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Andrew Neil R.


Employees Have No Equity Claim Against the Business Enterprise

Barayoga v. Asset Privatization Trust


By virtue of Proclamation No. 50, Former President Aquino issued A.O. No. 14,
which designated Asset Privatization Trust to title, conserve and provisionally
manage non-performing assets of the National Government. Among the assets
transferred was the financial claim of the PNB against Bicolandia Sugar
Development Corp.s (BISUDECO). As a result, APT contracted the services of the
Phil. Sugar Corporation (PHILSUCOR) to provisionally take over the management
of BISUDECOs sugar plantation and milling operations.

For failure to pay its outstanding loan with the PNB, BISUDECO mortgaged
properties were foreclosed and acquired by APT through auction. Subsequently,
the employees union filed a case against BISUDECO for unfair labor practice,
illegal dismissal and underpayment of wages.

Meanwhile, APTs Board of Trustees approved the offer of the Bicol Agro Industrial
Coop to buy the BISUDECOs sugar plantation and mill and to pay the separation
benefits of BISUDECOs employees in the event of companys privatization.

The Employees Union of BISUDECO filed an amended complaint impleading APT

alleging that when PHILSUCOR initially took over the operations of the
BISUDECO, it retained the latters existing personnel under the same terms and
conditions which includes all of the obligations and benefits.

The LA and the NLRC ruled in favor the union. It held that while no employer-
employee relationship existed between members of the union and APT, at the time
of the employees illegal dismissal, the assets of BISUDECO had been transferred
to the national government through APT and the latter should have treated
unions claim as a lien on the assets of BISUDECO. On appeal, the CA reversed
the decision of the NLRC.

Is APT liable to pay the unions monetary claims?

No. The duties and liabilities of BISUDECO, including its monetary liabilities
to its employees, were not all automatically assumed by APT as purchaser of
the foreclosed properties at the auction sale. Any assumption of liability must
be specifically and categorically agreed upon. Unless expressly assumed, labor
contracts like collective bargaining agreements are not enforceable against the
transferee of an enterprise. Labor contracts are in personam and thus binding
only between the parties.

Furthermore, under the principle of absorption, a bona fide buyer or

transferee of all, or substantially all, the properties of the seller or transferor
is not obliged to absorb the latters employees. The most that the purchasing
company may do, for reasons of public policy and social justice, is to give
preference of reemployment to the selling companys qualified separated
employees, who in its judgment are necessary to the continued operation of the
business establishment.

In other words, the liabilities of the previous owner to its employees are not
enforceable against the buyer or transferee, unless (1) the latter unequivocally
assumes them; or (2) the sale or transfer was made in bad faith. Thus, APT
cannot be held responsible for the monetary claims of petitioners who had been
dismissed even before it actually took over BISUDECOs assets.

Moreover, it should be remembered that APT merely became a transferee of

BISUDECOs assets for purposes of conservation because of its lien on those
assets -- a lien it assumed as assignee of the loan secured by the corporation
from PNB. Subsequently, APT, as the highest bidder in the auction sale, acquired
ownership of the foreclosed properties.