G.R. No. 71695-703 May 20, 1986
ASIAN FOOTWEAR & RUBBER CORPORATION, petitioner, vs. ANTONIO P. SORIANO, in his capacity as Deputy Sheriff of the Arbitration Branch, National Capital Region, National Labor Relations Commission, HON. BENIGNO L. VIVAR, JR., in his capacity as Executive Labor Arbiter, Arbitration Branch, National Capital Region, National Labor Relations Commission, and JACINTO RUBBER FREE WORKERS ASSOCIATION, respondents.

FACTS

Asian Footwear and Rubber Corporation (ASIAN) is a footwear manufacturer. On November 10, 1980, ASIAN purchased eight parcels of land with permanent improvements from Jacinto Rubber and Plastics Co., Inc. (JACINTO). The purchase price was P450 per square meter plus ASIAN’s assumption of JACINTO’s mortgage obligation to Philippine Banking Corporation amounting to P2,284,932.11. By November 28, 1980, ASIAN had obtained transfer certificates of title to the properties. The only lien annotated on the titles at the time of sale was the mortgage in favor of the bank.
On May 16, 1985, Deputy Sheriff Antonio P. Soriano, acting on an Alias Writ of Execution issued by Executive Labor Arbiter Benigno L. Vivar, Jr., attempted to levy on ASIAN’s premises to satisfy a labor judgment for gratuity pay owed by JACINTO to the Jacinto Rubber Free Workers Association. The writ commanded the sheriff to collect P765,998.99 from JACINTO or satisfy it from the company’s movable or immovable properties. ASIAN resisted, asserting ownership of the properties and having no obligation to the private respondent workers’ association.

ISSUE

Whether the respondent labor arbiter and sheriff acted without jurisdiction or with grave abuse of discretion in enforcing the alias writ of execution against the properties of ASIAN, a separate corporate entity that purchased the assets from the judgment debtor, JACINTO.

RULING

Yes. The Supreme Court granted the petition and made permanent the temporary restraining order, directing the respondents to desist from enforcing the writ against ASIAN’s properties. The legal logic is anchored on jurisdiction and the nature of the proceedings required to assail a transfer of property. The record established that ASIAN was a distinct corporate entity from JACINTO. At the time of the sale in 1980, JACINTO had ceased operations and applied for a total shutdown clearance. The titles transferred to ASIAN bore no annotation of the labor claim, only the bank mortgage. There was no evidence presented that ASIAN was merely an alter ego of JACINTO.
Crucially, the Court ruled that a labor arbiter, as an executive or quasi-judicial officer, is incompetent to adjudicate the issue of whether the sale was fraudulent or in bad faith vis-à-vis JACINTO’s creditors. Such a determination is inherently judicial in character. A claim that a sale was executed to defraud creditors requires a full-blown adversarial proceeding in a regular court, where evidence can be formally presented and the rights of all parties, including the purchaser, can be properly adjudicated. The labor arbiter’s verbal intimation that ASIAN was a purchaser in bad faith, without a proper judicial determination, constituted a grave abuse of discretion. The enforcement of the writ against a third-party purchaser, on the basis of a claim not established in a proper forum, was therefore without legal basis.