G.R. No. 84975 and G.R. No. 85211 . July 5, 1989.
ZENAIDA GALINDEZ, CAROLINA JUNIO AND GERONIMO SERNADILLA, petitioners, vs. RURAL BANK OF LLANERA, INC., NATIONAL LABOR RELATIONS COMMISSION, respondents. RURAL BANK OF LLANERA (N.E.), INC., petitioner vs. DEPARTMENT OF LABOR AND EMPLOYMENT AND ZENAIDA GALINDEZ, respondents.

FACTS

The Rural Bank of Llanera was placed under receivership by the Central Bank in 1981. The Receiver terminated the employment of Cashier Zenaida Galindez and two others, Carolina Junio and Geronimo Sernadilla, on grounds of retrenchment. Galindez opposed the termination. On May 4, 1983, the Labor Arbiter denied the Bank’s application for clearance to dismiss Galindez, ordering her reinstatement with full backwages and awarding separation pay to Junio and Sernadilla. The Bank failed to appeal this decision within the reglementary period, rendering it final and executory.
Subsequently, the Central Bank filed a petition for assistance in the liquidation of the Bank with the Regional Trial Court (RTC) of Cabanatuan City, which was granted on July 13, 1983, placing the Bank under judicial liquidation. Despite the final Labor Arbiter decision, its execution was restrained by the Liquidation Court. Later, the NLRC, acting on a separate appeal, modified the final Labor Arbiter decision on May 10, 1988, converting Galindez’s reinstatement into separation pay and limiting her backwages to three years, citing the Bank’s liquidation.

ISSUE

The primary issues were: (1) whether the NLRC had jurisdiction to modify a final and executory decision of the Labor Arbiter; and (2) how the monetary awards from the labor case should be enforced given the Bank’s ongoing judicial liquidation.

RULING

The Supreme Court affirmed the NLRC’s modified resolution. On jurisdiction, while the Labor Arbiter’s 1983 decision had become final due to the Bank’s failure to timely appeal, the supervening event of the Bank’s judicial liquidation justified the NLRC’s modification. Reinstatement became legally impossible as the Bank had ceased operations and was under court-supervised liquidation. The law recognizes that factual circumstances altering the feasibility of a remedy can warrant modification even of final judgments to serve substantial justice.
Regarding enforcement, the Court ruled that all monetary awards—separation pay and backwages—must be enforced as claims in the ongoing liquidation proceedings before the RTC of Cabanatuan City, Branch 23. This procedure is mandated to prevent multiplicity of suits and ensure the equitable distribution of the Bank’s limited assets among all creditors. The assets of an insolvent bank are held in trust for the equal benefit of all claimants; allowing individual execution would deplete assets and prejudice other depositors and creditors. Thus, the labor judgment merely fixed the amount of the debt, but its satisfaction must be pursued through the liquidation court to maintain orderly and fair settlement of the Bank’s obligations.