G.R. No. 82763-64 - Development Bank of the Philippines vs. National Labor Relations Commission

The petitioners are Development Bank of the Philippines (DBP), and the respondents include the National Labor Relations Commission (NLRC), Labor Arbiter Isabel P. Ortiguerra, and Labor Alliance for National Development (LAND), the bargaining representative of approximately 800 former rank-and-file employees of Lirag Textile Mills, Inc. (LIRAG).
LIRAG was the mortgagor of properties to DBP as mortgagee. LIRAG was also the employer of the complainants who are its former employees.

Starting September 1981, LIRAG began retrenching employees, terminating 180 regular employees by December. The company ceased operations presumably due to financial difficulties.
Joselito Albay filed a complaint for illegal dismissal against LIRAG in February 1982 (NLRC Case No. 2-2090-82).
LAND, on behalf of 180 dismissed members, filed for benefits and separation pay in March 1982 (NLRC Case No. 3-2581-82). These cases were consolidated and jointly heard; supervisors and managers later joined the complainants.

Labor Arbiter Apolinar L. Sevilla ruled that LIRAG pay the employees, a decision affirmed by the NLRC Third Division in March 1983, rendering the judgment final and executory.
A Writ of Execution was issued on 15 April 1983. On the same day, DBP foreclosed LIRAG’s mortgaged properties for non-payment of mortgage obligation, acquiring the properties via public auction for P31,346,462.90. Payment was credited to LIRAG’s mortgage debt.
The Writ of Execution against LIRAG’s properties remained unsatisfied. LAND filed for writ of execution and garnishment against DBP’s foreclosure proceeds on 7 December 1984 to satisfy unpaid labor claims.

Labor Arbiter Sevilla ordered DBP to intervene on 30 May 1985. On 12 February 1986, the Labor Arbiter granted the Writ of Garnishment and directed DBP to remit P6,292,380.00 from foreclosure proceeds to satisfy labor claims.
DBP opposed, arguing NLRC lacked jurisdiction and was deprived of due process. The Labor Arbiter and then NLRC denied reconsideration and affirmed the order.
Meanwhile, the Asset Privatization Trust (APT) became transferee of DBP’s foreclosed assets in 1987 and was joined as party-petitioner. A partial compromise agreement between APT and LAND was reached in 1987 for P750,000, but was opposed by LAND’s national officers.

DBP sought relief before the Supreme Court questioning the garnishment order.
The Supreme Court gave due course to the Petition for Certiorari, initially considered by the Second Division and later referred to the Court en banc.

Whether the NLRC had jurisdiction to implead DBP, a non-party mortgagee, in the enforcement of the labor claims against LIRAG.
Whether the issuance of Writ of Garnishment against the foreclosure proceeds of LIRAG’s properties to satisfy workers’ unpaid wages and monetary claims was proper.
Whether under Article 110 of the Labor Code and its amendments, workers have preference over mortgage creditors in the absence of formal bankruptcy or judicial liquidation proceedings.
Whether the usufruct of worker’s preference rights under Article 110 of the Labor Code applies retroactively or requires a judicial proceeding in rem for enforcement.