DEVELOPMENT BANK OF THE PHILIPPINES, PETITIONER, VS. THE NATIONAL LABOR RELATIONS COMMISSION, PINES HOTEL GENERAL WORKERS’ UNION-ALU, VIRGINIA ABAD, DOLORES AQUINO, JOHNNY CASTA…

This petition for certiorari, invoking Rule 65 of
the Rules of Court, challenges the decision, dated 16 April 1991, as well as
the resolution, dated 31 July 1992, of respondent National Labor Relations
Commission (“NLRC”).

Resort Hotel Corporation (“RHC”) was the former owner
and operator of the Pines Hotel in Baguio City, where private respondents were
employed. The property was hypothecated
to petitioner Development Bank of the Philippines (“DBP”). When RHC failed to comply with its
obligations, DBP foreclosed on the mortgage. Following the foreclosure, Hotel Development Corporation
(“HDC”), a subsidiary of DBP, assumed the management and operations
of the hotel. Private respondents were
rehired by HDC.

On 23 October 1984, Pines Hotel, unfortunately, was razed by
fire. On 05 November 1985, private
respondents filed a complaint against RHC for money claims still outstanding in
their favor at the time the foreclosure was effected. HDC and DBP were also impleaded upon the thesis that, should RHC
be bereft of sufficient property to answer for those claims, the foreclosed
property could be levied against in accordance with Article 110 of the Labor
Code.

On 13 May 1988, the Labor Arbiter rendered judgment thusly:

“IN THE LIGHT OF THE FOREGOING OBSERVATIONS, judgment is
hereby rendered with the following dispositions:

“1. That the foreclosure of the assets of the
Resort Hotels Corporation by the Development Bank of the Philippines had the
effect of placing the workers in a situation similar to that of establishments
that are bankrupt, or those that are dissolved, hence workers claims should be
paid in full before the Development Bank of the Philippines may establish any
claim over the assets of the RHC;

“2. That the Development Bank of the Philippines
is hereby ordered to deliver the complainants claims for separation pay, earned
vacation and sick leave benefits, meal provisions service charge share pay
claims and March 1984 service charge claims all of which having a total of TWO
MILLION ONE HUNDRED EIGHTY ONE THOUSAND, SIX HUNDRED NINETY NINE PESOS AND
FIFTY SIX CENTAVOS (P2,181,699.56), plus ten percent (10%) of which as attorney’s
fees and the legal interest to be computed from March 31, 1984 up to its actual
payment;

“3. The prayer of the respondent RHC calling for
the dismissal of this case for lack of merit is denied, with the qualification
that the cross claim is granted, and the DBP should deliver to the complainants
their claims; and

“4. That the Hotel Development Corporation does
not have any liability to the complainants, in so far as the claims for
separation pay, earned vacation and sick leave benefits, meal provisions
service charge share pay claim and March 1984 service charge claims are
concerned, hence it should dropped from this complaint.

“SO ORDERED.” (Rollo, pp. 85-86).

On appeal to the NLRC, the latter, on 15 April 1991, rendered its
decision which, among other things, said:

“RHC’s contention that its liability to herein complainants
was transferred to DBP as a consequence of the foreclosure of the Hotel, is
untenable. As aptly expounded by DBP,
the obligation to pay complainants money claims, the subject matter of this
complaint, is personal to RHC.

“WHEREFORE, the instant appeals are DISMISSED for lack of
merit and the appealed Decision is hereby AFFIRMED.

“SO ORDERED.” (Rollo, p. 107).

No appeal was interposed by either party.

On 03 October 1991, private respondents filed a motion for the
issuance of a writ of execution. On 15
October 1991, DBP submitted, in turn, with the Labor Arbiter a motion for
clarification to resolve an averred inconsistency between the body (i.e., that
RHC, not DBP, is liable to herein private respondents for their money claims
[see aforequoted decision]) and the dispositive portion (which dismissed DBP’s
appeal [ibid.]) of the NLRC decision. On 31 July 1992, the NLRC issued a resolution denying the motion for
clarification for lack of merit. The
NLRC said:

“There is no inconsistency between the findings in the April
25, 1991 Decision of this Commission and the dispositive portion thereof as
perceived by respondent DBP.

“It needs to be stressed that DBP was impleaded in this case
for reason that it foreclosed the assets of RHC. And, the complainants, who were employees of RHC, would like to
ensure the enforcement of their money claims against the foreclosed properties
of their employer invoking Art. 110 of the Labor Code which provides that:

“‘Art. 110 – Workers preference in case of bankruptcy. – In the event of bankruptcy or liquidation
of an employer’s business, his workers shall enjoy first preference as regards
their wages and other monetary claims, any provisions of law to the contrary
notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of the government and other
creditors may be paid.’

“Before complainants’ money claims could enjoy preference
under the aforesaid provision of the Labor Code, the same should be first
established. That is, it must be shown
with sufficient evidence that they are legally entitled thereto or, that their
employer is legally bound to pay their money claims. Precisely, this is the thrust of our findings when we declared
RHC liable to complainants’ money claims. Unfortunately, DBP interpreted this finding separately. It failed to take into consideration the
other portion of the decision of which it forms a part.

“WHEREFORE, the instant motion is hereby DENIED for lack of
merit.

“SO ORDERED.” (Rollo, pp. 130-131).

Hence, the instant petition for certiorari, which
asserts that:

“1. The National Labor Relations Commission
committed grave abuse of discretion amounting to lack or in excess of
jurisdiction when it promulgated its resolution of July 31, 1992 erroneously
sustaining the dispositive portion of its Decision of April 15, 1991, instead
of following its (Decision) body which correctly absolves DBP from liability in
favor of the private respondents.

“2. The National Labor Relations Commission
committed grave abuse of discretion amounting to lack or in excess of
jurisdiction when it affirmed the erroneous conclusion of Labor Arbiter
Irenarco R. Rimando that private respondents (complainants workers) claims
against RHC enjoys first preference over the mortgage credit of DBP;

“3. The National Labor Relations Commission and
the Labor Arbiter committed grave abuse of discretion amounting to lack or in
excess of jurisdiction when it declared that bankruptcy proceedings should not
be a condition before workers claims are paid of their claims in view of the amendment of Art. 110 by
Republic Act No. 6715;

“4. The National Labor Relations Commission
committed grave abuse of discretion amounting to lack or in excess jurisdiction
when it affirmed the conclusion of Labor Arbiter Irenarco R. Rimando that
because of DBP’s foreclosure of RHC assets, complainants workers lien should
now be enforced against DBP.” (Rollo, pp. 22-23).

Evidently, the NLRC erred in its application of the provisions of
Article 110 of the Labor Code. In
Republic vs. Peralta (150 SCRA 37, 38-40), this Court ruled:

“Article 110 of the Labor Code, in determining the reach of
its terms, cannot be viewed in isolation. Rather, Article 110 must be read in relation to the provisions of the
Civil Code concerning the classification, concurrence and preference of
credits, which provisions find particular application in insolvency proceedings
where the claims of all creditors, preferred or non-preferred, may be
adjudicated in a binding manner.

“x x x                                                             x
x x                                                                 x
x x.

“Article 110 of the Labor Code does not purport to create a
lien in favor of workers or employees for unpaid wages either upon all of the
properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore
fall at all within the category of specially preferred claims established under
Articles 2241 and 2242 of the Civil Code, except to the extent that such claims
for unpaid wages are already covered by Article 2241, number 6: ‘claims for laborers’ wages, on the goods
manufactured or the work done;’ or by Article 2242, number 3: ‘claims of laborers and other workers engaged
in the construction, reconstruction or repair of buildings, canals and other
works, upon said buildings, canals or other works.’ To the extent that claims
for unpaid wages fall outside the scope of Article 2241, number 6 and 2242,
number 3, they would come within the ambit of the category of ordinary
preferred credits under Article 2244.”

On 21 March 1989, Article 110 of the Labor Code was amended by
Republic Act No. 6715 to read:

“Article 110. Worker
preference in case of bankruptcy. – In
the event of bankruptcy or liquidation of an employer’s business, his workers
shall enjoy first preference as regards their wages and other monetary claims,
any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall
be paid in full before claims of the Government and other creditors may be
paid.”

In Development Bank of the Philippines vs. National Labor
Relations Commission (183 SCRA 328, 336-339), this Court expounded on the
effects of the amendment, in this wise:

“The amendment expands worker preference to cover not only
unpaid wages but also other monetary claims to which even claims of the
Government must be deemed subordinate.

“x x x                                                             x
x x                                                         x
x x.

“Notably, the terms ‘declaration’ of bankruptcy or ‘judicial’
liquidation have been eliminated. Does
this mean then that liquidation proceedings have been done away with?

“We opine in the negative, upon the following considerations:

“1. Because of its
impact on the entire system of credit, Article 110 of the Labor Code cannot be
viewed in isolation but must be read in relation to the Civil Code scheme on
classification and preference of credits.

“x x x                                                             x
x x                                                                 x
x x.

“2. In the same way that the Civil Code
provisions on classification of credits and the Insolvency Law have been
brought into harmony, so also must the kindred provisions of the Labor Law be
made to harmonize with those laws.

“3. In the event of insolvency, a principal
objective should be to effect an equitable distribution of the insolvent’s
property among his creditors. To
accomplish this there must first be some proceeding where notice to all of the
insolvents’ creditors may be given and where the claims of preferred creditors
may be bindingly adjudicated (De Barretto vs. Villanueva, No. L-14938, December
29, 1962, 6 SCRA 928). The rationale
therefore has been expressed in the recent case of DBP vs. Secretary of Labor
(G.R No. 79351, 28 November 1989), which we quote:

“x x x                                                             x
x x                                                                 x
x x.

“4. A distinction should be made between a
preference of credit and a lien. A
preference applies only to claims which do not attach to specific
properties. A lien creates a charge on
a particular property. The right of
first preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their
favor, a preference in application. It
is a method adopted to determine and specify the order in which credits should
be paid in the final distribution of the proceeds of the insolvent’s
assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor.

“x x x                                                             x
x x                                                                 x
x x.

“6. Even if Article 110 and its Implementing
Rule, as amended, should be interpreted to mean ‘absolute preference,’ the same
should be given only prospective effect in line with the cardinal rule that
laws shall have no retroactive effect, unless the contrary is provided (Article
4, Civil Code). Thereby, any
infringement on the constitutional guarantee on non-impairment of the
obligation of contracts (Section 10, Article III, 1987 Constitution) is also
avoided. In point of fact, DBP’s
mortgage credit antedated by several years the amendatory law, RA No.
6715. To give Article 110 retroactive
effect would be to wipe out the mortgage in DBP’s favor and expose it to a risk
which it sought to protect itself against by requiring a collateral in the form
of real property.

“In fine, the right to preference given to workers under
Article 110 of the Labor Code cannot exist in any effective way prior to the
time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency,
such unpaid wages shall be paid in full before the ‘claims of the Government
and other creditors’ may be paid. But,
for an orderly settlement of a debtor’s assets, all creditors must be convened,
their claims ascertained and inventoried, and thereafter the preferences
determined in the course of judicial proceedings which have for their object
the subjection of the property of the debtor to the payment of his debts or
other lawful obligations. Thereby, an
orderly determination of preference of creditors’ claims is assured (Philippine
Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the
adjudication made will be binding on all parties-in-interest, since those
proceedings are proceedings in rem; and the legal scheme of
classification, concurrence and preference of credits in the Civil Code, the
Insolvency Law, and the Labor Code is preserved in harmony.”

The above pronouncement was reiterated in Bolinao, Jr. vs. Padolina (186 SCRA 368),
Development Bank of the Philippines vs. National Labor Relations Commission
(186 SCRA 841), Development Bank of the Philippines vs. National Labor
Relations Commission (218 SCRA 183) and, more recently, in Development Bank of
the Philippines vs. National Labor Relations Commission (G.R. No. 86227, 19
January 1994) and Hautea vs. National Labor Relations Commission (G.R. No.
96149, 16 February 1994).

The instant petition, nonetheless, cannot be granted for a
different and overriding reason.

The 15th April 1991 decision of the NLRC has not been appealed;
having become final, it cannot now be challenged. Petitioner’s belated motion for clarification on 15 October 1991
itself does not appear to have been improperly denied. Like the NLRC, we fail to see any
inconsistency in its questioned decision. In effect, the NLRC has ruled that while the liability to private respondents
for their money claims pertains to RHC and not to DBP, petitioner’s appeal
should, nevertheless, be dismissed since, in its view (albeit incorrectly), Article 110 of the Labor Code has
created a worker’s preference superior to even that of DBP’s mortgage
lien. NLRC’s error could have been
rectified had there been a timely appeal. Article 223 of the Labor Code is explicit: “x x x The
decision of the Commission shall be final and executory after ten [10] calendar
days from receipt thereof by the parties.”

The questioned decision was promulgated on 15 April 1991. Petitioner filed a motion for clarification
(ostensibly but essentially a motion for reconsideration) only on 15 October
1991. In Manning International
Corporation vs. National Labor Relations Commission (195 SCRA 155), reiterated
in Nuñal vs. Court of Appeals (221 SCRA 26, 32), this Court ruled:

“x x x (W)hen a final judgment becomes executory, it thereby
becomes immutable and unalterable. The
judgment may no longer be modified in any respect, even if the modification is
meant to correct what is perceived to be an erroneous conclusion of fact or
law, and regardless of whether the modification is attempted to be made by the
Court rendering it or by the highest Court of the land.”

The rule of immutability of final judgments is adhered to by
necessity notwithstanding occasional errors that may result thereby (Francisco
vs. Bautista, 192 SCRA 388). Litigations must somehow come to an end for, otherwise, it would
“be even more intolerable than the wrong and injustice it is designed to
correct” (Reinsurance Company vs. Court of Appeals, 198 SCRA 19, 33).

WHEREFORE, the petition for certiorari is
DISMISSED. Costs against petitioner.

SO ORDERED.

Feliciano, (Chairman), Romero, and
Melo, JJ., concur.

Bidin, J., on leave.