Radio Communications of the Philippines, Inc. vs. Secretary of Labor and Employment

A defaulting employer that compels employees to litigate for statutory wage benefits up to the Supreme Court remains solely liable for attorney's fees due their union counsel, termed a union service fee, even if the union is not composed of lawyers and the original judgment did not expressly award fees.

Radio Communications of the Philippines, Inc. (RCPI) is a domestic corporation engaged in the telecommunications business employing members represented by respondent United RCPI Communications Labor Association (URCPICLA-FUR), a labor organization affiliated with the Federation of Unions of Rizal (FUR). Buklod ng Manggagawa sa RCPI-NFL (BMRCPI-NFL) later appeared as the certified bargaining agent of RCPI employees. Wage Order No. 1 mandating a P2.00 daily living allowance, and the National Wages Council's authority over exemption applications therefrom, provide the regulatory backdrop for the wage claim.

On May 4, 1981, Radio Communications of the Philippines, Inc., a domestic telecommunications corporation, filed with the National Wages Council an application for exemption from Wage Order No. 1. The application was opposed by United RCPI Communications Labor Association (URCPICLA-FUR), affiliated with the Federation of Unions of Rizal. On May 22, 1981, the Council through its Chairman disapproved the exemption and ordered RCPI to pay covered employees the P2.00 daily mandatory living allowance effective March 22, 1981. The letter-decision was affirmed by the Office of the President in O.P. Case No. 1882 and, on July 15, 1985 in G.R. No. 70148, the Supreme Court dismissed RCPI's petition for certiorari for lack of merit, with entry of final judgment issued the same date.

While the wage case was pending, URCPICLA-FUR asserted a claim for fees for prosecuting the employees' claim. On March 13, 1985, it moved for a writ of execution asserting 15% of total backpay due members as union service fee for successfully prosecuting the wage claim and for reimbursement of expenses incurred by FUR, praying for segregation and remittance to FUR through its National President. On September 9, 1985, it reiterated the claim in a Motion for Immediate Issuance of Writ of Execution, this time at 20% of total backpay. RCPI opposed on September 24, 1985, asserting no legal basis for deducting a 20% union service fee from amounts due each member. An alias writ of execution issued on September 26, 1985.

On October 24, 1985, without the knowledge and consent of URCPICLA-FUR, RCPI entered into a compromise agreement with Buklod ng Manggagawa sa RCPI-NFL as the new bargaining agent, covering NLRC-NCR-11-5265-83 relative to P.D. 1713 and Wage Orders 1, 2 and 3, NLRC Certified Case No. 0356, NWC Case Ref. No. WO-1-13 (O.P. Case No. 1882, S.C. G.R. No. 70148) relative to Wage Order No. 1, and NCR-FSD-10-118-83. RCPI acknowledged liability under P.D. 1713 (mandatory third year) and Wage Order 1 (first and third year) by way of compromise, agreeing to pay each employee 30% of what was due on November 30, 1985 with the 70% balance subject to reopening and negotiation on July 31, 1986, and providing that 10% of the total amount due every employee shall be considered attorney's fee due Atty. Rodolfo Capocyan, to be deducted from the remaining 70%, with Capocyan manifesting authority to collect and the union holding RCPI free and harmless from claims arising from the deduction. The parties filed a joint Motion to Dismiss with Prejudice on the ground that the May 22, 1981 decision had been novated. URCPICLA-FUR opposed on November 7, 1985, alleging BMRCPI-NFL was not a party in interest, that it had represented the employees from the Council to the Supreme Court, and that the compromise was irregular and invalid with nothing to compromise in view of a final and executory decision.

Thereafter, on November 22, 1985, URCPICLA-FUR filed an Urgent Motion for Lien for 15% union service fee pursuant to a June 4, 1984 resolution of its Legislative Board, praying that RCPI deposit 15% of the total amount due covered employees with the NCR cashier. Acting thereon, Director Severo M. Pucan issued an Order dated November 25, 1985 awarding 15% of total backpay to URCPICLA-FUR and FUR and directing RCPI to deposit the amount for proper disposition. Despite notice and a letter requesting withholding of the 15%, RCPI on November 29, 1985 paid the covered employees in full without deduction. RCPI moved for reconsideration to set aside the November 25, 1985 order as moot and academic, null and void ab initio for lack of jurisdiction and due process, proposing collection be redirected to rank-and-file employees. On December 16, 1985, the union petitioned for garnishment of RCPI's bank deposits, which RCPI moved to dismiss as illegal and anomalous.

In a final paragraph of operative events, the Regional Director on December 19, 1985 declared the September 26, 1985 alias writ fully satisfied and lifted garnishments. Subsequently, NCR officer-in-charge Romeo A. Young on May 7, 1986 found RCPI and its employees jointly and severally liable for P427,845.60 representing 15%, ordering garnishment, on the view that URCPICLA-FUR had acted as counsel of record so payment could be authorized by suppletory application of Section 37, Rule 138 on attorney's lien, and that the compromise with BMRCPI-NFL without URCPICLA-FUR's consent defrauded the latter's right to fees. On the omnibus motion treated as appeal, the Secretary modified the order to sole liability of RCPI for 10% as attorney's fees, finding the union responsible for successful prosecution to ultimate conclusion.

• Additional Obligation Not in Judgment: Petitioner argued that the May 7, 1986 order imposed with grave abuse of discretion an additional obligation for attorney's fees not contemplated in the National Wages Council decision.
• Non-Membership in the Bar: Petitioner maintained that respondent union was not entitled to attorney's fee or union service fee because it is not a member of the Bar.
• Jurisdiction and Due Process: Petitioner attacked the November 25, 1985 order as null and void ab initio for lack of jurisdiction and due process, and the garnishment petition as illegal, irregular and highly anomalous.
• Mootness by Full Payment and Novation: Petitioner argued that the fee order was rendered moot and academic because it had already paid in full the award under the Council decision, that the compromise agreement novated the prior decisions and warranted dismissal with prejudice, and that collection should be redirected to rank-and-file employees.
• Diversion to Other Counsel and Lack of Authorization: Petitioner claimed the 10% fee corresponded to other claims in the compromise and was properly payable to Atty. Rodolfo Capocyan, and invoked the lack of individual written authorizations from employees as basis for not withholding the union service fee.

• Successful Prosecution and Lien: Respondent union countered that it represented RCPI employees from the National Wages Council to the Supreme Court, successfully prosecuted the Wage Order No. 1 claim, incurred expenses through FUR, and was entitled per its June 4, 1984 resolution to 15% (later 20% claimed) of backpay as union service fee with segregation, deposit and garnishment.
• Invalid Compromise: Respondent union argued that the compromise agreement with BMRCPI-NFL was irregular and invalid because said union was not a party in interest, consent was not obtained, and there was nothing to compromise in the face of a final and executory decision.
• Employer Liability for Forced Litigation: Public respondent maintained that the claim for attorney's fee was the ultimate consequence of RCPI's non-compliance with Wage Order No. 1 which forced employees to avail of counsel and litigate to the Supreme Court, making the defaulting employer liable under Cristobal vs. ECC.
• Non-Lawyer Representation Allowed: Public respondent argued that appearance of labor federations and local unions as counsel is legally sanctioned by Article 222 of the Labor Code allowing non-lawyers to represent their organization or members.

• Liability for Union Service Fee as Attorney's Fees: Whether public respondents acted with grave abuse of discretion amounting to lack of jurisdiction in holding petitioner solely liable for union service fee to respondent URCPICLA-FUR.
• Entitlement of Non-Lawyer Union: Whether respondent union, not being a member of the Bar, is entitled to attorney's fees termed union service fee for prosecuting the wage claim.
• Novation and Check-Off Authorization: Whether the compromise agreement novated the final judgment so as to defeat the fee claim, and whether lack of individual written authorization bars deduction of the fee.

• Liability for Union Service Fee as Attorney's Fees: No grave abuse of discretion was committed. The Secretary's order reducing the fee to 10% and imposing sole liability on RCPI was sustained as the consequence of its non-compliance compelling litigation.
• Entitlement of Non-Lawyer Union: Yes. The union as counsel of record from inception to the Supreme Court had a valid claim for attorney's fees, non-lawyer representation being sanctioned by Article 222 of the Labor Code.
• Novation and Check-Off Authorization: No. No valid novation occurred for lack of absolute incompatibility, and lack of individual authorization did not shield RCPI where deduction was ordered, approved in the compromise, and authorized by law.

• Liability for Union Service Fee as Attorney's Fees: Although the original Council decision did not expressly provide attorney's fees, the deficiency was deemed supplied pro tanto by the compromise agreement expressly admitting that 10% of the total amount due every employee shall be considered attorney's fee. Respondent union was categorically found to have been responsible for successful prosecution to ultimate conclusion, rendering its right to fees indubitable. Because RCPI continuously withheld the Wage Order No. 1 benefit and forced employees to litigate to the Supreme Court, the defaulting employer remained liable following Cristobal vs. ECC, and its full payment on November 29, 1985 in disregard of the November 25, 1985 withholding order, plus diversion of 10% to a fictitious Atty. Rodolfo Capocyan not found in the Attorney's Roll, evidenced defraudation of the fee.
• Entitlement of Non-Lawyer Union: Representation by labor federations and local unions as counsel in labor proceedings is given legal sanction by Article 222 of the Labor Code allowing non-lawyers to represent their organization or members. It was undisputed that URCPICLA-FUR was counsel on record for the ECOLA claim under Wage Order No. 1 from the Council to the Supreme Court. While initially directed against members, the claim was basically for attorney's fee for compensation for services rendered, as RCPI itself admitted.
• Novation and Check-Off Authorization: The term novation was improperly used to secure dismissal with prejudice because the pre-existing obligation under the judgment and the new one were not absolutely incompatible. The compromise expressly recognized the judgment obligations and provided satisfaction by installment payments, merely giving more time and delaying execution until full compliance, per Zapanta vs. De Rotaeche. On authorization, Article 222's individual written authorization protects employees against unwarranted diminution without knowledge and consent, per National Power Corporation Supervisors' Union vs. National Power Corporation. Here deductions were not unwarranted, were ordered by the Regional Director before payment, were expressly approved in the compromise holding RCPI free and harmless, and were authorized by law under Section 11 in relation to Section 13, Rule VIII, Book III of the Omnibus Rules, requiring no individual check-off.

• Defaulting employer's liability for attorney's fees — A defaulting employer or government agency that unjustly refuses to recognize the validity of a claim and thereby compels the complainant to employ counsel remains liable for attorney's fees. Applied to hold RCPI solely liable for 10% of awarded amounts because its non-compliance with Wage Order No. 1 forced employees to litigate to the Supreme Court through union counsel.
• Non-lawyer representation in labor proceedings — Under Article 222 of the Labor Code, non-lawyers may represent their organization or members thereof, giving legal sanction to appearance of labor federations and local unions as counsel in labor cases. Applied to reject the contention that URCPICLA-FUR could not claim attorney's fees for being non-members of the Bar.
• Novation of obligations — Valid novation requires absolute incompatibility between the pre-existing and the new obligation; a contract that expressly ratifies the prior judgment obligations and merely provides a method and more time for satisfaction by installments does not extinguish them until fully complied with. Applied following Zapanta vs. De Rotaeche to reject RCPI's claim that the compromise novated the final Council decision.
• Wage deductions and check-off authorization — Article 222's requirement of individual written authorization protects employees against unwarranted practices diminishing compensation without knowledge and consent, but deductions ordered by competent authority, consented to, or authorized by law do not require individual check-off under Section 11 in relation to Section 13, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code. Applied to deny RCPI's shield of lack of authorization.

• "... oppositor's claim for attorney's fee was the ultimate consequence of the non-compliance of RCPI with Wage Order No. 1. The RCPI employees were forced to avail of the services of oppositor as counsel, RCPI having continuously withheld payment of said benefit." — States the ratio for imposing sole liability on the defaulting employer which compelled litigation to the Supreme Court.
• "The appearance of labor federations and local unions as counsel in labor proceedings has been given legal sanction and we need only cite Art. 222 of the Labor Code which allows non-lawyers to represent their organization or members thereof." — Defines the canonical justification for a union's entitlement to attorney's fees despite non-membership in the Bar.
• "While the claim for union service fee was initially directed against the union members, there is no dispute that the claim was basically for attorney's fee." — Clarifies the juridical character of the union service fee as compensation for services rendered in successful prosecution.

• Cristobal vs. ECC, 103 SCRA 339 (1981) — Followed as controlling for the rule that the defaulting employer remains liable for attorney's fees because it compelled complainant to employ counsel by unjustly refusing to recognize the claim.
• Zapanta vs. De Rotaeche, 21 Phil. 154 (1912) — Followed to define novation, holding that obligations under a judgment subsist where the later agreement merely provides installment satisfaction rather than incompatible obligations.
• National Power Corporation Supervisors' Union vs. National Power Corporation, 106 SCRA 556 (1981) — Cited to explain that Article 222's written authorization requirement seeks to protect employees against unwarranted diminution of compensation without knowledge and consent.

• Article 222, Labor Code — Allows non-lawyers to represent their organization or members in labor proceedings; applied to sustain URCPICLA-FUR's appearance as counsel of record and its fee claim, and to frame the written authorization rule for wage deductions.
• Section 37, Rule 138, Rules of Court — Governs attorney's lien; applied suppletorily by the Regional Director to authorize payment to the union which acted as counsel of record though the Council decision did not expressly award fees.
• Section 11 in relation to Section 13, Rule VIII, Book III, Omnibus Rules Implementing the Labor Code — Provides deductions authorized by law do not require individual check-off authorizations; applied to hold RCPI had no legal basis to refuse payment of the 10% fee.

Melencio-Herrera, J., Paras, J., Padilla, J. and Sarmiento, J., concur. No separate concurring opinions adding significant reasoning appear in the text.