G.R. No. 108031 - Development Bank of the Philippines vs. National Labor Relations Commission

On 21 March 1977, Leonor A. Ang commenced employment as Executive Secretary with Tropical Philippines Wood Industries, Inc. (TPWII), a company engaged in the manufacture and sale of veneer, plywood, and sawdust panel boards.
In 1982, she was promoted to the position of Personnel Officer.

In September 1983, the Development Bank of the Philippines (DBP), acting as mortgagee of TPWII, foreclosed on the company’s plant facilities and equipment.
Despite the foreclosure, TPWII continued its business operations with only brief shutdowns for servicing its facilities.
In January 1986, DBP took possession of the foreclosed properties, and subsequently, TPWII ceased its operations.

On 15 April 1986, Leonor A. Ang was verbally terminated from service due to the cessation of TPWII’s operations.
On 14 December 1987, she filed a complaint with the Labor Arbiter for separation pay, 13th month pay, vacation and sick leave pay, salaries, and allowances against TPWII, its General Manager, and DBP.
The Labor Arbiter found TPWII primarily liable for separation pay and vacation and sick leave pay, noting that claims for unpaid wages and 13th month pay had been settled after the complaint was filed.
The General Manager was absolved of liability; however, DBP was held subsidiarily liable in the event that TPWII failed to satisfy the judgment.
The rationale was anchored on the principle that an employee’s right to benefits from the employer’s properties supersedes that of the mortgagee.

On 16 November 1992, the National Labor Relations Commission (NLRC) affirmed the Labor Arbiter’s decision.
Before reaching the Supreme Court, issues arose regarding the applicability of Article 110 of the Labor Code without a formal declaration of bankruptcy or a judicial liquidation of TPWII.

Whether the worker’s preference provision under Article 110 of the Labor Code can be invoked in the absence of a declaration of bankruptcy or judicial liquidation of the employer’s business.
Whether public respondent (NLRC) committed grave abuse of discretion by holding that worker’s preference applies even when formal insolvency proceedings have not been instituted.

The issue of balancing the rights of the worker to be paid first against the claims of DBP, a mortgagee, and other creditors.
Whether enforcing worker’s preference prior to a formal insolvency proceeding disrupts the orderly distribution of the debtor’s assets as provided under the Civil Code and Insolvency Law.

Whether the ruling conforms with the Supreme Court’s previous decisions (e.g., Development Bank of the Philippines v. Santos and related cases) mandating that a judicial liquidation or bankruptcy proceeding is a prerequisite for enforcing worker’s preference claims.
The contrast between the majority’s interpretation and the dissenting opinion regarding the necessity of such formal proceedings.