G.R. No.

156292

January 11, 2005

ME-SHURN CORPORATION AND SAMMY CHOU, petitioners, vs. ME-SHURN WORKERS UNION-FSM AND ROSALINA* CRUZ, respondents. DECISION PANGANIBAN, J.: To justify the closure of a business and the termination of the services of the concerned employees, the law requires the employer to prove that it suffered substantial actual losses. The cessation of a companys operations shortly after the organization of a labor union, as well as the resumption of business barely a month after, gives credence to the employees claim that the closure was meant to discourage union membership and to interfere in union activities. These acts constitute unfair labor practices. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to annul the November 29, 2002 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 69675, the decretal portion of which reads: "UPON THE VIEW WE TAKE OF THIS CASE, THUS, the judgment must be, as it hereby is, AFFIRMED, and the present petition DISMISSED for lack of merit. Costs shall be taxed against petitioners."3 The affirmed November 29, 2001 Decision4 of the National Labor Relations Commission (NLRC), Third Division, disposed as follows: "WHEREFORE, the decision appealed from is hereby SET ASIDE, and respondent Me-Shurn Corp. is hereby ordered to pay the complainants who appeared in the proceedings conducted by the Labor Arbiter their full backwages from the date their wages were withheld from them to the date of the finality of this decision."5 The Facts On June 7, 1998, the regular rank and file employees of Me-Shurn Corporation organized Me-Shurn Workers Union-FSM, an affiliate of the February Six Movement (FSM).6 Respondent union had a pending application for registration with the Bureau of Labor Relations (BLR) through a letter dated June 11, 1998.7 Ten days later, or on June 17, 1998, petitioner corporation started placing on forced leave all the rank and file employees who were members of the unions bargaining unit.8 On June 23, 1998, respondent union filed a Petition for Certification Election with the Med-Arbitration Unit of the Department of Labor and Employment (DOLE), Regional Office No. 3.9 Instead of filing an answer to the Petition, the corporation filed on July 27, 1998, a comment stating that it would temporarily lay off employees and cease operations, on account of its alleged inability to meet the export quota required by the Board of Investment.10

While the Petition was pending, 184 union members allegedly submitted a retraction/withdrawal thereof on July 14, 1998. As a consequence, the med-arbiter dismissed the Petition. On May 7, 1999, Department of Labor and Employment (DOLE) Undersecretary Rosalinda Dimapilis-Baldoz granted the unions appeal and ordered the holding of a certification election among the rank and file employees of the corporation.11 Meanwhile, on August 4, 1998, respondent union filed a Notice of Strike against petitioner corporation on the ground of unfair labor practice (illegal lockout and union busting). This matter was docketed as Case No. NCMB-RO3-BEZ-NZ-08-42-98.12 On August 31, 1998, Chou Fang Kuen (alias Sammy Chou, the other petitioner herein) and Raquel Lamayra (the Filipino administrative manager of the corporation) imposed a precondition for the resumption of operation and the rehiring of laid off workers. He allegedly required the remaining union officers to sign an Agreement containing a guarantee that upon their return to work, no union or labor organization would be organized. Instead, the union officers were to serve as mediators between labor and management.13 After the signing of the Agreement, the operations of the corporation resumed in September 1998.14 On November 5, 1998, the union reorganized and elected a new set of officers. Respondent Rosalina Cruz was elected president.15 Thereafter, it filed two Complaints docketed as NLRC Case Nos. RAB-III-11-9586-98 and RAB-III-09-0322-99. These cases were consolidated and assigned to Labor Arbiter Henry Isorena for compulsory arbitration. Respondents charged petitioner corporation with unfair labor practice, illegal dismissal, underpayment of wages and deficiency in separation pay, for which they prayed for damages and attorneys fees. The corporation countered that because of economic reversals, it was compelled to close and cease its operations to prevent serious business losses; that under Article 283 of the Labor Code, it had the right to do so; that in August 1998, it had paid its 342 laid off employees separation pay and benefits in the total amount ofP1,682,863.88; and that by virtue of these payments, the cases had already become moot and academic. It also averred that its resumption of operations in September 1998 had been announced and posted at the Bataan Export Processing Zone, and that some of the former employees had reapplied. Petitioner corporation questioned the legality of the representation of respondent union. Allegedly, it was not the latter, but the Me-Shurn Independent Employees Union -- with Christopher Malit as president -- that was recognized as the existing exclusive bargaining agent of the rank and file employees and as the one that had concluded a Collective Bargaining Agreement (CBA) with the corporation on May 19, 1999.16 Hence, the corporation asserted that Undersecretary DimapilisBaldozs Decision ordering the holding of a certification election had become moot and academic. On the other hand, respondents contested the legality of the formation of the Me-Shurn Independent Employees Union and petitioners recognition of it as the exclusive bargaining agent of the employees. Respondents argued that the pendency of the representation issue before the DOLE had barred the alleged recognition of the aforementioned union. Labor Arbiter Isorena dismissed the Complaints for lack of merit. He ruled that (1) actual and expected losses justified the closure of petitioner corporation and its dismissal of its employees; (2) the voluntary acceptance of separation pay by the workers precluded them from questioning the validity of their dismissal; and (3) the claim for separation pay lacked factual basis.17
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On appeal, the NLRC reversed the Decision of Labor Arbiter Isorena. Finding petitioners guilty of unfair labor practice, the Commission ruled that the closure of the corporation shortly after

respondent union had been organized, as well as the dismissal of the employees, had been effected under false pretenses. The true reason therefor was allegedly to bar the formation of the union. Accordingly, the NLRC held that the illegally dismissed employees were entitled to back wages.18 After the denial of their Motion for Reconsideration,19 petitioners elevated the cases to the CA via a Petition for Certiorari under Rule 65.20 They maintained that the NLRC had committed grave abuse of discretion and serious errors of fact and law in reversing the Decision of the labor arbiter and in finding that the corporations cessation of operations in August 1998 had been tainted with unfair labor practice. Petitioners added that respondent unions personality to represent the affected employees had already been repudiated by the workers themselves in the certification election conducted by the DOLE. Pursuant to the Decision of Undersecretary Dimapilis-Baldoz in Case No. RO3 00 9806 RU 001, a certification election was held on September 7, 2000, at the premises of petitioner corporation under the supervision of the DOLE. The election had the following results: "Me Shurn Workers Union-FSM 1 No Union 135 Spoiled 2 Challenged 52 Total Votes Cast 190"21 Ruling of the Court of Appeals The CA dismissed the Petition because of the failure of petitioners to submit sufficient proof of business losses. It found that they had wanted merely to abort or frustrate the formation of respondent union. The burden of proving that the dismissal of the employees was for a valid or authorized cause rested on the employer. The appellate court further affirmed the unions legal personality to represent the employees. It held that (1) registration was not a prerequisite to the right of a labor organization to litigate; and (2) the cases may be treated as representative suits, with respondent union acting for the benefit of all its members. Hence, this Petition.22 Issues In their Supplemental Memorandum, petitioners submit the following issues for our consideration: "(1) Whether the dismissal of the employees of petitioner Meshurn Corporation is for an authorized cause, and (2) Whether respondents can maintain a suit against petitioners."23 The Courts Ruling

The Petition lacks merit. First Issue: Validity of the Dismissal The reason invoked by petitioners to justify the cessation of corporate operations was alleged business losses. Yet, other than generally referring to the financial crisis in 1998 and to their supposed difficulty in obtaining an export quota, interestingly, they never presented any report on the financial operations of the corporation during the period before its shutdown. Neither did they submit any credible evidence to substantiate their allegation of business losses. Basic is the rule in termination cases that the employer bears the burden of showing that the dismissal was for a just or authorized cause. Otherwise, the dismissal is deemed unjustified. Apropos this responsibility, petitioner corporation should have presented clear and convincing evidence24 of imminent economic or business reversals as a form of affirmative defense in the proceedings before the labor arbiter or, under justifiable circumstances, even on appeal with the NLRC. However, as previously stated, in all the proceedings before the two quasi-judicial bodies and even before the CA, no evidence was submitted to show the corporations alleged business losses. It is only now that petitioners have belatedly submitted the corporations income tax returns from 1996 to 1999 as proof of alleged continued losses during those years.
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Again, elementary is the principle barring a party from introducing fresh defenses and facts at the appellate stage.25 This Court has ruled that matters regarding the financial condition of a company -those that justify the closing of its business and show the losses in its operations -- are questions of fact that must be proven below.26Petitioners must bear the consequence of their neglect. Indeed, their unexplained failure to present convincing evidence of losses at the early stages of the case clearly belies the credibility of their present claim.27 Obviously, on the basis of the evidence -- or the lack thereof -- the appellate court cannot be faulted for ruling that the NLRC did not gravely abuse its discretion in finding that the closure of petitioner corporation was not due to alleged financial losses. At any rate, even if we admit these additional pieces of evidence, the circumstances surrounding the cessation of operations of the corporation reveal the doubtful character of its supposed financial reason. First, the claim of petitioners that they were compelled to close down the company to prevent further losses is belied by their resumption of operations barely a month after the corporation supposedly folded up. Moreover, petitioners attribute their loss mainly to their failure to obtain an export quota from the Garments and Textile Export Board (GTEB). Yet, as pointed out by respondents, the corporation resumed its business without first obtaining an export quota from the GTEB. Besides, these export quotas pertain only to business with companies in the United States and do not preclude the corporation from exporting its products to other countries. In other words, the business that petitioner corporation engaged in did not depend entirely on exports to the United States.

If it were true that these export quotas constituted the determining and immediate cause of the closure of the corporation, then why did it reopen for business barely a month after the alleged cessation of its operations? Second, the Statements of Income and Deficit for the years 1996 and 1997 show that at the beginning of 1996, the corporation had a deficit of P2,474,505. Yet, the closure was effected only after more than a year from such year-end deficit; that is, in the middle of 1998, shortly after the formation of the union. On the other hand, the Statement of Income and Deficit for the year 1998 does not reflect the extent of the losses that petitioner corporation allegedly suffered in the months prior to its closure in July/August 1998. This document is not an adequate and competent proof of the alleged losses, considering that it resumed operations in the succeeding month of September. Upon careful study of the evidence, it is clear that the corporation was more profitable in 1997 than in 1996. By the end of 1997, it had a net income of P1,816,397. If petitioners were seriously desirous of averting losses, why did the corporation not close in 1996 or earlier, when it began incurring deficits? They have not satisfactorily explained why the workers dismissal was effected only after the formation of respondent union in September 1998. We also take note of the allegation that after several years of attempting to organize a union, the employees finally succeeded on June 7, 1998. Ten days later, without any valid notice, all of them were placed on forced leave, allegedly because of lack of quota. All these considerations give credence to their claim that the closure of the corporation was a mere subterfuge, "a systematic approach intended to dampen the enthusiasm of the union members."28 Third, as a condition for the rehiring of the employees, the union officers were made to sign an agreement that they would not form any union upon their return to work. This move was contrary to law. Fourth, notwithstanding the Petition for Certification Election filed by respondents and despite knowledge of the pendency thereof, petitioners recognized a newly formed union and hastily signed with it an alleged Collective Bargaining Agreement. Their preference for the new union was at the expense of respondent union. Moncada Bijon Factory v. CIR29 held that an employer could be held guilty of discrimination, even if the preferred union was not company-dominated. Fifth, petitioners were not able to prove their allegation that some of the employees contracts had expired even before the cessation of operations. We find this claim inconsistent with their position that all 342 employees of the corporation were paid their separation pay plus accrued benefits in August 1998. Sixth, proper written notices of the closure were not sent to the DOLE and the employees at least one month before the effectivity date of the termination, as required under the Labor Code. Notice to the DOLE is mandatory to enable the proper authorities to ascertain whether the closure and/or dismissals were being done in good faith and not just as a pretext for evading compliance with the employers just obligations to the affected employees.30 This requirement is intended to protect the workers right to security of tenure. The absence of such requirement taints the dismissal.

All these factors strongly give credence to the contention of respondents that the real reason behind the shutdown of the corporation was the formation of their union. Note that, to constitute an unfair labor practice, the dismissal need not entirely and exclusively be motivated by the unions activities or affiliations. It is enough that the discrimination was a contributing factor.31 If the basic inspiration for the act of the employer is derived from the affiliation or activities of the union, the formers assignment of another reason, no matter how seemingly valid, is unavailing.32 Concededly, the determination to cease operations is a management prerogative that the State does not usually interfere in. Indeed, no business can be required to continue operating at a loss, simply to maintain the workers in employment. That would be a taking of property without due process of law. But where it is manifest that the closure is motivated not by a desire to avoid further losses, but to discourage the workers from organizing themselves into a union for more effective negotiations with management, the State is bound to intervene.33
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Second Issue: Legal Personality of Respondent Union Neither are we prepared to believe petitioners argument that respondent union was not legitimate. It should be pointed out that on June 29, 1998, it filed a Petition for Certification Election. While this Petition was initially dismissed by the med-arbiter on the basis of a supposed retraction, note that the appeal was granted and that Undersecretary Dimapilis-Baldoz ordered the holding of a certification election. The DOLE would not have entertained the Petition if the union were not a legitimate labor organization within the meaning of the Labor Code. Under this Code, in an unorganized establishment, only a legitimate union may file a petition for certification election.34 Hence, while it is not clear from the record whether respondent union is a legitimate organization, we are not readily inclined to believe otherwise, especially in the light of the pro-labor policies enshrined in the Constitution and the Labor Code.35 Verily, the union has the requisite personality to sue in its own name in order to challenge the unfair labor practice committed by petitioners against it and its members.36 "It would be an unwarranted impairment of the right to self-organization through formation of labor associations if thereafter such collective entities would be barred from instituting action in their representative capacity."37 Finally, in view of the discriminatory acts committed by petitioners against respondent union prior to the holding of the certification election on September 27, 2000 -- acts that included their immediate grant of exclusive recognition to another union as a bargaining agent despite the pending Petition for certification election -- the results of that election cannot be said to constitute a repudiation by the affected employees of the unions right to represent them in the present case. WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against the petitioners. SO ORDERED. G.R. No. 146728 February 11, 2004

GENERAL MILLING CORPORATION, petitioner, vs

HON. COURT OF APPEALS, GENERAL MILLING CORPORATION INDEPENDENT LABOR UNION (GMC-ILU), and RITO MANGUBAT, respondents. DECISION QUISUMBING, J.: Before us is a petition for certiorari assailing the decision1 dated July 19, 2000, of the Court of Appeals in CA-G.R. SP No. 50383, which earlier reversed the decision2 dated January 30, 1998 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-0112-94. The antecedent facts are as follows: In its two plants located at Cebu City and Lapu-Lapu City, petitioner General Milling Corporation (GMC) employed 190 workers. They were all members of private respondent General Milling Corporation Independent Labor Union (union, for brevity), a duly certified bargaining agent. On April 28, 1989, GMC and the union concluded a collective bargaining agreement (CBA) which included the issue of representation effective for a term of three years. The CBA was effective for three years retroactive to December 1, 1988. Hence, it would expire on November 30, 1991. On November 29, 1991, a day before the expiration of the CBA, the union sent GMC a proposed CBA, with a request that a counter-proposal be submitted within ten (10) days. As early as October 1991, however, GMC had received collective and individual letters from workers who stated that they had withdrawn from their union membership, on grounds of religious affiliation and personal differences. Believing that the union no longer had standing to negotiate a CBA, GMC did not send any counter-proposal. On December 16, 1991, GMC wrote a letter to the unions officers, Rito Mangubat and Victor Lastimoso. The letter stated that it felt there was no basis to negotiate with a union which no longer existed, but that management was nonetheless always willing to dialogue with them on matters of common concern and was open to suggestions on how the company may improve its operations. In answer, the union officers wrote a letter dated December 19, 1991 disclaiming any massive disaffiliation or resignation from the union and submitted a manifesto, signed by its members, stating that they had not withdrawn from the union. On January 13, 1992, GMC dismissed Marcia Tumbiga, a union member, on the ground of incompetence. The union protested and requested GMC to submit the matter to the grievance procedure provided in the CBA. GMC, however, advised the union to "refer to our letter dated December 16, 1991."3 Thus, the union filed, on July 2, 1992, a complaint against GMC with the NLRC, Arbitration Division, Cebu City. The complaint alleged unfair labor practice on the part of GMC for: (1) refusal to bargain collectively; (2) interference with the right to self-organization; and (3) discrimination. The labor arbiter dismissed the case with the recommendation that a petition for certification election be held to determine if the union still enjoyed the support of the workers.
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The union appealed to the NLRC. On January 30, 1998, the NLRC set aside the labor arbiters decision. Citing Article 253-A of the Labor Code, as amended by Rep. Act No. 6715,4 which fixed the terms of a collective bargaining agreement, the NLRC ordered GMC to abide by the CBA draft that the union proposed for a period of two (2) years beginning December 1, 1991, the date when the original CBA ended, to November 30, 1993. The NLRC also ordered GMC to pay the attorneys fees.5 In its decision, the NLRC pointed out that upon the effectivity of Rep. Act No. 6715, the duration of a CBA, insofar as the representation aspect is concerned, is five (5) years which, in the case of GMCIndependent Labor Union was from December 1, 1988 to November 30, 1993. All other provisions of the CBA are to be renegotiated not later than three (3) years after its execution. Thus, the NLRC held that respondent union remained as the exclusive bargaining agent with the right to renegotiate the economic provisions of the CBA. Consequently, it was unfair labor practice for GMC not to enter into negotiation with the union. The NLRC likewise held that the individual letters of withdrawal from the union submitted by 13 of its members from February to June 1993 confirmed the pressure exerted by GMC on its employees to resign from the union. Thus, the NLRC also found GMC guilty of unfair labor practice for interfering with the right of its employees to self-organization. With respect to the unions claim of discrimination, the NLRC found the claim unsupported by substantial evidence. On GMCs motion for reconsideration, the NLRC set aside its decision of January 30, 1998, through a resolution dated October 6, 1998. It found GMCs doubts as to the status of the union justified and the allegation of coercion exerted by GMC on the unions members to resign unfounded. Hence, the union filed a petition for certioraribefore the Court of Appeals. For failure of the union to attach the required copies of pleadings and other documents and material portions of the record to support the allegations in its petition, the CA dismissed the petition on February 9, 1999. The same petition was subsequently filed by the union, this time with the necessary documents. In its resolution dated April 26, 1999, the appellate court treated the refiled petition as a motion for reconsideration and gave the petition due course. On July 19, 2000, the appellate court rendered a decision the dispositive portion of which reads: WHEREFORE, the petition is hereby GRANTED. The NLRC Resolution of October 6, 1998 is hereby SET ASIDE, and its decision of January 30, 1998 is, except with respect to the award of attorneys fees which is hereby deleted, REINSTATED.6 A motion for reconsideration was seasonably filed by GMC, but in a resolution dated October 26, 2000, the CA denied it for lack of merit. Hence, the instant petition for certiorari alleging that: I THE COURT OF APPEALS DECISION VIOLATED THE CONSTITUTIONAL RULE THAT NO DECISION SHALL BE RENDERED BY ANY COURT WITHOUT EXPRESSING THEREIN CLEARLY AND DISTINCTLY THE FACTS AND THE LAW ON WHICH IT IS BASED.

II THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION IN THE ABSENCE OF ANY FINDING OF SUBSTANTIAL ERROR OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION. III THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT APPRECIATING THAT THE NLRC HAS NO JURISDICTION TO DETERMINE THE TERMS AND CONDITIONS OF A COLLECTIVE BARGAINING AGREEMENT.7 Thus, in the instant case, the principal issue for our determination is whether or not the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction in (1) finding GMC guilty of unfair labor practice for violating the duty to bargain collectively and/or interfering with the right of its employees to self-organization, and (2) imposing upon GMC the draft CBA proposed by the union for two years to begin from the expiration of the original CBA.
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On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No. 6715, states: ART. 253-A. Terms of a collective bargaining agreement. Any Collective Bargaining Agreement that the parties may enter into shall, insofar as the representation aspect is concerned, be for a term of five (5) years. No petition questioning the majority status of the incumbent bargaining agent shall be entertained and no certification election shall be conducted by the Department of Labor and Employment outside of the sixty-day period immediately before the date of expiry of such five year term of the Collective Bargaining Agreement. All other provisions of the Collective Bargaining Agreement shall be renegotiated not later than three (3) years after its execution.... The law mandates that the representation provision of a CBA should last for five years. The relation between labor and management should be undisturbed until the last 60 days of the fifth year. Hence, it is indisputable that when the union requested for a renegotiation of the economic terms of the CBA on November 29, 1991, it was still the certified collective bargaining agent of the workers, because it was seeking said renegotiation within five (5) years from the date of effectivity of the CBA on December 1, 1988. The unions proposal was also submitted within the prescribed 3-year period from the date of effectivity of the CBA, albeit just before the last day of said period. It was obvious that GMC had no valid reason to refuse to negotiate in good faith with the union. For refusing to send a counter-proposal to the union and to bargain anew on the economic terms of the CBA, the company committed an unfair labor practice under Article 248 of the Labor Code, which provides that: ART. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of the following unfair labor practice: ... (g) To violate the duty to bargain collectively as prescribed by this Code; ...

Article 252 of the Labor Code elucidates the meaning of the phrase "duty to bargain collectively," thus: ART. 252. Meaning of duty to bargain collectively. The duty to bargain collectively means the performance of a mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement.... We have held that the crucial question whether or not a party has met his statutory duty to bargain in good faith typically turn$ on the facts of the individual case.8 There is no per se test of good faith in bargaining.9Good faith or bad faith is an inference to be drawn from the facts.10 The effect of an employers or a unions actions individually is not the test of goodfaith bargaining, but the impact of all such occasions or actions, considered as a whole.11 Under Article 252 abovecited, both parties are required to perform their mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement. The union lived up to this obligation when it presented proposals for a new CBA to GMC within three (3) years from the effectivity of the original CBA. But GMC failed in its duty under Article 252. What it did was to devise a flimsy excuse, by questioning the existence of the union and the status of its membership to prevent any negotiation. It bears stressing that the procedure in collective bargaining prescribed by the Code is mandatory because of the basic interest of the state in ensuring lasting industrial peace. Thus: ART. 250. Procedure in collective bargaining. The following procedures shall be observed in collective bargaining: (a) When a party desires to negotiate an agreement, it shall serve a written notice upon the other party with a statement of its proposals. The other party shall make a reply thereto not later than ten (10) calendar days from receipt of such notice. (Underscoring supplied.) GMCs failure to make a timely reply to the proposals presented by the union is indicative of its utter lack of interest in bargaining with the union. Its excuse that it felt the union no longer represented the workers, was mainly dilatory as it turned out to be utterly baseless. We hold that GMCs refusal to make a counter-proposal to the unions proposal for CBA negotiation is an indication of its bad faith. Where the employer did not even bother to submit an answer to the bargaining proposals of the union, there is a clear evasion of the duty to bargain collectively.12 Failing to comply with the mandatory obligation to submit a reply to the unions proposals, GMC violated its duty to bargain collectively, making it liable for unfair labor practice. Perforce, the Court of Appeals did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in finding that GMC is, under the circumstances, guilty of unfair labor practice. Did GMC interfere with the employees right to self-organization? The CA found that the letters between February to June 1993 by 13 union members signifying their resignation from the union clearly indicated that GMC exerted pressure on its employees. The records show that GMC presented these letters to prove that the union no longer enjoyed the support of the workers. The fact that the resignations of the union members occurred during the pendency of the case before the labor arbiter shows GMCs desperate attempts to cast doubt on the legitimate status of the union. We agree with the CAs conclusion that the ill-timed letters of resignation from the union members

indicate that GMC had interfered with the right of its employees to self-organization. Thus, we hold that the appellate court did not commit grave abuse of discretion in finding GMC guilty of unfair labor practice for interfering with the right of its employees to self-organization. Finally, did the CA gravely abuse its discretion when it imposed on GMC the draft CBA proposed by the union for two years commencing from the expiration of the original CBA? The Code provides: ART. 253. Duty to bargain collectively when there exists a collective bargaining agreement. .... It shall be the duty of both parties to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the 60-day period [prior to its expiration date] and/or until a new agreement is reached by the parties. (Underscoring supplied.) The provision mandates the parties to keep the status quo while they are still in the process of working out their respective proposal and counter proposal. The general rule is that when a CBA already exists, its provision shall continue to govern the relationship between the parties, until a new one is agreed upon. The rule necessarily presupposes that all other things are equal. That is, that neither party is guilty of bad faith. However, when one of the parties abuses this grace period by purposely delaying the bargaining process, a departure from the general rule is warranted. In Kiok Loy vs. NLRC,13 we found that petitioner therein, Sweden Ice Cream Plant, refused to submit any counter proposal to the CBA proposed by its employees certified bargaining agent. We ruled that the former had thereby lost its right to bargain the terms and conditions of the CBA. Thus, we did not hesitate to impose on the erring company the CBA proposed by its employees union - lock, stock and barrel. Our findings in Kiok Loy are similar to the facts in the present case, to wit: petitioner Companys approach and attitude stalling the negotiation by a series of postponements, non-appearance at the hearing conducted, and undue delay in submitting its financial statements, lead to no other conclusion except that it is unwilling to negotiate and reach an agreement with the Union. Petitioner has not at any instance, evinced good faith or willingness to discuss freely and fully the claims and demands set forth by the Union much less justify its objection thereto.14 Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and Employment,15 petitioner therein, Divine Word University of Tacloban, refused to perform its duty to bargain collectively. Thus, we upheld the unilateral imposition on the university of the CBA proposed by the Divine Word University Employees Union. We said further: That being the said case, the petitioner may not validly assert that its consent should be a primordial consideration in the bargaining process. By its acts, no less than its action which bespeak its insincerity, it has forfeited whatever rights it could have asserted as an employer.16 Applying the principle in the foregoing cases to the instant case, it would be unfair to the union and its members if the terms and conditions contained in the old CBA would continue to be imposed on GMCs employees for the remaining two (2) years of the CBAs duration. We are not inclined to gratify GMC with an extended term of the old CBA after it resorted to delaying tactics to prevent negotiations. Since it was GMC which violated the duty to bargain collectively, based on Kiok Loy and Divine Word University of Tacloban, it had lost its statutory right to negotiate or renegotiate the terms and conditions of the draft CBA proposed by the union.

We carefully note, however, that as strictly distinguished from the facts of this case, there was no pre-existing CBA between the parties in Kiok Loy and Divine Word University of Tacloban. Nonetheless, we deem it proper to apply in this case the rationale of the doctrine in the said two cases. To rule otherwise would be to allow GMC to have its cake and eat it too. Under ordinary circumstances, it is not obligatory upon either side of a labor controversy to precipitately accept or agree to the proposals of the other. But an erring party should not be allowed to resort with impunity to schemes feigning negotiations by going through empty gestures.17 Thus, by imposing on GMC the provisions of the draft CBA proposed by the union, in our view, the interests of equity and fair play were properly served and both parties regained equal footing, which was lost when GMC thwarted the negotiations for new economic terms of the CBA. The findings of fact by the CA, affirming those of the NLRC as to the reasonableness of the draft CBA proposed by the union should not be disturbed since they are supported by substantial evidence. On this score, we see no cogent reason to rule otherwise. Hence, we hold that the Court of Appeals did not commit grave abuse of discretion amounting to lack or excess of jurisdiction when it imposed on GMC, after it had committed unfair labor practice, the draft CBA proposed by the union for the remaining two (2) years of the duration of the original CBA. Fairness, equity, and social justice are best served in this case by sustaining the appellate courts decision on this issue. WHEREFORE, the petition is DISMISSED and the assailed decision dated July 19, 2000, and the resolution dated October 26, 2000, of the Court of Appeals in CA-G.R. SP No. 50383, are AFFIRMED. Costs against petitioner. SO ORDERED.

[G.R. No. 110007. October 18, 1996]

HOLY CROSS OF DAVAO COLLEGE, INC., petitioner, vs. HON. JEROME JOAQUIN, in his capacity as Voluntary Arbitrator, and HOLY CROSS OF DAVAO COLLEGE UNION KALIPUNAN NG MANGGAGAWANG PILIPINO (KAMAPI), respondents.
DECISION
NARVASA, C.J.:

A collective bargaining agreement, effective from June 1, 1986 to May 31, 1989 was entered into between petitioner Holy Cross of Davao College, Inc. (hereafter Holy Cross), an educational institution, and the affiliate labor organization representing its employees, respondent Holy Cross of Davao College Union-KAMAPI (hereafter KAMAPI). Shortly before the expiration of the agreement, KAMAPI President Jose Lagahit, wrote Holy Cross under date of April 12, 1989 expressing his unions desire to renew the agreeme nt, withal

seeking its extension for two months, or until July 31, 1989, on the ground that the teachers were still on summer vacation and union activities necessary or incident to the negotiation of a new agreement could not yet be conducted.[1] Holy Cross President Emilio P. Palma-Gil replied that he had no objection to the extension sought, it being allowable under the collective bargaining agreement.[2] On July 24, 1989, Jose Lagahit convoked a meeting of the KAMAPI membership for the purpose of electing a new set of union officers, at which Rodolfo Gallera won election as president. To the surprise of many, and with resultant dissension among the membership, Galera forthwith initiated discussions for the unions disaffiliation from the KAMAPI Federation. Galleras group subsequently formed a separate organization known as the Holy Cross of Davao College Teachers Union, and elected its own officers. For its part, the existing union, KAMAPI, sent to the School its proposals for a new collective bargaining contract; this it did on July 31, 1989, the expiry date of the two-month extension it had sought.[3] Holy Cross thereafter stopped deducting from the salaries and wages of its teachers and employees the corresponding union dues and special assessment (payable by union members), and agency fees (payable by nonmembers), in accordance with the check-off clause of the CBA,[4] prompting KAMAPI, on September 1, 1989, to demand an explanation. In the meantime, there ensued between the two unions a full-blown action on the basic issue of representation, which was to last for some two years. It began with the filing by the new union (headed by Gallera) of a petition for certification election in the Office of the Med-Arbiter.[5] KAMAPI responded by filing a motion asking the Med-Arbiter to dismiss the petition. On August 31, 1989, KAMAPI also advised Holy Cross of the election of a new set of officers who would also comprise its negotiating panel.[6] The Med-Arbiter denied KAMAPIs motion to dismiss, and ordered the holding of a certification election. On appeal, however, the Secretary of Labor reversed the Med-Arbiters ruling and ordered the dismissal of the petition for certification election, which action was eventually sustained by this Court in appropriate proceedings. After its success in the certification election case KAMAPI presented, on April 11, 1991, revised bargaining proposals to Holy Cross;[7] and on July 11, 1991, it sent a letter to the School asking for its counter-proposals. The School replied, that it did not know if the Supreme Court had in fact affirmed the Labor Secretarys decision in favor of KAMAPI as the exclusive bargaining

representative of the School employees, whereupon KAMAPIs counsel furnished it with a copy of the Courts resolution to that effect; and on September 7, 1991, KAMAPI again wrote to Holy Cross asking for its counterproposals as regards the terms of a new CBA. In response, Holy Cross declared that it would take no action towards a new CBA without a definitive ruling on the proper interpretation of Article I of the old CBA which should have expired on May 31, 1989 (but, as above stated, had been extended for two months at the KAMAPIs request). Said Article provides inter alia for the automatic extension of the CBA for another period of three (3) years counted from its expiration, if the parties fail to agree on a renewal, modification or amendment thereof. It appears, in fact, that the opinion of the DOLE Regional Director on the meaning and import of said article I had earlier been sought by the College president, Emilio Palma Gil.[8]
KAMAPI then sent another letter to Holy Cross, this time accusing it of unfair labor practice for refusing to bargain despite the formers repeated demands; and on the following day, it filed a notice of strike with the National Mediation and Conciliation Board..[9]

KAMAPI and Holy Cross were ordered to appear before ConciliatorMediator Agapito J. Adipen on October 2, 1991. Several conciliation meetings were thereafter held between them, and when these failed to bring about any amicable settlement, the parties agreed to submit the case to voluntary arbitration.[10] Both parties being of the view that the dispute did indeed revolve around the interpretation of 1 and 2 of Article I of the CBA, they submitted position papers explicitly dealing with the following issues presented by them for resolution to the voluntary arbitrator:
a. Whether or not the CBA which expired on May 31, 1989 was automatically renewed and did not serve merely as a holdover CBA; and b. Whether or not there was refusal to negotiate on the part of the Holy Cross of Davao College.

On both issues, Voluntary Arbitrator Jerome C. Joaquin found in favor of KAMAPI. Respecting the matter of the automatic renewal of the bargaining agreement, the Voluntary Arbitrator ruled that the request for extension filed by KAMAPI constituted seasonable notice of its intention to renew, modify or amend the agreement, which it could not however pursue because of the absence of the teachers who were then on summer vacation.[11] He rejected the contention of Holy Cross that KAMAPI had unreasonably delayed (until July 31, 1989) the submission of bargaining proposals, opining that the delay was partly attributable to the Schools prolonged inaction on KAMAPIs

request for extension of the CBA. He also ruled that Holy Cross was estopped from claiming automatic renewal of the CBA because it ceased to implement the check-off provision embodied in the CBA, declaring said Schools argument -- that a "definitive ruling" by the DOLE on the correct interpretation of the automatic-extension clause of the old CBA was a condition precedent to negotiation for a new CBA -- to be a mere afterthought set up to justify its refusal to bargain with KAMAPI after the latter had proven that it was the legally-empowered bargaining agent of the school employees. In the dispositive portion of his award, the Voluntary Arbitrator ordered Holy Cross to:
1. sit down, negotiate and conclude (an agreement) with the Holy Cross of Davao College Faculty Union-KAMAPI, which, by Resolution of the Supreme Court, remains the collective bargaining agent of the permanent and regular teachers of said educational institution; (and)

2. pay to the Union the amount equivalent to the uncollected union dues from August 1989 up to the time respondent shall have concluded a new CBA with the Union, it appearing that respondent stopped complying with the CBAs check-off provisions as of said date.[12]

The Voluntary Arbitrator also requested the Fiscal Examiner of the NLRC, region XI, Davao City, to make the proper computation of the union dues to be paid by management to the complainant union. Dissatisfied, Holy Cross filed the petition at bar, challenging the Voluntary Arbitrators decision on the following grounds, viz.:[13]
1. That the voluntary arbitrator erred and acted in grave abuse of discretion amounting to lack or excess of jurisdiction in ordering petitioner to pay the union the uncollected union dues to private respondent which was not even an issue submitted for voluntary arbitration, resulting in serious violation of due process. 2. That the voluntary arbitrator erred in considering that petitioner refused to negotiate with (the) Union, contrary to the records and evidence presented in the case.

The Voluntary Arbitrators conclusion -- that petitioner Holy Cross had, in light of the evidence on record, failed to negotiate with KAMAPI, adjudged as the collective bargaining agent of the schools permanent and regular teachers -- is a conclusion of fact that the Court will not review, the inquiry at bar being limited to the issue of whether or not said Voluntary Arbitrator had acted without or in excess of his jurisdiction, or with grave abuse of discretion; nor does the Court see its way clear, after analyzing the record, to pronouncing that reasoned conclusion to have been made so whimsically, capriciously, oppressively, or unjustifiably -- in other words, attended by grave abuse of discretion amounting to lack or excess of jurisdiction -- as to call for

extension of the Courts correcting hand through the extraordinary writ of certiorari. Said finding should therefore be, and is hereby, sustained. Now, concerning its alleged failure to observe the check-off provisions of the collective bargaining agreement, Holy Cross contends that this was not one of the issues raised in the arbitration proceedings; that said issue was therefore extraneous and improper; and that even assuming the contrary, it (Holy Cross) had not in truth violated the CBA. Holy Cross asserts that it could not comply with the check-off provisions because contrary to established practice prior to August, 1989, KAMAPI failed to submit to the college comptroller every 8 day of the month, a list of employees from whom union dues and the corresponding agency fees were to be deducted; further, that there was an uncertainty as to the recognized bargaining agent with whom it would deal -- a matter settled only upon its receipt of a copy of this Courts Resolution on July 18, 1991 -- and in any case, the Voluntary Arbitrators order for it to pay to the union the uncollected employees' dues or agency fees -- would amount to the unions unjust enrichment.[14]
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KAMAPI maintains, on the other hand, that the check-off issue was raised in the position paper it submitted in the voluntary arbitration proceedings; and that in any case, the issue was intimately connected with those submitted for resolution and necessary for complete adjudication of the rights and obligations of the parties;[15] and that said position paper had alleged the manifest bad faith of management in not providing information as to who were regular employees, thereby precluding determination of teachers eligible for union membership. Disregarding the objection of failure to seasonably set up the check-off question -- the factual premises thereof not being indisputable, and technical objections of this sort being generally inconsequential in quasi-judicial proceedings -- the issues here ultimately boil down to whether or not an employer is liable to pay to the union of its employees, the amounts it failed to deduct from their salaries -- as union dues (with respect to union members) or agency fees (as regards those not union members) -- in accordance with the check-off provisions of the collective bargaining contract (CBA) which it claims to have been automatically extended. A check-off is a process or device whereby the employer, on agreement with the union recognized as the proper bargaining representatives, or on prior authorization from its employees, deducts union dues or agency fees from the latter's wages and remits them directly to the union.[16] Its desirability to a labor organization is quite evident; by it, it is assured of continuous

funding. Indeed, this Court has acknowledged that the system of check-off is primarily for the benefit of the union and, only indirectly, of the individual laborers.[17] When stipulated in a collective bargaining agreement, or authorized in writing by the employees concerned -- the labor Code and its Implementing Rules recognize it to be the duty of the employer to deduct sums equivalent to the amount of union dues from the employees' wages for direct remittance to the union, in order to facilitate the collection of funds vital to the role of the union as representative of employees in a bargaining unit to the role of the union as representative of employees in a bargaining unit if not, indeed, to its very existence. And it may be mentioned in this connection that the right to union dues deducted pursuant to a check of, pertains to the local union which continues to represent the employees under the terms of a CBA, and not to the parent association from which it has dissaffiliated.[18] The legal basis of check-off is thus found in statute or in contract.[19] Statutory limitations on check-offs generally require written authorization from each employee to deduct wages; however, a resolution approved and adopted by a majority of the union members at a general meeting will suffice when the right to check-off has been recognized by the employer, including collection of reasonable assessments in connection with mandatory activities of the union, or other special assessments and extraordinary fees.[20] Authorization to effect a check-off of union dues is co-terminous with the union affiliation or membership of employees.[21] On the other hand, the collection of agency fees in an amount equivalent to union dues and fees, from employees who are not union members, is recognized by Article 248 (e) of the Labor Code. No requirement of written authorization from the nonunion employee is imposed. The employees acceptance of benefits resulting from a collective bargaining agreement justifies the deduction of agency fees from his pay and the unions entitlement thereto. In this aspect, the legal basis of the unions right to agency fees is neither contractual nor statutory, but quasi-contractual, deriving from the established principle that non-union employees may not unjustly enrich themselves by benefiting from employment conditions negotiated by the bargaining union.[22] No provision of law makes the employer directly liable for the payment to the labor organization of union dues and assessments that the former fails to deduct from its employees salaries and wages pursuant to a check -off stipulation. The employers failure to make the requisite deductions may constitute a violation of a contractual commitment for which it may incur liability for unfair labor practice.[23] But it does not by that omission, incur

liability to the union for the aggregate of dues or assessments uncollected from the union members, or agency fees for non-union employees. Check-offs in truth impose as extra burden on the employer in the form of additional administrative and bookkeeping costs. It is a burden assumed by management at the instance of the union and for its benefit, in order to facilitate the collection of dues necessary for the latters life and sustenance. But the obligation to pay union dues and agency fees obviously devolves not upon the employer, but the individual employee. It is a personal obligation not demandable from the employer upon default or refusal of the employer to consent to a check-off. The only obligation of the employer under a check-off is to effect the deductions and remit the collections to the union. The principle of unjust enrichment necessarily precludes recovery of union dues -- or agency fees -- from the employer, these being, to repeat, obligations pertaining to the individual worker in favor of the bargaining union. Where the employer fails or refuses to implement a check-off agreement, logic and prudence dictate that the union itself undertake the collection of union dues and assessments from its members (and agency fees from non-union employees); this, of course, without prejudice to suing the employer for unfair labor practice. There was thus no basis for the Voluntary Arbitrator to require Holy Cross to assume liability for the union dues and assessments, and agency fees that it had failed to deduct from its employees salaries on the proffered plea that contrary to established practice, KAMAPI had failed to submit to the college comptroller every 8 day of the month, a list of employees from whose pay union dues and the corresponding agency fees were to be deducted.
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WHEREFORE, the requirement imposed on petitioner Holy Cross by the challenged decision of the Voluntary Arbitrator, to pay respondent KAMAPI the amount equivalent to the uncollected union dues and agency fees from August 1989 up to the time a new collective bargaining agreement is concluded, is NULLIFIED and SET ASIDE; but in all other respects, the decision of the Voluntary Arbitrator is hereby AFFIRMED. SO ORDERED.
G.R. No. L-25246 September 12, 1974 BENJAMIN VICTORIANO, plaintiff-appellee, vs. ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE FACTORY, INC., defendants, ELIZALDE ROPE WORKERS' UNION, defendant-appellant. Salonga, Ordonez, Yap, Sicat & Associates for plaintiff-appellee.

Cipriano Cid & Associates for defendant-appellant.

ZALDIVAR, J.:p Appeal to this Court on purely questions of law from the decision of the Court of First Instance of Manila in its Civil Case No. 58894. The undisputed facts that spawned the instant case follow: Benjamin Victoriano (hereinafter referred to as Appellee), a member of the religious sect known as the "Iglesia ni Cristo", had been in the employ of the Elizalde Rope Factory, Inc. (hereinafter referred to as Company) since 1958. As such employee, he was a member of the Elizalde Rope Workers' Union (hereinafter referred to as Union) which had with the Company a collective bargaining agreement containing a closed shop provision which reads as follows: Membership in the Union shall be required as a condition of employment for all permanent employees workers covered by this Agreement. The collective bargaining agreement expired on March 3, 1964 but was renewed the following day, March 4, 1964. Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its amendment by Republic Act No. 3350, the employer was not precluded "from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees." On June 18, 1961, however, Republic Act No. 3350 was enacted, introducing an amendment to paragraph (4) subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but such agreement shall not cover members of any religious sects which prohibit affiliation of their members in any such labor organization". Being a member of a religious sect that prohibits the affiliation of its members with any labor organization, Appellee presented his resignation to appellant Union in 1962, and when no action was taken thereon, he reiterated his resignation on September 3, 1974. Thereupon, the Union wrote a formal letter to the Company asking the latter to separate Appellee from the service in view of the fact that he was resigning from the Union as a member. The management of the Company in turn notified Appellee and his counsel that unless the Appellee could achieve a satisfactory arrangement with the Union, the Company would be constrained to dismiss him from the service. This prompted Appellee to file an action for injunction, docketed as Civil Case No. 58894 in the Court of First Instance of Manila to enjoin the Company and the Union from dismissing Appellee. 1 In its answer, the
Union invoked the "union security clause" of the collective bargaining agreement; assailed the constitutionality of Republic Act No. 3350; and contended that the Court had no jurisdiction over the case, pursuant to Republic Act No. 875, Sections 24 and 9 (d) and (e).2 Upon the facts agreed upon by the parties during the pre-trial conference, the Court a quo rendered its decision on August 26, 1965, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant Elizalde Rope Factory, Inc. from dismissing the plaintiff from his present employment and sentencing the defendant Elizalde Rope Workers' Union to pay the plaintiff P500 for attorney's fees and the costs of this action. 3

From this decision, the Union appealed directly to this Court on purely questions of law, assigning the following errors: I. That the lower court erred when it did not rule that Republic Act No. 3350 is unconstitutional. II. That the lower court erred when it sentenced appellant herein to pay plaintiff the sum of P500 as attorney's fees and the cost thereof. In support of the alleged unconstitutionality of Republic Act No. 3350, the Union contented, firstly, that the Act infringes on the fundamental right to form lawful associations; that "the very phraseology of said Republic Act 3350, that membership in a labor organization is banned to all those belonging to such religious sect prohibiting affiliation with any labor organization" 4 , "prohibits all the members of
a given religious sect from joining any labor union if such sect prohibits affiliations of their members thereto" 5 ; and, consequently, deprives said members of their constitutional right to form or join lawful associations or organizations guaranteed by the Bill of Rights, and thus becomes obnoxious to Article III, Section 1 (6) of the 1935 Constitution. 6

Secondly, the Union contended that Republic Act No. 3350 is unconstitutional for impairing the obligation of contracts in that, while the Union is obliged to comply with its collective bargaining agreement containing a "closed shop provision," the Act relieves the employer from its reciprocal obligation of cooperating in the maintenance of union membership as a condition of employment; and that said Act, furthermore, impairs the Union's rights as it deprives the union of dues from members who, under the Act, are relieved from the obligation to continue as such members. 7 Thirdly, the Union contended that Republic Act No. 3350 discriminatorily favors those religious sects which ban their members from joining labor unions, in violation of Article Ill, Section 1 (7) of the 1935 Constitution; and while said Act unduly protects certain religious sects, it leaves no rights or protection to labor organizations. 8 Fourthly, Republic Act No. 3350, asserted the Union, violates the constitutional provision that "no religious test shall be required for the exercise of a civil right," in that the laborer's exercise of his civil right to join associations for purposes not contrary to law has to be determined under the Act by his affiliation with a religious sect; that conversely, if a worker has to sever his religious connection with a sect that prohibits membership in a labor organization in order to be able to join a labor organization, said Act would violate religious freedom. 9 Fifthly, the Union contended that Republic Act No. 3350, violates the "equal protection of laws" clause of the Constitution, it being a discriminately legislation, inasmuch as by exempting from the operation of closed shop agreement the members of the "Iglesia ni Cristo", it has granted said members undue advantages over their fellow workers, for while the Act exempts them from union obligation and liability, it nevertheless entitles them at the same time to the enjoyment of all concessions, benefits and other emoluments that the union might secure from the employer. 10 Sixthly, the Union contended that Republic Act No. 3350 violates the constitutional provision regarding the promotion of social justice. 11 Appellant Union, furthermore, asserted that a "closed shop provision" in a collective bargaining agreement cannot be considered violative of religious freedom, as to call for the amendment introduced by Republic Act No. 3350; 12and that unless Republic Act No. 3350 is declared
unconstitutional, trade unionism in this country would be wiped out as employers would prefer to hire or employ members of the Iglesia ni Cristo in order to do away with labor organizations. 13

Appellee, assailing appellant's arguments, contended that Republic Act No. 3350 does not violate the right to form lawful associations, for the right to join associations includes the right not to join or to resign from a labor organization, if one's conscience does not allow his membership therein, and the Act has given substance to such right by prohibiting the compulsion of workers to join labor organizations; 14 that said Act does not impair the obligation of contracts for said law formed part of, and
was incorporated into, the terms of the closed shop agreement; 15that the Act does not violate the establishment of religion clause or separation of Church and State, for Congress, in enacting said law, merely accommodated the religious needs of those workers whose religion prohibits its members from joining labor unions, and balanced the collective rights of organized labor with the constitutional right of an individual to freely exercise his chosen religion; that the constitutional right to the free exercise of one's religion has primacy and preference over union security measures which are merely contractual 16 ; that said Act does not violate the constitutional provision of equal protection, for the classification of workers under the Act depending on their religious tenets is based on substantial distinction, is germane to the purpose of the law, and applies to all the members of a given class; 17 that said Act, finally, does not violate the social justice policy of the Constitution, for said Act was enacted precisely to equalize employment opportunities for all citizens in the midst of the diversities of their religious beliefs." 18

I. Before We proceed to the discussion of the first assigned error, it is necessary to premise that there are some thoroughly established principles which must be followed in all cases where questions of constitutionality as obtains in the instant case are involved. All presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt, that a law may work hardship does not render it unconstitutional; that if any reasonable basis may be conceived which supports the statute, it will be upheld, and the challenger must negate all possible bases; that the courts are not concerned with the wisdom, justice, policy, or expediency of a statute; and that a liberal interpretation of the constitution in favor of the constitutionality of legislation should be adopted. 19 1. Appellant Union's contention that Republic Act No. 3350 prohibits and bans the members of such religious sects that forbid affiliation of their members with labor unions from joining labor unions appears nowhere in the wording of Republic Act No. 3350; neither can the same be deduced by necessary implication therefrom. It is not surprising, therefore, that appellant, having thus misread the Act, committed the error of contending that said Act is obnoxious to the constitutional provision on freedom of association. Both the Constitution and Republic Act No. 875 recognize freedom of association. Section 1 (6) of Article III of the Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973, provide that the right to form associations or societies for purposes not contrary to law shall not be abridged. Section 3 of Republic Act No. 875 provides that employees shall have the right to selforganization and to form, join of assist labor organizations of their own choosing for the purpose of collective bargaining and to engage in concerted activities for the purpose of collective bargaining and other mutual aid or protection. What the Constitution and the Industrial Peace Act recognize and guarantee is the "right" to form or join associations. Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being prevented by law; and second, power, whereby an employee may, as he pleases, join or refrain from Joining an association. It is, therefore, the employee who should decide for himself whether he should join or not an association; and should he choose to join, he himself makes up his mind as to which association he would join; and even after he has joined, he still retains the liberty and the power to leave and cancel his membership with said organization at any time. 20 It is clear, therefore, that the right to join a union includes the right to abstain from joining any
union. 21 Inasmuch as what both the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd to say that

the law also imposes, in the same breath, upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any association.

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however, limited. The legal protection granted to such right to refrain from joining is withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of which the employer may employ only member of the collective bargaining union, and the employees must continue to be members of the union for the duration of the contract in order to keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350, provides that although it would be an unfair labor practice for an employer "to discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization" the employer is, however, not precluded "from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees". By virtue, therefore, of a closed shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs, wishes to be employed or to keep his employment, he must become a member of the collective bargaining union. Hence, the right of said employee not to join the labor union is curtailed and withdrawn. To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced an exception, when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: "but such agreement shall not cover members of any religious sects which prohibit affiliation of their members in any such labor organization". Republic Act No. 3350 merely excludes ipso jure from the application and coverage of the closed shop agreement the employees belonging to any religious sects which prohibit affiliation of their members with any labor organization. What the exception provides, therefore, is that members of said religious sects cannot be compelled or coerced to join labor unions even when said unions have closed shop agreements with the employers; that in spite of any closed shop agreement, members of said religious sects cannot be refused employment or dismissed from their jobs on the sole ground that they are not members of the collective bargaining union. It is clear, therefore, that the assailed Act, far from infringing the constitutional provision on freedom of association, upholds and reinforces it. It does not prohibit the members of said religious sects from affiliating with labor unions. It still leaves to said members the liberty and the power to affiliate, or not to affiliate, with labor unions. If, notwithstanding their religious beliefs, the members of said religious sects prefer to sign up with the labor union, they can do so. If in deference and fealty to their religious faith, they refuse to sign up, they can do so; the law does not coerce them to join; neither does the law prohibit them from joining; and neither may the employer or labor union compel them to join. Republic Act No. 3350, therefore, does not violate the constitutional provision on freedom of association. 2. Appellant Union also contends that the Act is unconstitutional for impairing the obligation of its contract, specifically, the "union security clause" embodied in its Collective Bargaining Agreement with the Company, by virtue of which "membership in the union was required as a condition for employment for all permanent employees workers". This agreement was already in existence at the time Republic Act No. 3350 was enacted on June 18, 1961, and it cannot, therefore, be deemed to have been incorporated into the agreement. But by reason of this amendment, Appellee, as well as others similarly situated, could no longer be dismissed from his job even if he should cease to be a member, or disaffiliate from the Union, and the Company could continue employing him notwithstanding his disaffiliation from the Union. The Act, therefore, introduced a change into the express terms of the union security clause; the Company was partly absolved by law from the contractual obligation it had with the Union of employing only Union members in permanent positions, It cannot be denied, therefore, that there was indeed an impairment of said union security clause.

According to Black, any statute which introduces a change into the express terms of the contract, or its legal construction, or its validity, or its discharge, or the remedy for its enforcement, impairs the contract. The extent of the change is not material. It is not a question of degree or manner or cause, but of encroaching in any respect on its obligation or dispensing with any part of its force. There is an impairment of the contract if either party is absolved by law from its performance. 22 Impairment
has also been predicated on laws which, without destroying contracts, derogate from substantial contractual rights. 23

It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the details. The prohibition is not to be read with literal exactness like a mathematical formula, for it prohibits unreasonable impairment only. 24 In spite of the constitutional
prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interests may modify or abrogate contracts already in effect. 25 For not only are existing laws read into contracts in order to fix the obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. All contracts made with reference to any matter that is subject to regulation under the police power must be understood as made in reference to the possible exercise of that power. 26 Otherwise, important and valuable reforms may be precluded by the simple device of entering into contracts for the purpose of doing that which otherwise may be prohibited. The policy of protecting contracts against impairment presupposes the maintenance of a government by virtue of which contractual relations are worthwhile a government which retains adequate authority to secure the peace and good order of society. The contract clause of the Constitution must, therefore, be not only in harmony with, but also in subordination to, in appropriate instances, the reserved power of the state to safeguard the vital interests of the people. It follows that not all legislations, which have the effect of impairing a contract, are obnoxious to the constitutional prohibition as to impairment, and a statute passed in the legitimate exercise of police power, although it incidentally destroys existing contract rights, must be upheld by the courts. This has special application to contracts regulating relations between capital and labor which are not merely contractual, and said labor contracts, for being impressed with public interest, must yield to the common good. 27

In several occasions this Court declared that the prohibition against impairing the obligations of contracts has no application to statutes relating to public subjects within the domain of the general legislative powers of the state involving public welfare. 28 Thus, this Court also held that the Blue
Sunday Law was not an infringement of the obligation of a contract that required the employer to furnish work on Sundays to his employees, the law having been enacted to secure the well-being and happiness of the laboring class, and being, furthermore, a legitimate exercise of the police power. 29

In order to determine whether legislation unconstitutionally impairs contract obligations, no unchanging yardstick, applicable at all times and under all circumstances, by which the validity of each statute may be measured or determined, has been fashioned, but every case must be determined upon its own circumstances. Legislation impairing the obligation of contracts can be sustained when it is enacted for the promotion of the general good of the people, and when the means adopted to secure that end are reasonable. Both the end sought and the means adopted must be legitimate, i.e., within the scope of the reserved power of the state construed in harmony with the constitutional limitation of that power. 30 What then was the purpose sought to be achieved by Republic Act No. 3350? Its purpose was to insure freedom of belief and religion, and to promote the general welfare by preventing discrimination against those members of religious sects which prohibit their members from joining labor unions, confirming thereby their natural, statutory and constitutional right to work, the fruits of which work are usually the only means whereby they can maintain their own life and the life of their dependents. It cannot be gainsaid that said purpose is legitimate.

The questioned Act also provides protection to members of said religious sects against two aggregates of group strength from which the individual needs protection. The individual employee, at various times in his working life, is confronted by two aggregates of power collective labor, directed by a union, and collective capital, directed by management. The union, an institution developed to organize labor into a collective force and thus protect the individual employee from the power of collective capital, is, paradoxically, both the champion of employee rights, and a new source of their frustration. Moreover, when the Union interacts with management, it produces yet a third aggregate of group strength from which the individual also needs protection the collective bargaining relationship. 31 The aforementioned purpose of the amendatory law is clearly seen in the Explanatory Note to House Bill No. 5859, which later became Republic Act No. 3350, as follows: It would be unthinkable indeed to refuse employing a person who, on account of his religious beliefs and convictions, cannot accept membership in a labor organization although he possesses all the qualifications for the job. This is tantamount to punishing such person for believing in a doctrine he has a right under the law to believe in. The law would not allow discrimination to flourish to the detriment of those whose religion discards membership in any labor organization. Likewise, the law would not commend the deprivation of their right to work and pursue a modest means of livelihood, without in any manner violating their religious faith and/or belief. 32 It cannot be denied, furthermore, that the means adopted by the Act to achieve that purpose exempting the members of said religious sects from coverage of union security agreements is reasonable. It may not be amiss to point out here that the free exercise of religious profession or belief is superior to contract rights. In case of conflict, the latter must, therefore, yield to the former. The Supreme Court of the United States has also declared on several occasions that the rights in the First Amendment, which include freedom of religion, enjoy a preferred position in the constitutional system. 33 Religious freedom, although not unlimited, is a fundamental personal right and liberty, 34 and
has a preferred position in the hierarchy of values. Contractual rights, therefore, must yield to freedom of religion. It is only where unavoidably necessary to prevent an immediate and grave danger to the security and welfare of the community that infringement of religious freedom may be justified, and only to the smallest extent necessary to avoid the danger.

3. In further support of its contention that Republic Act No. 3350 is unconstitutional, appellant Union averred that said Act discriminates in favor of members of said religious sects in violation of Section 1 (7) of Article Ill of the 1935 Constitution, and which is now Section 8 of Article IV of the 1973 Constitution, which provides: No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free exercise and enjoyment of religious profession and worship, without discrimination and preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights. The constitutional provision into only prohibits legislation for the support of any religious tenets or the modes of worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the practice of any form of worship, 35 but also assures the free exercise of one's chosen form of religion
within limits of utmost amplitude. It has been said that the religion clauses of the Constitution are all designed to protect the broadest possible liberty of conscience, to allow each man to believe as his

conscience directs, to profess his beliefs, and to live as he believes he ought to live, consistent with the liberty of others and with the common good. 36 Any legislation whose effect or purpose is to impede the observance of one or all religions, or to discriminate invidiously between the religions, is invalid, even though the burden may be characterized as being only indirect. 37 But if the stage regulates conduct by enacting, within its power, a general law which has for its purpose and effect to advance the state's secular goals, the statute is valid despite its indirect burden on religious observance, unless the state can accomplish its purpose without imposing such burden. 38

In Aglipay v. Ruiz 39 , this Court had occasion to state that the government should not be precluded from
pursuing valid objectives secular in character even if the incidental result would be favorable to a religion or sect. It has likewise been held that the statute, in order to withstand the strictures of constitutional prohibition, must have a secular legislative purpose and a primary effect that neither advances nor inhibits religion. 40 Assessed by these criteria, Republic Act No. 3350 cannot be said to violate the constitutional inhibition of the "no-establishment" (of religion) clause of the Constitution.

The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not spiritual or religious or holy and eternal. It was intended to serve the secular purpose of advancing the constitutional right to the free exercise of religion, by averting that certain persons be refused work, or be dismissed from work, or be dispossessed of their right to work and of being impeded to pursue a modest means of livelihood, by reason of union security agreements. To help its citizens to find gainful employment whereby they can make a living to support themselves and their families is a valid objective of the state. In fact, the state is enjoined, in the 1935 Constitution, to afford protection to labor, and regulate the relations between labor and capital and industry. 41 More so now in the 1973 Constitution
where it is mandated that "the State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relation between workers and employers. 42

The primary effects of the exemption from closed shop agreements in favor of members of religious sects that prohibit their members from affiliating with a labor organization, is the protection of said employees against the aggregate force of the collective bargaining agreement, and relieving certain citizens of a burden on their religious beliefs; and by eliminating to a certain extent economic insecurity due to unemployment, which is a serious menace to the health, morals, and welfare of the people of the State, the Act also promotes the well-being of society. It is our view that the exemption from the effects of closed shop agreement does not directly advance, or diminish, the interests of any particular religion. Although the exemption may benefit those who are members of religious sects that prohibit their members from joining labor unions, the benefit upon the religious sects is merely incidental and indirect. The "establishment clause" (of religion) does not ban regulation on conduct whose reason or effect merely happens to coincide or harmonize with the tenets of some or all religions. 43 The free exercise clause of the Constitution has been interpreted to require that religious
exercise be preferentially aided. 44

We believe that in enacting Republic Act No. 3350, Congress acted consistently with the spirit of the constitutional provision. It acted merely to relieve the exercise of religion, by certain persons, of a burden that is imposed by union security agreements. It was Congress itself that imposed that burden when it enacted the Industrial Peace Act (Republic Act 875), and, certainly, Congress, if it so deems advisable, could take away the same burden. It is certain that not every conscience can be accommodated by all the laws of the land; but when general laws conflict with scrupples of conscience, exemptions ought to be granted unless some "compelling state interest" intervenes.45 In
the instant case, We see no such compelling state interest to withhold exemption.

Appellant bewails that while Republic Act No. 3350 protects members of certain religious sects, it leaves no right to, and is silent as to the protection of, labor organizations. The purpose of Republic Act No. 3350 was not to grant rights to labor unions. The rights of labor unions are amply provided

for in Republic Act No. 875 and the new Labor Code. As to the lamented silence of the Act regarding the rights and protection of labor unions, suffice it to say, first, that the validity of a statute is determined by its provisions, not by its silence 46 ; and, second, the fact that the law may work hardship
does not render it unconstitutional. 47

It would not be amiss to state, regarding this matter, that to compel persons to join and remain members of a union to keep their jobs in violation of their religious scrupples, would hurt, rather than help, labor unions, Congress has seen it fit to exempt religious objectors lest their resistance spread to other workers, for religious objections have contagious potentialities more than political and philosophic objections. Furthermore, let it be noted that coerced unity and loyalty even to the country, and a fortiori to a labor union assuming that such unity and loyalty can be attained through coercion is not a goal that is constitutionally obtainable at the expense of religious liberty. 48 A desirable end cannot be
promoted by prohibited means.

4. Appellants' fourth contention, that Republic Act No. 3350 violates the constitutional prohibition against requiring a religious test for the exercise of a civil right or a political right, is not well taken. The Act does not require as a qualification, or condition, for joining any lawful association membership in any particular religion or in any religious sect; neither does the Act require affiliation with a religious sect that prohibits its members from joining a labor union as a condition or qualification for withdrawing from a labor union. Joining or withdrawing from a labor union requires a positive act. Republic Act No. 3350 only exempts members with such religious affiliation from the coverage of closed shop agreements. So, under this Act, a religious objector is not required to do a positive act to exercise the right to join or to resign from the union. He is exempted ipso jure without need of any positive act on his part. A conscientious religious objector need not perform a positive act or exercise the right of resigning from the labor union he is exempted from the coverage of any closed shop agreement that a labor union may have entered into. How then can there be a religious test required for the exercise of a right when no right need be exercised? We have said that it was within the police power of the State to enact Republic Act No. 3350, and that its purpose was legal and in consonance with the Constitution. It is never an illegal evasion of a constitutional provision or prohibition to accomplish a desired result, which is lawful in itself, by discovering or following a legal way to do it. 49 5. Appellant avers as its fifth ground that Republic Act No. 3350 is a discriminatory legislation, inasmuch as it grants to the members of certain religious sects undue advantages over other workers, thus violating Section 1 of Article III of the 1935 Constitution which forbids the denial to any person of the equal protection of the laws. 50 The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity of rights. The Constitution does not require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different. 51 It does not prohibit legislation which is limited
either in the object to which it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments of knowledge or practice, is the grouping of things in speculation or

practice because they agree with one another in certain particulars. A law is not invalid because of simple inequality. 52 The very idea of classification is that of inequality, so that it goes without saying that
the mere fact of inequality in no manner determines the matter of constitutionality. 53 All that is required of a valid classification is that it be reasonable, which means that the classification should be based on substantial distinctions which make for real differences; that it must be germane to the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each member of the class. 54 This Court has held that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary. 55

In the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction, the state is recognized as enjoying a wide range of discretion. 56 It is not
necessary that the classification be based on scientific or marked differences of things or in their relation. 57 Neither is it necessary that the classification be made with mathematical nicety. 58 Hence legislative classification may in many cases properly rest on narrow distinctions,59 for the equal protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may appear.

We believe that Republic Act No. 3350 satisfies the aforementioned requirements. The Act classifies employees and workers, as to the effect and coverage of union shop security agreements, into those who by reason of their religious beliefs and convictions cannot sign up with a labor union, and those whose religion does not prohibit membership in labor unions. Tile classification rests on real or substantial, not merely imaginary or whimsical, distinctions. There is such real distinction in the beliefs, feelings and sentiments of employees. Employees do not believe in the same religious faith and different religions differ in their dogmas and cannons. Religious beliefs, manifestations and practices, though they are found in all places, and in all times, take so many varied forms as to be almost beyond imagination. There are many views that comprise the broad spectrum of religious beliefs among the people. There are diverse manners in which beliefs, equally paramount in the lives of their possessors, may be articulated. Today the country is far more heterogenous in religion than before, differences in religion do exist, and these differences are important and should not be ignored. Even from the phychological point of view, the classification is based on real and important differences. Religious beliefs are not mere beliefs, mere ideas existing only in the mind, for they carry with them practical consequences and are the motives of certain rules. of human conduct and the justification of certain acts. 60 Religious sentiment makes a man view things and events in their
relation to his God. It gives to human life its distinctive character, its tone, its happiness or unhappiness its enjoyment or irksomeness. Usually, a strong and passionate desire is involved in a religious belief. To certain persons, no single factor of their experience is more important to them than their religion, or their not having any religion. Because of differences in religious belief and sentiments, a very poor person may consider himself better than the rich, and the man who even lacks the necessities of life may be more cheerful than the one who has all possible luxuries. Due to their religious beliefs people, like the martyrs, became resigned to the inevitable and accepted cheerfully even the most painful and excruciating pains. Because of differences in religious beliefs, the world has witnessed turmoil, civil strife, persecution, hatred, bloodshed and war, generated to a large extent by members of sects who were intolerant of other religious beliefs. The classification, introduced by Republic Act No. 3350, therefore, rests on substantial distinctions.

The classification introduced by said Act is also germane to its purpose. The purpose of the law is precisely to avoid those who cannot, because of their religious belief, join labor unions, from being deprived of their right to work and from being dismissed from their work because of union shop security agreements.

Republic Act No. 3350, furthermore, is not limited in its application to conditions existing at the time of its enactment. The law does not provide that it is to be effective for a certain period of time only. It is intended to apply for all times as long as the conditions to which the law is applicable exist. As long as there are closed shop agreements between an employer and a labor union, and there are employees who are prohibited by their religion from affiliating with labor unions, their exemption from the coverage of said agreements continues. Finally, the Act applies equally to all members of said religious sects; this is evident from its provision. The fact that the law grants a privilege to members of said religious sects cannot by itself render the Act unconstitutional, for as We have adverted to, the Act only restores to them their freedom of association which closed shop agreements have taken away, and puts them in the same plane as the other workers who are not prohibited by their religion from joining labor unions. The circumstance, that the other employees, because they are differently situated, are not granted the same privilege, does not render the law unconstitutional, for every classification allowed by the Constitution by its nature involves inequality. The mere fact that the legislative classification may result in actual inequality is not violative of the right to equal protection, for every classification of persons or things for regulation by law produces inequality in some degree, but the law is not thereby rendered invalid. A classification otherwise reasonable does not offend the constitution simply because in practice it results in some inequality. 61 Anent this matter, it has been said that whenever it is apparent from the scope of the law
that its object is for the benefit of the public and the means by which the benefit is to be obtained are of public character, the law will be upheld even though incidental advantage may occur to individuals beyond those enjoyed by the general public. 62

6. Appellant's further contention that Republic Act No. 3350 violates the constitutional provision on social justice is also baseless. Social justice is intended to promote the welfare of all the people. 63 Republic Act No. 3350 promotes that welfare insofar as it looks after the welfare of those who,
because of their religious belief, cannot join labor unions; the Act prevents their being deprived of work and of the means of livelihood. In determining whether any particular measure is for public advantage, it is not necessary that the entire state be directly benefited it is sufficient that a portion of the state be benefited thereby.

Social justice also means the adoption by the Government of measures calculated to insure economic stability of all component elements of society, through the maintenance of a proper economic and social equilibrium in the inter-relations of the members of the community. 64 Republic
Act No. 3350 insures economic stability to the members of a religious sect, like the Iglesia ni Cristo, who are also component elements of society, for it insures security in their employment, notwithstanding their failure to join a labor union having a closed shop agreement with the employer. The Act also advances the proper economic and social equilibrium between labor unions and employees who cannot join labor unions, for it exempts the latter from the compelling necessity of joining labor unions that have closed shop agreements and equalizes, in so far as opportunity to work is concerned, those whose religion prohibits membership in labor unions with those whose religion does not prohibit said membership. Social justice does not imply social equality, because social inequality will always exist as long as social relations depend on personal or subjective proclivities. Social justice does not require legal equality because legal equality, being a relative term, is necessarily premised on differentiations based on personal or natural conditions. 65 Social justice guarantees equality of opportunity 66 , and this is precisely what Republic Act No. 3350 proposes to accomplish it gives laborers, irrespective of their religious scrupples, equal opportunity for work.

7. As its last ground, appellant contends that the amendment introduced by Republic Act No. 3350 is not called for in other words, the Act is not proper, necessary or desirable. Anent this matter, it has been held that a statute which is not necessary is not, for that reason, unconstitutional; that in

determining the constitutional validity of legislation, the courts are unconcerned with issues as to the necessity for the enactment of the legislation in question. 67 Courts do inquire into the wisdom of
laws. 68 Moreover, legislatures, being chosen by the people, are presumed to understand and correctly appreciate the needs of the people, and it may change the laws accordingly. 69 The fear is entertained by appellant that unless the Act is declared unconstitutional, employers will prefer employing members of religious sects that prohibit their members from joining labor unions, and thus be a fatal blow to unionism. We do not agree. The threat to unionism will depend on the number of employees who are members of the religious sects that control the demands of the labor market. But there is really no occasion now to go further and anticipate problems We cannot judge with the material now before Us. At any rate, the validity of a statute is to be determined from its general purpose and its efficacy to accomplish the end desired, not from its effects on a particular case. 70 The essential basis for the exercise of power, and not a mere incidental result arising from its exertion, is the criterion by which the validity of a statute is to be measured. 71

II. We now pass on the second assignment of error, in support of which the Union argued that the decision of the trial court ordering the Union to pay P500 for attorney's fees directly contravenes Section 24 of Republic Act No. 875, for the instant action involves an industrial dispute wherein the Union was a party, and said Union merely acted in the exercise of its rights under the union shop provision of its existing collective bargaining contract with the Company; that said order also contravenes Article 2208 of the Civil Code; that, furthermore, Appellee was never actually dismissed by the defendant Company and did not therefore suffer any damage at all . 72 In refuting appellant Union's arguments, Appellee claimed that in the instant case there was really no industrial dispute involved in the attempt to compel Appellee to maintain its membership in the union under pain of dismissal, and that the Union, by its act, inflicted intentional harm on Appellee; that since Appellee was compelled to institute an action to protect his right to work, appellant could legally be ordered to pay attorney's fees under Articles 1704 and 2208 of the Civil Code. 73 The second paragraph of Section 24 of Republic Act No. 875 which is relied upon by appellant provides that: No suit, action or other proceedings shall be maintainable in any court against a labor organization or any officer or member thereof for any act done by or on behalf of such organization in furtherance of an industrial dispute to which it is a party, on the ground only that such act induces some other person to break a contract of employment or that it is in restraint of trade or interferes with the trade, business or employment of some other person or with the right of some other person to dispose of his capital or labor. (Emphasis supplied) That there was a labor dispute in the instant case cannot be disputed for appellant sought the discharge of respondent by virtue of the closed shop agreement and under Section 2 (j) of Republic Act No. 875 a question involving tenure of employment is included in the term "labor dispute". 74 The
discharge or the act of seeking it is the labor dispute itself. It being the labor dispute itself, that very same act of the Union in asking the employer to dismiss Appellee cannot be "an act done ... in furtherance of an industrial dispute". The mere fact that appellant is a labor union does not necessarily mean that all its acts are in furtherance of an industrial dispute. 75 Appellant Union, therefore, cannot invoke in its favor Section 24 of Republic Act No. 875. This case is not intertwined with any unfair labor practice case existing at the time when Appellee filed his complaint before the lower court.

Neither does Article 2208 of the Civil Code, invoked by the Union, serve as its shield. The article provides that attorney's fees and expenses of litigation may be awarded "when the defendant's act or omission has compelled the plaintiff ... to incur expenses to protect his interest"; and "in any other case where the court deems it just and equitable that attorney's fees and expenses of litigation

should be recovered". In the instant case, it cannot be gainsaid that appellant Union's act in demanding Appellee's dismissal caused Appellee to incur expenses to prevent his being dismissed from his job. Costs according to Section 1, Rule 142, of the Rules of Court, shall be allowed as a matter of course to the prevailing party. WHEREFORE, the instant appeal is dismissed, and the decision, dated August 26, 1965, of the Court of First Instance of Manila, in its Civil Case No. 58894, appealed from is affirmed, with costs against appellant Union. It is so ordered. G.R. No. L-16561 January 28, 1961

FREEMAN SHIRT MANUFACTURING CO., INC. and SAW MUI, General Manager, petitioners, vs. COURT OF INDUSTRIAL RELATIONS, KAPISANAN NG MGA MANGGAGAWA SA DAMIT BALANGAY-NAFLU and FREEMAN SHIRT EMPLOYEES LABOR UNION, respondents. Sycip, Salazar and Associates for petitioners. Manuel B. Tuazon for respondent Court of Agrarian Relations. Risma and Viola for respondent Union. GUTIERREZ DAVID, J.: In a certification election ordered by the Court of Industrial Relations between the Kapisanan Ng Mga Manggagawa Sa Damit Balangay (NAFLU) and Freeman Shirt Employees Labor Union, the latter won and was certified as the sole collective bargaining representative of the employees of the Freeman Shirt Manufacturing Co., Inc. Thereafter, the company and the winning union entered into a collective bargaining agreement respecting terms and conditions of employment. Included in the agreement is a provision on union security which reads as follows: 2. Union Security; Union Shop. Membership in the UNION shall be a condition to continued employment in the COMPANY. Employees who are not members of the UNION on the effectivity of this Agreement and who fails to become a member of the UNION within thirty (30) days after such date of effectivity, shall be dismissed by the COMPANY from employment upon notice of that fact by the UNION to the COMPANY; any person hired by the COMPANY during the term of this Agreement who fails to become a member of the UNION within thirty (30) days after becoming a regular employee shall likewise be dismissed upon notice of that fact by the UNION to the COMPANY. Any employee who, during the term of this Agreement, resigns from the UNION or is expelled therefrom in accordance with the Constitution and By-Laws of the UNION shall likewise be dismissed by the COMPANY upon notice of that fact by the UNION to the COMPANY. The Collective Bargaining Agreement was duly publicized among the employees of the company. Before the expiration of the period of 30 days within which all employees were required to join the union under pain of separation from employment should they fail to do so, the union and the company warned all employees who had not yet theretofore complied with the agreement that the company would have no choice but to dismiss them should they fail to join the union within the prescribed period. Ten employees, namely, Marcela Reyes, Claudia Escobia, Leonila C. Gatus Corazon Velasquez, Bernardina Clarin, Remedios Jacinto, Corazon Maningas, Isidra Paredes, Enriqueta Gacuson and Estelita Papa, refused to join the union, and, in consequence, were dismissed by the company upon demand by the union.

The above-named persons then initiated the present proceedings, through the Kapisanan Ng Mga Manggagawa sa Damit Balangay Freeman (NAFLU) of which they were members, by the filing of a complaint for unfair labor practice against the Freeman Shirt Manufacturing Co., its general manager and the Freeman Shirt Employees' Labor Union, it being charged that the company dominated the union and that said company violated sec. 4 (a) of Republic Act No. 875 for having dismissed the ten laborers. After due hearing, the Industrial Court absolved the company of the charges of unfair labor practice and ordered the dismissal of the complaint. However, holding that the closed-shop agreement authorized in sec. 4, subsec.(a) (4) of Republic Act No. 875 is applicable only to new employees to be hired or to non-union members, and not to those already in the company's service, the Industrial Court ordered the reinstatement of the dismissed employees. Reconsideration of the decision insofar as it orders the reinstatement of the complainants having been denied by the Court in banc, the company and its general manager brought the case to this Court through the present petition for certiorari. We do not think the lower court committed any error in ordering the reinstatement of the dismissed employees. A closed-shop agreement has been considered as one form of union security whereby only union members can be hired and workers must remain union members in good standing as a condition to continued employment. (Francisco's Labor Laws, Vol. 1, 3rd., p. 368; Handler Case on Labor Law, p. 67). Such union security clause embodied in collective bargaining agreements is sanctioned under the Industrial Peace Act, sec. 4, subsec. a(4) provides as follows: To discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization: Provided, That nothing in this Act or in any other Act or statute of the Republic of the Philippines shall preclude an employer from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees as provided in section twelve;" Indeed, its validity has already been upheld by this Court. (Tolentino, et al. vs. Angeles, et al., G.R. No. L-8150, May 30, 1956; NLU vs. Aguinaldo's Echague, 51 Off. Gaz. 2899; Ang Malayang Manggagawa Ng Ang Tibay Enterprises, et al. vs. Ang Tibay, et al., G.R. No. L-8259, December 23, 1957; Bacolod-Murcia Milling Co., Inc., et al. vs. National Employees Workers Security Union, 53 Off. Gaz. 615; Confederated Sons of Labor vs. Anakan Lumber Co., et al., G.R. No. L-12503, April 29, 1960). The closed-shop agreement authorized under see. 4, subsec. a (4) of the Industrial Peace Act above quoted should however, apply to persons to be hired or to employees who are not yet members of any labor organization. It is inapplicable to those already in the service who are members of another union. To hold otherwise, i.e., that the employees in a company who are members of a minority union may be compelled to disaffiliate from their union and join the majority or contracting union, would render nugatory the right of all employees to self-organization and to form, join or assist labor organizations of their own choosing, a right guaranteed by the Industrial Peace Act (sec. 3, Rep. Act No. 875) as well as by the Constitution (Art. III, sec. 1[61). Section 12 of the Industrial Peace Act providing that when there is reasonable doubt as to who the employees have chosen as their representative the Industrial Court can order a certification election, would also become useless. For once a union has been certified by the court and enters into a collective bargaining agreement with the employer a closed-shop clause applicable to all employees

be they union or non-union members, the question of majority representation among the employees would be closed forever. Certainly, there can no longer exist any petition for certification election, since eventually the majority or contracting union will become a perpetual labor union. This alarming result could not have been the intention of Congress. The Industrial Peace Act was enacted precisely for the promotion of unionism in this country. Since a closed-shop clause in a collective bargaining agreement is inapplicable to employees who were already in the company's service at the time of its execution, the dismissal of the employees herein concerned is unjustified. (Local 7, Press & Printing Free Workers (FFW) et al. vs. Tabigne etc., et al., G.R. No. L-16093, November 29, 1960; 1 Francisco, Labor Laws, 3rd ed., 374-375, citing Electric Vacuum Cleaner Co., NLRB No. 75, 1939, cited in II Teller, Labor Disputes and Collective Bargaining, 867-868). Petitioners contend that the dismissal of the charges of unfair labor practices against the company precludes any order for reinstatement. The contention is untenable, for the dismissal here was made pursuant to a closed-shop agreement -which is unauthorized by law. In short, the dismissal was illegal. Ordinarily, the order for reinstatement should have carried with it an award for back pay. Considering, however, that there is no local decision on point, we are inclined to agree with the lower court and give the company the benefit of the doubt regarding its claim that it acted in good faith and in the honest belief that, as the law now stands, it could dismiss the employees who refused to join the winning or contracting union. IN VIEW OF THE FOREGOING, the decision complained of is affirmed, with costs against the petitioners.