DBP vs NLRC

G.R. No. 108031 March 1, 1995 DEVELOPMENT BANK OF THE PHILIPPINE !". NATIONAL LABOR RELATION #OMMIION a$% LEONOR A. ANG FA#T&

On 21 March 1977 private respondent Leonor A. Ang started employment as Executive Secretary ith !ropical "hilippines #ood $ndustries% $nc. &!"#$$'. $n 19(2 she as promoted to the position o) "ersonnel O))icer. $n Septem*er 19(+ petitioner ,evelopment -an o) the "hilippines &,-"'% as mortgagee o) !"#$$% )oreclosed its plant )acilities and e/uipment. 0evertheless !"#$$ continued its  *usiness operations operations interrupted only only *y *rie) shutdons shutdons )or the purpose o) servicing servicing its plant )acilities )acilities and e/uipment. $n anuary 19( ,-" too possession o) the )oreclosed properties. 3rom then on the company ceased its operations. As a conse/uence private respondent as on 14 April 19( ver*ally terminated )rom the service. On 15 ,ecem*er 19(7% private respondent )iled ith the La*or Ar*iter a complaint )or separation pay% 1+th month pay% vacation and sic leave pay% salaries and alloances against !"#$$% its 6eneral Manager% and petitioner. A)ter A)ter hearing the La*or Ar*iter )ound !"#$$ primarily lia*le to private respondent *ut only )or her separation pay and vacation and sic leave pay *ecause her claims )or unpaid ages and 1+th month pay ere later paid a)ter the complaint as )iled. !he 6eneral Manager as a*solved o) any lia*ility. lia*ility. ,-" as held su*sidiarily lia*le in the event the company )ailed to satis)y the udgment. !he La*or Ar*iter rationali8ed that the right o) an employee to *e paid *ene)its due him )rom )r om the properties o) his employer is superior to the right o) the latters mortgage. !he 0ational La*or :elations ;ommission a))irmed the ruling o) the La*or Ar*iter. I'E&

#hether or not the 0L:; committed grave a*use o) discretion in holding that Art. 11< 11< o) the La*or ;ode% as amended% hich re)ers to orer pre)erence in case o) *anruptcy or li/uidation o) an employers *usiness is applica*le to the present case notithstanding the a*sence o) any )ormal declaration o) *anruptcy or udicial li/uidation o) !"#$$. R'LING&

S; held that 0L:; gravely a*used its discretion in a))irming the decision o) the La*or Ar*iter. Ar*iter. Art. 11< should not *e treated apart )rom other las *ut applied in conunction ith the pertinent  provisions o) the ;ivil ;ode and the $nsolvency $nsolvency La to the extent extent that piece=meal distri*ution distri*ution o) the assets o) the de*tor is avoided. #orer #orer pre)erence ill )ind application hen% in proceedings such as insolvency% such unpaid ages shall *e paid in )ull *e)ore the >claims o) the 6overnment and other creditors> may *e paid. All creditors must *e convened% their claims ascertained and inventoried% and therea)ter the pre)erences determined. $n the course o) udicial proceedings hich have )or their o*ect the su*ection o) the  property o) the de*tor de*tor to the payment o) his de*ts de*ts or other la)ul o*ligations. o*ligations. !here*y% !here*y% an orderly determination o) pre)erence o) creditors claims is assured? the adudication made ill *e *inding on all parties=in=interest since those proceedings are proceedings in rem? rem? and the legal scheme o) classi)ication% concurrence and pre)erence o) credits in the ;ivil ;ode% the $nsolvency La% and the La*or ;ode is preserved in harmony. $n the present case% there is as yet no declaration o) *anruptcy nor udicial li/uidation o) !"#$$. @ence% it ould *e premature to en)orce the orers pre)erence.!he additional ratiocination ratiocination o) pu*lic respondent that >under Article Article 11< o) the La*or ;ode complainant enoys a pre)erence o) credit over the  properties o) !"#$$ !"#$$ *eing held in possession possession *y ,-"%> ,-"%> is a dismal dismal misconception o) the the nature o)  pre)erence o) credit A pre)erence applies only to claims hich do not attach to speci)ic properties. A lien creates a charge on a particular property. !he right o) )irst pre)erence as regards unpaid ages recogni8ed *y Article 11< does not constitute a lien on the property o) the insolvent de*tor in )avor o) orers. $t is *ut a pre)erence o) credit in their )avor% a pre)erence in application. $t is a method adopted to determine and speci)y the order in hich credits should *e paid in the )inal distri*ution o) the proceeds o) the insolvents assets. $t is a right to a )irst pre)erence in the discharge o) the )unds o) the udgment de*tor

Article 11< o) the La*or ;ode does not purport to create a lien in )avor o) orers or employees )or unpaid ages either upon all o) the properties or upon any particular property oned *y their employer. ;laims )or unpaid ages do not there)ore )all at all ithin the category o) specially pre)erred claims esta*lished under Articles 2251 and 2252 o) the ;ivil ;ode%  except to the extent that such claims  for unpaid wages are are already already covered by Article 2241, 2241, number 6  6  >claims )or la*orers ages% on the goods manu)actured or the or done?> or by Article 2242, number 3 % >claims o) la*orers and other orers engaged in the construction reconstruction or repair o) *uildings% canals and other ors% upon said *uildings% canals and other ors . . . . !o the extent that claims )or unpaid ages )all outside the scope o) Article 2251% num*er % and 22521 num*er +% they ould come ithin the am*it o) the category o) ordinary pre)erred credits under Article 2255. !he ,-" anchors its claim on a mortgage credit. A mortgage mortgage directly and immediately su*ects the property upon hich it is imposed% hoever the possessor may *e% to the )ul)illment o) the o*ligation )or hose security it as constituted &Article 217% ;ivil ;ode'. $t creates a real right hich is en)orcea*le against the hole orld. $t is a lien on an identi)ied immova*le property% hich a pre)erence is not. A recorded mortgage credit is a special pre)erred credit under Article 2252 &4' o) the ;ivil ;ode on classi)ication o) credits. !he pre)erence given *y Article 11<% hen not )alling ithin Article 2251 &' and Article Article 2252 &+'% o) the ;ivil ;ode and not attached to an y speci)ic property% property% is all ordinary pre)erred credit although its impact is to move it )rom second priority to )irst priority in the order o) pre)erence esta*lished *y Article 2255 o) the ;ivil ;ode. #@E:E3O:E% the petition is 6:A0!E,. !he decision o) pu*lic respondent 0ational La*or :elations ;ommission a))irming the decision o) the La*or Ar*iter inso)ar as it held petitioner ,evelopment -an o) the "hilippines lia*le )or the monetary claims o) private respondent Leonor A. Ang is SE! AS$,E.