G.R. No. 96149 February 16, 1994.
CONCHITA S. HAUTEA, in Substitution of JOSE H. HAUTEA (Deceased), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ASSET PRIVATIZATION TRUST AND PHILIPPINE NATIONAL BANK, respondents.

FACTS

Jose H. Hautea was hired by Calinog-Lambunao Sugarmill, Inc. (CLSMI) in January 1967 and retired in December 1984. On December 2, 1986, the Philippine National Bank (PNB) extrajudicially foreclosed the real and personal properties mortgaged to it by CLSMI and was the sole bidder at the auction sale. On January 12, 1987, Jose Hautea filed a complaint for separation pay/retirement benefits against CLSMI and/or PNB before the NLRC. All notices and copies of the complaint were sent to CLSMI’s offices in Calinog, Iloilo. For failure to appear at hearings, CLSMI and PNB were declared in default. On February 27, 1987, the foreclosed properties were transferred to the Government through the Asset Privatization Trust (APT) under Proclamation No. 50. On March 12, 1987, the Labor Arbiter rendered a decision ordering CLSMI to pay Jose Hautea separation pay, moral damages, and attorney’s fees. The dispositive portion did not order PNB to pay. A writ of execution was issued, and the sheriff levied on the foreclosed properties now held by APT/PNB. APT and PNB filed a petition with the NLRC. Jose Hautea died and was substituted by his wife, petitioner Conchita S. Hautea. The NLRC, in its decision dated August 13, 1990, annulled the Labor Arbiter’s decision insofar as it affected PNB, vacated the writ of execution and order, and lifted the levy on PNB’s properties. Petitioner’s motion for reconsideration was denied.

ISSUE

1. Whether the NLRC erred in strictly applying the Rules of Court on service of summons to the detriment of expeditious labor justice.
2. Whether the NLRC erred in holding that Jose H. Hautea cannot claim coverage under Section 27 of Proclamation No. 50.
3. The relevant issue, as framed by the Court, is whether the judgment against CLSMI can be enforced against APT/PNB as mortgagee of the foreclosed properties.

RULING

The Supreme Court DENIED the petition and AFFIRMED the NLRC decision.
1. On the issue of summons, the Court found it immaterial. The Labor Arbiter’s decision did not adjudge PNB liable for the claim; it only ordered CLSMI to pay. PNB was impleaded because it possessed CLSMI’s foreclosed property, but it was not Hautea’s employer.
2. On the issue of Proclamation No. 50, the Court held that Section 27 pertains to the entitlement of officers and employees of government corporations whose employment is terminated upon the corporation’s transfer to APT. It does not support the submission that the award can be satisfied from corporate properties subject to a lien superior to workers’ preference.
3. On the enforcement of the judgment against APT/PNB, the Court applied the doctrine from Development Bank of the Philippines v. NLRC. A mortgage credit is a special preferred credit under Article 2241 of the Civil Code, which constitutes a lien on specific property. In contrast, the worker’s preference under Article 110 of the Labor Code (prior to its amendment by R.A. No. 6715 ) is an ordinary preferred credit not attached to any specific property. Therefore, the mortgage lien of PNB/APT on the foreclosed properties is superior to the worker’s claim for separation pay. The foreclosure and transfer of properties occurred before the finality of the labor decision, and the judgment cannot be enforced against the mortgagee’s rights. The levy on the foreclosed properties was properly lifted.