G.R. No.

177524               July 23, 2014

NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT AND ALLIED INDUSTRIES

DECISION

BRION, J.:

We resolve the petition for review on certiorari,  challenging the January 31, 2007 decision  and the
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April 20, 2007 resolution  of the Court of Appeals (CA) in CA-G.R. SP No. 93698.
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This CA decision reversed the July 4, 2005 decision  of the National Labor Relations Commission
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(NLRC) in NLRC NCR CA No. 031977-02 (NLRC NCR-30-05-02011-01) that in tum, reversed and
set aside the April 30, 2002 decision  of the Labor Arbiter (LA).
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The LA dismissed the complaint for non-payment of service charges filed by petitioner National
Union of Workers in Hotel Restaurant and Allied Industries (NUWHRAIN-APL-IUF), Philippine Plaza
Chapter (Union).

The Factual Antecedents

The Union is the collective bargaining agent of the rank-and-file employees of respondent Philippine
Plaza Holdings, Inc. (PPHI).

On November 24, 1998, the PPHI and the Union executed the "Third Rank-and-File Collective
Bargaining Agreement as Amended"  (CBA). The CBA provided, among others, for the collection, by
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the PPHI, of a ten percent (10%) service charge on the saleof food, beverage, transportation,
laundry and rooms. The pertinent CBA provisions read:

SECTION 68. COLLECTION. The HOTEL shall continue to collect ten percent (10%) service charge
on the sale of food, beverage, transportation, laundry and rooms except on negotiated contracts and
special rates. [Emphasis supplied]

SECTION 69. DISTRIBUTION. The service charge to be distributed shall consist of the following:

Effectiv Food & Beverage Room, Transportation & valet

The distributable amount will beshared equally by all HOTEL employees, including managerial
employees but excluding expatriates, with three shares to be given to PPHI Staff and three shares to
the UNION (one for the national and two for the local funds) that may be utilized by them for
purposes for which the UNION may decide.
These provisions merely reiterated similar provisions found in the PPHIUnion’s earlier collective
bargaining agreement executed on August 29, 1995. 7

On February 25, 1999, the Union’s Service Charge Committee informed the Union President,
through an audit report (1st audit report),  of uncollected service charges for the last quarter of 1998
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amounting to ₱2,952,467.61. Specifically, the audit report referred to the service charges from the
following items: (1) "Journal Vouchers;" (2) "Banquet Other Revenue;" and (3) "Staff and Promo."
The Union presented this audit report to the PPHI’s management during the February 26, 1999
Labor Management Cooperation Meeting (LMCM).  The PPHI’s management responded that the
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Hotel Financial Controller would need to verify the audit report.

Through a letter dated June 9, 1999,  the PPHI admitted liability for ₱80,063.88 out of the
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₱2,952,467.61 thatthe Union claimed as uncollected service charges. The PPHI denied the rest of
the Union’s claims because: (1) they were exempted from the service charge being revenues from
"special promotions" (revenue from the Westin Gold Card sales) or "negotiated contracts" (alleged
revenue from the Maxi-Media contract); (2) the revenues did not belong to the PPHI but to third-party
suppliers; and (3) no revenue was realized from these transactions as they were actually expenses
incurred for the benefit of executives or by way of good-will to clients and government officials.

During the July 12, 1999 LMCM,  the Union maintained its position on uncollected service charges
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so that a deadlock on the issue ensued. The parties agreed to refer the matter to a third party for the
solution. They considered two options – voluntary arbitration or court action – and promised to get
back to each other on their chosen option.

In its formal reply (to the PPHI’sJune 9, 1999 letter) dated July 21, 1999 (2nd audit report),  the
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Union modified its claims. It claimed uncollected service charges from: (1) "Journal Vouchers -
Westin Gold Revenue and Maxi-Media" (F&B and Rooms Barter); (2) "Banquet and Other Revenue;"
and (3) "Staff and Promo."

On August 10, 2000, the Union’s Service Charge Committee made another service charge audit
report for the years 1997, 1998 and 1999 (3rd audit report).  This 3rd audit report reflected total
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uncollected service charges of ₱5,566,007.62 from the following entries: (1) "Journal Vouchers;" (2)
"Guaranteed No Show;" (3) "Promotions;" and (4) "F & B Revenue." The Union President presented
the 3rd audit report to the PPHI on August 29, 2000.

When the parties failed to reachan agreement, the Union, on May 3, 2001, filed before the LA
(Regional Arbitration Branch of the NLRC) a complaint  for non-payment of specified service
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charges. The Union additionally charged the PPHI with unfair labor practice (ULP) under Article 248
of the Labor Code, i.e., for violation of their collective bargaining agreement.

In its decision  dated April 30, 2002, the LA dismissed the Union’s complaint for lack of merit. The
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LA declared that the Union failed to show, by law, contract and practice, its entitlement to the
payment of service charges from the entries specified in its audit reports (specified
entries/transactions).

The LA pointed out that Section 68 of the CBA explicitly requires, as a precondition for the
distribution of service charges in favor of the covered employees, the collection of the 10% service
charge on the "sale of food, beverage, transportation, laundry and rooms;" at the same time, the
provision exempts from its coverage "negotiated contracts" and "special rates" that the LA deemed
as non-revenue generating transactions involving "food, beverage, transportation, laundry and
rooms." The Union failed to prove that the PPHI collected 10% service charges on the specified
entries/transactions that could have triggered the PPHI’s obligation under this provision.
Particularly, the LA pointed out that, first, the only evidence on record that could have formed the
basis of the Union’s claim for service charges was the PPHI’s admission that, as a matter of policy, it
has been charging, collecting and distributing to the covered employees 10% service charge on the
fifty percent (50%) of the total selling price of the "Maxi-Media F & B" and on the "Average House"
rate of the "Maxi-Media Rooms." And it did so, notwithstanding the fact that the "Maxi-Media F & B
and Rooms Barter" is a "negotiated contract" and/or "special rate" that Section 68 explicitly excludes
from the service charge coverage.

Second,while the PPHI derived revenues from the sale of the Westin Gold Cards (Westin Gold
Revenue), the PPHI did not and could not have collected a 10% service charge as these
transactions could not be considered as sale of food, beverage, transportation, laundry and rooms
that Section 68 contemplates.

Third, the "Staff and Business Promotion and Banquet" entry refers to the expenses incurred by the
PPHI’s Marketing Department and Department Heads and Hotel executives either as part of their
perks or the PPHI’s marketing tool/public relations. These are special rates that are essentially non-
revenue generating items.

Fourth, the "Backdrop" entry refers to services undertaken by third parties payment for which were
made of course to them; hence, this entry/transaction could not likewise be considered as sale of
services by PPHI for which collection of the 10% service charge was warranted.

Lastly, the LA equally brushed aside the Union’s claim of ULP declaring that the PPHI was well
within its legal and contractual right to refuse payment of service charges for entries from which it did
not collect any service charge pursuant tothe provision of their CBA.

The NLRC’s ruling

In its decision  of July 4, 2005, the NLRC reversed the LA’s decision and considered the specified
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entries/transactions as "service chargeable." As the PPHI failed to prove that it paid or remitted the
required service charges, the NLRC held the PPHI liable to pay the Union ₱5,566,007.62
representing the claimed uncollected service charges for the years 1997, 1998 and 1999 per the 3rd
audit report.

The PHHI went to the CA on a petition for certiorari  after the NLRC denied its motion for
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reconsideration. 18

The CA’s ruling

The CA granted the PPHI’s petition in its January 31, 2007 decision.  It affirmed the LA’s decision
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but ordered the PPHI to pay the Union the amount of ₱80,063.88 as service charges that it found
was due under the circumstances. The CA declared that no service charges were due from the
specified entries/transactions; either these constituted "negotiated contracts" and "special rates" that
Section 68 of the CBA explicitly excludes from the coverage of service charges, or they were cited
bases that the Union failed to sufficiently prove.

The CA pointed out that: one, the "Westin Gold Card Revenues" entry involved the sale, not of food,
beverage, transportation, laundry and rooms, but of a "contractual right" to be charged a lesser rate
for the products and services that the Hotel and the stores within it provide. At any rate, the PPHI
charges, collects and distributes to the covered employees the CBAagreed service charges
whenever any Westin Gold Card member purchases food, beverage, etc. Two, the "Maxi-Media F &
B and Rooms and Barter" entry did not involve any sale transaction that Section 68 contemplates.
The CA pointed out that the arrangement  between the PPHI and Maxi-Media International, Inc. was
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not one of sale but an innominate contract of facio ut des, i.e., in exchange for the professional
entertainment services provided by Maxi-Media, the Hotel agreed to give the former ₱2,800,000.00
worth of products and services.The CA added that this agreement falls under "negotiated contracts"
that Section 68 explicitly exempts. Three, the sale of "Gift Certificates" does not involve the CBA-
contemplated "sale of food, beverage, etc." Four, the Union failed to show the source of its
computations for its "Guaranteed No Show" and "F & B Revenue" claims. Five, the "Business
Promotions" entry likewise did not involve any sale; these were part of the PPHI’s business
expenses in the form of either signing benefits for the PPHI’s executives or asmarketing tool used by
the PPHI’s marketing personnel to generate goodwill. And six, the Union’s claims for service charges
that the PPHI allegedly collected prior to May 3, 1998 or three years before the Union filed
itscomplaint on May 3, 2001 had already prescribed per Article 291 of the Labor Code.

The Union filed the present petition after the CA denied its motion for Reconsideration 21

in the CA’s April 20, 2007 resolution. 22

The Petition

The Union argues that the CA clearly misapprehended and misappreciated, with grave abuse of
discretion, the facts and evidence on record. It maintains that the specified entries/transactions are
revenue based transactions which, per Section 68 and 69 of the CBA, clearly called for the collection
and distribution of a 10% service charge in favor of the covered employees. Particularly, the Union
argues that: (1) the "Westin Gold Cards" serve not only as a discount card but also as a "pre-paid"
card that provide its purchasing members complimentary amenities for which the Hotel employees
rendered services and should, therefore, had been subjected to the 10% service charge; (2) the
PPHI failed to prove that it had paid and distributed to the covered employees the service charge
due on the actual discounted sales of food, beverage, etc., generated by the "Westin Gold Cards;"
(3) the Hotel employees likewise rendered services whenever the Maxi-Media International, Inc.
consumed or availed part of the 2,800,000.00 worth of goods and services pursuant to its agreement
with the PPHI; (4) the "Maxi-Media" discounts should be charged to the PPHI as part of its expenses
and not the Union’s share in the service charges; (5) the PPHI has a separate budget for
promotions, hence the "Business Promotions" entry should likewise had been subjected to the 10%
service charge; (6) the sale of "Gift Certificates," recorded in the PPHI’s "Journal Vouchers" as
"other revenue/income," constituted a revenue transaction for which service charges were due; (7)
the PPHI admitted that service charges from "Guaranteed No Show" were due; and (8) it properly
identified through reference numbers the uncollected service charges from "Food and Beverage
Revenue."

The Union contends that inrefusing to collect and remit the CBA-mandated service charges that the
PPHI insists were non-revenue transactions falling under "Negotiated Contracts" and/or "Special
Rates," the PPHI, in effect, contravened the employees’ rights to service charges under the law and
the CBA. The Union also contends that the term "Negotiated Contracts" should be applied to "airline
contracts" only that they (the Union and the PPHI) intended when they executed the CBA. It points
out that at the time the CBA was executed, the PPHI had an existing agreement with Northwest
Airlines to which the term "Negotiated Contracts" clearly referred to. Further, the Union argues that
its claim for unpaid services charges for the year 1997 and part of 1998 had not yet prescribed.
Applying Article 1155 of the Civil Code in relation toArticle 291 of the Labor Code, the Union points
out that the running of the prescriptive period for the filing of its claim was interrupted when it
presented to the PPHI its 1st audit report during the February 26, 1999 LMCMand when the PPHI
admitted the service charges due to the Union inthe PPHI’s June 9, 1999 letter.
The Union additionally argues that the PPHI failed to conform to the generally accepted accounting
standards when it reclassified the revenue items as expense items.

Finally, the Union contends that the PPHI’s refusal, despite repeated demands, to distribute the
unremitted service charges and recognize its right to service charges on the specified entries; the
PPHI’s deliberate failure to disclose its financial transactions and audit reports; and the PPHI’s
reclassification of the revenues into expense items constitute gross violation of the CBA that
amounts to whatthe law considers as ULP.

The Case for the Respondent

The PPHI primarily counters, in its comment,  that the Union’s call for the Court to thoroughly re-
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examinethe records violates the Rule 45 proscription against questions of facts.The PPHI points out
that Rule 45 of the Rules of Court under which the petition is filed requires that only questions of law
be raised. In addition, the factual findings of the LA that had been affirmed by the CA deserve not
only respect but even finality.

On the petition’s merits, the PPHI argues that the specified entries/transactions for which the Union
claims service charges: (1) were not revenue generating transactions; (2) that did not involve a sale
of food, beverage, rooms, transportation or laundry; and/or (3) were in the nature of negotiated
contracts and special rates that Section 68 of the CBA specifically excepts from the collection of
service charges. Correlatively, Article 96 of the Labor Code requires the collection of service charges
as a condition precedent to its distribution or payment. Thus, as no service charges were collected
on the specified entries/transactions that the CBA expressly excepts, the Union’s claim for unpaid
service charges clearly had no basis.

To be precise, the PPHI points out that, first, the sale per se of the "Westin Gold Cards" did not
involve a sale of food, beverage, etc. that Section 68 of the CBA contemplates. The discounted
sales of food, beverage, etc. to Westin Gold Card holders, on the other hand, had already been
subjected to service charges inclusive of the discount, i.e., computed on the gross sales of food,
beverage, etc. to the card holders, and which service charges it had already distributed to the
covered employees. Second, its agreement with Maxi-Media involved an exchange or barter
transaction, i.e., its food and Hotel services in exchange for Maxi-Media’s entertainment services
that did not generate income. This agreement likewise falls under "Negotiated Contracts" that
Section 68 clearly excepts. And, in any case, it had already collected, and distributed to the covered
employees, the service charges on the food, beverage, etc. that Maxi-Media consumed based on
the monthly average rate of the rooms and on the 50% rate of the price of the consumed food and
beverage. Third, the Union failed to prove its claims for uncollected service charges from
"Guaranteed No Show" and "Business Promotions." Fourth, the "Food and Beverage other
Revenue" entry refers to the PPHI’s transactions with external service providers the payment for
whose services could not be considered as the PPHI’s revenue. Fifth, the sale per se of the "Gift
Certificates" also did not involve the Section 68-contemplated sale of food, beverage, etc. and the
Union failed to prove that the presented Gift Certificateshad actually been consumed, i.e., used
within the Hotel premises for food, beverage, etc. And sixth, it had never been its practice to collect
service charges on the specified entries/transactions that could have otherwise resulted in what the
Union considers as "partial abolition of service charges" when it refused to collect service charges
from them.

The PPHI also disputes what it considers as the Union’s strained interpretation of the CBA exception
of "Negotiated Contracts" as applicable to airline contracts only. It points out that the clear wordings
of Section 68 of the CBA plainly show the intent to except, in a general and broad sense,
"Negotiated Contracts" and "Special Rates" as to include the "Westin Gold Cards" and "Maxi-Media"
barter agreement. The PPHI additionally argues that the CBA’s exception of "Negotiated Contracts"
and "Special Rates" from the collection of service charges does not violate Article 96 of the Labor
Code. It points out that Article 96 merely provides for the minimum percentage distribution, between
it (the PPHI) as the employer and the Hotel’s covered employees, of the collected service charges
which their CBA more than satisfied. It also points out that Article 96 does not prohibit the exception
of certain transactions from the coverage and/or collection of service charges that it (as the
employer) and the Union (in behalf of the covered Hotel employees) had voluntarily and mutually
agreed on in their CBA.  And in fact, the Union’s refusal to recognize these clear and express
1âwphi1

exceptions constituted a violation of their agreement.

Further, the PPHI maintains that the Union’s claim for the alleged uncollected service charges for the
year 1997 and the early months of 1998 had already prescribed per Article 291 of the Labor Code.

Finally, the PPHI points out that the issue in this case is not whether service charges had been paid.
Rather, the clear issue is whether or not service charges should have been collected (and distributed
to the covered employees) for the specified entries/transactions that the LA and the CA correctly
addressed and which the NLRC clearly missed as it rendered a decision without any factual or legal
basis.

The Court's Ruling

We find the petition unmeritorious.

Preliminary considerations: jurisdictional limitations of the Court’s Rule 45 review of the CA’s Rule 65
decision in labor cases; the Montoya ruling and factual-issue-bar-rule

In a petition for review on certiorari under Rule 45 of the Rules of Court, we review the legal errors
that the CA may have committed in the assailed decision, in contrastwith the review for jurisdictional
errors that we undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision in a labor case taken under Rule 65 of the Rules of Court, we examine the CA decision in
the context that it determined the presence or the absence of grave abuse of discretion in the NLRC
decision before it and not on the basis of whether the NLRC decision, on the merits of the case, was
correct. In other words, we proceed from the premise that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. Within this limited scope of our Rule 45
review, the question that we ask is: Did the CA correctly determine whether the NLRC committed
grave abuse of discretion in ruling on the case? 24

In addition, the Court’s jurisdiction in a Rule 45 petition for review on certiorari is limited to resolving
only questions of law. A question of law arises when the doubt or controversy exists as to what law
pertains to a particular set of facts; and a question of fact arises when the doubt or controversy
pertains to the truth or falsity of the alleged facts. 25

The present petition essentially raises the question – whether the Union may collect from the PPHI,
under the terms of the CBA, its share of the service charges. This is a clear question of law that falls
well within the Court’s power in a Rule 45 petition.

Resolution of this question of law, however, is inextricably linked with the largely factual issue of
whether the specified entries/transactions fall within the generally covered sale of food, beverage,
transportation, etc. from which service charges are due or within the CBA excepted "Negotiated
Contracts" and "Special Rates." It also unavoidably requires resolution of another factual issue, i.e.,
whether the Union’s claim for service charges collected for the year 1997 and the early months of
1998 had already prescribed. As questions of fact, they are proscribed by our Rule 45 jurisdiction;
we generally cannot address these factual issues except to the extent necessary to determine
whether the CA correctly found the NLRC in grave abuse of discretion in granting the Union’s claim
for service charges from the specified entries/transactions.

The jurisdictional limitations of our Rule 45 review of the CA’s Rule 65 decision in labor cases
constrain us to deny the present petition for clear lack of legal error in the CA’s decision.Our
consideration of the facts taken within this limited scope of our factual review power, convinces us
that grave abuse of discretion attended the NLRC’s decision. At what point and to what extent the
NLRC gravely abusedits discretion is the matter we shall discuss below.

The NLRC’s patently erroneous appreciation of the real issue in the present controversy, along with
the facts and the evidence, amounted to grave abuse of discretion

In granting the Union’s claim, the NLRC simply declared that the PPHI "has not shown any proof that
it paid or remitted what is due to the Union and its members" and concluded that the specified
entries/transactions were "service chargeable." This NLRC conclusion plainly failed to appreciate
that it involved only the alleged uncollected service charges from the specified entries/transactions.
The NLRC likewise, in the course of its ruling, did not point to any evidence supporting its
conclusion.

In deciding as it did, the NLRC patently proceeded from the wrong premise, i.e., that the PPHI did
not at all distribute to the Hotel’s covered employees their share in the collected service charges. It
likewise erroneously assumed that all the specified entries/transactions were subject to service
charges and that the PPHI collected service charges from them as its ruling was patently silent on
this point. The NLRC also erroneously assumed that each and every transaction that the PPHI
entered into was subject to a service charge.

What the NLRC clearly and conveniently overlooked was the underlying issue of whether service
charges are due from the specified entries/transactions, i.e., whether the specified
entries/transactions are covered by the CBA’s general-rule provisions on the collection of service
charges or whether they are excepted because they fall within the excepted "Negotiated Contracts"
and "Special Rates" or simply did not involve a "sale of food, beverage, etc." from which service
charges are due. This understanding of this case’s real issue is an indispensable requisite in the
proper resolution of the controversy and a task that the NLRC, as a tribunal exercising quasi-judicial
power, mustperform with circumspection and utmost diligence. The patent failure led to its manifestly
flawed conclusions that were belied by the underlying facts. By so doing, the NLRC acted outside
the clear contemplation of the law.26

Accordingly, we affirm the CA’s decision to be legally correct as it correctly reversed the NLRC
decision for grave abuse of discretion.

Nature of a CBA; rules inthe interpretation of CBA provisions

A collective bargaining agreement, as used in Article 252 (now Article 262)  of the Labor Code, is a
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contract executed at the request of either the employer or the employees’ exclusive bargaining
representative with respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions under such
agreement.  Jurisprudence settles that a CBA is the law between the contracting parties who are
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obliged under the law to comply with its provisions. 29

As a contract and the governing law between the parties, the general rules of statutory construction
apply in the interpretation of its provisions. Thus, if the terms of the CBA are plain, clear and leave
no doubt on the intention of the contracting parties, the literal meaning of its stipulations, as they
appear on the face of the contract, shall prevail.  Only when the words used are ambiguous and
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doubtful or leading to several interpretations of the parties’ agreement that a resort to interpretation
and construction is called for.
31

No service charges were due from the specified entries/transactions; they either fall within the CBA-
excepted "Negotiated Contracts" and "Special Rates" or did not involve "a sale of food, beverage,
etc."

The Union anchors its claim for services charges on Sections 68 and 69 of the CBA, in relation with
Article96 of the Labor Code. Section 68 states that the sale of food, beverage, transportation,
laundry and rooms are subject to service charge at the rate often percent (10%). Excepted from the
coverage of the 10% service charge are the so-called "negotiated contracts" and "special rates."

Following the wordings of Section 68 of the CBA, three requisites must be present for the provisions
on service charges to operate: (1) the transaction from which service charge is sought to be
collected is a sale; (2) the sale transaction covers food, beverage, transportation, laundry and
rooms; and (3) the sale does not result from negotiated contracts and/or at special rates.

In plain terms, all transactions involving a "sale of food, beverage, transportation, laundry and
rooms" are generally covered. Excepted from the coverage are, first, non-sale transactions or
transactions that do not involve any sale even though they involve "food, beverage, etc." Second,
transactions that involve a sale but do not involve "food, beverage, etc." And third, transactions
involving "negotiated contracts" and "special rates" i.e., a "sale of food, beverage, etc." resulting from
"negotiated contracts" or at "special rates;" non-sale transactions involving "food, beverage, etc."
resulting from "negotiated contracts" and/or "special rates;" and sale transactions, but not involving
"food, beverage, etc.," resulting from "negotiated contracts" and "special rates." Notably, the CBA
does not specifically define the terms "negotiated contracts" and "special rates." Nonetheless, the
CBA likewise does not explicitly limit the use of these terms to specified transactions. With particular
reference to "negotiated contracts," the CBA does not confine its application to "airline contracts" as
argued by the Union. Thus, as correctly declared by the CA, the term "negotiated contracts" should
be read as applying to all types of negotiated contracts and not to "airlines contracts" only. This is in
line with the basic rule of construction that when the terms are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall prevail. A constricted
interpretation of this term, i.e., as applicable to "airlines contracts" only, must be positively shown
either by the wordings of the CBA or by sufficient evidence of the parties’ intention to limit its
application. The Union completely failed to provide support for its constricted reading of the term
"negotiated contracts," either from the wordings of the CBA or from the evidence.

In reversing the NLRC’s ruling and denying the Union’s claim, the CA found the specified
entries/transactions as either falling under the excepted negotiated contracts and/or special rates or
not involving a sale of food, beverage, etc. Specifically, it considered the entries "Westin Gold

Cards Revenue" and "Maxi Media Barter" to be negotiated contracts or contracts under special
rates, and the entries "Business Promotions" and "Gift Certificates" as contracts that did not involve
a sale of food, beverage, etc. The CA also found no factual and evidentiary basis to support the
Union’s claim for service charges on the entries "Guaranteed No show" and "F & B Revenue."

Our consideration of the records taken under our limited factual review power convinces us that
these specified entries/transactions are indeed not subject to a 10% service charge. We thus see no
reason to disturb the CA’s findings on these points.
The PPHI did not violate Article 96 of the Labor Code when they refused the Union’s claim for
service charges on the specified entries/transactions

Article 96 of the Labor Code provides for the minimum percentage distribution between the employer
and the employees of the collected service charges, and its integration inthe covered employees’
wages in the event the employer terminates its policy of providing for its collection. It pertinently
reads:

Art. 96. Service Charges.

x x x In case the service charge is abolished, the share of the covered employees shall be
considered integrated in their wages.

This last paragraph of Article 96 of the Labor Code presumes the practice of collecting service
charges and the employer’s termination of this practice. When this happens, Article 96 requires the
employer to incorporate the amount that the employees had been receiving as share of the collected
service charges into their wages. Incases where no service charges had previously been collected
(as where the employer never had any policy providing for collection of service charges or had never
imposed the collection of service charges on certain specified transactions), Article 96 will not
operate.

In this case, the CA found that the PPHI had not in fact been collecting services charges on the
specified entries/transactions that we pointed out as either falling under "negotiated contracts"
and/or "special rates" or did not involve a "sale of food, beverage, etc." Accordingly, Article 96 of the
Labor Code finds no application in this case; the PPHI did not abolish or terminate the
implementation of any company policy providing for the collection of service charges on specified

entries/transactions that could have otherwise rendered it liable to pay an amount representing the
covered employees’ share in the alleged abolished service charges.

The Union’s claim for service charges for the year 1997 and the early months of 1998 could not have
yet prescribed at the time it filed its complaint on May 3, 2001; Article 1155 of the Civil Code applies
suppletorily to Article 291 of the Labor Code

Article 291 (now Article 305)  of the Labor Code states that "all money claims arising from employer-
32

employee relations x x x shall be filed within three (3) years from the time the cause of action
accrued; otherwise, they shall forever be barred." [Emphasis supplied]

Like other causes of action, the prescriptive period for money claims under Article 291 of the Labor
Code is subject to interruption. And, in the absence of an equivalent Labor Codeprovision for
determining whether Article 291’s three-year prescriptive period may be interrupted, Article 1155 of
the Civil Code  may be applied. Thus, the period of prescription of money claims under Article 291 is
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interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by the creditor; and (3) a
written acknowledgment of the debt by the debtor.

In the present petition, the facts indisputably showed that as early as 1998, the Union demanded, via
the 1st audit report, from the PPHI the payment and/or distribution of the alleged uncollected service
charges for the year 1997. From thereon, the parties went through negotiations (LCMC) to settle and
reconcile on their respective positions and claims.
Under these facts – the Union’s written extrajudicial demand through its 1st audit report and the
successive negotiation meetings between the Union and the PPHI – the running of the three-year
prescriptive period under Article 291 of the Labor Code could have effectively been interrupted.
Consequently, the Union’s claims for the alleged uncollected service charges for the year 1997 could
not have yet prescribed at the time it filed its complaint on May 3, 2001.

This non-barring effect of prescription, notwithstanding (i.e., that the running of the three-year
prescriptive period had effectively been interrupted – by the Union's written extrajudicial demand on
the PPHI), the CA, as it affirmed the LA, still correctly denied the Union's claims for the alleged
uncollected and/or undistributed service charges on the specified entries/transactions for the year
1997 and the early part of 1998. As the CA found and discussed in its decision, and with which we
agree as amply supported by factual and legal bases, the nature of these specified
entries/transactions as either excepted from the collection of service charges or not constituting a
"sale of food, beverage, etc.," and the Union's failure to support its claims by sufficient evidence
warranted, without doubt, the denial of the Union's action.

In sum, we find the CA's denial of the Union's claim for service charges from the specified
entries/transactions legally correct and to be well supported by the facts and the law. The CA
correctly reversed for grave abuse of discretion the NLRC's decision.

WHEREFORE, in light of these considerations, we hereby DENY the petition. We AFFIRM the
decision dated January 31, 2007 and resolution dated April 20, 2007 of the Court of Appeals in CA-
G.R. Sp No. 93698.

SO ORDERED.