Lingkod Manggagawa sa Rubberworld, Adidas-Anglo vs. Rubberworld (Phils.) Inc.

All actions for claims against a corporation placed under a management committee by the SEC must be suspended pursuant to Section 6(c) of P.D. 902-A, with no exception in favor of labor claims; proceedings conducted in violation of such suspension order are null and void ab initio and cannot acquire finality.

Rubberworld Philippines, Inc. was a domestic corporation engaged in the manufacture of footwear, bags, and garments. Petitioner Lingkod Manggagawa sa Rubberworld, Adidas-Anglo ("Lingkod") was a legitimate labor union whose members were Rubberworld employees, distinct from Bisig Pagkakaisa-NAFLU, the recognized bargaining agent with which the corporation had a collective bargaining agreement. The dispute arose within the framework of Presidential Decree No. 902-A, which vested the SEC with original and exclusive jurisdiction over petitions for declaration of suspension of payments and empowered it to create management committees whose appointment automatically suspends all claims against the corporation pending before any court, tribunal, board, or body.

Rubberworld Philippines, Inc. was a domestic corporation engaged in the manufacture of footwear, bags, and garments. Its employees were represented by two unions: Bisig Pagkakaisa-NAFLU, the recognized bargaining agent with which the corporation had a collective bargaining agreement, and Lingkod Manggagawa sa Rubberworld, Adidas-Anglo ("Lingkod"), the petitioner union in this case, represented by its President, Sonia Esperanza.

On August 26, 1994, Rubberworld filed with the Department of Labor and Employment a Notice of Temporary Partial Shutdown due to severe financial crisis, announcing the formal shutdown to take effect on September 26, 1994. A copy was served on Bisig Pagkakaisa-NAFLU. On September 1, 1994, Bisig Pagkakaisa-NAFLU staged a strike, setting up a picket line and welding Rubberworld's gate, causing the premature closure of the premises before the scheduled shutdown date.

On September 9, 1994, Lingkod filed a complaint against Rubberworld and its Vice Chairperson, Antonio Yang, for unfair labor practice, illegal shutdown, and non-payment of salaries and separation pay, docketed as NLRC-NCR-Case No. 00-09-06637. The complaint alleged that Lingkod had filed a petition for certification election during the freedom period, which was granted by the DOLE Regional Director, and that the strike staged by Bisig Pagkakaisa-NAFLU was company-instigated. The complaint was referred to Labor Arbiter Ernesto Dinopol.

While the ULP case was pending, Rubberworld filed on November 22, 1994 a Petition for Declaration of a State of Suspension of Payments with Proposed Rehabilitation Plan with the SEC, docketed as SEC Case No. 11-94-4920. On December 28, 1994, the SEC granted the petition, creating a management committee and ordering that all actions for claims against Rubberworld pending before any court, tribunal, office, board, body, commission, or sheriff be deemed suspended. On January 10, 1995, Rubberworld submitted a Motion to Suspend Proceedings before Labor Arbiter Dinopol.

Notwithstanding the SEC's suspension order and Rubberworld's motion, Labor Arbiter Dinopol proceeded with the ULP case and rendered his decision on August 16, 1995, denying the motion to suspend, declaring Rubberworld guilty of unfair labor practice, declaring the temporary shutdown officially ended as of March 26, 1995, ordering reinstatement of Lingkod's members who indicated intention to be reinstated, and ordering payment of backwages computed from April 26, 1995 and separation pay if reinstatement was no longer possible, plus 10% attorney's fees. The appeal bond was tentatively set at P500,000. On August 18, 1995, a writ of execution was issued by the NLRC in favor of the petitioner union.

Rubberworld appealed to the NLRC on September 21, 1995, posting a P500,000 temporary appeal bond. On October 10, 1995, NLRC Research and Information Unit officer Ricardo Atienza submitted a computation of monetary awards totaling P27,506,255.70. On January 22, 1996, the NLRC First Division directed Rubberworld to upgrade its appeal bond to P27,506,255.70 within ten days, warning that failure to comply would result in dismissal of the appeal. Rubberworld's motion for reconsideration was denied on March 29, 1996. Rubberworld then filed a Petition for Certiorari with the Supreme Court. On June 28, 1996, the NLRC dismissed Rubberworld's appeal for failure to upgrade the bond, prompting Rubberworld to file a Supplemental Petition for Certiorari.

On April 22, 1998, the SEC declared Rubberworld dissolved under Section 6(d) of P.D. 902-A, lifted the suspension order, and appointed Laya Mananghaya Salgado & Co., CPAs as liquidator. On February 8, 1999, Rubberworld filed a Motion to Admit its Amended Petition for Certiorari and Supplement, contending that the proceedings before the Labor Arbiter should have been suspended pursuant to the SEC order and that the subsequent proceedings were null and void. The Supreme Court referred the petition to the CA, where it was docketed as CA-G.R. SP No. 53356. On January 18, 2002, the CA granted Rubberworld's petition, finding that the Labor Arbiter committed grave abuse of discretion in proceeding despite the SEC suspension order, and declared the proceedings before the Labor Arbiter, the NLRC's dismissal of Rubberworld's appeal, and the writ of execution null and void. The CA denied the petitioners' motion for reconsideration on June 5, 2002.

• Finality of Labor Decisions: Petitioners maintained that the decision of the Labor Arbiter, the affirmatory decision of the NLRC, the latter's dismissal of Rubberworld's appeal, and the writ of execution had all become final and executory, warranting the outright dismissal of Rubberworld's petition before the CA.
• Failure to Perfect Appeal: Petitioners argued that no appeal from the Labor Arbiter's decision was ever perfected because Rubberworld failed to upgrade or post the additional appeal bond as ordered by the NLRC, and that this failure barred review by the CA.
• CA Grave Abuse of Discretion: Petitioners submitted that the CA acted in grave abuse of discretion in giving due course to Rubberworld's petition in CA-G.R. SP No. 53356 and in rendering a decision annulling the labor proceedings.
• Inapplicability of P.D. 902-A: Petitioners contended that the CA committed grave abuse of discretion and reversible error in applying Section 5(d) and Section 6(c) of P.D. 902-A to the case.
• Stare Decisis Inapplicable: Petitioners argued that the doctrines laid down in the two prior Rubberworld cases could not apply because the SEC order therein only mandated suspension of pending cases, whereas the labor decisions in the present case had allegedly become final and executory by reason of Rubberworld's failure to perfect its appeal.

• Suspension of Proceedings: Respondent Rubberworld contended that pursuant to the SEC Order dated December 28, 1994, the proceedings before the Labor Arbiter should have been suspended, and that since the Labor Arbiter disregarded the SEC's suspension order, the subsequent proceedings were null and void.
• NLRC Lack of Jurisdiction: Rubberworld argued that the labor tribunal acted without or in excess of jurisdiction in requiring the upgraded appeal bond and in dismissing its appeal.

• Finality vs. Nullity: Whether the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction when it gave due course to Rubberworld's petition and annulled the labor decisions, when the said decisions had allegedly become final and executory warranting outright dismissal.
• Applicability of P.D. 902-A: Whether the CA committed grave abuse of discretion and reversible error when it applied Section 5(d) and Section 6(c) of P.D. No. 902-A, as amended, to the case.
• Stare Decisis: Whether the CA committed reversible error when it adopted and applied the rulings in the prior Rubberworld cases to the case at bar.

• Finality vs. Nullity: No. The Labor Arbiter's decision and all subsequent NLRC orders were null and void ab initio for having been rendered in violation of the SEC's mandatory suspension order, and a void judgment can never attain finality regardless of whether an appeal was perfected.
• Applicability of P.D. 902-A: No error. Section 6(c) of P.D. 902-A categorically mandates the suspension of all actions for claims against a corporation placed under a management committee, with no exception in favor of labor claims.
• Stare Decisis: No error. The proceedings before the Labor Arbiter were still pending when the SEC issued its suspension order on December 28, 1994, squarely bringing the case within the doctrine established in the prior Rubberworld decisions.

• Finality vs. Nullity: While posting an appeal bond is indeed a requirement for the perfection of an appeal from the Labor Arbiter to the NLRC, Rubberworld's failure to upgrade its appeal bond could not bar CA review in this instance because the underlying proceedings were void from the outset. The Labor Arbiter completely disregarded Section 6(c) of P.D. 902-A, which mandates the suspension of all actions for claims against a corporation placed under a management committee. Acts executed against the provisions of mandatory or prohibitory laws are void. The Labor Arbiter's decision was void ab initio and therefore non-existent. A void judgment is in effect no judgment at all — no rights are divested by it, nor obtained from it; it neither binds nor bars anyone. It is immaterial whether an appeal was perfected, since a judgment void ab initio is non-existent and cannot acquire finality. The judgment is vulnerable to attack even when no appeal has been taken. Additionally, the Labor Arbiter effectively required Rubberworld to post a bond before it could question the denial of its motion to suspend, by simultaneously ruling on both the merits and the motion in a single decision. Had the Labor Arbiter ruled on the motion to suspend separately, no bond would have been required for a review of that resolution.

• Applicability of P.D. 902-A: Section 5(d) of P.D. 902-A vests the SEC with original and exclusive jurisdiction over petitions of corporations to be declared in a state of suspension of payments. Section 6(c) provides that upon appointment of a management committee or rehabilitation receiver, all actions for claims against corporations under management or receivership pending before any court, tribunal, board, or body shall be suspended accordingly. The law is clear and makes no distinction or exemption in favor of labor claims. The justification for the automatic stay is to enable the management committee to effectively exercise its powers free from judicial or extra-judicial interference that might hinder the rescue of the debtor company. Allowing labor cases to proceed would defeat the purpose of the automatic stay, encumber the management committee's time and resources, and open the floodgates to other claimants. Article 217 of the Labor Code must be construed not in isolation but in harmony with P.D. 902-A, under the rule that implied repeals are not favored. The NLRC's authority to hear and decide labor disputes is deemed suspended when P.D. 902-A is put into effect by the SEC.

• Stare Decisis: The denial of Rubberworld's motion to suspend proceedings was incorporated into the Labor Arbiter's decision of August 16, 1995, which was rendered at a time when Lingkod's complaint ought to have been suspended. At the time the SEC issued its suspension order on December 28, 1994, the proceedings before the Labor Arbiter were still very much pending. No final and executory decision could have validly emanated therefrom. The doctrine of stare decisis therefore applies, as the factual situation falls squarely within the rulings in the two prior Rubberworld cases.

• Void Judgment Doctrine — A judgment rendered without jurisdiction or in violation of mandatory or prohibitory laws is void ab initio and therefore non-existent. A void judgment is in effect no judgment at all: no rights are divested by it nor obtained from it; it neither binds nor bars anyone. All acts performed under it and all claims flowing out of it are void. A void judgment cannot acquire finality and is vulnerable to attack even when no appeal has been taken. In this case, the Labor Arbiter's decision was void ab initio because it was rendered in violation of the SEC's mandatory suspension order under Section 6(c) of P.D. 902-A.

• Automatic Suspension of Claims under P.D. 902-A — Upon the appointment of a management committee or rehabilitation receiver by the SEC, all actions for claims against the corporation pending before any court, tribunal, board, or body shall be suspended ipso jure. The law makes no distinction or exemption in favor of labor claims. The justification is to enable the management committee to effectively exercise its powers free from interference that might hinder the rescue of the debtor company. The NLRC's authority to hear and decide labor disputes is deemed suspended when P.D. 902-A is put into effect by the SEC. Article 217 of the Labor Code must be construed in harmony with P.D. 902-A, as implied repeals are not favored.

• Stare Decisis — Where the factual situation of a subsequent case falls squarely within the doctrine established in prior decisions, the doctrine of stare decisis applies. Petitioners' argument that the prior Rubberworld rulings did not apply because the labor decisions had become final was rejected, since the proceedings were still pending when the SEC issued its suspension order, and void judgments can never attain finality.

• "Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity." — This passage articulates the Civil Code basis for declaring the Labor Arbiter's decision void ab initio, establishing the foundational principle that proceedings conducted in violation of the SEC's mandatory suspension order are nullities.

• "The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims for actions 'shall be suspended accordingly.' No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos." — This passage, quoted from the first Rubberworld decision, states the canonical formulation of the rule that P.D. 902-A's suspension of claims applies equally to labor cases, applying the principle of statutory construction that courts cannot distinguish where the law does not.

• "A void judgment is in effect no judgment at all. No rights are divested by it nor obtained from it. Being worthless in itself, all proceedings upon which the judgment is founded are equally worthless. It neither binds nor bars anyone. All acts performed under it and all claims flowing out of it are void." — This passage defines the legal effect of a void judgment and explains why the Labor Arbiter's decision could not attain finality notwithstanding Rubberworld's failure to perfect its appeal.

• "True, the NLRC has the power to hear and decide labor disputes, but such authority is deemed suspended when PD 902-A is put into effect by the Securities and Exchange Commission." — This passage, quoted from the first Rubberworld decision, articulates the relationship between the NLRC's jurisdiction under Article 217 of the Labor Code and the SEC's suspension powers under P.D. 902-A, establishing that labor jurisdiction yields to corporate rehabilitation proceedings.

• Rubberworld (Phils.), Inc. vs. NLRC, Marilyn F. Arellano, et al., G.R. No. 126773, April 14, 1999, 305 SCRA 721 — Controlling precedent. The Court upheld the applicability of P.D. 902-A to labor cases, ruling that all claims against a corporation under a management committee must be suspended, with no exception for labor claims. This case established the canonical formulation that the NLRC's authority is deemed suspended when P.D. 902-A is put into effect by the SEC.

• Rubberworld (Phils.), Inc. vs. NLRC, Aquino Magsalin, et al., G.R. No. 128003, July 26, 2000, 336 SCRA 433 — Controlling precedent. Reiterated the doctrine from the first Rubberworld case that the NLRC acted without or in excess of jurisdiction when it proceeded to decide the case despite the SEC suspension order, rendering any resolution, decision, or order a nullity.

• St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16, 1998, 295 SCRA 494 — Procedural precedent. The Court relied on this ruling to refer Rubberworld's amended petition for certiorari from the Supreme Court to the Court of Appeals for appropriate action.

• Chua vs. National Labor Relations Commission — Supporting authority. The Court cited this ruling for the proposition that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, as these claims would spawn needless controversy, delays, and confusion — applying with more reason to SEC suspension orders in rehabilitation cases.

• BF Homes, Incorporated vs. Court of Appeals, G.R. No. 76879, October 3, 1990, 190 SCRA 262 — Supporting authority cited within the first Rubberworld decision, for the rationale that the automatic stay of claims enables the management committee to effectively exercise its powers free from interference.

• Section 5(d), P.D. No. 902-A — Vests the SEC with original and exclusive jurisdiction over petitions of corporations to be declared in a state of suspension of payments where the corporation possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they fall due, or where the corporation has no sufficient assets to cover its liabilities but is under the management of a rehabilitation receiver or management committee. Applied to establish the SEC's jurisdiction over Rubberworld's petition for suspension of payments.

• Section 6(c), P.D. No. 902-A — Empowers the SEC to appoint receivers or management committees and provides that upon such appointment, 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. This provision was the controlling basis for declaring the Labor Arbiter's proceedings null and void, as the SEC's creation of a management committee on December 28, 1994 mandated the automatic suspension of all claims against Rubberworld.

• Article 217, Labor Code — Confers jurisdiction upon Labor Arbiters and the NLRC to hear and decide labor disputes. The Court construed this provision not in isolation but in harmony with P.D. 902-A, holding that the NLRC's authority is deemed suspended when P.D. 902-A is put into effect by the SEC.

• Article 5, Civil Code — Provides that acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity. Applied as the Civil Code basis for declaring the Labor Arbiter's decision void ab initio for having been rendered in violation of the mandatory suspension order under Section 6(c) of P.D. 902-A.

Chief Justice Reynato S. Puno (Chairperson), Associate Justice Angelina Sandoval-Gutierrez, Associate Justice Renato C. Corona, and Associate Justice Adolfo S. Azcuna concurred. No separate concurring opinions were written.