G.R. No. 81415. June 06, 1990
A.N. BOLINAO, JR., JUAN A. AGSALON, JR., ZOSIMO L. CARREON AND REYNOLD P. DANNUG, PETITIONERS, VS. HON. MANUEL S. PADOLINA, PHELPS DODGE (PHILS.) INC., BANK OF AMERICA, AND DEPU…
PARAS, J.:
This is a petition for certiorari with preliminary
injunction which seeks to reverse and to set aside the order of the Regional
Trial Court of Pasig, Metro Manila, dated January 5, 1988 in Civil Case No.
50936 entitled “Phelps Dodge (Phils.) Inc. v.
Sabena Mining Corporation” denying the motion to intervene and dismissing
the third party claim filed by herein petitioners.
As gathered from the records, the facts of the case are as
follows:
Petitioners A.N. Bolinao, Jr., Reynold P. Dannug, Juan A. Agsalon, Jr. and Zosimo L. Carreon were all former employees of Sabena Mining
Corporation, which had a copper and gold project in operation, located in New Bataan, Davao del Norte. In 1982 and 1983 they were laid off without
being recalled (Rollo,
Petition, pp. 3-4).
In September, 1983, petitioners filed a formal complaint for
collection of unpaid salaries, unused accrued vacation and sick leave benefits,
13th month pay and separation pay before the National Labor Relations
Commission (NLRC) against Sabena Mining Corporation and Development Bank of the
Philippines
docketed as NCR Case No. 9-4178-83 (Rollo, Petition,
p. 5).
On May 29, 1984, a compromise agreement was entered into by the
parties, wherein petitioners were to be paid on a staggered basis the
collective amount of P385,583.95 (Rollo, Petition,
Annex “A”, pp. 22-24). The
company faithfully complied with the scheduled payments only up to March, 1985
because it ceased operations effective April
1, 1985. With this development,
petitioners moved for the issuance of a writ of execution in June, 1985 (Rollo, Petition, p. 6).
In an order dated June
21, 1985, the Labor Arbiter issued a writ of execution against the
company to collect the balance of P311,580.14 (Rollo, Annex “B”, pp. 25-26). On June
27, 1985 Deputy Sheriff Antonio P. Soriano
garnished the remaining amount of P150,279.64 in the
savings account of the company at the Development Bank of the Philippines (DBP)
(Rollo, Annex “B-1”, p. 27). However, the same amount was previously
garnished by two creditors of the company; namely, Bank of America and Phelps
Dodge (Phils.), Inc.
Bank of America garnished the amount in April, 1982 in Civil Case No.
45452 (Rollo, Petition, pp. 4-5 while Phelps Dodge
garnished the amount in June, 1984 in
Civil Case No. 50936 (Rollo, Petition, p.
5). Both cases were filed in different
branches of the Regional Trial Court in Pasig (Ibid.)
In an order dated September 30, 1987, the respondent court
directed the DBP to release to its Deputy Sheriff, herein respondent Carlos G. Maog, the amount of P150,279.64
declaring that the writ of preliminary attachment made by Bank of America thru
Deputy Sheriff Norberto Doblado in Civil Case No.
45452 by the Pasig Regional Trial Court cannot
prevail over the garnishment pursuant to a writ of execution issued in Civil
Case No. 50936 in favor of respondent Phelps Dodge (Phils.)
Inc., for failure of Bank of America to prosecute its lien (Rollo, Petition, Annex “C”, pp. 29-31).
The order came to the attention of the petitioners who then filed
a “Motion to Intervene and to Lift Order of September 30, 1987” on October 13, 1987 and a third party claim with the deputy
sheriff on October 19, 1987
(Rollo, Annex “D”, p. 32-36; Annex
“D-1”, pp. 38-42).
DBP did not interpose any objection to the motion to intervene
and the third party claim (Rollo, Annex
“E”, pp. 44-45). But
respondent Phelps Dodge, Phils., Inc. opposed said Motion to Intervene/Third Party Claim,
on the ground among others:
xxx
b) That the rights of preference and first
lien of petitioners, as former employees of Sabena Mining Corporation, as
provided for in Art. 110 of the Labor Code and Art.
2244 of the Civil Code, are operative only in
insolvency court and in a bankruptcy case;
(Rollo,
Annex “F”, pp. 47-53; Annex “F-1”, pp. 54-57).
Petitioners filed their reply to the opposition and at the same
time filed a motion to resolve
the third party claim (Rollo, Annex “G”,
pp. 58-62; Annex “G-1”, pp. 63-67).
On January 5, 1988
the respondent court issued an order denying the motion to intervene and
dismissing the third party claim, declaring that the garnishment made by its
Deputy Sheriff in favor of respondent Phelps Dodge, Phils., Inc. superior to the
rights of petitioners (Rollo, Annex “I”,
pp. 70-77).
Hence, the petition.
The Second Division of this Court in its resolution dated August 10, 1989, gave due course to
the petition (Rollo, Petition, pp. 2-19; Resolution,
p. 309).
The main thrust in this petition is whether or not petitioners
enjoy preferential right or claim over the funds of Sabena Mining Corporation
as provided for under the provisions of Article 110 of the New Labor Code, as amended, and Section
10, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor
Code.
The petitioners contend that under Article 110 and its
implementing rules and regulations of the Labor Code, the claims of the
laborers for unpaid wages and other monetary benefits due them for services
rendered prior to bankruptcy enjoy first preference in the satisfaction of credits against a bankrupt company.
On the other hand, the respondent maintains that the rights of
preference and first lien of petitioners, as former employees of Sabena Mining
Corporation, under aforesaid law and rules, are operative only in an insolvency
court and in a bankrupt case.
The petition is without merit.
It is quite clear from the provisions of Article 110 of the Labor
Code and Section 10, Rule VIII, Book II of the Revised Rules and Regulations
Implementing the Labor Code, that a declaration
of bankruptcy or a judicial liquidation must be present
before the worker’s preference may be enforced.
Thus, it was held that Article 110 of the Labor Code and its
implementing rule cannot be invoked absent a formal declaration of bankruptcy
or a liquidation order (Development Bank of the Philippines v. Labor Arbiter,
G.R. Nos.78261-62, March 8, 1989).
(Underscoring supplied)
In the case at bar, there was no showing of any insolvency
proceeding or declaration of bankruptcy or judicial liquidation that was being
filed by Sabena Mining Corporation. It
is only an extra-judicial foreclosure that was being enunciated as when DBP
extra-judicially foreclosed the assets of Sabena Mining Corporation.
Conversely, to hold that Article 110 is also applicable in
extra-judicial proceedings would be putting the worker in a better position
than the State which could only assert its own prior preference in case of a
judicial proceeding. Article 110 must
not be viewed in isolation and must always be reckoned with the provisions of
the Civil Code (DBP v. Labor Arbiter, supra).
Quite recently, the rule enunciated in Republic v. Peralta
(150 SCRA 37 [1987]) reads:
“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“
The reason behind the necessity for a judicial proceeding or a
proceeding in rem before the
concurrence and preference of credits may be applied is to bind all interested
persons whether known to the parties or not.
The claims of all credits whether preferred or non
preferred, the identification of the preferred ones and the totality of the
employer’s assets should be brought into the picture. There can then be an authoritative, fair and
binding adjudication instead of the piece meal settlement which would result
from the questioned decision in this case[1]
(DBP v. Labor Arbiter, supra).
PREMISES CONSIDERED, the petition is hereby DISMISSED for
lack of merit and the questioned Order dated January 5, 1988 issued by the respondent court is hereby
AFFIRMED.
SO ORDERED.
Melencio-Herrera, (Chairman), and Regalado, JJ., concur.
Padilla, J., dissents for the same reasons stated in his dissent in DBP vs. NLRC,
G.R. Nos. 82763-64, 19 March 1990.
Sarmiento, J., see dissenting opinion.
[1]
This was also the doctrine in the case of Development
Bank of the Philippines versus National Labor Relations
Commission, Labor Arbiter Isabel P. Ortiquerra, and
Labor Alliance For National Development, G.R. Nos.
82763-64, Promulgated on March 19,
1990.
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DISSENTING OPINION
SARMIENTO, J.:
I reiterate my dissent in Development Bank of the Philippines
vs. National Labor Relations Commission.[1]
I also adopt Mr. Justice Teodoro Padilla’s dissent
therein, insofar as he holds that under Article 110 of the Labor Code, as
amended by Republic Act No. 6715, workers enjoy “absolute preference”[2]
as and for unpaid wages and other monetary claims, over and above taxes due to
the government and claims of creditors, and subject to no prior declaration of
bankruptcy or judicial order of liquidation.
I find his opinion to be not only accord with the explicit language of
Republic Act No. 6715, but, as I held in my own dissent, consistent with the
express decree of the Constitution affording full protection to labor.[3]
While I agree that prior to its amendment, Article 110 was
couched in arguable terms,[4]
that is, a declaration of insolvency was necessary before labor may
claim preference, Republic Act No. 6715 has laid the
debate to rest. The very language of the
Act:
SECTION 1.
Article 110 of Presidential Decree No. 442, as amended, otherwise known
as the Labor Code of the Philippines,
is hereby further amended to read as follows:
“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 the
claims at the Government and other creditors may be paid.”[5]
convinces this
writer that the Congressional intent was precisely to settle the argument–in
favor of absolute worker preference.
Indeed, to say that the amendment of Article 110 by Republic Act
No. 6715 wrought no change, and the Article should be
read as it was read prior to amendment:
Article 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 wages
due them for services rendered during the period prior to the bankruptcy or
liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full before
other creditors may establish any claim to a share in the assets of the employer.[6]
is to say that
the legislature engaged in an exercise in futility, a proposition I am not
prepared to accept. Clearly, the
legislative will, in working the amendment, was to change the law–it could not
have been for any other purpose–and I do not believe that the Supreme Court is
empowered to override the intent of the lawmakers.
Once more, constitutional policy is to give full protection to labor. It also means exactly what it says–labor
above capital. The Charter is evidently
not neutral, it is partial to the workingman. I am
afraid that with the holding my brethren will leave in this case, the working
class would find itself at the receiving end.
[1]
G.R. Nos. 82763-64, March 19, 1990.
[2]
Supra, Padilla, J., Dissenting, 4.
[3]
CONST., art. XIII, sec. 3.
[4]
In his dissent in Development Bank v. National Labor Relations
Commission, supra, Mr. Justice Isagani Cruz,
reiterating his dissent in Republic v. Peralta, No. L-56568, May 20, 1987, 150 SCRA 37, insists
that worker preference is nonetheless absolute under article 110, whether in
its original or amended form.
[5]
Rep. Act No. 6715, sec. 1.
[6]
LABOR CODE, art. 110, prior to
amendment.