Case Digest: Kaisahan at Kapatiran v. MWC, Inc.

G.R. No. 174179 : November 16, 2011




The Union is the duly-recognized bargaining agent of the rank-and-file employees of the respondent Manila Water Company, Inc. (Company) while Borela is the Union President. On February 21, 1997, the Metropolitan Waterworks and Sewerage System (MWSS) entered into a Concession Agreement (Agreement) with the Company to privatize the operations of the MWSS. Article 6.1.3 of the Agreement provides that "the Concessionaire shall grant [its] employees benefits no less favorable than those granted to MWSS employees at the time of [their] separation from MWSS." Among the benefits enjoyed by the employees of the MWSS were the amelioration allowance (AA) and the cost-of-living allowance (COLA) granted in August 1979, pursuant to Letter of Implementation No. 97 issued by the Office of the President.

The payment of the AA and the COLA was discontinued pursuant to Republic Act No. 6758, otherwise known as the "Salary Standardization Law," which integrated the allowances into the standardized salary. Nonetheless, in 2001, the Union demanded from the Company the payment of the AA and the COLA during the renegotiation of the parties Collective Bargaining Agreement (CBA). The Company initially turned down this demand, however, it subsequently agreed to an amendment of the CBA on the matter, which provides that the "Company shall implement the payment of the Amelioration Allowance and Cost of Living [A]llowance retroactive August 1, 1997 should the MWSS decide to pay its employees and all its former employees or upon award of a favorable order by the MWSS Regulatory Office or upon receipt of [a] final court judgment."

Thereafter, the Company integrated the AA into the monthly payroll of all its employees beginning August 1, 2002, payment of the AA and the COLA after an appropriation was made and approved by the MWSS Board of Trustees. The Company, however, did not subsequently include the COLA since the Commission on Audit disapproved its payment because the Company had no funds to cover this benefit.

As a result, the Union and Borela filed on April 15, 2003 a complaint against the Company for payment of the AA, COLA, moral and exemplary damages, legal interest, and attorneys fees before the National Labor Relations Commission (NLRC). The Labor Arbiter ruled in favor of the petitioners and such ruling was affirmed by the NLRC albeit removing the award for AA.

The Court of Appeals (CA) modified the assailed rulings by deleting the order for MWCI to pay attorneys fees equivalent to 10% of the judgment award since the same was not based in anything under the binding MOA between the Company and the Union. The CA noted that the award is without basis under Article 111 of the Labor Code which provides that attorneys fees equivalent to ten percent (10%) of the amount of wages recovered may be assessed only in cases of unlawful withholding of wages, which is not the case here.

The petitioners seek a reversal of the CA rulings on the sole ground that the appellate court committed a reversible error in reviewing the factual findings of the NLRC and in substituting its own findings an action that is not allowed under Rule 65 of the Rules of Court.


I. Whether the CA can review the factual findings of the NLRC in a Rule 65 petition

II. Whether the NLRC gravely abused its discretion in awarding ten percent (10%) attorney's fees to petitioners


(1) We agree with the petitioners that as a rule, the CA cannot undertake a re-assessment of the evidence presented in the case in certiorari proceedings under Rule 65 of the Rules of Court. However, the rule admits of exceptions. InMercado v. AMA Computer College-Paraque City, Inc., we held that the CA may examine the factual findings of the NLRC to determine whether or not its conclusions are supported by substantial evidence, whose absence justifies a finding of grave abuse of discretion.

(2) Article 111 of the Labor Code, as amended, governs the grant of attorney's fees in labor cases. We explained in PCL Shipping Philippines, Inc. v. National Labor Relations Commission that there are two commonly accepted concepts of attorneys fees the ordinary and extraordinary. In its ordinary concept, an attorneys fee is the reasonable compensation paid to a lawyer by his client for the legal services the former renders; compensation is paid for the cost and/or results of legal services per agreement or as may be assessed. In its extraordinary concept, attorneys fees are deemed indemnity for damages ordered by the court to be paid by the losing party to the winning party. The instances when these may be awarded are enumerated in Article 2208 of the Civil Code, specifically in its paragraph 7 on actions for recovery of wages, and is payable not to the lawyer but to the client, unless the client and his lawyer have agreed that the award shall accrue to the lawyer as additional or part of compensation.

Moreover, Article 111 of the Labor Code contemplates the extraordinary concept of attorneys fees and that Article 111 is an exception to the declared policy of strict construction in the award of attorneys fees. Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. In carrying out and interpreting the Labor Code's provisions and implementing regulations, the employee's welfare should be the primary and paramount consideration.

In the present case, we find it undisputed that the union members are entitled to their AA benefits and that these benefits were not paid by the Company. That the Company had no funds is not a defense as this was not an insuperable cause that was cited and properly invoked. As a consequence, the union members represented by the Union were compelled to litigate and incur legal expenses. On these bases, we find no difficulty in upholding the NLRC's award of ten percent (10%) attorney's fees.