BANCO FILIPINO SAVINGS AND MORTGAGE BANK (REPRESENTED BY ITS LIQUIDATOR, MS. CARLOTA P. VALENZUELA), PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER EVANGELIN…

After BANCO FILIPINO SAVINGS AND MORTGAGE BANK was placed under
receivership, and later ordered liquidated by Monetary Board of the Central
Bank, FORTUNATO M. DIZON, Jr., who was then holding the position of Executive
Vice President and Chief Operating Officer of the bank, received a letter from
the Central Bank appointed liquidator, MS. CARLOTA P. VALENZUELA, informing him
that all management authority in the bank had been assumed by the Central Bank
appointed liquidators and that his
employment is being terminated.

Mr. Dizon filed with the liquidator a request for the payment to
him of the cash equivalent of his vacation and sick leave credits and
unexpended/unused reimbursable allowance. His claims were not paid by the liquidator upon counsel’s advice that
Dizon’s claim should be treated as a claim of a creditor and should therefore
be processed pursuant to the liquidation plan as approved by the Monetary
Board. Subsequent demands for payment
having been denied, Dizon filed on March 31, 1986 a complaint with the labor
arbiter against the bank for recovery of unpaid salary, the cash equivalent of
his accumulated vacation and sick leaves, termination pay under Article 283 of
the Labor Code and moral damages and attorney’s fees.

Representing the bank, the liquidator moved for the dismissal of
the complaint refuting the legal and factual bases thereof as well as the
jurisdiction of the labor arbiter to entertain Dizon’s money claims because
such pertains to the Regional Trial Court of Makati, Branch 146, acting as the
liquidation court.

On November 14, 1986, the labor arbiter upheld her jurisdiction
and promulgated a decision in favor of Dizon but withheld his demand for
payment of moral damages and attorney’s fees. Both parties appealed to the National Labor Relations Commission which
increased the award due Dizon and further ordered payment of actual and moral
damages and attorney’s fees. The award
of moral damages was later deleted in the resolution of February 24, 1988 of
the Commission.

In this petition, the liquidator assails the foregoing decisions
and resolution and prays that they be declared null and void on the following
grounds: Firstly, she maintains that
“[a]ll disputed claims against banks under liquidation pertain to the exclusive
jurisdiction of the liquidation court (pursuant to section 29 of the Central
Bank Act) and may not be adjudicated by the Labor Arbiters and the NLRC under
Article 217 of the Labor Code,” and cites the case of Hernandez v. Rural Bank
of Lucena, Inc., No. L-29791, January 10, 1978, 81 SCRA 75. She argues that “[t]he general provisions
of Article 217 conferring upon respondents Labor Arbiter and the NLRC
jurisdiction over claims arising from an employment relationship cannot prevail over the explicit provisions
of Section 29 of the Central Bank Act, which is a special law specifically
vesting upon the liquidation court jurisdiction over all claims against
liquidated banks.” Secondly, the liquidator points out that “[t]he assailed
decisions directing the payment of the claims outside of the liquidation
process amount to an undue preference in favor of a particular creditor.” She
submits that “the statutory status
of employees as preferred creditors with respect to ‘wages due them for
services rendered during the period prior to the bankruptcy or liquidation’
does not in itself entitle them to advance payment outside of the
liquidation proceedings and while said proceedings are in progress. The provision [Art. 110, Labor Code]
entitles them only to preferential treatment over other creditors in the
same liquidation proceedings to the proceeds of the assets
of the employer after the distributable assets shall have been
determined therein,” and cites the case of Republic v. Peralta, No. 56568, May
20, 1987, 150 SCRA 37. She further
argues that an action could not be maintained against an insolvent bank after
it had been ordered liquidated citing Central Bank v. Morfe, No. L-­38427,
March 12, 1975, 63 SCRA 114 and Central Bank v. Court of Appeals, No. L-37859,
July 26, 1988, 163 SCRA 482.

It is common knowledge that the taking over of the management and
assets of Banco Filipino by the Monetary Board of the Central Bank is being
contested by some stockholders of the bank who insist that the bank is solvent
and in sound financial condition and that its closure was illegal. The controversy has generated quite a number
of cases in this Court and in one of them, G.R. No. 70054, entitled “Banco
Filipino Savings and Mortgage Bank v. The Monetary Board, et al.,” We adopted a
resolution, dated August 29, 1985, enjoining the Monetary Board, its officers,
and the Central Bank-appointed receivers “from executing further acts of
liquidation of a bank” save “acts such as receiving collectibles and
receivables or paying off creditors claims and other transactions pertaining to
normal operations of a bank,” and later, further ordered that a hearing be
conducted by the Regional Trial Court of Makati, Branch 146 to afford the
former management/stockholders of the bank an opportunity to prove that the
bank’s closure was illegal. The
temporary restraining order still stands and it appears that a report and
recommendation on the hearing has yet to be filed. For the moment, therefore, the bank is not being liquidated and
the possibility lurks that it might not be at all. Respondent Dizon, cognizant of these, argues that it is the labor
arbiter and the NLRC which has jurisdiction over his money claims since there
is no liquidation court to speak
of.

We are of the opinion that it is the NLRC which has jurisdiction
over Dizon’s money claims. Section 29
of the Central Bank Act (Republic Act No. 265) before its amendment by Executive
Order No. 289 (September, 1987) reads, to wit:

“Sec. 29. Proceedings upon
insolvency. – x x x. If the Monetary Board shall determine and
confirm within the said period that the bank or non-bank financial intermediary
performing quasi-banking functions is insolvent or cannot resume business with
safety to its depositors, creditors and the general public, it shall, if the
public interest requires, order its liquidation, indicate the manner of its
liquidation and approve a liquidation plan. The Central Bank shall, by the
Solicitor General, file a petition in
the Court of First Instance reciting the
proceedings which have been taken and praying
the assistance of the court in the
liquidation of such institution. The court shall have
jurisdiction in the same proceedings to adjudicate
disputed claims against the bank or non-bank
financial intermediary performing quasi-banking functions
and enforce individual liabilities of the
stockholders and do all that is necessary
to preserve the assets of such institution
and to implement the liquidation plan
approved by the Monetary Board. x x x. The liquidator shall with all convenient speed, convert the assets of
the banking institution or non-bank financial intermediary performing quasi-banking
functions to money or sell, assign or otherwise dispose of the same to
creditors and other parties for the purpose of paying the debts of such
institution and he may, in the name of the bank or non-bank financial
intermediary performing quasi-banking functions, institute such actions as may
be necessary in the appropriate court to collect and recover accounts and
assets of such institution.” [underscoring ours]

There is nothing in Section 29 which suggests that the
jurisdiction of the liquidation court to adjudicate claims against the
insolvent bank is exclusive. On the
other hand, Article 217 of the Labor Code explicitly provides that labor
arbiters have original and exclusive jurisdiction over money claims of an
employee against his employer, thus:

“ART. 217. Jurisdiction of the Labor Arbiter and the Commission. (a) The Labor Arbiter shall have
the original and exclusive jurisdiction to
hear and decide x x x the following cases involving all workers, x x x:

“x x x.

“3. All money claims
of workers, including those based on non-payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or
appropriate agreement, except claims for employee’s compensation, social
security, medicare and maternity benefits.” [underscoring ours]

We do not think that this jurisdiction would be lost simply
because a former employer had been placed under liquidation. The legislature deemed it wise to confer
jurisdiction over labor disputes to a body exclusively of others and We are not
prepared to divest
such authority from the labor arbiter and the NLRC absent any clear provision
of law to that effect.

The liquidator cites the case of Hernandez v. Rural Bank of
Lucena, supra, where this Court, commenting on the original section 29
as embodied in R.A. No. 265, held that:

“The fact that the insolvent bank is forbidden to do business, that
its assets are turned over to the Superintendent of Banks, as a receiver, for
conversion into cash, and that its liquidation is undertaken with judicial
intervention means that, as far as lawful and
practicable, all claims against the insolvent bank should be filed in
the liquidation proceeding.

“The judicial liquidation is intended to prevent multiplicity of
actions against the insolvent bank. The
law making body contemplated that for convenience only one court, if possible,
should pass upon the claims against the insolvent bank and that the liquidation
court should assist the Superintendent of Banks and control his operations.

“In the course of the liquidation, contentious cases might arise
wherein a full-dress hearing would be required and legal issues would have to
be resolved. Hence, it would be
necessary in justice to all concerned that a Court of First Instance should
assist and supervise the liquidation and should act as umpire and arbitrator in
the allowance and disallowance of claims.

“The judicial liquidation is a pragmatic arrangement designed to
establish due process and orderliness in the liquidation of the bank, to
obviate the proliferation of litigations and to avoid injustice and
arbitriness.” (Hernandez v. Rural Bank of Lucena, Inc. supra, pp. 87-88)
[underscoring ours]

But it will be noted that even in the quoted opinion,
consideration was given of the possibility or practicality of certain claims
being adjudicated by other tribunals besides the liquidation court. Thus, in the later case of Carandang v.
Court of Appeals, No. L-44932, April 15, 1988, 160 SCRA 266, We upheld the
jurisdiction of the then Court of First Instance of Laguna over that of the
liquidation court, the Court of First Instance of Manila, considering that the
cause of action of therein plaintiff was already fully litigated in the former
court and to re-litigate would “mean more inconvenience to the parties,
entailing waste of money and precious time.” In other words, it is not a legal
aberration that certain claims against an insolvent bank be
litigated in another court where to do so would be more practical; and more so
in this case where it is not legally possible to litigate Dizon’s claims other
than with the Labor Arbiter and the NLRC because of the express provision of
the Labor Code.

Neither do We subscribe to the interpretation given by the bank
in the case of Central Bank v. Morfe, supra, which purportedly prohibits
the filing of cases against a bank after it has been declared insolvent. That case simply ruled that judgments from
suits filed after a bank has been declared insolvent “cannot be considered
preferred and that Article 2244 (14) (b) [of the Civil Code] does not apply to
judgments for the payment of the deposits in an insolvent savings bank which
were obtained after the declaration of insolvency.” Moreover, as in the other
cited case of Central Bank v. Court of Appeals, supra, the case involves
recovery of deposits.

Under normal circumstances the decision of the NLRC is
immediately executory (See Article 223, Labor Code). The bank’s liquidator,
however, resists immediate payment to Dizon of his adjudicated money claims on
the ground that it would amount to undue preference of credit. Dizon countered that under Article 110 of
the Labor Code unpaid wages of laborers are indeed preferred. Moreover, Dizon reminded, this Court had
temporarily enjoined the liquidation of the bank and, therefore, there is no
liquidation proceeding where his claims may be paid.

Article 110 of the Labor Code before its amendment by Republic Act No. 6715 (March 2, 1989)
reads 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 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.”

In Republic v. Peralta, supra the majority of this Court
was of the opinion that the above quoted provision did not upgrade the worker’s
claim as absolutely preferred credit. There We explained that the provision did not alter Articles 2241 and
2242 of the Civil Code so much so that creditors with liens over a certain property are still given
special preference over the proceeds of that property. And it is only after these specially
preferred credits are satisfied may the ordinary preferred credits enumerated
in Article 2244 of the Civil Code be paid according to their order of priority. The significance of Article 110 in the
scheme of concurrence and preference of credit is to raise the worker’s money
claim into first priority under Article 2244. (See also Development Bank of the Philippines v. NLRC, G.R. Nos.
82763-64, March 19, 1990).

Not being an absolutely preferred credit, as taxes are under
Articles 2241 (1) and 2242 (1), Dizon’s claims cannot be paid ahead of other
credits and outside of the liquidation proceeding because the “free property”
or the property left after the creditors mentioned in Articles 2241 and 2242
are paid has not yet been determined (See Barreto v. Villanueva, No. L-14938,
December 29, 1962, 6 SCRA 928). In the
words of Lipana v. Development Bank of Rizal, No. 73884, September 24, 1987,
154 SCRA 257, 261, “to execute the judgment would unduly deplete the assets of
respondent bank to the obvious prejudice of other [depositors and] creditors.”

Thus, Dizon’s adjudicated claims should be submitted to the
liquidators for processing. If, of
course, it is later determined that Banco Filipino’s liquidation is improper
then the NLRC’S decision may be executed under normal procedure. If the contrary is proven, however, and the
bank’s liquidation should proceed,
Dizon’s established claims should be treated as an ordinary preferred credit
enjoying first preference under Art. 2244 of the Civil Code.

In its petition, the bank did not raise any argument against the
merit of Dizon’s money claims. Thus,
the comments of the public and private respondents thereto were directed on
what was so far discussed. It would
seem unfair, therefore, that the bank would subsequently assail the merits of
the award in its memorandum leaving the respondents off-guard. In any event, We do not find the bank’s
foray on Dizon’s money claims meritorious.

The bank argues that Dizon is not entitled to separation pay
citing Article 283 of the Labor Code which reads to wit:

“x x x. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to one (1) month
pay or at least one-half (1/2) month pay for every year of service, whichever
is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.”

It is the bank’s interpretation of the law that when an institution is closed due to serious
business losses or financial reverses its workers are not entitled to
separation pay. We disagree. We instead quote with approval the opinion
of respondent Labor Arbiter, thus:

“Article 283 (Art. 282) of the Labor Code enumerated the just
causes for an employer to terminate an employee. If an employee is dismissed for just cause, he is not entitled to
termination pay. However, in Article
284 (Art. 283), in case of
closure of establishment, the employee is always given termination pay. The reason for the closure is taken into
consideration only to determine whether to give one month or one-half month pay
for every year of service. This
provision is based on social justice and equity. x x x.” (p. 41, Rollo)

Such was Our ruling in
International Hardware, Inc. v. NLRC, G.R. No. 80770, August 10, 1989. As regards the commutation to cash of
Dizon’s accumulated vacation and sick leaves, both the Labor Arbiter and the NLRC
found that this was authorized by the Collective Bargaining Agreement then
existing before the bank’s closure and which CBA the liquidators manifested to
honor. This is a factual issue which We
are not inclined to disturb. Also,
since Dizon was forced to litigate, he is entitled to attorney’s fees.

ACCORDINGLY, the decision under review is AFFIRMED save
that the money due the private respondent should be presented to the
liquidators for processing.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Grino-Aquino, JJ., concur.