ZENAIDA GALINDEZ, CAROLINA JUNIO AND GERONIMO SERNADILLA, PETITIONER, VS. RURAL BANK OF LLANERA, INC., NATIONAL LABOR RELATIONS COMMISSION, RESPONDENTS.

Arising from the same facts and involving the same issues and
questions of law, these separate Petitions were ordered consolidated in this
Court’s Resolution of 9 November 1988.

The undisputed facts follow:

Zenaida Galindez,
petitioner in G.R. No. 84975, was, since March 1979, the Cashier of the Rural
Bank of Llanera, Inc. (Nueva
Ecija), which is the
petitioner in G.R. No. 85211 (the Bank,
for short).

Sometime in January of 1981, the said Bank was placed under
receivership by the Central Bank, with a Receiver designated to take over the
management of the Bank as well as its reorganization.

On 3 April
1981, the Receiver
applied for clearance with the Regional Office No. III, Nueva
Ecija Labor Office, at Cabanatuan
City (docketed as R03 NELO Case No. 700), to terminate the services of Zenaida Galindez (Galindez, for brevity) and two of her co-employees, namely,
Carolina Junio and Geronimo Sernadilla,
based on retrenchment.  Prior to that,
however, or on 1 April 1981, notice of termination was sent to them
informing them of the termination of their services effective 16 April
1981.

All three, namely, Galindez, Junio and Sernadilla opposed the
application for clearance on 20 April 1981.  On 4
May 1981 the Nueva Ecija
Labor Office recommended the approval of the application and the dismissal of
the employees’ opposition.  The case was thereupon referred to the
Arbitration Branch, Region 3, San Fernando, Pampanga.

Pending resolution of the
Bank’s application for clearance, the Central Bank filed a “Petition for
Assistance in the Liquidation of the Bank” with the Regional Trial Court of Cabanatuan City, Branch 23, on 23 August 1982.  This
was granted by the Trial Court on 13 July 1983.

In the interim, or on 4 May
1983, the Labor
Arbiter rendered a Decision denying the Bank’s application for clearance to
terminate Galindez and, instead, ordered her
reinstatement.  The dispositive
portion of that Decision reads:

“WHEREFORE, the application for clearance is hereby denied and
the applicant Rural Bank of Llanera is ordered to
reinstate oppositor Zenaida
Galindez to her former position as Cashier without
loss of seniority rights and privileges, with full backwages
from April 16, 1981 up to
her actual date of reinstatement,
including all the mandatory benefits provided by law.

“Applicant is further ordered to pay separation pay benefits
to oppositors Carolina Junio
and Geronimo Sernadilla equivalent to one (1) month
salary for every year of service.

“SO
ORDERED.” (p. 22, Rollo, G.R. No. 84975).

No appeal having been
filed within the reglementary period, the Labor
Arbiter issued a Writ of Execution.

On 22
August 1983, the Bank
filed a “Petition to Alter or Modify
Judgment” which, however, was denied by the Labor Arbiter on 16
September 1983 on
the principal ground that the Decision of 4 May 1983 had become final and executory.

On 7
October 1983, the
Bank interposed an appeal to the NLRC by way of a ”
Notice of Appeal with Injunction to Stay Execution” of the Labor
Arbiter Decision of 4 May 1983.

On 24 August 1984,
the NLRC, in an en banc Resolution, dismissed the appeal holding
that the Decision of 4 May 1983
had already become final and executory.

On 28 November 1984,
the Labor Arbiter issued an Alias Writ of
Execution commanding the Sheriff to reinstate
petitioner and to collect the sum of P63,707.20, the
newly computed liability of the Bank. 
However, the said Writ could not be enforced because the Regional Trial
Court, at Cabanatuan
City, Branch 23, issued a
Restraining Order suspending its enforcement on the ground that the monetary
claims against the Bank should be coursed through the said Court as the Liquidation
Court.

On 28 January 1985,
the Bank filed with the Labor Arbiter a “Petition for Relief from
Judgment” principally on the ground that execution could no longer issue
because the Bank was already in the process of liquidation.  Said Petition was denied by the Labor Arbiter
for lack of merit on 30
January 1985.  The Bank appealed the Order to the NLRC on 16
February 1985.

On 8 July,
1986, since almost
two (2) years had elapsed without any implementation of the Decision of the
Labor Arbiter and the NLRC (en banc), Galindez filed
a “Petition for Mandamus with Damages” before the Regional Trial Court of Cabanatuan City, Branch 29 (Spec. Procs.
No. 1936), seeking reinstatement to her former position as Cashier and payment
of her backwages
and mandatory benefits.  The Bank filed its Opposition thereto on 6 August
1986.

On 2
December 1986, said
Trial Court issued an Order disposing as follows:

WHEREFORE, upon the filing of a
bond in the sum of P106,817.00 which shall
answer for all damages that may be sustained by the respondent  Rural Bank of Llanera,
Inc., in case this petition is
finally decided in its favor, let a peremptory writ of mandamus issue to implement this order.

“SO ORDERED.” (p. 38, Rollo of G.R. No. 84975)

On 29 January 1988,
the Court of Appeals, Fifth Division, to which said Order was elevated,
rendered a Decision in CA-G.R. Nos.
12136 and 11047-SP, the pertinent
portion of which reads:

“x x x What the Court a quo acted upon is within the
exclusive and original jurisdiction of the Labor Commission and not with the
Regional Trial Court.  In fact, a
Decision having been rendered already by the NLRC, appeal therefrom,
if still available, should be by
petition for certiorari with the Supreme Court to review the Decision of
the NLRC.  Neither the Regional Trial
Court, nor even this Court can review the decisions issued under the Labor Code
(No. 16-E of the Interim Rules of Court; Callanta vs.
Carnation Philippines, Inc., 145 SCRA 268).” (p. 10, Rollo
of G.R. No. 84975)

On 10 May 1988, acting on
the appeal of the Bank from the Order of the Labor Arbiter, dated 30 January
1985, the NLRC, through its Second Division, issued the questioned Resolution
modifying the Labor Arbiter’s Decision of 4 May 1983.  The pertinent portion of the assailed
Resolution reads:

“Since reinstatement is no longer possible due to the
liquidation of the bank, oppositor-appellee should be
awarded separation pay equivalent to
one-half month salary for every year
of service.

“WHEREFORE, the May 4, 1983 decision of the Labor arbiter is
Modified, the applicant Rural Bank is ordered to pay oppositor-appellee
separation pay equivalent to one-half month salary for every year of service, a
fraction of at least six months being considered as one whole year, in lieu of
reinstatement.  The award for backwages is hereby limited to three (3) years without any
qualification or deduction.  No other
pronouncements.

“SO
ORDERED.” (p. 34, Rollo of G.R. No. 84975)

Motions for
Reconsideration filed by both parties having been denied, Galindez
and the Bank filed these separate Petitions for Certiorari with this
Court, alleging grave abuse of discretion
on the part of the NLRC.  We resolved to give due course.

The issues raised by the
parties may be summed up thus:

1.  Whether or not the NLRC
acted with grave abuse of discretion in modifying a final and executory judgment of the Labor Arbiter;

2.  Whether or not backwages can be awarded without the grant of
reinstatement; and

3.  Whether or not the award
of backwages and separation pay can be enforced
directly with the Bank or should be coursed through the Court taking cognizance
of the liquidation proceedings against the Bank.

Galindez claims grave abuse of
discretion on the part of the NLRC in that the NLRC cannot modify the Decision
of the Labor Arbiter and affirmed by the NLRC en banc, which had attained finality, and that the only ministerial
duty of the Labor Arbiter is to execute it.

The general rule is,
indeed, that once a judgment
becomes final and executory, said judgment can no
longer be disturbed, altered, or modified. 
That principle, however, admits of exceptions as in cases where, because
of supervening events, it becomes imperative, in the higher interest of justice,
to direct its modification in order to harmonize the disposition with the
prevailing circumstances (Seavan Carrier, Inc., vs.
GTI Sportswear Corp., No. L-65953, July 16, 1985, 137 SCRA 580) or whenever it is necessary to accomplish the aims of justice (Pascual vs. Tan, 85 Phil. 164 [1949]; Central Textile
Mills, Inc., vs. United [CMC] Textile Workers Union-TGWF, No. L-51077, December 27, 1979, 94 SCRA 883).

In the case at bar, the
modification of the judgment, rendered by the Labor Arbiter on 4 May
1983, is warranted
by the fact that the Bank had
been placed under liquidation thereby permanently foreclosing any possibility
for the Bank to resume its business. 
Reinstatement of Galindez, as Cashier,
therefore, was rendered inappropriate considering the Bank’s eventual closure.

As correctly pointed out
by the Solicitor General, another reason which militates strongly
against Galindez’s reinstatement is the fact that the
position of Cashier has been abolished as a result of
liquidation.  In point is the ruling in
Pizza Inn vs. NLRC, G.R. No. 74531, June 28, 1988, reading:

“Reinstatement presupposes that the previous position from
which one had been removed still exists or there is an unfilled position more
or less of similar nature as the one previously occupied by the employee. 
Admittedly, no such
position is available.  Reinstatement
therefore becomes a legal impossibility. 
The law cannot exact compliance with what is impossible.”

It is true that in the
Order of the Regional Trial Court of Cabanatuan City,
Branch 29, dated 2 December 1986, it disbelieved that the position of Cashier
had been abolished stating that one “Mrs. Aurora Lazaro
signed the receipts as Bookkeeper-Cashier of the respondent bank and collected certain amounts from the bank borrowers” (p. 4 Order,
Sp. Procs. No. 1936).  As is obvious, however, the two positions
were already merged thereby showing that the Bank was, in fact, retrenching its
employees in the process of liquidation. 
That merger cannot be construed to mean that the position of Cashier was being retained.

Reinstatement having been
rendered non-available, the modification of the Labor Arbiter’s Decision by the
NLRC (Second Division) by the deletion of the same, was thus in
order.  A circumstance had transpired
which rendered execution of the said Decision legally impossible.  The separation pay, which was awarded in lieu
of reinstatement, was likewise proper, Section 4(b), Rule 1, Book VI of the
Omnibus Rules Implementing the Labor Code being explicit in that:

“(b) In case the
establishment where the employee is to
be reinstated has closed or ceased operations or where his former position no
longer exists at the time of reinstatement for reasons not attributable to the
fault of the employer, the employee shall be entitled to separation pay
equivalent to at least one month salary or to one month salary for every year
of service, whichever is higher, a fraction
of at least six months being considered as one whole year.”

As to the second issue,
it is the Bank’s position that entitlement to backwages
necessitates the grant of reinstatement. 
That is not so.  They are two
different forms of relief.  In Santos vs. NLRC (No. L-76721, September 21, 1987, 154 SCRA 166), it was squarely held:

 “The two forms of
relief are distinct and separate, one from the other.  Though the grant of reinstatement commonly
carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the
inappropriateness or non-availability of the other.”

Besides, the modification
by the NLRC (Second Division) of the Labor Arbiter’s Decision of 4 May
1983 was limited to
the matter of reinstatement.  The
original award of backwages had to remain as there
was no extraordinary circumstance which rendered the execution of backwages impossible or impractical.  The NLRC, however, correctly reduced it to
three (3) years following doctrinal jurisprudence.

We come now to the third and final issue.  The
Bank contends that the award of separation pay (for Galindez,
Junio and Sernadilla), and backwages (for Galindez) should
be enforced through formal claims with the Liquidation Court.  We
agree, considering that the Regional Trial Court, Cabanatuan City, Branch 23, is now such a Court by virtue of
its Order, dated 13 July 1983, in connection with a “Petition for
Assistance in Liquidation” filed by the Central Bank before it.  This is but in keeping with the cardinal rule
against multiplicity of suits and in order that the assets of the Bank
may not be unduly depleted to the prejudice of other creditors.

“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 proceedings.  The judicial liquidation is
intended to prevent multiplicity of action against the insolvent bank”
(Hernandez vs. Rural Bank of Lucena, Inc., January 10, 1978, No. L-29791, 81 SCRA 75).

So also
was the rule laid down in the case of Lipana vs.
Development Bank of Rizal (G.R. No. L-73884, September 24, 1987, 154 SCRA 257) that:

“In the instant case, the stay of execution of judgment is
warranted by the fact that the respondent bank was placed under
receivership.  To execute the judgment
would unduly deplete the assets of respondent bank to the obvious prejudice of
other depositors/creditors, since, as aptly stated in Central Bank of the Philippines
vs. Hon. Morfe (63 SCRA 114), after the Monetary
Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board becomes the trustee
of its assets for the equal benefit of all the creditors, including the
depositors.  The assets of the insolvent
banking institution are held in trust for the equal benefit of all creditors,
and after its insolvency, one cannot obtain an advantage or preference over another by an attachment, execution, or otherwise.”

x              x              x               x               x               x               x

“The time of the filing of the complaint is immaterial.  It is the execution that will obviously
prejudice the other depositors and creditors.  Moreover, as stated in the said Morfe case, the effect of the judgment is only to fix the
amount of debt, and not to give priority to other depositors and
creditors.”

WHEREFORE, the
Resolution of the National Labor
Relations Commission (NLRC), through its Second Division, dated 10 May
1988, which modified
the Labor Arbiter’s Decision of 4
May 1983, is hereby AFFIRMED.  The monetary awards adjudged therein,
however, must be enforced through formal claims filed with the Regional Trial
Court, Cabanatuan City, Branch 23, which
is taking cognizance of the liquidation proceedings of the Rural Bank of Llanera, Inc.  No
costs.

SO ORDERED.

Paras, Padilla, Sarmiento,
and Regalado, JJ., concur.