G.R. No. L-50402 August 19, 1982
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK and THE MANILA BANKING CORPORATION, petitioners, vs. NATIONAL MINES & ALLIED WORKERS UNION (NAMAWU-MIF), NATIONAL LABOR RELATIONS COMMISSION, and ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION, respondents.

FACTS

Petitioners PCIB and Manila Banking Corporation foreclosed on the properties of Philippine Iron Mines, Inc. (PIM) and subsequently sold them to respondent Atlas Consolidated Mining for Thirty Million Pesos (P30,000,000.00). Meanwhile, respondent Union had earlier obtained a final and executory NLRC judgment against PIM for severance pay amounting to P4,298,307.77. To satisfy this judgment, the NLRC, upon the Union’s ex parte motion, issued a writ of garnishment on April 18, 1979, directing Atlas to withhold the said amount from the purchase price due to the petitioner banks. Atlas complied by delivering a check for the garnished amount to the sheriff, which the Union encashed and distributed to its members from April 23 to May 5, 1979, before this Court could issue a preliminary injunction.
The petitioners filed this certiorari proceeding, arguing that the NLRC acted with grave abuse of discretion in issuing the garnishment order. They contended that they were not parties to the labor case and that the garnished funds, being part of the purchase price payable to them by Atlas, were not funds due to the judgment debtor, PIM. They sought to annul the garnishment order and to have Atlas held liable to them for the full P30 million purchase price.

ISSUE

Whether the NLRC committed grave abuse of discretion in garnishing funds owed by Atlas to the petitioner banks, which were not parties to the labor case, to satisfy a judgment against PIM.

RULING

The Supreme Court dismissed the petition and upheld the garnishment. The legal logic rests on the constitutional principles of social justice and protection to labor, coupled with the statutory preference for workers’ claims under Article 110 of the Labor Code (Presidential Decree No. 442). The Court ruled that the workers’ monetary claims for services rendered constitute a lien on the employer’s properties, superior to the claims of creditors. This lien attached to PIM’s properties from the moment the Ministry of Labor approved PIM’s application for clearance to shut down due to liquidation on May 7, 1975—a date prior to the foreclosure sale to the petitioners. The subsequent NLRC decision was merely confirmatory of this pre-existing, vested right of the workers.
Consequently, when petitioners acquired PIM’s properties through foreclosure, they took them already burdened by this statutory lien in favor of the workers. Petitioners, presumed to know the law, purchased and later sold the properties with awareness of this encumbrance. Therefore, Atlas, as the buyer, had the right to receive the properties free from liens. When served with the garnishment writ, Atlas was legally justified in deducting the workers’ claims from the purchase price to satisfy the superior lien, incurring no liability to the petitioners for the deducted amount. The consummated distribution of the garnished funds to the workers rendered the injunctive prayers moot, but the Court resolved the core issue to settle the parties’ rights definitively.