Development Bank of the Philippines vs Secretary of Labor and Employment

A Summary of a Decision of the Supreme Court of the Philippines

G.R. No. 79351 November 28, 1989

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.THE HON. SECRETARY OF LABOR, CRESENCIA DIFONTORUM, ET AL., respondents.

Facts of the case:

Private respondents won a case for illegal dismissal, unfair labor practice, illegal deductions from salaries and violation of the minimum wage law against Riverside Mills Corporation. Consequently, a writ of execution was issued, on October 22, 1985 , against the goods and chattel of RMC. Said assets however had already been foreclosed by petitioner Development Bank of the Philippines (DBP) through an extra-judicial proceedings as early as 1983. Private respondents, in a motion, moved for the delivery of RMC properties in possession of DBP, relying on the provisions of Article 110 of the Labor Code giving them first preference over the mortgaged properties of RMC for the satisfaction of the judgment rendered in their favor. Which motion was granted. On appeal, the decision was affirmed.

Issue:

Whether or not Article 110 of the Labor Code finds application on the instant case. Article 110 provides that in case of bankruptcy or liquidation of an employer's business, his workers enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation.

Ruling:

The Supreme Court held that Article 110 cannot be applied in the instant case because the important requisite that employer's business must be bankrupt is lacking. The Supreme Court ruled that in the Philippine jurisdiction, bankruptcy, insolvency and general judicial liquidation proceedings are the only means to establish that a business is bankrupt or insolvent. Absent of such judicial declaration, the business cannot be considered bankrupt for the purpose of applying the provisions of Article 110.