GR 75801; (March, 1991) (Digest)
G.R. No. 75801 ; March 20, 1991
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. THE MINISTER OF LABOR and SAMAHANG PAGKAKAISANG MANGGAGAWA SA RMC-GATCORD, respondents.
FACTS
Samahang Pagkakaisang Manggagawa sa RMC-Gatcord filed a complaint against Riverside Mills Corporation (RMC) for non-payment of wage increases and allowances. The Ministry of Labor ruled in favor of the union, ordering RMC to pay a monetary award. Meanwhile, petitioner Development Bank of the Philippines (DBP) had extra-judicially foreclosed on RMC’s properties due to loan defaults, selling them to Rosario Textile Mills.
The labor union sought to enforce its judgment award against DBP by having the sheriff garnish the proceeds from the sale of the foreclosed properties. DBP received a Notice of Garnishment for over three million pesos, prompting it to file the instant petition, arguing the garnishment was improper as the funds belonged to DBP, not the judgment debtor RMC.
ISSUE
Whether the writ of garnishment against the proceeds from the sale of RMC’s foreclosed properties, held by DBP, is valid under Article 110 of the Labor Code on worker preference.
RULING
No, the garnishment is not valid. The Supreme Court ruled that the workers’ preference under Article 110 of the Labor Code, even as amended by Republic Act No. 6715 , cannot be invoked to justify garnishing funds belonging to DBP. The legal logic is twofold. First, the preference credit under Article 110 requires a formal declaration of bankruptcy or a judicial liquidation of the employer’s business. The extra-judicial foreclosure by DBP did not constitute such a judicial liquidation. Therefore, the preferential right of workers did not attach to the proceeds from the sale.
Second, and more fundamentally, execution of a judgment can only reach properties belonging to the judgment debtor. Upon foreclosure and sale, the proceeds belonged to DBP as the foreclosing mortgagee-creditor, not to RMC. Garnishing DBP’s funds to satisfy RMC’s labor obligations effectively enforced the judgment against a third party not liable under the labor case. The sheriff and the Minister of Labor acted with grave abuse of discretion in authorizing and sustaining a garnishment on properties not unquestionably owned by the judgment debtor, violating established rules on execution. The Court made permanent the restraining order against the garnishment.