Case Digest: Barayoga v. Asset Privatization Trust, G.R. No. 160073, October 24, 2005

Labor Code Art. 110 | Principle of Absorption

  • Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development Corporation (BISUDECO).
  • BISUDECO contracted the services of Philippine Sugar Corporation (Philsucor) to take over the management of the sugar plantation and milling operation.
  • Asset Privatization Trust, a public trust created to take title to and manage non-performing assets of the Philippine government, acquired the mortgage credits of BISUDECO from Philippine National Bank.
  • BISUDECO’s assets were eventually foreclosed and the properties were sold at a public auction to APT. APT later transferred the assets to Bicol-Agro-Industrial Cooperative (BAPCI), which took over the sugar milling operations.
  • The Union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction, and underpayment of wages and other labor standard benefits.
  • LA: Ruled in favor of the workers, ordering APT to pay mandated employment benefits. 
  • NLRC: Affirmed APT’s liability for the workers’ money claims but ruled that APT was not liable for unfair labor practice and illegal dismissal.
  • CA: Ruled that APT was not liable for the workers’ claims as there was no employer-employee relationship between APT and the workers.
WoN the APT is liable for petitioners’ monetary claims, including back wages. NO

APT, as a mere transferee of mortgage credit and later as a purchaser in a public auction, cannot be held liable for the workers’ claims against BISUDECO. APT's liabilities were not automatically assumed from BISUDECO. 

Labor contracts like collective bargaining agreements are not enforceable against the transferee (APT) unless expressly assumed.  The principle of absorption does not obligate a bona fide buyer or transferee to absorb the selling company’s employees. The purchasing company may give preference to reemploy qualified separated employees for reasons of public policy and social justice.

APT’s lien on BISUDECO’s mortgaged assets is a special preferred lien that must be satisfied first before the claims of the workers. Worker’s preference under Article 110 of the Labor Code does not constitute a lien on the property in favor of workers.

The Court clarified that the ruling does not reverse or rule upon the workers’ entitlement to back wages and other unpaid benefits from their previous employer, BISUDECO. The decision only absolves APT from liability in this case.


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