Tuesday, February 21, 2012

Development Bank of the Philippines vs. NLRC, 242 SCRA 59

Facts: On March 21, 1977 private respondent Leonor A. Ang started employment as Executive Secretary with Tropical Philippines Wood Industries, Inc. (TPWII), a corporation engaged in the manufacture and sale of veneer, plywood and sawdust panel boards. In 1982, she was promoted to the position of Personnel Officer. In September 1983, petitioner Development Bank of the Philippines, as mortgagee of TPWII, foreclosed its plant facilities and equipment. Nevertheless, TPWII continued its business operations interrupted only by brief shutdowns for the purpose of servicing its plant facilities and equipment. On January 1986, the petitioner took possession of the foreclosed properties, and from then on the company ceased its operations. As a consequence, the private respondent was verbally terminated from the service. After the hearing, the Labor Arbiter found TPWII primarily liable to private respondent but only for her separation pay and vacation and sick leave pay because her claims for unpaid wages and 13th month pay were later paid after the complaint was filed. The General Manager was absolved of any liability. But with respect to petitioner, it was held subsidiarily liable in the event the company failed to satisfy the judgment. The Labor Arbiter rationalized that the right of an employee to be paid benefits due him from the properties of his employer is superior to the right of the latter's mortgagee.

Issue : Whether or not there is grave abuse of discretion on the part of NLRC.

Held:  Yes. We hold that public respondent gravely abused its discretion in affirming the decision of the Labor Arbiter. Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent provisions of the Civil Code and the Insolvency Law to the extent that piece-meal distribution of the assets of the debtor is avoided. Art. 110, then prevailing, provides:

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 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.

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