- Petitioner
- Development Bank of the Philippines
- Respondent
- National Labor Relations Commission
- Citation
- G.R. No. 86932
- Court
- Supreme Court
- Division
- Second Division
- Ponente
- Regalado, J.
- Decided
- June 27, 1990
Summary
This case involves Development Bank of the Philippines (DBP) seeking to reverse an NLRC decision holding it liable for unpaid wages of Philippine Smelters Corporation (PSC) employees. PSC had obtained a secured loan from DBP in 1983, with DBP becoming majority stockholder. When PSC defaulted on its P75.7 million obligation, DBP foreclosed on the mortgaged properties in 1987. PSC employees filed a labor complaint for unpaid wages and benefits, including DBP as respondent. The Labor Arbiter and NLRC ruled against DBP, holding it liable as foreclosing creditor. The Supreme Court reversed, ruling that Article 110 of the Labor Code requires formal bankruptcy or judicial liquidation proceedings before workers' wage preferences can be enforced against foreclosing creditors. The Court distinguished between DBP's mortgage rights (special preferred credit) and workers' wage preferences (ordinary preferred credit), emphasizing that orderly liquidation requires proper insolvency proceedings where all creditors' claims can be adjudicated. The decision preserves the harmony between Civil Code credit classification provisions and Labor Code worker protections.