GR 80593; (December, 1989) (Digest)
G.R. No. 80593 December 18, 1989
PHILIPPINE NATIONAL BANK, petitioner, vs. TERESITA CRUZ, et al., respondents.
FACTS
Aggregate Mining Exponents (AMEX) laid off seventy percent of its workforce in 1980 due to business reverses and subsequently failed to pay the retained thirty percent their wages. Operations ceased completely by July 1982, with AMEX entering an operating agreement for its equipment with T.M. San Andres Development Corporation. The unpaid employees filed a complaint, and the Labor Arbiter ordered AMEX and its president to pay separation pay and back wages totaling P219,452.03. The decision also indicated that if AMEX could not satisfy the award, payment could be sourced from the proceeds of its machineries operated by T.M. San Andres, which were mortgaged to Philippine National Bank (PNB). AMEX did not appeal, but PNB, as a mortgagee-creditor, appealed to the NLRC, arguing the workers’ preference under Article 110 of the Labor Code covered only unpaid wages, not separation pay. The NLRC affirmed the Labor Arbiter’s decision.
ISSUE
Whether the workers’ preference under Article 110 of the Labor Code extends to separation pay and takes precedence over the claims of a mortgagee-creditor like PNB.
RULING
Yes. The Supreme Court dismissed PNB’s petition. The Court held that Article 110 of the Labor Code, as amended by Republic Act No. 6715 , explicitly grants workers first preference regarding “unpaid wages and other monetary claims” in cases of employer bankruptcy or liquidation. The phrase “any provision of law to the contrary notwithstanding” unequivocally means this preference prevails over the order of concurrence and preference of credits under Articles 2241 to 2245 of the Civil Code. The Court rejected PNB’s attempt to limit the preference to unpaid wages alone, noting that PNB had acquiesced to the decision on appeal by not contesting the inclusion of separation pay earlier. Moreover, the Court emphasized the constitutional policy of social justice and protection to labor, stating that the workers’ dire need for these amounts for subsistence justifies their preferential treatment over secured creditors. The later enactment of the Labor Code provision must prevail over contrary Civil Code provisions. Therefore, the workers’ monetary claims, including separation pay, enjoy priority over PNB’s mortgage credit.