Nueva Ecija II Electric Cooperative, Inc. (NEECO II) vs. Wilfredo S. Palma (G.R. No. 256393, November 13, 2020)
SYLLABUS:
The RTC had no jurisdiction to issue an injunction against the execution of a labor decision because such matters are under the exclusive jurisdiction of labor tribunals, and courts are prohibited by law from interfering in labor disputes. A petition for declaratory relief was not the appropriate remedy for NEECO II since it sought to resolve contested factual issues related to ownership and liability, which are beyond the scope of declaratory relief. The proper remedy for NEECO II was to file a third-party claim before the labor arbiter or sheriff under NLRC rules.
FACTS:
In 1992, the National Electrification Administration (NEA), a government agency overseeing electric cooperatives, dissolved Nueva Ecija Electric Cooperative III (NEECO III). NEA then acquired NEECO III’s assets, including land, buildings, electric distribution systems, motor vehicles, and office equipment, through a process called dacion en pago (payment in kind). These assets were later transferred to a newly established electric cooperative, Nueva Ecija II Electric Cooperative, Inc. (NEECO II).
In 2004, NEA granted NEECO II a permanent franchise to operate in the areas previously served by NEECO III. On April 4, 2006, NEA sold the assets of the defunct NEECO III to NEECO II through a Deed of Conditional Sale for PHP 300 million, payable in installments over 25 years.
Several former employees of NEECO III had filed illegal dismissal cases against NEECO III. These labor cases resulted in a monetary award of PHP 83 million in favor of the dismissed employees, including respondent Wilfredo S. Palma. On October 9, 2013, the National Labor Relations Commission (NLRC) issued a Notice of Levy and Sale of Execution against NEECO III’s capital assets to satisfy the judgment.
However, since the capital assets of NEECO III had been transferred to NEECO II as part of the Deed of Conditional Sale, these assets were now in the possession of NEECO II. In response to the levy on assets now owned by NEECO II, the cooperative filed a Petition for Declaratory Relief with the Regional Trial Court (RTC) on October 16, 2013. NEECO II argued that it was an innocent purchaser for value, having acquired the assets in good faith through the Deed of Conditional Sale, and that the assets should be insulated from attachment or levy. NEECO II also claimed that the money it paid for the assets should be considered public funds and exempt from garnishment.
Alongside the petition, NEECO II requested an injunction to stop the labor arbiter and sheriff from proceeding with the execution sale of the levied assets. The RTC granted the injunction and issued a Writ of Preliminary Injunction in favor of NEECO II, enjoining the labor arbiter and the sheriff from executing the levy.
Wilfredo S. Palma and Jesus Fajardo Jr., two of the former employees with claims against NEECO III, filed a Motion to Dismiss the Petition for Declaratory Relief on the grounds of lack of jurisdiction and forum shopping. They argued that the RTC had no authority to interfere with the labor arbiter’s execution process and that NEECO II’s petition involved the same issues being litigated before the labor arbiter. The RTC denied the Motion to Dismiss, asserting that the parties and issues in the declaratory relief case were different from the labor cases.
Palma then filed a Petition for Certiorari with the Court of Appeals (CA), which set aside the RTC’s decision and directed the dismissal of the Petition for Declaratory Relief. The CA ruled that the RTC had no jurisdiction to issue injunctive relief and that the Petition for Declaratory Relief was not the proper remedy because it involved contested factual issues rather than the mere construction of the Deed of Conditional Sale.
NEECO II then elevated the case to the Supreme Court, leading to the issues of whether the RTC had jurisdiction to issue the injunction and whether declaratory relief was the appropriate remedy.
ISSUES:
1. Whether the RTC had jurisdiction to issue injunctive relief against the levy and sale of NEECO II’s assets.
2. Whether the Petition for Declaratory Relief was the proper remedy for NEECO II.
HELD:
1. Whether the RTC had jurisdiction to issue injunctive relief against the levy and sale of NEECO II’s assets:
The Supreme Court held that the RTC had no jurisdiction to issue injunctive relief against the levy and sale of NEECO II’s assets because such matters fell under the exclusive jurisdiction of labor tribunals.'
Article 266 of the Labor Code explicitly prohibits courts from issuing temporary or permanent injunctions in cases arising from labor disputes, except in circumstances specifically provided for in the law. Since the execution of the labor arbiter’s decision—leading to the levy on the assets—was part of the enforcement of labor claims, it constituted a labor dispute. The RTC, as a regular court, could not interfere with such processes.
The Court emphasized the long-standing doctrine of exclusive jurisdiction of labor tribunals over matters related to labor disputes. This principle includes not only the adjudication of disputes between employers and employees but also extends to the enforcement of decisions rendered by the labor arbiter or the National Labor Relations Commission (NLRC). By issuing the injunction, the RTC intruded upon the exclusive authority of the NLRC to execute its own decisions.
Splitting of jurisdiction is highly discouraged in the legal system. Allowing regular courts to issue injunctions or otherwise interfere in labor disputes would create the problem of splitting jurisdiction, where different courts and tribunals would handle different aspects of the same dispute. This would lead to confusion, delays, and a breakdown in the orderly administration of justice. The principle of orderly administration of justice requires that labor-related matters be adjudicated and enforced by labor tribunals.
Thus, the RTC's decision to issue injunctive relief over a labor dispute's execution process was invalid because it overstepped its jurisdiction. The proper forum for addressing issues related to the execution of labor decisions is the labor arbiter or NLRC.
2. Whether the Petition for Declaratory Relief was the proper remedy for NEECO II:
The Supreme Court also ruled that declaratory relief was not the proper remedy for NEECO II to resolve the issue of the levy on its assets.
Nature of Declaratory Relief: Under Rule 63 of the Rules of Court, a petition for declaratory relief is a preventive remedy. It is meant to resolve questions of construction or validity arising from a contract, statute, or other written instrument before an actual breach or violation occurs. The relief is limited to interpreting the legal meaning or validity of provisions and does not extend to resolving contested factual matters.
The Supreme Court highlighted that the purpose of declaratory relief is to clarify legal relationships or obligations, not to determine factual issues such as ownership or the propriety of a levy on assets. In this case, NEECO II’s petition went beyond merely asking for the interpretation of the Deed of Conditional Sale; it sought a declaration that it was an innocent purchaser for value, free from any liability to NEECO III’s creditors. This involved factual determinations regarding the ownership and status of the assets, which could not be resolved by merely interpreting the Deed.
Declaratory Relief and Labor Disputes: The Court noted that a petition for declaratory relief is inappropriate when the issue involves the execution of a judgment, particularly in labor cases. In labor disputes, the proper forum for addressing issues related to the execution of judgments is the labor tribunal, not the regular courts through declaratory relief.
Alternative Remedy – Third-Party Claim: The Manual on the Execution of Judgment (NLRC Rules) provides a remedy for third parties who claim ownership of properties levied upon in labor disputes. This third-party claim allows individuals or entities to assert their ownership over assets seized by the sheriff in the execution of a labor decision. NEECO II, as a third party not directly involved in the labor dispute, should have filed a third-party claim under the NLRC rules rather than seeking declaratory relief in a regular court.
Rule 39, Section 16 of the Rules of Court, as applied by analogy to labor disputes, allows third parties to claim that their property has been wrongfully levied by filing an affidavit with the sheriff and seeking relief from the court that issued the writ of execution. This was the remedy that NEECO II should have pursued, rather than filing a petition for declaratory relief in the RTC.
Thus, the ratio decidendi of the Supreme Court’s decision is based on the principle that declaratory relief is not appropriate when the resolution of the matter involves contested factual issues. Instead, the proper remedy in labor disputes involving third-party claims to property is to file a third-party claim under the procedures outlined in labor laws and NLRC rules.
