NUWHRAIN-APL-IUF, Philippine Plaza Chapter vs. Philippine Plaza Holdings, Inc.

Service charges under a CBA are due only when the transaction is a sale of food, beverage, transportation, laundry, or rooms, and does not fall under excepted "negotiated contracts" or "special rates"; the NLRC commits grave abuse of discretion when it awards service charges without first determining whether the claimed transactions satisfy these requisites or fall within the exceptions. Article 1155 of the Civil Code applies suppletorily to Article 291 of the Labor Code to interrupt the three-year prescriptive period for money claims arising from employer-employee relations.

The Union is the collective bargaining agent of the rank-and-file employees of respondent Philippine Plaza Holdings, Inc. (PPHI), which operates a hotel. On November 24, 1998, the parties executed the "Third Rank-and-File Collective Bargaining Agreement as Amended" (CBA), which provided, among others, for the collection by PPHI of a 10% service charge on the sale of food, beverage, transportation, laundry, and rooms, except on negotiated contracts and special rates. These provisions reiterated similar ones found in the parties' earlier CBA executed on August 29, 1995. The CBA likewise prescribed the distribution scheme for the collected service charges among covered employees, managerial employees, PPHI staff, and the Union.

The Union is the collective bargaining agent of the rank-and-file employees of PPHI, a hotel operator. On November 24, 1998, the parties executed the "Third Rank-and-File Collective Bargaining Agreement as Amended," which provided for the collection of a 10% service charge on the sale of food, beverage, transportation, laundry, and rooms, except on negotiated contracts and special rates. The CBA likewise prescribed a distribution scheme for the collected service charges among covered employees, managerial employees, PPHI staff, and the Union. These provisions reiterated similar ones from an earlier CBA executed on August 29, 1995.

On February 25, 1999, the Union's Service Charge Committee informed the Union President, through a first audit report, of uncollected service charges for the last quarter of 1998 amounting to ₱2,952,467.61, specifically referring to service charges from "Journal Vouchers," "Banquet Other Revenue," and "Staff and Promo." The Union presented this audit report to PPHI management during the February 26, 1999 Labor Management Cooperation Meeting. PPHI responded that its Financial Controller would need to verify the report. Through a letter dated June 9, 1999, PPHI admitted liability for ₱80,063.88 out of the claimed amount, denying the rest on the grounds that the revenues were exempted as "special promotions" or "negotiated contracts," belonged to third-party suppliers, or were expenses incurred for the benefit of executives or as goodwill to clients. During the July 12, 1999 LMCM, the Union maintained its position, resulting in a deadlock; the parties agreed to refer the matter to a third party but never finalized their chosen option.

The Union issued a second audit report on July 21, 1999, modifying its claims to cover "Journal Vouchers — Westin Gold Revenue and Maxi-Media" (F&B and Rooms Barter), "Banquet and Other Revenue," and "Staff and Promo." On August 10, 2000, the Union's Service Charge Committee prepared a third audit report for the years 1997, 1998, and 1999, reflecting total uncollected service charges of ₱5,566,007.62 from "Journal Vouchers," "Guaranteed No Show," "Promotions," and "F & B Revenue." The Union President presented this report to PPHI on August 29, 2000.

When the parties failed to reach an agreement, the Union filed a complaint before the Labor Arbiter on May 3, 2001 for non-payment of specified service charges, additionally charging PPHI with unfair labor practice for violation of the CBA. The LA dismissed the complaint on April 30, 2002, finding that the Union failed to prove entitlement to service charges from the specified entries, which either fell under CBA-excepted "negotiated contracts" and "special rates" or did not involve a sale of food, beverage, etc. The NLRC reversed on July 4, 2005, declaring the specified entries "service chargeable" and awarding ₱5,566,007.62. The CA granted PPHI's petition for certiorari on January 31, 2007, affirming the LA's decision but ordering PPHI to pay the admitted ₱80,063.88, finding the specified entries either excepted from service charge coverage or unsupported by evidence. The Union's motion for reconsideration was denied on April 20, 2007, prompting the present petition.

• Entitlement to Service Charges on Specified Entries: The Union argued that the specified entries/transactions were revenue-based transactions which, per Sections 68 and 69 of the CBA, clearly called for the collection and distribution of a 10% service charge in favor of covered employees.
• Westin Gold Cards: The Union maintained that the Westin Gold Cards served not only as a discount card but also as a "pre-paid" card providing complimentary amenities for which hotel employees rendered services, and that PPHI failed to prove it had paid and distributed service charges on the actual discounted sales generated by the cards.
• Maxi-Media Barter: The Union argued that hotel employees rendered services whenever Maxi-Media consumed or availed of part of the ₱2,800,000 worth of goods and services under its agreement with PPHI, and that the Maxi-Media discounts should be charged to PPHI as part of its expenses, not deducted from the Union's share in service charges.
• Business Promotions: The Union contended that PPHI had a separate budget for promotions, hence the "Business Promotions" entry should likewise have been subjected to the 10% service charge.
• Gift Certificates: The Union argued that the sale of Gift Certificates, recorded in PPHI's Journal Vouchers as "other revenue/income," constituted a revenue transaction for which service charges were due.
• Guaranteed No Show and F&B Revenue: The Union asserted that PPHI admitted service charges from "Guaranteed No Show" were due, and that it properly identified through reference numbers the uncollected service charges from "Food and Beverage Revenue."
• Interpretation of "Negotiated Contracts": The Union contended that the term "Negotiated Contracts" should apply only to "airline contracts," pointing to PPHI's existing agreement with Northwest Airlines at the time the CBA was executed.
• Prescription: The Union argued that its claims for 1997 and part of 1998 had not yet prescribed, applying Article 1155 of the Civil Code in relation to Article 291 of the Labor Code, because the prescriptive period was interrupted when it presented the 1st audit report during the February 26, 1999 LMCM and when PPHI admitted service charges due in its June 9, 1999 letter.
• Accounting Standards: The Union argued that PPHI failed to conform to generally accepted accounting standards when it reclassified revenue items as expense items.
• Unfair Labor Practice: The Union contended that PPHI's refusal to distribute unremitted service charges, deliberate failure to disclose financial transactions and audit reports, and reclassification of revenues into expense items constituted gross violation of the CBA amounting to unfair labor practice.

• Procedural Bar — Questions of Fact: PPHI countered that the Union's call for the Court to re-examine the records violated the Rule 45 proscription against questions of fact, and that the factual findings of the LA affirmed by the CA deserve respect and finality.
• Specified Entries Not Subject to Service Charges: PPHI argued that the specified entries/transactions were not revenue-generating, did not involve a sale of food, beverage, rooms, transportation, or laundry, and/or were in the nature of negotiated contracts and special rates expressly excepted by Section 68 of the CBA.
• Article 96 as Condition Precedent: PPHI maintained that Article 96 of the Labor Code requires the collection of service charges as a condition precedent to distribution or payment, and since no service charges were collected on the specified entries, the Union's claim had no basis.
• Westin Gold Cards: PPHI argued that the sale per se of the cards did not involve a sale of food, beverage, etc., and that discounted sales to card holders had already been subjected to service charges computed on gross sales, which had been distributed to covered employees.
• Maxi-Media Barter: PPHI argued that its agreement with Maxi-Media involved an exchange or barter transaction that did not generate income and fell under "Negotiated Contracts," and that it had already collected and distributed service charges on food, beverage, etc. consumed by Maxi-Media based on monthly average room rates and 50% of consumed food and beverage prices.
• Other Entries: PPHI argued that the Union failed to prove claims for "Guaranteed No Show" and "Business Promotions," that "F&B other Revenue" referred to transactions with external service providers whose payments could not be considered PPHI revenue, and that the sale per se of Gift Certificates did not involve the CBA-contemplated sale and the Union failed to prove the certificates had actually been consumed within the hotel.
• CBA Exception Does Not Violate Article 96: PPHI argued that the CBA's exception of "Negotiated Contracts" and "Special Rates" does not violate Article 96, which merely provides for the minimum percentage distribution of collected service charges and does not prohibit the exception of certain transactions from coverage by mutual agreement.
• Prescription: PPHI maintained that the Union's claims for 1997 and the early months of 1998 had already prescribed under Article 291 of the Labor Code.
• Real Issue: PPHI pointed out that the real issue was not whether service charges had been paid, but whether service charges should have been collected on the specified entries — an issue the LA and CA correctly addressed and the NLRC missed.

• Grave Abuse of Discretion by NLRC: Whether the NLRC committed grave abuse of discretion in reversing the LA and awarding service charges to the Union.
• Entitlement to Service Charges: Whether the specified entries/transactions are subject to the 10% service charge under Sections 68 and 69 of the CBA.
• Interpretation of "Negotiated Contracts": Whether the term "Negotiated Contracts" in Section 68 of the CBA should be limited to "airline contracts" only.
• Article 96 of the Labor Code: Whether PPHI violated Article 96 of the Labor Code by refusing to collect service charges on the specified entries/transactions.
• Prescription: Whether the Union's claims for service charges for the year 1997 and the early months of 1998 had already prescribed when it filed its complaint on May 3, 2001.
• Unfair Labor Practice: Whether PPHI's refusal to distribute service charges and reclassification of revenues constituted unfair labor practice.

• Grave Abuse of Discretion by NLRC: Yes. The NLRC committed grave abuse of discretion by proceeding from the wrong premise that all specified transactions were subject to service charges, without determining whether they fell within the CBA's exceptions or involved a sale of food, beverage, etc.
• Entitlement to Service Charges: No. The specified entries/transactions either fell under the CBA-excepted "negotiated contracts" and "special rates" or did not involve a "sale of food, beverage, transportation, laundry and rooms" from which service charges are due.
• Interpretation of "Negotiated Contracts": No. The term "negotiated contracts" should be read as applying to all types of negotiated contracts, not limited to "airline contracts," pursuant to the rule that clear contractual terms prevail in their literal meaning.
• Article 96 of the Labor Code: No. Article 96 presumes the practice of collecting service charges and the employer's termination of that practice; where no service charges had previously been collected on certain transactions, Article 96 does not operate.
• Prescription: No. The claims had not yet prescribed because Article 1155 of the Civil Code applies suppletorily to Article 291 of the Labor Code, and the Union's written extrajudicial demand through the 1st audit report and subsequent negotiations interrupted the prescriptive period — though the claims were still properly denied on the merits.
• Unfair Labor Practice: No. PPHI was well within its legal and contractual right to refuse payment of service charges for entries from which it did not collect any service charge pursuant to the CBA.

• Grave Abuse of Discretion by NLRC: In reviewing the CA's Rule 65 decision under Rule 45, the Court's task was to determine whether the CA correctly found the NLRC to have committed grave abuse of discretion. The NLRC simply declared that PPHI "has not shown any proof that it paid or remitted what is due to the Union" and concluded that the specified entries were "service chargeable," without pointing to any supporting evidence. The NLRC proceeded from the wrong premise that PPHI did not at all distribute service charges, erroneously assumed all specified transactions were subject to service charges, and assumed every transaction PPHI entered into was subject to a service charge. It overlooked the underlying issue of whether the specified entries fell within the CBA's exceptions or involved a sale of food, beverage, etc. This patent failure to appreciate the real issue, the facts, and the evidence amounted to grave abuse of discretion, as the NLRC acted outside the clear contemplation of the law. The CA was therefore legally correct in reversing the NLRC.

• Entitlement to Service Charges: Section 68 of the CBA requires three requisites for service charges to operate: (1) the transaction is a sale; (2) the sale covers food, beverage, transportation, laundry, or rooms; and (3) the sale does not result from negotiated contracts and/or special rates. The specified entries failed these requisites. "Westin Gold Cards Revenue" involved the sale of a contractual right to discounted rates, not a sale of food, beverage, etc.; service charges were already collected and distributed when card holders purchased food, beverage, etc. "Maxi-Media F&B and Rooms Barter" involved an innominate contract of facio ut des — an exchange of hotel products and services for professional entertainment services — which fell under "negotiated contracts." "Business Promotions" were expenses, not sales. "Gift Certificates" did not involve the CBA-contemplated sale of food, beverage, etc. The Union also failed to show the source of its computations for "Guaranteed No Show" and "F&B Revenue." The Court found no reason to disturb the CA's findings on these points.

• Interpretation of "Negotiated Contracts": The CBA does not specifically define "negotiated contracts" and does not explicitly limit the term to specified transactions. Under the rule that when contractual terms are clear and leave no doubt as to the parties' intention, the literal meaning shall prevail, the term "negotiated contracts" should be read as applying to all types of negotiated contracts. A constricted interpretation limiting it to "airline contracts" must be positively shown either by the CBA's wordings or by sufficient evidence of the parties' intention. The Union completely failed to provide such support. The CA was therefore correct in declaring that the term applies to all types of negotiated contracts.

• Article 96 of the Labor Code: The last paragraph of Article 96 presumes the practice of collecting service charges and the employer's termination of that practice; when this occurs, the employer must integrate the employees' share into their wages. In cases where no service charges had previously been collected on certain transactions — as where the employer never imposed collection on those transactions — Article 96 does not operate. The CA found that PPHI had not been collecting service charges on the specified entries/transactions. Accordingly, Article 96 found no application; PPHI did not abolish or terminate any company policy providing for collection of service charges on those transactions that would have rendered it liable to pay an amount representing the employees' share in abolished service charges.

• Prescription: Article 291 of the Labor Code requires that money claims arising from employer-employee relations be filed within three years from the time the cause of action accrued. In the absence of an equivalent Labor Code provision on interruption, Article 1155 of the Civil Code applies suppletorily, so the prescriptive period is interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by the creditor; and (3) a written acknowledgment of the debt by the debtor. The Union demanded payment via the 1st audit report as early as 1998, and the parties went through negotiations thereafter. Under these facts, the running of the three-year prescriptive period was effectively interrupted, so the claims for 1997 could not have prescribed when the complaint was filed on May 3, 2001. Nevertheless, the claims were still properly denied on the merits because the specified entries/transactions were either excepted from service charge coverage or did not constitute a sale of food, beverage, etc., and the Union failed to support its claims by sufficient evidence.

• Unfair Labor Practice: PPHI was within its legal and contractual right to refuse payment of service charges for entries from which it did not collect any service charge pursuant to the CBA. The LA had correctly brushed aside the ULP claim on this ground, and the CA's affirmance of the LA on this point was legally sound.

• CBA as Law Between Parties; Rules of Statutory Construction — A collective bargaining agreement is the law between the contracting parties, who are obliged to comply with its provisions. The general rules of statutory construction apply in interpreting CBA provisions: if the terms are plain, clear, and leave no doubt on the intention of the contracting parties, the literal meaning of the stipulations shall prevail. Resort to interpretation and construction is called for only when the words used are ambiguous, doubtful, or lead to several interpretations. In this case, the clear and broad wording of the CBA exception for "negotiated contracts" and "special rates" was given its literal meaning, rejecting the Union's attempt to confine "negotiated contracts" to "airline contracts" only.

• Grave Abuse of Discretion by Quasi-Judicial Bodies — A quasi-judicial body such as the NLRC commits grave abuse of discretion when it proceeds from a patently wrong premise, fails to appreciate the real issue in the controversy, and renders conclusions belied by the underlying facts without pointing to any supporting evidence. The NLRC's patent failure to determine whether the specified entries/transactions fell within the CBA's exceptions or involved a sale of food, beverage, etc. — and its assumption that all transactions were subject to service charges — constituted grave abuse of discretion amounting to lack or excess of jurisdiction.

• Suppletory Application of Article 1155 of the Civil Code to Article 291 of the Labor Code — The prescriptive period for money claims under Article 291 of the Labor Code is subject to interruption. In the absence of an equivalent Labor Code provision on interruption, Article 1155 of the Civil Code applies suppletorily. Thus, the three-year prescriptive period is interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by the creditor; and (3) a written acknowledgment of the debt by the debtor. A union's written extrajudicial demand through an audit report and subsequent negotiation meetings effectively interrupt the running of the prescriptive period.

• Article 96 of the Labor Code — Service Charges; Abolition and Integration — Article 96 provides for the minimum percentage distribution between employer and employees of collected service charges, and requires integration of the employees' share into their wages in the event the employer abolishes the practice of collecting service charges. The provision presumes the practice of collecting service charges and the employer's termination of that practice. Where no service charges had previously been collected on certain specified transactions, Article 96 does not operate, and the employer is not liable for integration.

• "Following the wordings of Section 68 of the CBA, three requisites must be present for the provisions on service charges to operate: (1) the transaction from which service charge is sought to be collected is a sale; (2) the sale transaction covers food, beverage, transportation, laundry and rooms; and (3) the sale does not result from negotiated contracts and/or at special rates." — This passage articulates the three-part test for determining whether a transaction is subject to service charges under the CBA, serving as the ratio decidendi for the Court's denial of the Union's claims.

• "In the absence of an equivalent Labor Code provision for determining whether Article 291's three-year prescriptive period may be interrupted, Article 1155 of the Civil Code may be applied. Thus, the period of prescription of money claims under Article 291 is interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by the creditor; and (3) a written acknowledgment of the debt by the debtor." — This passage establishes the suppletory application of the Civil Code's interruption rules to the Labor Code's prescriptive period for money claims, a doctrine frequently cited in subsequent labor jurisprudence.

• "The NLRC's patently erroneous appreciation of the real issue in the present controversy, along with the facts and the evidence, amounted to grave abuse of discretion." — This passage defines the standard for grave abuse of discretion by the NLRC: failure to appreciate the real issue and proceeding from a wrong premise, supporting the Court's affirmation of the CA's reversal.

• Montoya vs. Transmed Manila Corporation, G.R. No. 183329, August 27, 2009 — Followed. Cited for the principle that in a Rule 45 review of a CA's Rule 65 decision in labor cases, the Court examines whether the CA correctly determined the presence or absence of grave abuse of discretion in the NLRC decision, not whether the NLRC decision was correct on the merits.

• Baguio Central University vs. Gallente, G.R. No. 188267, December 2, 2013 — Followed. Cited for the distinction between questions of law and questions of fact in Rule 45 petitions.

• Gonzales vs. Solid Cement Corporation, G.R. No. 198423, October 23, 2012 — Followed. Cited for the principle that a quasi-judicial body's patent failure to appreciate the real issue amounts to grave abuse of discretion.

• Davao Integrated Port Stevedoring Services vs. Abarquez, G.R. No. 102132, March 19, 1993 — Followed. Cited for the definition of a collective bargaining agreement under the Labor Code.

• Goya, Inc. vs. Goya, Inc. Employees Union-FFW, G.R. No. 170054, January 21, 2013 — Followed. Cited for the doctrine that a CBA is the law between the contracting parties.

• PNCC Skyway Traffic Management and Security Division Workers Organization (PSTMSDWO) vs. PNCC Skyway Corporation, G.R. No. 171231, February 17, 2010 — Followed. Cited for the rule that when CBA terms are clear, the literal meaning of stipulations shall prevail.

• Article 96, Labor Code — Provides for the minimum percentage distribution of collected service charges between employer and employees, and requires integration of the employees' share into wages upon abolition of the service charge practice. The Court held that Article 96 presumes prior collection of service charges and the employer's termination of that practice; where no service charges had been collected on certain transactions, Article 96 does not operate. PPHI did not violate Article 96 because it never had a policy of collecting service charges on the specified excepted transactions.

• Article 291 (now Article 305), Labor Code — Requires that all money claims arising from employer-employee relations be filed within three years from the time the cause of action accrued, otherwise barred. The Court applied this provision but held that the prescriptive period was interrupted under Article 1155 of the Civil Code, so the Union's claims for 1997 had not yet prescribed when the complaint was filed on May 3, 2001.

• Article 1155, Civil Code — Provides that prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is a written acknowledgment of the debt by the debtor. The Court applied this provision suppletorily to Article 291 of the Labor Code, finding that the Union's 1st audit report constituted a written extrajudicial demand that interrupted the prescriptive period.

• Sections 68 and 69, CBA — Section 68 provides for the collection of a 10% service charge on the sale of food, beverage, transportation, laundry, and rooms, except on negotiated contracts and special rates. Section 69 prescribes the distribution scheme for collected service charges. The Court interpreted Section 68 as requiring three requisites for service charges to operate and held that the specified entries/transactions either fell within the excepted categories or did not involve a sale of food, beverage, etc.

Antonio T. Carpio (Chairperson), Mariano C. Del Castillo, Jose Portugal Perez, and Estela M. Perlas-Bernabe concurred in the decision. No separate concurring opinions were written.