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558 SUPREME COURT REPORTS ANNOTATED

Chua vs. National Labor Relations Commission

*
G.R. Nos. 89971-75. October 17, 1990.

CELIA B. CHUA, MARITES R MARTINEZ and ARACELI

A. ELARDO, For Themselves and in Their Capacity as
AttorneysIn-Fact of 2,345 Former Daily-Paid Employees of
Stanford Microsystems. Inc., LUDIVINA L. SABALZA,
ADELIZA E. CANTILLO and REMIGIO P. PESTAÑO, For
Themselves and in Their Capacity As Attorneys-In-Fact of
3,244 Former DailyPaid Employees of Stanford
Microsystems, Inc., MARIO A. MENTIL, REMIGIO F.
SANTOS and NOEL VILLENA, For Themselves and in
Their Capacity As Attorneys-In-Fact of 599 Former
Monthly-Paid Employees of Stanford Microsystems Inc.,
MAXIMO E. DAQUIL, GEORGE T, BARTOLOME and
ERNESTO L. CONCEPCION, For Themselves and in
Their Capacity As Attorneys-In-Fact of 300 Former Non-
Unionized and Confidential Employees of Stanford
Microsystems, Inc., and LIQUIDATION COMMITTEE OF
STANFORD MICROSYSTEMS, INC., Duly Appointed by
the Securities and Exchange Commission, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION LABOR
ARBITER DOMINADOR M. CRUZ, Public Respondents,
and FERNANDO R. GUMABON, CARMELITA
TOLENTINO, RICARTE CABASE, TERESITA ALORAN,
ENCARNITA JULIANO, ANITA DAILEG, ERNESTO
ALARCON, JOHNNY ARAGON, LEONCIO PIMENTEL,
RODOLFO MERCADO, DANIEL ALMAZAN, ORLANDO
DE LEON, EDITHA LIMA, MARYLIN INES, LINDA
ESTABA, NELIA DE BORJA, CECILIA CRUZ, FE
RAYALA, ADELIZA MOYA, NATY LAMAN, JANET
PONCE, ESTELA ALABASO, MILAGROS CERRA,
JOSEPHINE BAYONETA and ANNABELLE SALABIT,
private respondents.

Corporation Law; Securities and Exchange Commission; PD

902A; Liquidation Proceedings; A liquidation proceeding is a
proceeding in rem so that all other interested persons whether
known to the parties or not may be bound by such proceedings.—
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An insolvency proceeding is similar to the settlement of a

decedent's estate in that it is a proceeding in rem and is binding
against the whole world. Therefore, all persons which have
interest in the subject matter involved, whether

________________

* THIRD DIVISION.

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Chua vs. National Labor Relations Commission

or not they are given notice are equally bound. Thus, "a
liquidation of similar import or other equivalent general
liquidation must also necessarily be a proceeding in rem so that all
other interested persons whether known to the parties or not may
be bound by such proceed ings." (Philippine Savings Bank v.
Lantin, 124 SCRA 476 [1983]; Emphasis supplied) The rule is
that a declaration of bankruptcy or a judicial liquidation must be
present before preferences over various money claims may be
enforced. Since a liquidation proceeding is a proceeding in rem, all
claims of creditors whether preferred or nonpreferred, the
identification of the preferred ones and the totality of the
employer's asset should be brought into the picture. There can
then be an authoritative, fair and binding adjudication. (See
Development Bank of the Philippines v. Santos, 171 SCRA 138
[1989]).
Same; Same; Same; Same; Labor Law; Money Claims; Money
claims of former employees of a corporation may be presented in
the liquidation proceedings pending before the Securities and
Exchange Commission.—Consequently, the Solicitor General's
submission that the money claims of Stanford's former employees
pending with respondent Labor Arbiter Dominador M. Cruz
should be allowed to continue and that the money awards be later
presented to the Stanford Liquidation Committee is not the
correct solution. It would only spawn needless controversy, delays,
and confusion. Significantly, the money claims were presented
after Stanford filed a petition for suspension of payments and
appointment of a rehabilitation receiver with the SEC. In other
words, the money claims were filed when Stanford was already
experiencing financial difficulties. Apparently, the employees filed
the cases to enforce money claims which they might not collect in

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view of Stanford's financial crisis and impending closure. Under

these circumstances, and bearing in mind the welfare of the
workers and their voluntary choices as to how their claims may be
equitably settled to their satisfaction, we rule that such money
claims were correctly submitted in the course of the liquidation
proceedings at the SEC.
Labor Relations; Republic Act 6715; RA 6715 reiterates the
promotion of the use of voluntary modes of settling labor disputes;
Compromise agreements executed between workers and their
employer, if done in good faith are valid and binding among the
parties.—Recently, in Republic Act 6715, the promotion of the
preferential use of voluntary modes of settling labor disputes was
again reiterated. In fact, as early as 1963, under the Industrial
Peace Act, we have ruled that compromise agreements executed
by workers or employees and their employer to settle their
differences if done in good faith are valid and

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Chua vs. National Labor Relations Commission

binding among the parties. (Dionela v. Court of Industrial

Relations, 8 SCRA 832 [1963]; Pampanga Sugar Development Co.,
Inc. v. Court of Industrial Relations, 114 SCRA 725 [1982]).
Same; Same; Same; A minority of the employees representing
less than 1% of the total employees cannot prevent the enforcement
of memorandum of agreement executed by the majority.—However,
may a minority of the employees which is equivalent to less than
1% of the total employees (25) represented by Atty. Ocampo
prevent the enforcement of the Memorandum of Agreement
executed by employees representing about 89% of the total
number of employees (6,341 out of a total 7,124 employees; 783
not represented in the negotiations but their shares placed in
escrow for their benefit under the MOA)? The answer is in the
negative. In the case of Dionela vs. Court of lndustrial Relations
supra, we ruled: "The main question for determination in this
case is whether the compromise agreement pursuant to which the
complaint in Case No. 598-ULP had, inter alia, been withdrawn
and then dismissed is binding upon petitioners herein. The latter
maintains that it is not, but the lower court held otherwise, upon
the ground that 'it is an accepted rule under our laws that the will
of the majority should prevail over the minority' citing Betting
Ushers Union (PLUM) v. Jai-alai, L-9330, June 29, 1957 and
Jesalva, et al. v. Bautista, L-11928 to L-11930, March 24, 1959—

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and that the action taken by petitioners herein as minority

members of the Union 'is contrary to the policy of the Magna
Carta of Labor, which promotes the settlement of differences
between management and labor by mutual agreement,' and that if
said action were tolerated, 'no employer would ever enter into any
compromise agreement for the minority members of the Union
will always dishonor the terms of the agreement and demand for
better terms.' The view thus taken by the lower court is correct.
Indeed, otherwise, even collective bargaining agreements would
cease to promote industrial peace and the purpose of Republic Act
No. 875 would thus be defeated.
Same; Same; Attorneys; Attorney's Fees; An attorney hired on
a contingent arrangement and whose services were terminated by
his clients because of his refusal to represent them in the out of
court settlement of their claims, has no right to interfere in the
implementation of the settlement agreement in his efforts to collect
attorney's fees not due him.—Since the contract for legal services
was on a contingent basis, Atty. Ocampo as counsel can be paid
only if he wins the case for the group. As it turned out, however,
Atty. Ocampo's services were terminated by the group as early as
October and November 1986 when he refused to represent the
group in the negotiations with the other

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creditors of Stanford for an out of court settlement of their claims

resulting in the execution of the Memorandum of Agreement. In
an earlier case involving Atty. Ocampo, entitled Ocampo v. Lerum
(162 SCRA 498 [1988]), we ruled: "The record of the case clearly
discloses that the private respondent Atty. Lerum was primarily
responsible for negotiating for the PALEA the retroactive wage
increases mentioned earlier, to the exclusion of petitioner Atty.
Ocampo. PAL could validly deal with the Biangco Faction
represented by Atty. Lerum because no court order had been
issued restraining PAL from doing so. The record of the case also
reveals that Atty. Ocampo tried his best to enjoin the negotiations
initiated by Atty. Lerum by questioning the same before the Court
of Industrial Relations and even this Court. On the basis of the
foregoing observations, We cannot see how Atty. Ocampo could be
entitled to any part of the said attorney's fees. The attorney's fees
emanated from the retroactive wage increases negotiated by Atty.
Lerum. Accordingly, and under the circumstances obtaining in
this case, the said attorney's fees should belong to Atty. Lerum to
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the exclusion of Atty. Ocampo, We, therefore, find no grave abuse

of discretion on the part of the public respondents in reaching this
conclusion." (at p. 502) Considering that Atty. Ocampo took no
part in the negotiations leading to the execution of the
Memorandum of Agreement, a compromise agreement among the
creditors and former employees of Stanford to liquidate Stanford
which we rule as valid, we find no plausible reason for Atty.
Ocampo to interfere with its implementation by filing complaints
and/or pleadings with the SEC, the Labor Arbiter and the NLRC
in his effort to collect attorney's fees not due him. With the
foregoing findings, we find no need to discuss the other arguments
posed by the petitioners.

PETITION to review the resolution of the National Labor

Relations Commission.
The facts are stated in the opinion of the Court.
          Carpio, Villaraza & Cruz; Delos Reyes, Bonifacio,
Delos Reyes; Bacungan, Larcia, Bacungan; Maria Ana C.
Sison; and Reynaldo Geronimo for petitioners.
          Vicente T. Ocampo Law Offices for movants-
intervenors.

GUTIERREZ, JR., J.:

The instant petition questions the jurisdiction of the

National Labor Relations Commission (NLRC) in issuing
three (3) resolutions dated October 6, 1988, November 3,
1988 and January
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562 SUPREME COURT REPORTS ANNOTATED

Chua vs. National Labor Relations Commission

3, 1990 in NLRC Injunction Case No. 1793. The October

6,1988 resolution denied for lack of merit the petitioners'
petition for writ of prohibition to stay further proceedings
in the five (5) consolidated labor cases involving the former
employees of Stanford Microsystems, Inc. pending with
respondent Labor Arbiter Dominador M. Cruz. The
November 3, 1988 resolution ordered petitioners'
Liquidation Committee of Stanford Microsystems, Inc. to
defer the payment of SIX MILLION PESOS
(P6,000,000.00) to the former employees of Stanford
Microsystems, Inc. The January 3, 1990 resolution, among
others directed petitioner Liquidation Committee to deposit
with the NLRC the deducted attorney's fees representing

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ten percent (10%) of the amount due and/or to be paid to

the former employees of Stanford Microsystems, Inc.
In December, 1985, Stanford Microsystems, Inc.
(Stanford) a service conductor corporation filed a petition
for suspension of payments and appointment of
rehabilitation receiver (Annex "A", Petition) with the
Securities and Exchange Commission (SEC). The petition
was docketed as SEC Case No. 2930. At that time, Stanford
had seven (7) secured creditor banks and more or less
seven thousand one hundred twenty-four (7,124)
employees.
On February 5, 1986, the SEC declared Stanford to be in
a state of suspension of payments. It issued an order
(Annex "B", Petition) appointing Sycip Gorres & Velayo &
Co. (SGV) as the rehabilitation receiver.
In view of these developments, the former employees of
Stanford filed with the Department of Labor and
Employment (DOLE) cases for money claims, to wit:

"(a) STANFORD TECHNICAL AND OFFICE STAFF

EMPLOYEES ASSOCIATION (STOSEA)-FFW, THROUGH ITS
PRESIDENT, NOEL VILLENA AND FOR AND IN BEHALF OF
ITS EIGHT HUNDRED SIXTY (860) MEMBERS, Complainants,
v. STANFORD MICROSYSTEMS, INC. AND CRISTINO
CONCEPCION, JR., IN HIS CAPACITY AS PRESIDENT AND
GENERAL MANAGER, Respondents, NLRC-NCR CASE NOS. 1-
106-86 AND 1-117-86, filed by herein Petitioners Mario A. Mentil,
Noel Villena, and Remigio F. Santos, acting for themselves and as
the duly appointed Attorneys-InFact of Five Hundred Ninety
Nine (599) Monthly-Paid Employees for Stanford, and assigned to
Labor Arbiter Ceferina Diosana—

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—for illegal lockout and payment of thirteenth month pay,

vacation leave and sick leave benefits and subsidiary seminar
fund and recreational activities fund. This case has been decided
but execution was suspended upon motion of the complainants;
(b) RODOLFO FERNANDEZ, ET AL., Petitioners, v.
STANFORD MICROSYSTEMS, INC., Respondent, NCR CASE
NO. 1-29486, filed by herein Petitioners Rodolfo Fernandez, for
himself, Maximo E. Daquil, George T. Bartolome and Ernesto L.
Concepcion, acting for themselves and as the duly appointed
Attorneys-In-Fact of Three Hundred (300) Confidential and Non-

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Unionized employees of Stanford, and assigned to Labor Arbiter

Raymundo R. Valenzuela—
—which case have been archived at the instance of the
complainants;
(c) STANFORD MICROSYSTEMS, INC. LABOR UNION-
FFW, Petitioners, v. STANFORD MICROSYSTEMS, INC.,
Respondent, CASE NO. 1-039-86, filed by herein Petitioners Celia
B. Chua, Araceli A. Elardo and Marites P. Martinez, acting for
themselves and as the duly appointed Attorneys-In-Fact of Two
Thousand Three Hundred Forty Five (2,345) Daily-Paid
employees of Stanford, and formerly assigned to Labor Arbiter
Benigno C. Villarente, now assigned to Labor Arbiter Alex
Arcadio Lopez—
—which case has been decided but the execution of the decision
and the case archived at the instance of the complainants;
(d) LUDIVINA L. SABALZA, ADELIZA E. CANTILLO,
REMIGIO P. PESTAÑO, ET AL., Complainants v. STANFORD
MICROSYSTEMS, INC. ET AL., Respondents, CASE NO. 12-
4882-86, filed by herein Petitioners Ludivina L. Sabalza, Adelina
E. Cantillo, and Remegio P. Pestaño, acting for themselves and as
the duly appointed Attorneys-In-Fact of Three Thousand Two
Hundred Forty Four (3,244) Daily-Paid employees of Stanford,
and formerly assigned to Labor Arbiter Evangeline Lubaton—
—for payment of separation pay, back (strike duration) pay
and thirteenth month pay for 1985, cash conversion of vacation
leave and sick leave and other money claims. The petitioner
Stanford Liquidation Committee has intervened in this case and
moved to stay proceedings;
(e) SMI LABOR UNION-FFW, ET AL., Petitioners v.
STANFORD MICROSYSTEMS, INC. Respondent, NCR-NS-3-
124-85, CASE NO. 3-753-86, filed by herein Petitioners Ludivina
L. Sabalza, Adelina E. Cantillo, and Remigio P. Pestaño, acting
for themselves and as the duly appointed Attorneys-In-Fact of
Three Thousand Two Hundred Forty Four (3,244) Daily-Paid
employees of Stanford, and assigned to Labor Arbiter Dominador
M. Cruz—

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—for payment of separation pay, back (strike duration) pay and

thirteenth month pay for 1985, cash conversion of vacation leave
and sick leave, and other money claims. The petitioner Stanford
Liquidation Committee has intervened in this case and moved to
stay proceedings;

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(f) LUDIVINA SABALZA, ET AL., Petitioners v. STANFORD

MICROSYSTEMS, INC., Respondent, CASE NO. 2-628-86, filed
by herein Petitioners Ludivina L. Sabalza, Adeliza E. Cantillo,
and Remigio P. Pestaño, acting for themselves and as the duly
appointed Attorneys-In-Fact of Three Thousand Two Hundred
Forty Four (3,244) Daily-Paid employees of Stanford, and
assigned to Labor Arbiter Dominador M. Cruz—
—for payment of separation pay, back (strike duration) pay
and thirteenth month pay for 1985, cash conversion of vacation
leave and sick leave, and other money claims. The petitioner
Stanford Liquidation Committee has intervened in this case and
moved to stay proceedings;
(g) LUDIVINA SABALZA, ET AL., FERNANDO R.
GUMABON, ET AL., Complainants v. Stanford Microsystems,
Inc., Respondent, CASE NO. 11-4543-86, filed by herein
Petitioners Ludivina L. Sabalza, Adeliza E. Cantillo, and Remigio
P. Pestaño, acting for themselves and as the duly appointed
Attorneys-In-Fact of Three Thousand Two Hundred Forty Four
(3,244) Daily-Paid employees of Stanford, and formerly assigned
to Labor Arbiter Armando Polintan—
—for payment of separation pay, back (strike duration) pay
and thirteenth month pay for 1985, cash conversion of vacation
and sick leave, and other money claims. The petitioner Stanford
Liquidation Committee has intervened in this case and moved to
stay proceedings; and
(h) FERNANDO R. GUMABON, ET AL, Petitioners v.
STANFORD MICROSYSTEMS, INC., Respondent, CASE NO. 3-
803-86, filed by herein Petitioners Mario A. Mentil, Noel Villena,
and Remigio F. Santos, acting for themselves and as the duly
appointed AttorneysIn-Fact of Five Hundred Ninety Nine (599)
Monthly-Paid employees of Stanford, and formerly assigned to
Labor Arbiter Martinez—
—for payment of separation pay, back (strike duration) pay
and thirteenth month pay for 1985, cash conversion of vacation
leave and sick leave, and other money claims. The petitioner
Stanford Liquidation Committee has intervened in this case and
moved to stay proceedings." (Petition, pp. 40-43)

Except for cases (a), (b) and (c) which were assigned to
different labor arbiters, cases (d) to (h) were consolidated
and as-

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signed to respondent Labor Arbiter Dominador M. Cruz.

The petitioners in case (d) comprise the former daily paid
employees of Stanford who were members of the Stanford
Microsystems, Inc., Labor Union ("SMILU"). They formed a
"Caretaker Committee", and the individual members
appointed Ludivina L. Sabalza, Adeliza E. Cantillo and
Remigio P. Pestaño as Attorneys-In-Fact for the purpose of
prosecuting and settling their claims against Stanford,
both before the SEC and the DOLE. The Attorneys-In-Fact
engaged the services of private respondent, Atty. Vicente
Ocampo, to act as their legal counsel.
In January, 1987, the SEC disapproved the
Rehabilitation Plan submitted by SGV and dismissed
Stanford's Petition for Suspension of Payments and
Appointment of a Rehabilitation Receiver. (Annex "C",
Petition) Subsequently, the SEC ordered Stanford's
liquidation.
The seven (7) secured creditor banks of Stanford,
namely:

(a) Philippine Commercial International Bank;

(b) Far East Bank and Trust Company;
(c) Private Development Corporation of the
Philippines;
(d) Equitable Banking Corporation;
(e) Union Bank of the Philippines;
(f) Philippine National Bank; and
(g) City Trust Banking Corporation

which have an aggregate principal exposure of Two

Hundred Thirty One Million Six Hundred Thousand Pesos
(P231,600,000.00), and the twelve (12) duly authorized
Attorneys-In-Fact of six thousand three hundred forty one
(6,341) former employees of Stanford (89% of the total
employees) with employees' claims of approximately One
Hundred Twenty Five Million Seven Hundred Ten
Thousand Pesos (P125,710,000.00) reached a mutually
acceptable plan for the speedy and orderly liquidation of
Stanford. Hence, representatives of the seven (7) secured
banks and the employees' Attorneys-In-Fact assisted by
their respective counsel held marathon meetings and
negotiations in the Office of Director Luna C. Piezas of the
DOLE, National Capital Region resulting in the execution
of a Memorandum of Agreement dated March 13, 1987
("MOA", Annex "D", Petition). The MOA was signed by all
the parties and duly attested by Director Luna C. Piezas.
566

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The principal terms of the MOA are as follows:

"(a) The Secured Creditor Banks will foreclose their real

estate and chattel mortgages;
(b) The Secured Creditor Banks will consolidate and
retain title to the foreclosed properties in their
respective names and contribute the same to a 'Pool
of Assets' under the control and administration of a
Liquidation Committee composed of eleven (11)
members, representing the Secured Creditor Banks,
and the Six Thousand Three Hundred Forty One
(6,341) former employees of Stanford who
authorized the MOA;
(c) The MOA Liquidation Committee will sell all the
foreclosed properties and distribute the proceeds
among the Secured Creditor Banks and the Six
Thousand Three Hundred Forty One (6,341)
employees. The share of the remaining Seven
Hundred Eighty Three (783) employees shall be
placed in escrow for their benefit until they claim
their share;
(d) The sharing formula for the distribution of the sales
proceeds principally took into account the principal
claims of the claimants; and
(e) All suits inconsistent with the MOA shall be
withdrawn." (Petition, p. 30)

The eleven (11) members of the MOA Liquidation

Committee are the following:

"(a) Philippine Commercial International Bank;

(b) Far East Bank and Trust Company;
(c) Private Development Corporation of the
Philippines;
(d) Equitable Banking Corporation;
(e) Union Bank of the Philippines;
(f) Philippine National Bank;
(g) Citytrust Banking Corporation;
(h) Celia B. Chua, Araceli A. Elardo and Marites P.
Martinez, acting for themselves and as the duly
appointed Attorneys-In-Fact of Two Thousand
Three Hundred Forty Five (2,345) former Daily-
Paid employees of Stanford;
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(i) Ludivina L. Sabalza, Adeliza E. Cantillo, and

Remigio P. Pestaño, acting for themselves and as
the duly appointed Attorneys-InFact of Three
Thousand Two Hundred Forty Four (3,244) former
Daily-Paid employees of Stanford;
(j) Mario A. Mentil, Noel Villena, and Remigio F.
Santos, acting for themselves and as the duly
appointed Attorneys-In-Fact of Five

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Chua vs. National Labor Relations Commission

Hundred Ninety Nine (599) former Monthly-Paid

employees of Stanford; and
(k) Rodolfo Fernandez, for himself, Maximo E. Daquil,
George T. Bartolome and Ernesto L. Concepcion,
acting for themselves and as the duly appointed
Attorneys-In-Fact of Three Hundred (300) former
confidential and Non-Unionized employees of
Stanford." (Petition, pp. 30-31)

Pursuant to the MOA, the secured creditor banks

foreclosed their mortgages, consolidated title over the real
properties and contributed the same to the "Pool of Assets."
The MOA Liquidation Committee then proceeded with the
sale of the foreclosed properties.
It is to be noted that the group of employees whose
attorneysin-fact are Ludivina L. Sabalza, Adeliza E.
Cantillo and Remigio P. Pestaño were represented in the
negotiations leading to the execution of the MOA by new
counsel, the Bacungan Larcia Bacungan Law Office.
Respondent Atty. Vicente Ocampo's legal services were
terminated by the attorneys-in-fact as early as October and
November 1986 in view of his refusal to represent the
group in the negotiations with the other former Stanford
employees and Stanford creditors towards an out-of-court
settlement of their claims against Stanford. This
termination was confirmed in a letter dated March 9, 1987
(Annex "K", Petition) which was received by Atty. Ocampo
on March 11, 1987. The pertinent portion of the
termination letter reads:

"It is with deep regret that we, the regular daily-paid rank-andfile
employees of Stanford Microsystems, Inc. (SMI), accept your
decision not to represent us in our negotiations, with various

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creditors of SMI, including former fellow employees, towards an

out-of-court settlement of our claims against the company. x x x
We, therefore, have no recourse but to engage the services of
another counsel in connection with the case now pending before
the Ministry of Labor, the Securities and Exchange Commission
and other courts or tribunals including the negotiations for an
out-of-court settlement of our claims. x x x" (Petition, p. 44)

On October 2, 1987, the SEC en banc issued an order

(Annex "E", Petition) appointing the same eleven (11)
members of the MOA Liquidation Committee as the
permanent SEC Liquida-

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Chua vs. National Labor Relations Commission

tor of Stanford pursuant to Presidential Decree No. 902-A,

as amended.
Atty. Ocampo claiming to be still the counsel for the
group represented by Ludivina L. Sabalza, Adeliza E.
Cantillo and Remigio P. Pestaño and other former Stanford
employees filed a "class suit" for the reconsideration of the
October 2, 1987 order.
In the hearing en banc held on December 17, 1987, the
SEC directed the Stanford Liquidation Committee and
Atty. Ocampo to submit the number and names of the
former Stanford employees represented by them.
On January 22,1988, the Stanford Liquidation
Committee, filed a compliance with the directive (Annex
"F", Petition) together with the following documents:

"(a) Copies of all the Special Powers of Attorney

executed by the Six Thousand Three Hundred Forty
One (6,341) former employees of Stanford [Eighty
Nine Percent (89%) of the total employees] in favor
of their Attorneys-In-Fact who signed the MOA;
(b) List of the names of all the Six Thousand Three
Hundred Forty One (6,341) former employees of
Stanford who executed Special Powers of Attorney,
which list was prepared by Carlos J. Valdes & Co.
on the basis of the special powers of attorney
executed (Annex "F-1", but refer to Annex "C-1" of
Annex "Q");
(c) Letters-certifications dated 21 January 1988 and 27
January 1988 of Carlos J. Valdes & Co. that based
on their verification, Six Thousand Three Hundred
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Forty One (6,341) former Stanford employees

actually executed Special Powers of Attorney in
favor of the workers' representatives in the MOA
Liquidation Committee and the Stanford
Liquidation Committee (Annexes "F-2" and "F-2-
A")." (Petition, p. 32)

On the other hand, Atty. Ocampo failed to comply with the

directive.
On October 12,1988, the SEC en banc denied Atty.
Ocampo's motion for reconsideration of the October 2, 1987
order (Annex "E", Petition) and various other motions. It
issued an Omnibus Order (Annex "H") approving the MOA
and confirming the appointment of the members of the
MOA Liquidation Committee as members of the Stanford
Liquidation Committee. In the same order, the SEC
clarified that Atty. Ocampo represents
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Chua vs. National Labor Relations Commission

only thirty four (34) employees. Actually, Atty. Ocampo

represents only twenty five (25) former Stanford employees
who are now the private respondents in the instant
petition.
As regards the money claims filed by the former
employees of Stanford, the following events meanwhile
transpired:
On June 30, 1988 the Stanford Liquidation Committee
filed a Manifestation (Annex "L", Petition) with the labor
arbiters, including Labor Arbiter Cruz, before whom the
labor cases filed against Stanford were pending, advising
said labor arbiters of the October 2, 1987 SEC order
appointing the Stanford Liquidation Committee as the
permanent liquidator of Stanford and of the execution of
the MOA among the secured creditor banks and six
thousand three hundred forty one (6,341) former employees
of Stanford.
On September 19, 1988, the petitioners, including the
complainants in the consolidated labor cases except the
twenty five (25) private respondents represented by Atty.
Ocampo, filed a Joint Motion to Stay Proceedings (Annex
"M", Petition) praying that the Labor Arbiters stay
proceedings in the labor cases pending before them. On the
other hand, Atty. Ocampo on behalf of the twenty five (25)
private respondents filed an Urgent Petition for Injunction
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with Prayer for Issuance of a Temporary Restraining Order

in the consolidated labor cases pending before respondent
Labor Arbiter Cruz.
In response to these motions, the Labor Arbiters except
respondent Labor Arbiter Cruz issued orders staying
proceedings in the cases pending before them. (Annexes,
"N", "N-1" and "N2", Petition).
For his part, respondent Labor Arbiter Cruz issued an
order dated September 2,1988 (Annex "O", Petition) the
dispositive portion of which reads:

"WHEREFORE, pursuant to the provisions of Article 218 (e) of

the Labor Code, as amended, in relation to Rule XIV, Section 1,
paragraph 2, of the Revised Rules of the National Labor Relations
Commission, in order to preserve the rights of the parties during
the pendency of the cases, the intervenor Liquidation Committee
of Stanford Microsystems, Inc., its Chairman, Vice-Chairman,
members, agents and/or representatives should be, as they are
hereby:
(1) RESTRAINED from implementing the Memorandum of
Agreement dated March 13, 1987 marked as Annex "A" and
attached

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to the record, or from delivering/paying the Six Million Pesos

(P6,000,000.00) to the alleged employees/workers representatives,
Ludivina Sabalza, Celia Chua, Mario Mentil, and Maximo Daquil,
for distribution and payment to the employees and workers
concerned in the defunct SMI; and
(2) DIRECTED to deposit the amount of SIX MILLION PESOS
(P6,000,000.00) with the Cashier of the NLRC Main Office at the
Phoenix Building, Intramuros, Manila, immediately upon receipt
of this Order, subject to further disposition of the undersigned
Labor Arbiter."

In view of this restraining order, the petitioners, on

October 6, 1988, filed with the National Labor Relations
Commission (NLRC) a petition for prohibition/injunction
with preliminary injunction and/or temporary restraining
order (NLRC Injunction Case No. 1793; Annex "Q",
Petition). Attached to the petition was the manifestation of
the attorneys-in-fact for the 3,097 former Stanford
employees who were not parties to the consolidated labor

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cases pending before respondent Labor Arbiter Cruz

asserting the lack of jurisdiction of Labor Arbiter Cruz.
On this same day, October 6,1988, the NLRC en banc
issued the first questioned resolution (Annex "R", Petition)
the pertinent portion of which reads:

"INJUNCTION CASE NO. 1793 x x x Enjoining respondent Labor

Arbiter Dominador M. Cruz, private respondents, their attorneys,
representatives, agents and any other person acting for and in
their behalf from implementing the questioned Order dated
September 20, 1988, in NLRC NCR Case No. NS-3-124-85 Case
No. 3-753-86, entitled SMI Labor Union-FFW, LUDIVINA
SABALZA, et al. Fernando Gumabon, et al. Complainants v.
Stanford Microsystems, Inc. Respondent, Liquidation Committee
of Stanford Microsystems, Inc., Intervenor, NLRC NCR Case No.
11-4543-86, entitled Ludivina Sabalza, et al., Fernando R.
Gumabon, et al., Complainants v. Stanford Microsystems, Inc.,
Respondent, Liquidation Committee of Stanford Microsystems,
Inc., Intervenor, which restrained herein SEC Appointed
Liquidation Committee of Stanford Microsystems, Inc., from
implementing the Memorandum of Agreement dated March 13,
1987 in the matter of liquidating the property of the said company
and distributing the amount of P6,000,000.00 to the former
employees of the same company pursuant to the provisions of the
Agreement and, directing the said amount to be deposited to the
Cashier of the Commission, said

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Order being a patent nullity; and 2) to deny, for lack of merit, the
petition for Writ of Prohibition to stay further proceedings in the
five (5) cited labor cases involving the former employees of the
company pending before the respondent Labor Arbiter."

On October 21,1988, Atty. Ocampo, on behalf of his twenty

five (25) clients filed a "Motion For Partial Reconsideration
of Resolution of the Respondent NLRC dated October 6,
1988, etc." (Annex "S", Petition)
On November 3, 1988, the NLRC issued the second
questioned resolution (Annex "T", Petition) the relevant
portion of which reads:

"INJUNCTION CASE NO. 1793 x x x. However, Petitioner

Liquidation Committee of Stanford Microsystems, Inc. its
attorneys, representatives, agents and any other person acting for
and in its behalf is ordered to hold in abeyance and/or defer the
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payment of the P6,000,000.00 to the former employees of the said

company after the Commission rules on the said Partial Motion
for Reconsideration."

On November 8,1988, the petitioners filed a joint

opposition/ motion for reconsideration (Annex "V", Petition)
of the two (2) NLRC resolutions.
On November 28,1988, Atty. Ocampo filed an "Amended
Motion for Partial Reconsideration of Resolution dated
October 6, 1988 with Memorandum of Agreement x x x".
(Annex "X", Petition)
On December 21,1988, petitioner Stanford Liquidation
Committee filed an "Urgent Motion for Early Resolution
with Opposition to Atty. Vicente T. Ocampo's Amended
Motion for Partial Reconsideration of Resolution dated
October 6,1988 x x x."
Atty. Ocampo, in turn filed a "Motion to Cite For
Contempt and Urgent Motion To Stop Delivery of Deducted
Attorney's Fees To Any Lawyers and To Deposit The Same
With the NLRC." (Annex "Z", Petition)
On January 3, 1989, the NLRC issued the third
questioned resolution (Annex "AA", Petition), to wit:

"INJUNCTION CASE NO. 1793 x x x After deliberation, the

Commission sitting en banc, RESOLVED: 1) to require the
petitioner SEC Liquidation Committee of Stanford Microsystems,
Inc., its Chair

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man Helen Osias; Co-petitioners Mario A. Mentil; Noel Villena,

Remegio (sic) F. Santos, Rodolfo Fernandez; Maximo F. Daquil,
George T. Bartolome, Ernesto C. Concepcion, Celia B. Chua,
Araceli A. Elardo, Marites P. Martinez, Ludivina L. Sabalza,
Adelina E. Cantillo and Remegio (sic) F. Pestaño, as well as their
respective counsel of record, to answer the respondents' Motion to
Cite For Contempt and Urgent Motion To Stop Delivery of
Deducted Attorney's Fees To Any Lawyer And To Deposit The
Same With The NLRC and to show cause why they should not be
cited in contempt by this Commission within five (5) days from
receipt hereof; 2) to direct, as it hereby directs, the said
petitioners to strictly comply with the Resolution of this
Commission dated November 3, 1988 and, 3) to direct said
petitioner SEC Appointed Liquidation Committee and its agents
or any person acting in its behalf to deposit to this Committee

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within five (5) days from receipt of this Resolution, the deducted
attorney's fees representing 10% of the amount due and/or to be
paid to the former employees of Stanford Microsystems, Inc."
(Rollo, p. 54)

On January 18 and 24, 1989, the petitioners filed their

respective motions for reconsideration (Annex "BB", "BB-
1", and "BB-3", Petition) of the aforementioned NLRC
resolution. Also on February 10,1989, petitioner Stanford
Liquidation Committee filed a Second Urgent Motion for
Early Resolution (Annex "CC", Petition) of the motion and
amended motion for partial reconsideration filed by Atty.
Ocampo and the motion for reconsideration filed by
petitioner Stanford Liquidation Committee.
On July 11,1989, petitioner Stanford Liquidation
Committee filed a motion to lift restraining order and/or
third urgent motion for early resolution (Annex "DD",
Petition).
These motions notwithstanding, the NLRC had not
acted upon them nor had it resolved the injunction case
despite the parties' submission of their respective
memoranda prompting the petitioners to file the instant
petition.
At the time the three questioned NLRC resolutions were
issued, the MOA Liquidation Committee was already in the
process of distributing money claims to the former
employees of Stanford. The petitioners state:

xxx      xxx      xxx

"8. As of June 1989, the MOA Liquidation Committee has
realized the amount of approximately Forty One Million Four
Hundred Twenty Eight Thousand Five Hundred Seventy One and
42/100 Pesos

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(P41,428,571.42) from net sales proceeds of the properties in the

Pool of Assets' out of which Fourteen Million Five Hundred
Thousand Pesos (P14,500,000.00) should have already been
distributed to all the employees of Stanford, whether or not
signatories of the MOA.
xxx      xxx      xxx
"11. Out of the Fourteen Million Five Hundred Thousand Pesos
(P14,500,000.00) which is available and approved for distribution
to the former Stanford employees, only Five Million Two Hundred

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Seventy Two Thousand One Hundred Eighty Six and 17/100

Pesos (P5,272,186.17) has been distributed in the first
distribution.
"12. The amounts of Seven Hundred Twenty Seven Thousand
Eight Hundred Thirteen and 83/100 Pesos (P727,813.83) (balance
of first distribution), and Eight Million Five Hundred Thousand
Pesos (P8,500,000.00) (amount for second distribution), for a total
of Nine Million Two Hundred Twenty Seven Thousand Eight
Hundred Thirteen and 83/100 Pesos (P9,227,813.83) remain
undistributed to all the Stanford employees due to respondent
NLRC's restraining order issued on 03 November 1988 or more
than Ten (10) months ago.
"13. There is extreme urgency in allowing the distribution of the
foregoing amount to the former Stanford employees considering
that:

(a) The former Stanford employees, especially the Six

Thousand Three Hundred Forty One (6,341) employees
who signed the MOA in an amicable settlement of their
claims, are unjustly prevented from getting the amounts
due them under the MOA, having awaited such
distribution since 1985 when Stanford closed;
(b) A great number of said employees are jobless and/or
underemployed with insufficient incomes; and
(c) The highly probable danger of an outbreak of violent
unrest due to the unjust and unconscionable delay in
distribution brought about by the machinations of Atty.
Ocampo.

14. Hence, the instant Petition for Certiorari and Prohibition

With Prayer for Preliminary Injunction and/or Temporary
Restraining Order under Rule 65 of the Rules of Court." (Petition,
pp. 25-27)

In a resolution dated June 25, 1990 we gave due course to

the instant petition.
The petitioners aver that the NLRC acted with grave
abuse of discretion amounting to lack of jurisdiction and/or
without or in excess of its jurisdiction in issuing the three
(3) questioned resolutions considering that:
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THE SECURITIES AND EXCHANGE COMMISSION HAS

ORIGINAL AND EXCLUSIVE JURISDICTION OVER THE
LIQUIDATION OF STANFORD MICROSYSTEMS, INC.,
INCLUDING THE PROCEDURES FOR SETTLING THE
MONEY CLAIMS OF FORMER WORKERS AND EMPLOYEES.
xxx      xxx      xxx

II

THE MEMORANDUM OF AGREEMENT DATED 13 MARCH

1987 IS VALID, FAIR AND REASONABLE AND IS IN ACCORD
WITH LAW, MORALS, PUBLIC POLICY AND ESTABLISHED
JURISPRUDENCE.
xxx      xxx      xxx

III

REPUBLIC ACT NO. 6715 ONLY TOOK EFFECT ON 21

MARCH 1989 AND HAS NO RETROACTIVE APPLICATION TO
THE INSTANT CASE, SPECIALLY WHERE SUCH
APPLICATION WILL ADVERSELY AFFECT VESTED RIGHTS
OF REPUBLIC ACT NO. 6715.
xxx      xxx      xxx

IV

INDUBITABLY, ATTY. VICENTE T. OCAMPO DOES NOT

HAVE THE INTEREST OF LABOR AT HEART AS HE HAS
CONSISTENTLY AND PERSISTENTLY ATTACKED,
DELAYED AND IMPEDED THE LIQUIDATION OF
STANFORD MICROSYSTEMS, INC. AND THE DISTRIBUTION
OF THE 'LIQUIDATION' PROCEEDS THEREOF TO THE
FORMER EMPLOYEES OF STANFORD MICROSYSTEMS,
INC. (Petition, pp. 66, 68-69)
xxx      xxx      xxx

Jurisdiction over liquidation proceedings of insolvent

corporations is vested in the Securities and Exchange
Commission (SEC) pursuant to Presidential Decree No.
902-A, as amended. On the other hand, jurisdiction over
money claims of employees against their employers is
vested in the Labor Arbiter whose decision may be
appealed to the National Labor -Relations

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Commission (NLRC) pursuant to Article 217 of the Labor

Code.
Following these allocations of jurisdiction, the Solicitor
General states that the jurisdiction problems between the
NLRC and the SEC can be reconciled with neither one
depriving the other of its jurisdiction. Thus, the Solicitor
General opines that this can be achieved by simply
allowing the Labor Arbiter and the NLRC to continue with
their adjudication of the employees' money claims, subject
to the condition that any award they may obtain against
Stanford must be filed with the Liquidation Committee as
one of the established claims against the debtorcompany."
(RoIIo, Vol. II, p. 1630)
The petitioners, however, maintain that the SEC
jurisdiction over the liquidation of Stanford should include
the money claims, now pending before respondent Labor
Arbiter Dominador Cruz because they refer to claims to be
submitted in the course of the liquidation proceedings.
An insolvency proceeding is similar to the settlement of
a decedent's estate in that it is a proceeding in rem and is
binding against the whole world. Therefore, all persons
which have interest in the subject matter involved,
whether or not they are given notice are equally bound.
Thus, "a liquidation of similar import or other equivalent
general liquidation must also necessarily be a proceeding in
rem so that all other interested persons whether known to
the parties or not may be bound by such proceedings."
(Philippine Savings Bank v. Lantin, 124 SCRA 476 [1983];
Emphasis supplied)
The rule is that a declaration of bankruptcy or a judicial
liquidation must be present before preferences over various
money claims may be enforced. Since a liquidation
proceeding is a proceeding in rem, all claims of creditors
whether preferred or non-preferred, the identification of
the preferred ones and the totality of the employer's asset
should be brought into the picture. There can then be an
authoritative, fair and binding adjudication. (See
Development Bank of the Philippines v. Santos, 171 SCRA
138 [1989]).
The money claims of workers pose a special problem of
jurisdiction when liquidation proceedings are on-going
because of the highly preferred nature given by law to said
claims.
In these cases, however, the problem poses no particular
difficulty because the workers themselves have voluntarily
opted to
576

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participate in the liquidation proceedings. Their

representatives in the MOA Liquidation Committee
participated in the discussions and proceedings which led
to the orders to distribute payments to the various
claimants. The workers themselves oppose the orders of the
NLRC which have denied them to speedy receipt of funds
they urgently need. It is a grave abuse of discretion on the
part of NLRC to raise a technical question of its own
jurisdiction when the workers over whom it is raised reject
the assertion of that jurisdiction. The NLRC has allowed
only 25 out of 7,124 employees and a former counsel trying
to claim alleged unpaid fees to delay the immediate
payment of the worker's claims.
Consequently, the Solicitor General's submission that
the money claims of Stanford's former employees pending
with respondent Labor Arbiter Dominador M. Cruz should
be allowed to continue and that the money awards be later
presented to the Stanford Liquidation Committee is not the
correct solution. It would only spawn needless controversy,
delays, and confusion. Significantly, the money claims were
presented after Stanford filed a petition for suspension of
payments and appointment of a rehabilitation receiver
with the SEC. In other words, the money claims were filed
when Stanford was already experiencing financial
difficulties. Apparently, the employees filed the cases to
enforce money claims which they might not collect in view
of Stanford's financial crisis and impending closure. Under
these circumstances, and bearing in mind the welfare of
the workers and their voluntary choices as to how their
claims may be equitably settled to their satisfaction, we
rule that such money claims were correctly submitted in
the course of the liquidation proceedings at the SEC.
The petitioners themselves (the former employees who
were complainants in the money claims cases pending with
the different labor arbiters including those with respondent
Labor Arbiter Cruz except for the twenty-five private
respondents represented by Atty. Ocampo) filed the motion
to stay proceedings in the money claim cases with DOLE
on the ground that "x x x the proceedings in the instant
labor cases which refer to the claims of the Stanford
employees against Stanford should be stayed and the
subject claims be submitted in the course of the liquidation
proceedings under the jurisdiction of the SEC."
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(Petition, p. 77)
Significantly, the petitioners point out that all the other
labor arbiters except for the respondent Labor Arbiter
granted the motion to stay proceedings in the money claims
pending before them. Respondent Labor Arbiter Cruz was
assigned to handle five (5) consolidated money claims
affecting 3,244 former Stanford employees. With this
group, were former employees represented by Ludivina L.
Sabalza, Adeliza E. Cantillo and Remigio P. Pestaño who
initially hired the services of Atty. Ocampo. However,
because of the questioned NLRC resolution, all the other
workers, or around 3,097 former employees who were never
covered by the jurisdiction of respondent Labor Arbiter
Cruz have also been adversely affected.
This brings us to the other issue regarding the effect of
the Memorandum of Agreement dated March 13, 1987
(MOA) executed by the seven (7) secured creditor banks of
Stanford and the 6,341 former Stanford employees.
As earlier stated, at the time Stanford filed a petition for
suspension of payments and appointment of rehabilitation
receiver with SEC, Stanford had seven (7) secured creditor
banks and approximately 7,124 employees. On March 13,
1987, the seven secured creditor banks of Stanford and
6,341 former employees executed a Memorandum of
Agreement to speed up the orderly liquidation of Stanford.
All the creditor banks and the said employees were
represented by their respective counsel in the negotiations
which were supervised by Regional Director Luna C. Piezas
of the DOLE, National Capital Region. The SEC approved
the MOA. In its en banc omnibus order dated October
12,1988 (Annex "H") the SEC said:

"The Memorandum of Agreement having been entered into

voluntarily and freely by the parties after taking into
consideration all existing conditions appears fair and reasonable.
This is the only available solution to labor's sharing in the
proceeds it appearing that all properties of Stanford had been
encumbered by creditor-banks.
xxx      xxx      xxx
The Memorandum of Agreement (MOA) was executed by the
representatives of the secured creditor-banks and labor on March
13, 1987, prior to the order of dissolution of SMI by this
Commission. The MOA was conceived to pursue extrajudicially
money claims of the parties thereto to avoid lengthy litigations.

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xxx      xxx      xxx

The purpose of the Commission's directive requiring
submission of the special powers of attorney is precisely to, see for
itself if the laborers are given maximum protection and security
in the memorandum of agreement. A reading of its features shows
that the agreement is fair and reasonable and to the best interest
of labor considering that almost all the properties of SMI were
mortgaged to and foreclosed by the secured-creditor banks. Yet
under this agreement, the securedcreditor-banks are willing to
share to labor 35% of whatever proceeds can be generated from
the disposition of the foreclosed properties.
xxx      xxx      xxx
In opposing intervenors' manifestation opposing submission of
alleged updated lists and special powers of attorney, the
liquidation committee denies the allegation of fraud employed in
securing the consent of six thousand three hundred forty (6,340)
employees to represent them in the Memorandum of Agreement.
Verily, it is incredible for so many employees to have consented to
their misrepresentation; if at all, perhaps a few number can be
misled in so doing.
Anyway, as correctly pointed out by the liquidation committee,
nobody complained to the Commission regarding such fraud and
misrepresentation." (Annex "H", pp. 332-341)

It is precisely because of the execution of the MOA that the

petitioners filed the motion to stay proceedings in the
money claims pending before the labor arbiters.
Under the scheme of the MOA the following events
transpired:

xxx      xxx      xxx

"13. Petitioner Stanford Liquidation Committee regularly files
report on its activities, as well as those of the MOA Liquidation
Committee, with the SEC. For the distribution of the sales
proceeds (realized out of the properties contributed to the Pool in
accordance with the MOA) to the former Stanford employees,
petitioner Stanford Liquidation Committee formulated the
following guidelines:

(a) The amounts available for distribution under the MOA

shall be distributed to:

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(i) All Six Thousand Three Hundred Forty One (6,341)

former employees of Stanford who executed Special
Powers of Attorney in favor of the employees' Attorneys-
In-Fact who signed the MOA; and
(ii) All former employees of Stanford willing to be bound by
the MOA by signing the Affidavit of
Acceptance/Affirmation [Annex "B" of the Trust
Agreement (Annex "I")] upon receipt of his/her 'crossed'

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cashier's check.

(b) The share of the other Seven Hundred Eighty Three

(783) Stanford employees (who have not yet signed
special powers of attorney) shall be held in escrow
for their benefit until they claim the same.
(c) Distribution shall be pro rata on the basis of the
General List of Employees and their claims, duly
audited by Carlos J. Valdes & Co.
(d) Authorized deductions for attorney's fees and other
expenses shall be deducted and delivered to the
appropriate Attorneys-In-Fact.
(e) Distribution shall be via 'crossed' cashier's checks
issued by Philippine Commercial International
Bank, Far East Bank & Trust Company, Equitable
Banking Corporation, Citytrust, and Philippine
National Bank, payable directly to the individual
Stanford employees themselves.
(f) The physical distribution of the aforementioned
cashier's checks (which shall be on a uniform but
staggered basis) shall be the responsibility of the
respective Attorneys-In-Fact (Trustees).
Accordingly, the respective Attorneys-In-Fact
(Trustees) shall announce the venue/s and date/s of
actual physical distribution, in coordination with
the appropriate banks.
(g) Any two (2) of the following identification
documents shall be required to be presented:

(i) Stanford lD
(ii) Present Employer's ID
(iii) Driver's License
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(iv) SSS/GSIS ID
(v) Passport
(vi) Current NBI Id/Certificate
(vii) Other acceptable IDs

(h) A representative from Carlos J. Valdes & Co. will

be present at each distribution center to witness the
receipt of the individual 'crossed' cashier's checks
and the signing of the Affidavits/Affirmation, by
each Stanford employee.
(i) Any Stanford employee who is not able to claim
his/her cashier's check on his/her designated date
may claim the same on the succeeding dates of
distribution. Checks which remain unclaimed for
three (3) months shall be returned and kept for
safekeeping by the Stanford Liquidation
Committee.
(j) The Attorneys-In-Fact (Trustees) shall submit
regular written reports to the Stanford Liquidation
Committee relating to the distribution.
(k) The Notice of Distribution will be published in the
Bulletin Today and the People's Journal, and will
be announced over radio and television (DZRH,
DZME and DZXL).

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(14) Further, the duly appointed Attorneys-In-Fact of the Six

Thousand Three Hundred Forty One (6,341) former Stanford
employees [Eighty Nine Percent (89%) of all Stanford employees],
petitioners herein, who authorized the MOA, executed a Trust
Agreement dated 12 October 1988 (Annex "I"), as Trustees for the
distribution of the individual 'crossed' cashier's checks to the
former Stanford employees.
15. In September 1988, petitioner Stanford Liquidation
Committee approved an initial distribution of Six Million Pesos
(P6,000,000.00) in sales proceeds via 'crossed' cashier's checks
payable directly to the former Stanford employees. The share in
the sales proceeds of each Stanford employees was based on
computation audited by Carlos J. Valdez & Co." (Petition, pp. 36-
39)

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Considering these circumstances, we rule that NLRC

committed grave abuse of discretion in refusing to stay the
proceedings in the money claims pending before respondent
Labor Arbiter Cruz and when it deferred the payment of
P6,000,000.00 to the former Stanford employees.
We agree with the petitioners that the Memorandum of
Agreement dated March 13, 1987 is valid, fair and
reasonable, and is in accord with law, morals, public policy
and established jurisprudence.
Article XIII of the Constitution (paragraph 3, section 3)
provides for voluntary modes of settling labor disputes, to
wit:

xxx      xxx      xxx

"The State shall promote the principle of shared responsibility
between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation and
shall enforce their mutual compliance therewith to foster
industrial peace."

This policy is echoed under Article 227 of the Labor Code

which provides:

"Compromise Agreement.—Any compromise settlement, including

those involving labor standard laws, voluntarily agreed upon by
the parties with the assistance of the Bureau or the regional office
of the Department of Labor, shall be final and binding upon the
parties. The National Labor Relations Commission or any court
shall not assume jurisdiction over issues involved therein except
in case of noncompliance thereof or if there is prima facie evidence
that the settlement was obtained through fraud,
misrepresentation, or coer

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Chua vs. National Labor Relations Commission

cion.

Recently, in Republic Act 6715, the promotion of the

preferential use of voluntary modes of settling labor
disputes was again reiterated.
In fact, as early as 1963, under the Industrial Peace Act,
we have ruled that compromise agreements executed by
workers or employees and their employer to settle their
differences if done in good faith are valid and binding
among the parties. (Dionela v. Court of Industrial
Relations, 8 SCRA 832 [1963]; Pampanga Sugar
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Development Co., Inc. v. Court of Industrial Relations, 114

SCRA 725 [1982]).
Undoubtedly, the MOA was executed in good faith and
the employees were duly represented during the
negotiations which were supervised by a Regional Director
of the DOLE. More important, the rights of the employees
were safeguarded and protected. not only during the
negotiations but also at the implementation of the
compromise agreement.
However, may a minority of the employees which is
equivalent to less than 1% of the total employees (25)
represented by Atty. Ocampo prevent the enforcement of
the Memorandum of Agreement executed by employees
representing about 89% of the total number of employees
(6,341 out of a total 7,124 employees; 783 not represented
in the negotiations but their shares placed in escrow for
their benefit under the MOA)?
The answer is in the negative. In the case of Dionela vs,
Court of lndustrial Relations supra, we ruled:

"The main question for determination in this case is whether the

compromise agreement pursuant to which the complaint in Case
No. 598-ULP had, inter alia, been withdrawn and then dismissed
is binding upon petitioners herein. The latter maintains that it is
not, but the lower court held otherwise, upon the ground that 'it is
an accepted rule under our laws that the will of the majority
should prevail over the minority' citing Betting Ushers Union
(PLUM) v. Jai-alai, L-9330, June 29, 1957 and Jesalva, et al. v.
Bautista, L-11928 to L-11930, March 24, 1959—and that the
action taken by petitioners herein as minority members of the
Union 'is contrary to the policy of the Magna Carta of Labor,
which promotes the settlement of differences between
management and labor by mutual agreement/ and that if said
action were tolerated, 'no employer would ever enter into any
compromise

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582 SUPREME COURT REPORTS ANNOTATED

Chua vs, National Labor Relations Commission

agreement for the minority members of the Union will always

dishonor the terms of the agreement and demand for better
terms/ The view thus taken by the lower court is correct. Indeed,
otherwise, even collective bargaining agreements would cease to
promote industrial peace and the purpose of Republic Act No. 875
would thus be defeated,

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As regards the January 3, 1989 NLRC resolution which

directed petitioner Stanford Liquidation Committee to
deposit with the NLRC the deducted attorney's fees
representing 10% of the amount due and/or to be paid to
the former employees of Stanford Microsystem, Inc. we
agree with the petitioners that such directive was
jurisdictionally defective and premature. Such directive is
premature because the NLRC, in effect? prematurely and
unduly disposed of, resolved and prejudged the contentious
issues raised in the Stanford Employees' Injunction case,
based on the bare assertions of Atty. Ocampo and his
twenty five (25) clients, the private respondents herein.
The Solicitor General, who agrees with the petitioners that
the NLRC resolution is premature aptly observed:

"x x x [A]ny attorney's fee that may be awarded in the aforesaid

cases would be assessed from whatever money award is made in
favor of the employees. In other words, the attorney's fee is not a
Stanford obligation but a lien on the employees' money award. By
requiring the Liquidation Committee to make deposit, the NLRC
in effect would shift the obligation from the employees to
Stanford." (Public respondent's Memorandum, p. 1638)

Obviously, the NLRC directive was for the benefit of

respondent Atty. Vicente Ocampo who is claiming
attorney's fees as counsel of the group of former Stanford
employees headed by Ludivina L. Sabalza, Adeliza Cantillo
and Remigio P. Pestaño. But as stated earlier in this
decision, the group terminated the services of Atty. Ocampo
when he refused to represent them in the negotiations with
the creditors and other former employees of Stanford. This,
notwithstanding, Atty. Ocampo insisted on acting as
counsel of the group by filing pleadings on their behalf with
SEC and NLRC. He opposed the appearance dated June 30,
1988 (Annex "NN', Petition) filed by the Bacungan Larcia
Bacungan law offices in the case pending before the SEC
and the respondents Labor Arbiter Cruz and NLRC, in
substitution
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VOL. 190, OCTOBER 17, 1990 583

Chua vs. National Labor Relations Commission

of Atty. Ocampo, which appearance bears the conformity of

the group.
Eventually, however, the SEC found that Atty. Ocampo
represented only thirty four (34) employees which is less
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9/15/21, 5:37 PM SUPREME COURT REPORTS ANNOTATED VOLUME 190

than 1% of the total Stanford employees.

The record shows that Atty. Ocampo filed with the SEC
a Notice of Attorney's Lien dated November 11, 1987, to
wit:

"The undersigned counsel, Atty. VICENTE T. OCAMPO LAW

OFFICES, hereby file their Notice of Attorney's Lien in the above
entitled case and its incidents on their claim for attorney's fees on
contingent basis, in the amount equivalent to twenty five percent
(25%) of the back (strike duration) pay or similar benefit, and ten
percent (10%) of the cash conversion of the unused vacation and
sick leave with pay and 13th month's pay for 1985, separation pay.
and other money pay claims or benefits which may be due and
payable to the workers and employees of SMI involved herein and
recipients thereof, as a result of the filing and I or prosecution of
such actions as are deemed necessary under the premises and/or
judgments which may be rendered in their favor, pursuant to the
contract of legal services by and between the said attorneys and
the said workers and employees represented by the Caretaker
Committee, composed of Ludivina L. Sabalza, Adeliza Cantillo,
Remigio Pestaño, Merian Ocampo, and Leticia Tabora, and
Fernando Gumabon. A xerox copy of said contract of legal services
is hereby attached as Annex "A" hereof. (Emphasis supplied)."
(Petition, p. 129)

Since the contract for legal services was 011 a contingent

basis, Atty. Ocampo as counsel can be paid only if he wins
the case for the group. As it turned out, however, Atty.
Ocampo's services were terminated by the group as early as
October and November 1986 when he refused to represent
the group in the negotiations with the other creditors of
Stanford for an out of court settlement of their claims
resulting in the execution of the Memorandum of
Agreement. In an earlier case involving Atty. Ocampo,
entitled Ocampo v. Lerum (162 SCRA 498 [1988]), we
ruled:

"The record of the case clearly discloses that the private

respondent Atty. Lerum was primarily responsible for negotiating
for the PALEA the retroactive wage increases mentioned earlier,
to the exclusion of petitioner Atty. Ocampo. PAL could validly
deal with the

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584 SUPREME COURT REPORTS ANNOTATED

Chua vs, National Labor Relations Commission

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Biangco Faction represented by Atty. Lerum because 110 court

order had been issued restraining PAL from doing so. The record
of the case also reveals that Atty. Ocampo tried his best to enjoin
the negotiations initiated by Atty. Lerum by questioning the same
before the Court of Industrial Relations and even this Court.
On the basis of the foregoing observations, We cannot see how
Atty. Ocampo could be entitled to any part of the said attorney's
fees. The attorney's fees emanated from the retroactive wage
increases negotiated by Atty. Lerum. Accordingly, and under the
circumstances obtaining in this case, the said attorney's fees
should belong to Atty. Lerum to the exclusion of Atty, Ocampo,
We, therefore, find no grave abuse of discretion on the part of the
public respondents in reaching this conclusion." (at p. 502)

Considering that Atty. Ocampo took no part in the

negotiations leading to the execution of the Memorandum
of Agreement, a compromise agreement among the
creditors and former employees of Stanford to liquidate
Stanford which we rule as valid, we find no plausible
reason for Atty. Ocampo to interfere with its
implementation by filing complaints and/or pleadings with
the SEC, the Labor Arbiter and the NLRC in his effort to
collect attorney's fees not due him. With the foregoing
findings, we find no need to discuss the other arguments
posed by the petitioners.
WHEREFORE, the instant petition is GRANTED. The
questioned resolutions dated October 6,1988, November 3,
1988 and January 3, 1989 of the National Labor Relations
Commission are declared NULL and VOID and are hereby
SET ASIDE. The Court Orders:

1) Respondent Labor Arbiter Dominador M. Cruz to

desist from conducting further proceedings in Case
No. 12-4882-86, Case No. 3-753-86; Case No. 2-
6280-86; Case No. 11-4543-86 and Case No. 3-803-
86;
2) Respondent National Labor Relations Commission
and Labor Arbiter Dominador M. Cruz to desist
from interfering in the implementation of the
Memorandum of Agreement dated March 13, 1987
in the matter of the liquidation Committee under
the jurisdiction of the Securities and Exchange
Commission; and
3) Private respondents and Atty. Vicente T. Ocampo
and associates, their representatives, agents and
any other person as

585

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VOL. 190, OCTOBER 18, 1990 585

Lizares vs. Kintanar

sisting them or acting for them and on their behalf to desist

from interfering with the implementation of the
Memorandum of Agreement, the liquidation of the Stanford
Microsystems, Inc., and the exercise by the Stanford
Liquidation Committee duly appointed by the Securities
and Exchange Commission of its functions. No costs.
SO ORDERED.

          Fernan (C.J., Chairman), Bidin and Cortés, JJ.,

concur.
     Feliciano, J., On leave.

Petition granted. Resolutions null and void and are

hereby set aside.

Note.—A compromise agreement by union officers must

be authorized by union members. Said authority must be
produced in evidence. (Kaisahan ng mga Manggagawa sa
La Campana vs. Sarmiento, 133 SCRA 220.)

——o0o——

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