SUPREME COURT EN BANC G.R. No. L-21484 November 29, 1969 ACCFA vs. CUGCO, ACCFA v.

Cugco, 30 SCRA 649 MAKALINTAL, J.

The ACCFA filed two separate appeals by certiorari from the CIR decision dated March 25, 1963 (G.R. No. L-21484) and the order dated May 21, 1964 (G.R. No. L-23605) as affirmed by the resolutions en banc, of the Court of Industrial Relations (CIR), in Cases Nos. 3450-ULP and 1327-MC, respectively. *** Only one decision was rendered since the parties and the principal issues involved in both cases are practically the same.

FACTS: Background of the Parties 1. The Agricultural Credit and Cooperative Financing Administration (ACCFA) was a government agency created under RA No. 821 (as amended). 2. Its administrative machinery was reorganized and its name changed to Agricultural Credit Administration (ACA) under the Agricultural Land Reform Code (RA No. 3844) signed into law by the President on August 8, 1963. 3. The ACCFA Supervisors' Association (ASA) and the ACCFA Workers' Association (AWA) are labor organizations composed of the supervisors and the rank-and-file employees, respectively, in the ACCFA (now ACA). They are referred to in the cases as the Unions. Background of the Cases G.R. No. L-21484 1. On September 4, 1961, ACCFA and the Unions entered into a Collective Bargaining Agreement (CBA) which was to be effective for a period of one (1) year from July 1, 1961. 2. A few months thereafter, the Unions started protesting against alleged violations and non-implementation of said agreement. They declared a strike on October 25, 1962 which was ended on November 26, 1962 when the strikers voluntarily returned to work. 3. On October 30, 1962, the Unions, together with its mother union, the Confederation of Unions in Government Corporations and Offices (CUGCO), filed a complaint with the Court of Industrial Relations (CIR) against the ACCFA (Case No. 3450-ULP) for having allegedly committed acts of unfair labor practice, namely:
A. Violation of the CBA to discourage the members of the Unions to exercise their right to self-organization; B. Discrimination against said members in the matter of promotions; C. Refusal to bargain.

THE AGRICULTURAL CREDIT and COOPERATIVE FINANCING ADMINISTRATION (ACCFA), petitioner,

vs.

ACCFA SUPERVISORS' ASSOCIATION, ACCFA WORKERS' ASSOCIATION, and THE COURT OF INDUSTRIAL RELATIONS, respondents.
Deogracias E. Lerma and Esmeraldo U. Guloy for petitioner Agricultural Credit and Cooperative Financing Administration. Office of the Agrarian Counsel, Department of Justice for petitioner Agricultural Credit Administration J. C. Espinas and Associates for respendentsConfederation of Unions

4. The ACCFA presented the following defenses:

A. B. C. D. Lack of jurisdiction of the CIR over the case; Illegality of the bargaining contract; Expiration of said contract; and Lack of approval by the Office of the President of the fringe benefits provided for therein.

5. The CIR, in its decision dated March 25, 1963 ordered the ACCFA: 1. To cease and desist from committing further acts tending to
discourage the members of complainant unions in the exercise of their right to self-organization; 2. To comply with and implement the provision of the collective bargaining contract executed on September 4, 1961, including the payment of P30.00 a month living allowance; 3. To bargain in good faith and expeditiously with the herein complainants.

in Government Corporations Offices (CUGCO), et al. Mariano

B. Tuason for respondent Court of Industrial Relations.

CERTIORARI

6. The ACCFA moved to reconsider but was turned down in a

n. (sersh-oh-rare-ee), \ s r-sh( -) rer- , - rr- , - ra-r \

resolution dated April 25, 1963 of the CIR en banc. 7. The ACCFA then brought an appeal by certiorari. G.R. No. L-23605 1. On March 17, 1964, the Unions filed a petition for certification election with the CIR (Case No. 1327-MC) to be certified as the exclusive bargaining agents for the employees of ACA.While this petition was not yet decided upon, on 19 March 1964, EO 75 was also passed which placed ACA under the Land Reform Project Administration. 2. The ACA denied that the Unions represented the majority of the employees in the ACA and alleged that: A. The petition was premature; B. The ACA was not the proper party to be notified and to answer the petition; and C. The employees and supervisors could not lawfully become members of the Unions, nor be represented by them. 3. In its order dated May 21, 1964, the CIR certified "the ACCFA Workers' Association and the ACCFA Supervisors' Association as the sole and exclusive bargaining representatives of the rank-and-file employees and supervisors, respectively, of the Agricultural Credit Administration."The said order was affirmed by the CIR en banc in its resolution dated August 24, 1964. 4. On October 2, 1964 the ACA filed in the Supreme Court a petition for certiorari with urgent motion to stay the CIR order of May 21, 1964. 5. In a resolution dated October 6, 1964, the Supreme Court dismissed the petition for lack of adequate allegations but later reconsidered when the ACA complied with the formal requirement stated in the said resolution and ordered the CIR to stay the execution of its order. ISSUES: 1. Whether or not ACCFA exercised governmental or proprietary functions. 2. Whether or not the Unions can be given sole bargaining rights with ACA and whether or not the CBA between the petitioner and the respondents is valid; 3. Whether or not there is a legal and/or factual basis for the finding of the respondent court that the petitioner had committed acts of unfair labor practice. 4. Whether or not the fringe benefits are already enforceable, as stipulated in the CBA. HELD: 1. The ACA is a government office or agency engaged in governmental, not proprietary functions. These functions may not be strictly what President Wilson described as "constituent. Under this traditional classification, such constituent (governmental) functions are exercised by the State as attributes of sovereignty. Ministrant (proprietary) functions, on the other hand, e.g. promote the welfare, progress, and prosperity of the people,are optional on the part of the government. However, the growing complexities of modern society have rendered the classification of the governmental functions as unrealistic, if not obsolete. Ministerial and governmental functions continue to lose their well-defined boundaries. The areas which used to be left to private enterprise and initiative are absorbed within the activities that the government must undertake in its sovereign capacity if it to meet

- a writ (order) of a higher court to a lower court to send all the documents in a case to it so the higher court can review the lower court's decision. - a writ of superior court to call up the records of an inferior court or a body acting in a quasijudicial capacity

COLLECTIVE BARGAINING AGREEMENT

refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit, including mandatory provisions for grievances and arbitration machineries.

FRINGE BENEFIT means any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank and file employees as defined herein) such as, but not limited to, the following: (1) Housing; (2) Expense account; (3) Vehicle of any kind; (4) Household personnel, such as maid, driver and others; (5) Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted; (6) Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations; (7) Expenses for foreign travel; (8) Holiday and vacation expenses; (9) Educational assistance to the employee or his dependents; and (10) Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.

Governmental Functions are classified into CONSTITUENT and MINISTRANT. CONSTITUENT FUNCTIONS are those which constitute the very bonds of society and are compulsory in nature MINISTRANT FUNCTIONS are those that are undertaken only by way of advancing the general interests of society, and are merely optional. US President Woodrow Wilson, in a textbook on political science the first edition of which was published in 1898, enumerates the constituent functions as follows: (1) The keeping of order and providing for the protection of persons and property from violence and robbery. (2) The fixing of the legal relations between man and wife and between parents and children. (3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for debt or for crime. (4) The determination of contract rights between individuals. (5) The definition and punishment of crime. (6) The administration of justice in civil cases. (7) The determination of the political duties, privileges, and relations of citizens. (8) Dealings of the state with foreign powers: the preservation of the state from external danger or encroachment and the advancement of its international interests. The principles determining whether or not a government shall exercise certain of these optional functions are: (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do these things which by its very nature it is better equipped to administer for the public welfare than is any private individual or group of individuals." The Wilson classification reflected the primacy of the

the increasing social challenges of the times and move towards a greater socialization of economic forces. Land Reform Code Sections 113 to 118, inclusive, invest the ACA with certain rights and powers not accorded to non-governmental entities. The implementation of the land reform program of the State by the ACA according to RA No. 3844 is most certainly a governmental, not a proprietary, function. The law itself declares that the ACA is a government office, with the formulation of policies, plans and programs vested no longer in a Board of Governors, as in the case of the ACCFA, but in the National Land Reform Council, itself a government instrumentality. The appointing authority in respect of the officials and employees of the ACA is the President of the Philippines, pursuant to the provisions of Section 79(D) of the Revised Administrative Code. 2. The Unions have no bargaining rights with ACA. EO 75 placed ACA under the LRPA and by virtue of RA 3844 the implementation of the Land Reform Program of the government is a governmental function NOT a proprietary function. Being such, ACA can no longer step down to deal privately with said unions as it may have been doing when it was still ACCFA. The collective bargaining powers in the respondent Unions cannot be recognized within the context of Republic Act No. 875, and hence cannot be granted their basic petition for certification election as proper bargaining units. The Unions are not entitled to the certification election. Such certification is admittedly for purposes of bargaining with respect to terms and conditions of employment, including the right to strike as a coercive economic weapon, as in fact the said unions did strike in 1962 against the ACCFA (G.R. No. L-21824). The said right to strike is contrary to Section 11 of R.A. No. 875, which provides:
SEC. 11. Prohibition Against Strike in the Government The terms and conditions of employment in the Government, including any political subdivision or instrumentality thereof, are governed by law and it is declared to be the policy of this Act that employees therein shall not strike for the purposes of securing changes or modification in their terms and conditions of employment. Such employees may belong to any labor organization which does not impose the obligation to strike or to join in strike: Provided, However, that this section shall apply only to employees employed in governmental functions of the Government including but not limited to governmental corporations.

3. With the reorganization of the ACCFA and its conversion into the ACA under the Land Reform Code and in view of SC ruling as to the governmental character of the functions of the ACA, the decision of the CIR dated March 25, 1963, and the resolution en banc affirming it, in the unfair labor practice case filed by the ACCFA, has becomemoot and academic, particularly insofar as the order to bargain collectively with the respondent Unions is concerned. 4. The position of the ACCFA in regard to the question of fringe benefits provided for in the CBA is that the said fringe benefits have not become enforceable because the condition that they should first be approved by the Office of the President has not been complied with. Under Section 3, Article XIV, of the CBA, the same "shall not become

dominant laissez-faire concept carried into the sphere of government. "The most important of the ministrant functions are: public works, public education, public charity, health and safety regulations, and regulations of trade and industry. 4

effective unless and until the same is duly ratified by the Board of Governors of the Administration." Such approval was given even before the formal execution of the CBA but with the proviso that "the fringe benefits contained therein shall take effect only if approved by the office of the President." The condition is, therefore, deemed to be incorporated into the agreement by reference.
NOTE: On July 24, 1963 the ACCFA Board of Governors ratified the CBA but with the express qualification that the same was "without prejudice to the pending appeal in the Supreme Court.The Office of the President approved the payment of the CBAs agreed upon fringe benefits.

The Supreme Court held that insofar as the fringe benefits already paid are concerned, there is no reason to set aside the decision of the CIR, but that since the respondent Unions have no right to the certification election sought by them nor, consequently, to bargain collectively with the petitioner, no further fringe benefits may be demanded on the basis of any collective bargaining agreement. The decisions and orders appealed from are set aside and/or modified in accordance with the foregoing pronouncements. No costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez, Castro, Teehankee and Barredo, JJ., concur. Zaldivar, J., concurs in the result.

Separate Opinion FERNANDO, J., concurring: The decision reached by this Court represents a clear tendency not to be necessarily bound by our previous pronouncements on what activities partake of a nature that is governmental.
Of even greater significance, there is a definite rejection of the "constituentministrant" criterion of governmental functions, followed in Bacani v. NACOCO. There is again full adherence to the basic philosophy of the Constitution as to the extensive and vast power lodged in our government to cope with the social and economic problems that even now sorely beset us. Our decision today does not pass upon the rights of labor employed in instrumentalities of the state discharging governmental functions. The Constitutional Convention saw to it that our fundamental law embodies a policy of the responsibility thrust on government to cope with social and economic problems and an earnest and sincere commitment to the promotion of the general welfare through state action. It would thus follow that the force of any legal objection to regulatory measures adversely affecting property rights or to statutes organizing public corporations that may engage in competition with private enterprise has been blunted. Unless there be a clear showing of any invasion of rights guaranteed by the Constitution, their validity is a foregone conclusion. The opinion of Justice Makalintal contains this footnote: "It must be stated, however, that we do not here decide the question not at issue in this case of whether or not a labor organization composed employees discharging governmental functions, which is allowed under the legal provision just quoted, provided such organization does not impose the obligation to strike or to join in strike, may petition for a certification election and compel the employer to bargain collectively with it for purposes other than to secure changes or conditions in the terms and conditions of employment."
References:
http://www.merriam-webster.com http://dictionary.law.com OMNIBUS RULESIMPLEMENTING THE LABOR CODE

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