Peñalosa vs. Villanueva

A stranger to a labor dispute who makes a prima facie showing of ownership over property levied upon under an NLRC writ of execution may maintain a separate action for injunctive relief in regular court, notwithstanding the prohibition on injunctions in labor disputes, and workers cannot enforce a first preference over a mortgagee's encumbrance absent bankruptcy or judicial liquidation of the employer.

Michael Peñalosa and his co-petitioners were former employees of Riverside Mills Corporation, while the Development Bank of the Philippines was a mortgage creditor of the same corporation that had extra-judicially foreclosed RMC's real properties. Article 254 of the Labor Code, Presidential Decree No. 442, generally prohibits temporary or permanent injunctions in cases involving or growing out of labor disputes. Section 17 of Rule 39 of the Rules of Court separately allows a third person claiming property levied upon on execution to vindicate the claim by action.

On November 29, 1984, Labor Arbiter Manuel Caday awarded separation pay, wage and living allowance increases and 13th month pay to members of the Philippine Association of Free Labor Unions-RMC Chapter in NLRC-NCR Case No. 2517-84 against Riverside Mills Corporation. On March 18, 1985, Labor Arbiter Teodorico Dogelio likewise awarded separation pay, vacation and sick leave pay and unpaid increases in basic wage and allowances to Michael Peñalosa, Jose Garcia, Apolinar Ray and others, and to members of Samahang Diwang Manggagawa sa RMC-FFW Chapter, in NLRC Case No. NCR-7-2577-84 against RMC. After the judgment became final and executory, Dogelio issued on March 29, 1985 a writ of execution directing Deputy Sheriff Juanito Atienza to collect P85,961,058.70. The sheriff failed to collect in cash and levied upon personal and real properties of RMC, with a notice of levy on execution annotated on April 25, 1985 on the certificates of title with the Register of Deeds of Pasig.

Meanwhile, DBP had extra-judicially foreclosed all RMC properties at public auction earlier in 1983 and obtained on June 7, 1985 a writ of possession from the Regional Trial Court of Pasig. DBP thereafter leased the properties to Egret Trading and Manufacturing Corporation, Rosario Textile Mills and General Textile Mills. Because the writ of possession prevented the scheduled auction sale of the levied properties, the workers filed on June 19, 1985 an incidental petition with the NLRC to declare their preference over the levied properties against RMC and DBP. Dogelio granted first preference on October 31, 1985, but on appeal the NLRC set the order aside and remanded the case to Labor Arbiter Ariel Santos, where another complaint for separation pay and underpayment filed April 7, 1986 by Jaime Arada and others was consolidated after hearings and submission of position papers.

During the pendency of those proceedings, DBP filed on June 26, 1985 Civil Case No. 10945 with the Regional Trial Court, Branch CXLIV, Makati, against Peñalosa, the Samahang Diwang Manggagawa sa RMC-FFW Chapter and sheriffs Juanito Atienza and Romeo de la Cruz, seeking to enjoin implementation of the NLRC writ of execution, return of properties allegedly taken from the RMC compound, and a declaration of DBP as rightful owner. A temporary restraining order issued the same day. Petitioners moved on July 5, 1985 to dismiss and to lift the restraining order, which was denied by order of June 30, 1986 granting DBP preliminary prohibitory and mandatory injunction upon a P50,000.00 bond and requiring an answer. On April 9, 1986 petitioners separately filed Civil Case No. 53333 in RTC Pasig Branch 158 for nullification of the lease between DBP and Egret Trading, which remained pending. The present petition was filed July 31, 1986, while DBP separately assailed Santos' March 31, 1987 adverse decision, leading to the March 8, 1989 annulment thereof.

• Jurisdiction of the Trial Court: Petitioner argued that respondent Judge Candido P. Villanueva acted without jurisdiction, in excess of jurisdiction and with grave abuse of discretion in denying the motion to dismiss, lifting no restraining order, assuming jurisdiction, granting the writs sought by DBP, and requiring an answer.
• Prior Jurisdiction of the NLRC and Splitting of Cause of Action: Petitioner maintained that the properties in the RTC civil complaint were the same properties litigated in NLRC-NCR Case No. 7-2577-84 where preferential right and lawful ownership were sought, so the NLRC having taken jurisdiction should continue until the whole dispute was resolved and allowing both actions to proceed would split a cause of action.

• Ownership and Injunctive Relief: Respondent countered that it was the rightful owner of the properties by virtue of the 1983 extra-judicial foreclosure sale and the June 7, 1985 writ of possession, that the disputed property was no longer owned by judgment debtor RMC when the NLRC writ was sought to be enforced, and that petitioners and the sheriffs should be enjoined from implementing the writ with return of properties taken from the RMC compound.

• Jurisdiction Over Third-Party Ownership Claim: Whether the RTC had jurisdiction to entertain Civil Case No. 10945 and issue restraining and injunctive writs against execution of an NLRC decision where DBP claimed ownership of the levied property.
• Prohibition on Injunctions in Labor Disputes: Whether Article 254 of the Labor Code barred the RTC from issuing an injunction although the underlying judgment arose from a labor dispute with RMC.

• Jurisdiction Over Third-Party Ownership Claim: Yes. Jurisdiction was properly assumed because a third person claiming property levied upon may vindicate ownership by separate action, and property of a stranger is not subject to levy for another's judgment.
• Prohibition on Injunctions in Labor Disputes: No. The prohibition did not apply since the separate civil action neither involves nor grows out of a labor dispute as to the third-party claimant and does not enjoin execution against the judgment debtor's own properties.

• Jurisdiction Over Third-Party Ownership Claim: Under Section 17 of Rule 39, a third person claiming property levied upon on execution may vindicate the claim by action, with a favorable judgment declaring ownership constituting no interference with the court or body that rendered the enforced judgment. Applied here, DBP presented a certificate of sale dated August 19, 1983 inscribed March 6, 1984 and a writ of possession, while the NLRC levy was inscribed only on April 25, 1985; on at least a prima facie showing of stranger-ownership, an interlocutory injunction was likewise no interference. Because the preferential-right issue had already been foreclosed by G.R. Nos. 78261-62 for lack of bankruptcy or judicial liquidation, and because the levied property allegedly no longer belonged to RMC, the objections to Branch CXLIV's jurisdiction were rejected.
• Prohibition on Injunctions in Labor Disputes: Although Article 254 prohibits injunctions in cases involving or growing out of labor disputes and the RMC judgment account arose from such a dispute, the rule was held inapplicable where the NLRC writ is sought to be enforced against a stranger's property. Following National Mines and Allied Workers' Union vs. Vera, the civil case puts in issue not the fact, validity, or execution of the NLRC decision against the judgment debtor, but whether satisfaction may be had against properties of non-parties to the NLRC case. Such recourse being allowed under Section 17, Rule 39, the proceedings and incidents in Civil Case No. 10945 were within the respondent judge's authority.

• Third-party claim against execution; Section 17, Rule 39 — A third person who claims property levied upon on execution may vindicate the claim by independent action, and a judgment declaring ownership in the claimant's favor is not interference with the powers or processes of the tribunal whose judgment was being enforced because a stranger's property is not subject to levy. The doctrine was applied to sustain the RTC's temporary restraining order and preliminary injunction on DBP's prima facie showing of ownership acquired through foreclosure, even though the writ of execution emanated from the NLRC, treated as a co-equal body for this purpose.
• Prohibition on labor injunctions; Article 254, Labor Code — No temporary or permanent injunction in any case involving or growing out of a labor dispute shall issue, but the prohibition does not bar a separate civil action by a stranger to the labor dispute to prevent satisfaction of an NLRC decision and writ against the stranger's own properties. The doctrine was applied to hold that Civil Case No. 10945 neither involves nor grows out of the NLRC dispute between the workers and RMC, following National Mines and Allied Workers' Union vs. Vera.
• Workers' preference over encumbered assets — Workers may not enforce first preference in satisfaction of wage and benefit claims over a mortgagee's earlier encumbrances in the absence of a declaration of bankruptcy or judicial liquidation of the employer. The doctrine, already settled against petitioners in Development Bank of the Philippines vs. Hon. Labor Arbiter Ariel Santos, et al., foreclosed further adjudication of preferential right in the present petition, without prejudice to involuntary insolvency or other appropriate proceedings against RMC.

• "Under Sec. 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by action." — States the controlling procedural basis for allowing DBP's separate RTC action and interlocutory injunctive relief against the NLRC levy.
• "committed grave abuse of discretion in ruling that the private respondents may enforce their first preference in the satisfaction of their claim over those of the petitioner (DBP) in the absence of a declaration of bankruptcy or judicial liquidation of RMC." — Restates the companion decision's ratio that foreclosed petitioners' preference claim in the present case.
• "Civil Case No. 2749 is one which neither 'involves' nor 'grows out' of a labor dispute." — Quotes the National Mines and Allied Workers' Union vs. Vera formulation adopted mutatis mutandis to exempt the third-party injunction suit from the Article 254 labor-injunction ban.

• Development Bank of the Philippines vs. Hon. Labor Arbiter Ariel Santos, et al., G.R. Nos. 78261-62, March 8, 1989 — Controlling companion precedent annulling the labor arbiter's declaration of first preference absent bankruptcy or judicial liquidation; foreclosed relitigation of preferential right herein.
• Abiera, et al. vs. Court of Appeals, et al., 45 SCRA 314 (1972) — Cited with other Rule 39, Section 17 cases as authority that a third-party ownership action and interlocutory injunction do not interfere with the executing tribunal's processes.
• National Mines and Allied Workers' Union, et al. vs. Vera, etc., et al., 133 SCRA 259 (1984) — Followed for the rule that Article 254's injunction ban has no application to a civil case testing whether an NLRC decision may be satisfied against a non-party's properties.

• Section 17, Rule 39, Rules of Court — Allows a third person claiming property levied on execution to vindicate ownership by separate action; applied to uphold RTC jurisdiction and injunctive writs on DBP's prima facie ownership claim.
• Article 254, Presidential Decree No. 442, Labor Code — Prohibits injunctions or restraining orders in cases involving or growing out of labor disputes; held inapplicable to DBP's separate civil action as a stranger to the NLRC labor dispute.

Melencio-Herrera, Chairperson, Paras, Padilla and Sarmiento, JJ., concur.