PHILIPPINE NATIONAL BANK, PETITIONER, VS. TERESITA CRUZ, JOSE AGRIPINO, BERNARDO BAUZON, LUCRECIA BILBAO, MA. LUISA CABRERA, FRANCIS BAACLO, GUADALUPE CAMACHO, LUZ DE LEON, MIKE…

The focus of the instant petition for certiorari is the
application of Article 110 of the Labor Code. 
The said article provides that workers shall enjoy first preference with
regard to wages due them in cases of bankruptcy or liquidation of an employer’s
business.

The antecedent facts of the case are as follows:

Sometime in 1980 Aggregate Mining Exponents (AMEX) laid-off about
seventy percent (70%) of its employees because it was experiencing business reverses.  The retained employees constituting thirty
percent (30%) of the work force however, were not paid their wages.  This non-payment of salaries went on until
July 1982 when AMEX completely ceased operations and instead entered into an
operating agreement with T.M. San
Andres Development Corporation whereby the latter would be leasing the
equipment and machineries of AMEX.

The unpaid employees
sought redress from the Labor Arbiter^[1] who, on August 27, 1986 rendered a decision finding their claim
valid and meritorious.  The dispositive part of the said decision, reads:

WHEREFORE, finding the claims of complainants for payment of unpaid
wages and separation pay to be valid and meritorious, respondents Aggregate
Mining Exponent and its president Luis Tirso Revilla should, as they are hereby ordered to pay the same
to said complainants in the following amounts:

in the total amount of P219,452.03.  To properly effectuate the payment of the
same, the necessary arrangement should be made between respondents Amex and
T.M. San Andres Development Corp. and Philippine National Bank (PNB) on their respective role and participation
herein.  For should the principal
respondent be unable to satisfy these Awards, the same can be satisfied from the proceeds or
fruits of its machineries and equipment operated by respondent T. M. San Andres Dev. Corp. either by operating agreement
with respondent Amex_or thru lease of the same from
PNB.

To obviate any further differences between complainants and their
counsel to the latter’s attorney’s fees which seems to be the cause of their
earlier misunderstanding, as can be gleaned from the Charging Lien filed by
said counsel, respondents are, moreover, ordered to segregate and pay the same
directly to said counsel, the amount of which is to be computed pursuant to
their agreement on July 14, 1983 (Annex A of Position to Enter Attorney’s
Charging Lien in the Record of the Case).”^[2]

AMEX and its President, Tirso Revilla did not appeal from
this decision.  But PNB, in its capacity
as mortgagee-creditor of AMEX interposed an appeal with the respondent
Commission, not being satisfied with the outcome of the case.  The appeal was primarily based on the
allegation that the workers’ lien covers unpaid wages only and not the termination or severance pay which the workers likewise
claimed they were entitled to.

In a resolution^[3] dated October 27, 1987, the National Labor Relations Commission
affirmed the decision appealed from.  Hence
the instant petition filed by the petitioner bank based on the following
grounds:

“I.  ARTICLE 110 OF THE LABOR CODE MUST BE READ IN
RELATION TO ARTICLES 2241, 2242, 2243, 2244 AND 2245 OF THE CIVIL CODE
CONCERNING THE CLASSIFICATION, CONCURRENCE AND PREFERENCE OF CREDITS.

II.  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.”^[4]

The petition is devoid of
merit.

At the outset, petitioner PNB did not question the validity of
the workers’ claim for unpaid
wages with respect to the mortgaged properties of AMEX, provided that the same
be limited to the unpaid wages, and to the exclusion of termination pay.  In the instant petition however, PNB starts
off with the question of whether or not the workers’ lien takes precedence over
any other claim considering that this Court has ruled otherwise Republic vs.
Peralta.^[5]

This Court cannot allow the petitioner to alter its stance at
this stage inasmuch as it is deemed to have acquiesced in the decision of the
labor arbiter concerning payment of unpaid wages.  The records reveal that the petitioner failed to question the same on
appeal.  Hence, it is now barred from
claiming that the workers’ lien applies only to the products of their labor and
not to other properties of the employer which are encumbered by mortgage
contracts otherwise.

Notwithstanding the foregoing, an attempt on the part of the
petitioner to seek relief from that portion of the decision would still be in
vain.

Article 110 of the Labor
Code provides that:

“Art. 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 unpaid
wages and other monetary claims, any provision 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.”^[6]

This Court must uphold
the preference accorded to the private respondents in view of the provisions of
Article 110 of the Labor Code which are clear and which admit of no other interpretation.  The phrase
“any provision of law to the contrary notwithstanding” indicates that
such preference shall prevail despite the order set forth in Articles 2241 to
2245 of the Civil Code.6-a No exceptions were provided under the said
article, henceforth, none shall be considered. 
Furthermore, the Labor Code was signed into Law decades after the Civil
Code took effect.

In Herman vs. Radio Corporation of the Philippines,^[7] this
Court declared that whenever two statutes of different dates and of contrary
tenor are of equal theoretical application to a particular case, the statute of
later date must prevail being a later expression of legislative will.  Applying the aforecited
case in the instant petition, the Civil Code provisions cited by the petitioner
must yield to Article 110 of the Labor Code.

Moreover, Our
pronouncement in A.C. Ransom Labor Union – CCLU vs. NLRC,^[8] reinforces
the above-mentioned interpretation where this Court, speaking through Associate
Justice Melencio-Herrera, explicitly stated that
“(t)he worker preference applies even if the employer’s properties are
encumbered by means of a mortgage contract xxx. 
So that, when (the) machinery and equipment of RANSOM were sold to
Revelations Manufacturing Corporation for P2 M in 1975, the right of the 22
laborers to be paid from the proceeds should have been recognized xxx.”^[9]

Reliance by the
petitioners on Republic vs. Peralta is without basis.  The said case involved a question of workers’
preference as against the tax claims of the State.  In the said case the Court held that the
State must prevail in that instance since “it has been frequently said
that taxes are the very lifeblood of government.  The effective Collection of taxes is a task
of highest importance for the sovereign. 
It is critical indeed for its own survival.”^[10]

Nevertheless, under
Article 110 of the Labor Code as amended, the unpaid wages and other monetary
claims of workers should be paid in full before the claims of the Government
and other creditors.  Thus not even tax claims
could have preference over the workers claim.

Consistent with the
ruling of this Court in Volkschel Labor Union vs. Bureau of Labor Relations,^[11] this Court adopts the doctrine that “(i)n the implementation and interpretation of the provisions
of the Labor Code and its implementing regulations, the workingman’s welfare should be the primordial and
paramount consideration.”^[12] Bearing, this in mind, this Court must
reiterate the dictum laid down in A.C. Ransom that the conflict between
Article 110 of the Labor Code and Articles 2241 to 2245 of the Civil Code must
be resolved in favor of the former.  A
contrary ruling would defeat the purpose for which Article 110 was intended;
that is, for the protection of the working class, pursuant to the never-ending
quest for social justice.

Petitioner next advances the theory that “even if the worker‘s lien applies in the
instant case, the same should cover only unpaid wages excluding termination or
severance pay.”^[13] To support this contention, petitioner cites
Section 7, Rule I, Book VI of the Rules and Regulations
implementing the Labor Code which provides that:

“The just causes for terminating the services of an employee shall be
those provided under Article 283 of the Code. 
The separation from work of an employee for a just cause does not
entitle him to termination pay provided in the Code, xxx.”
(Underscoring by petitioner.)

Based
on that premise, petitioner contends that the claim for termination pay should
not be enforced against AMEX properties mortgaged to petitioner PNB because
Article 110 of the Labor Code refers only to “wages due them for services
rendered during the period prior to bankcruptcy or
liquidation.”^[14] Citing serious financial losses as the basis
for the termination of the private respondents, petitioner alleges that the
employees are not entitled to the termination pay which they claim.

This contention is,
again, bereft of merit.

The respondent Commission
noted that “AMEX failed to adduce convincing evidence to prove that the
financial reverses were indeed serious.”^[15] After a careful study of the records of the
case, this Court finds no reason to alter the findings of the respondent
Commission.

In Garcia vs. National
Labor Relations Comission,^[16] it was held that “it is essentially
required that the alleged losses in business operations must be proved.”^[17] This policy was adopted to obviate the
possibility of an employer fabricating business reverses in order to ease out
employees for no apparent reason.  Hence,
no departure shall be made by this Court from the ruling in Philippine
Commercial and Industrial Bank vs. National Mines and Allied Workers Union (NAMAWU-MIF)^[18] where
it was categorically stated that the term “wages” includes not
only remunerations or earnings payable by an employer for services rendered or to be rendered, but also covers all benefits
of the employees under a Collective Bargaining Agreement like severance
pay, educational allowance, accrued vacation leave earned but not enjoyed, as
well as workmen’s compensation awards and unpaid salaries for services
rendered.  All of these benefits fall
under the term “wages” which
enjoy first preference
over all other claims against the employer.^[19]

Furthermore, in Peralta,
this Court held that for purposes of the application of Article 110,
“termination pay is reasonably regarded as forming part of the
remuneration or other money benefits accruing to employees or workers by reason
of their having previously rendered services xxx.”^[20] Hence, separation pay must be considered as
part of remuneration for services rendered or to be rendered.

Indeed Article 110 of the
Labor Code, as amended, aforecited, now provides that
the workers’ preference covers not only unpaid wages but also all other
monetary claims.

The respondent Commission
was, therefore, not in error when
it awarded the termination pay
claimed by the private respondents.  As
far as the latter are concerned, the termination pay which they so
rightfully claim is an additional remuneration for having rendered services to
their employer for a certain period of time. 
Noteworthy also is the relationship between termination pay and services
rendered by an employee, that in computing the amount to be given to an
employee as termination pay, the length of service of such employee is taken
into consideration such that the
former must be considered as part and parcel of wages.  Under these circumstances then, this Court
holds that the termination or severance pay awarded by the respondent Commission to the private respondents is proper
and should be sustained.

Lastly, it must be noted
that the amount claimed by petitioner PNB for the satisfaction of the
obligations of AMEX is
relatively insubstantial and is not significant enough as to drain its
coffers.  By contrast, that same amount
could mean subsistence or starvation for the workingman.  Quoting further from Philippine Commercial
and Industrial Bank, this Court supports the equitable principle that
“it is but humane and partakes of the divine that labor, as human beings,
must be treated over and above chattels, machineries and other kinds of
properties and the interests of the employer who can afford and survive the
hardships of life better than their workers. 
Universal sense of human justice, not to speak of our specific social
justice and protection to labor constitutional injunctions dictate the
preferential lien that the above provision accord to labor.”^[21] In line with this policy, measures must be
undertaken to ensure that such constitutional mandate on protection to labor is not rendered meaningless by an erroneous interpretation of the
applicable laws.

WHEREFORE, premises considered, the petition is hereby
DISMISSED for lack of merit.  No costs.

 SO ORDERED.

Narvasa, (Chairman), Griño-Aquino, and Medialdea, JJ., concur.

Cruz, J., concur and file a
separate opinion.

^[1]
Labor Arbiter Raymundo R. Valenzuela.

^[2]
Pages 34 to 35, Rollo.

^[3]
Penned by Commissioner Oscar N. Abella, concurred in by Commissioners Daniel M. Lucas,
Jr. and Domingo Zapanta.

^[4]
Page 6, Petition; Page 28, Rollo.

^[5]
150 SCRA 37 (1987).

^[6]
Republic Act 6715; See Official Gazette, Manila 6, 1989, page 15.

6-a Articles 2241 to 2245, Civil
Code of the Philippines.

^[7]
50 Phil. 490 (1927).

^[8]
150 SCRA 498 (1987).

^[9]
Ibid, page 507.

^[10]
Op cit., page 51.

^[11]
137 SCRA 42 (1985).

^[12]
Ibid, page 48.

^[13]
Page 26, Rollo.

^[14]
Page 27, Rollo.

^[15]
Pages 4 to 5, Resolution; page 36 to 37, Rollo.

^[16]
153 SCRA 639 (1987), citing National Federation of Labor Union vs. Ople, 143 SCRA 124 (1986).

^[17]
Ibid, page 651.

^[18]
115 SCRA 873 (1982).

^[19]
Ibid, page 880.

^[20]
Supra, note 5, page 44.

^[21]
Op. cit., Note 18, pages 880 to 881.

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