2001 Decision had been reversed by the Bureau of Labor Relations on March 26, 2002.

LEGEND filed a Petition for Certiorari with the Court of Appeals, which rendered its Decision on September 18, 2003 finding no grave abuse of discretion on the part of the Office of the Secretary of DOLE. The appellate court held that the issue of KML's legitimacy had been settled with finality in the cancellation case, as the BLR's March 26, 2002 Decision had become final and executory for failure of LEGEND to appeal. LEGEND moved for reconsideration, alleging that it had appealed the BLR Decision to the Court of Appeals and that the appeal was still pending. The appellate court denied the motion on September 14, 2005.

Meanwhile, on June 30, 2005, the Court of Appeals rendered its Decision in CA-G.R. SP No. 72659, reversing the BLR's March 26, 2002 Decision and reinstating the November 7, 2001 Decision canceling KML's registration. KML's motion for reconsideration was denied on September 30, 2005, and its subsequent Petition for Review on Certiorari before the Supreme Court was denied on February 13, 2006 for having been filed out of time. Entry of judgment was made on July 18, 2006.

• Error in Finding of Finality: LEGEND argued that the Court of Appeals grievously erred in ruling that the March 26, 2002 Decision of the Bureau of Labor Relations denying its Petition for Cancellation had become final and executory, because it had seasonably filed a Petition for Certiorari before the CA docketed as CA-G.R. SP No. 72659.
• Retroactivity of Cancellation: LEGEND posited that the cancellation of KML's certificate of registration should retroact to the time of its issuance, and that the petition for certification election and all of KML's activities should be nullified because KML had no legal personality to file the same, much less demand collective bargaining.

• Finality of BLR Decision: KML insisted that the Decision of the Bureau of Labor Relations upholding its legitimacy as a labor organization had already attained finality, hence there was no more hindrance to the holding of a certification election.
• Mootness: KML claimed that the instant petition had become moot because the certification election sought to be prevented had already been conducted.

• Finality of BLR Decision: Whether the March 26, 2002 Decision of the Bureau of Labor Relations upholding KML's legitimacy as a labor organization had become final and executory.
• Retroactivity of Cancellation: Whether the cancellation of KML's certificate of registration should retroact to the time of its issuance, thereby nullifying its petition for certification election and other activities.
• Collateral Attack: Whether KML's legal personality as a labor organization could be collaterally attacked in a petition for certification election proceeding.

• Finality of BLR Decision: No. The March 26, 2002 Decision of the Bureau of Labor Relations had not become final and executory because LEGEND had timely filed a Petition for Certiorari before the Court of Appeals on September 6, 2002, docketed as CA-G.R. SP No. 72659. The Court of Appeals erred in disregarding this allegation and in maintaining its earlier ruling on finality.
• Retroactivity of Cancellation: No. The cancellation of KML's certificate of registration should not retroact to the time of its issuance. A certification election may be conducted during the pendency of cancellation proceedings because at the time the petition for certification was filed, the petitioning union is presumed to possess the legal personality to file the same.
• Collateral Attack: No. The legitimacy of KML's legal personality cannot be collaterally attacked in a petition for certification election proceeding, but may be questioned only through a separate and independent action for cancellation of union registration, pursuant to Section 5, Rule V of Department Order No. 9, series of 1997.

• Finality of BLR Decision: The Court found that the Court of Appeals "totally disregarded" LEGEND's allegation in its Motion for Reconsideration that the March 26, 2002 BLR Decision had not yet attained finality. Records showed that LEGEND timely filed a petition for certiorari on September 6, 2002, which was docketed as CA-G.R. SP No. 72659, and that KML received a copy of said petition on September 10, 2002 and filed its Comment on December 2, 2002. The Court found it "quite interesting" for KML to claim that the BLR Decision had attained finality when it had received and responded to LEGEND's appeal. The Court of Appeals later rendered its Decision in CA-G.R. SP No. 72659 on June 30, 2005, reversing the BLR Decision and reinstating the cancellation of KML's registration, which became final and executory on July 18, 2006.

• Retroactivity of Cancellation: The Court applied the ruling in Pepsi-Cola Products Philippines, Inc. vs. Secretary of Labor, which held that "an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation." The Court also cited Capitol Medical Center, Inc. vs. Hon. Trajano, which held that "the pendency of a petition for cancellation of union registration does not preclude collective bargaining," and Association of Court of Appeals Employees vs. Ferrer-Calleja and Samahan ng Manggagawa sa Pacific Plastic vs. Hon. Laguesma, which reiterated the same view. Based on this jurisprudence, the Court concluded that there was no basis for LEGEND's assertion that the cancellation of KML's certificate of registration should retroact to the time of its issuance or that it effectively nullified all of KML's activities.

• Collateral Attack: The Court agreed with the Office of the Secretary of DOLE that the legitimacy of KML's legal personality cannot be collaterally attacked in a petition for certification election proceeding, citing Laguna Autoparts Manufacturing Corporation vs. Office of the Secretary, Department of Labor and Employment. Section 5, Rule V of the Implementing Rules of Book V provides that a labor organization "shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack but may be questioned only in an independent petition for cancellation in accordance with these Rules." The Court also noted Section 11, Paragraph II, Rule IX of D.O. No. 9, which provides for dismissal of a petition for certification election based on lack of legal personality only when the appellant is not listed in the registry of legitimate labor organizations or when its legal personality has been revoked or cancelled with finality.

• Non-Retroactivity of Cancellation of Union Registration — The cancellation of a labor organization's certificate of registration does not retroact to the time of its issuance. Acts performed by the union while it possessed legal personality, such as filing a petition for certification election and demanding collective bargaining, remain valid. The Court applied this doctrine to reject LEGEND's claim that the cancellation of KML's registration nullified all of KML's activities.

• Prohibition Against Collateral Attack on Union Legal Personality — A labor organization's legal personality, once acquired through registration, cannot be subject to collateral attack but may be questioned only in an independent petition for cancellation of registration. This is prescribed by Section 5, Rule V of Department Order No. 9, series of 1997. The Court applied this doctrine to hold that the issue of KML's legal personality could not be raised in the certification election proceeding.

• Certification Election During Pendency of Cancellation Proceedings — A certification election may be conducted despite the pendency of a petition to cancel the union's registration certificate, because at the time the union filed its petition for certification, it still had the legal personality to perform such act absent an order directing its cancellation. The Court applied this doctrine to affirm the order for certification election notwithstanding the eventual cancellation of KML's registration.

• "Anent the issue of whether or not the Petition to cancel/revoke registration is a prejudicial question to the petition for certification election, the following ruling in the case of Association of the Court of Appeals Employees (ACAE) v. Hon. Pura Ferrer-Calleja, x x x is in point, to wit: x x x It is well-settled rule that 'a certification proceedings is not a litigation in the sense that the term is ordinarily understood, but an investigation of a non-adversarial and fact finding character.'" — This passage establishes the non-adversarial character of certification election proceedings and supports the rule that such proceedings may proceed despite pending cancellation petitions.

• "At any rate, the Court applies the established rule correctly followed by the public respondent that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation." — This is the canonical formulation of the rule that a certification election may proceed during the pendency of cancellation proceedings, which the Court applied to reject LEGEND's claim of retroactivity.

• "The labor organization or worker's association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack but may be questioned only in an independent petition for cancellation in accordance with these Rules." — This is the statutory basis for the prohibition against collateral attack on a union's legal personality, which the Court applied to affirm the Office of the Secretary of DOLE's ruling.

• Pepsi-Cola Products Philippines, Inc. vs. Secretary of Labor, 371 Phil. 30 (1999) — Controlling precedent establishing that a certification election may be ordered despite the pendency of a petition for cancellation of the respondent union's registration certificate.
• Capitol Medical Center, Inc. vs. Hon. Trajano, 501 Phil. 144 (2005) — Followed, holding that the pendency of a petition for cancellation of union registration does not preclude collective bargaining.
• Association of Court of Appeals Employees vs. Ferrer-Calleja, G.R. No. 94716, November 15, 1991, 203 SCRA 596 — Followed, holding that an order to hold a certification election is proper despite the pendency of a petition for cancellation of the union's registration.
• Samahan ng Manggagawa sa Pacific Plastic vs. Hon. Laguesma, 334 Phil. 955 (1997) — Followed, declaring that a certification election can be conducted despite the pendency of a petition to cancel the union registration certificate.
• Laguna Autoparts Manufacturing Corporation vs. Office of the Secretary, Department of Labor and Employment, 497 Phil. 255 (2005) — Controlling precedent on the prohibition against collateral attack on a union's legal personality.
• San Miguel Corporation Employees Union-Phil. Transport and General Workers Org. vs. San Miguel Packaging Products Employees Union-Pambansang Diwa ng Manggagawang Pilipino, G.R. No. 171153, September 12, 2007, 533 SCRA 125 — Cited for the principle that a labor organization's legal personality cannot be subject to a collateral attack.

• Article 245, Labor Code — Prohibits supervisory employees from joining the union of rank and file employees. The Med-Arbiter relied on this provision to dismiss the petition for certification election, but the Office of the Secretary of DOLE held that any violation does not ipso facto render the existence of the labor organization illegal.
• Section 5, Rule V, Department Order No. 9, series of 1997 — Provides that a labor organization is deemed registered and vested with legal personality on the date of issuance of its certificate of registration, and that such legal personality cannot be subject to collateral attack but may be questioned only in an independent petition for cancellation. The Court applied this provision to hold that KML's legitimacy could not be collaterally attacked in the certification election proceeding.
• Section 11, Paragraph II, Rule XI, Department Order No. 9, series of 1997 — Provides the grounds for dismissal of a petition for certification election based on lack of legal personality, which are limited to instances where the appellant is not listed in the registry of legitimate labor organizations or where its legal personality has been revoked or cancelled with finality. The Court noted that mixed membership in one union is not among these grounds.

Corona, C.J. (Chairperson), Velasco, Jr., J., Nachura, J., and Perez, J., concurred in the decision.