Republic v Peralta

FACTS
RP seeks the review on certiorari of the Order of the CFI of Manila in its Civil Case
No. 108395 entitled "In the Matter of Voluntary Insolvency of Quality Tobacco
Corporation, Quality Tobacco.
In its questioned Order, the trial court held that the above enumerated claims of
USTC and FOITAF (the Unions) for separation pay of their respective members
embodied in final awards of the NLRC were to be preferred over the claims of the
Bureau of Customs and the BIR.
o The trial court relied primarily upon Article 110.
o SolGen: Article 110 of the Labor Code is not applicable as it speaks of
"wages," a term which he asserts does not include the separation pay
claimed by the Unions. "Separation pay" is given to a laborer for a separation
from employment computed on the basis of the number of years the laborer
was employed by the employer; it is a form of penalty or damage against the
employer in favor of the employee for the latter's dismissal or separation
from service.

ISSUE + RULING
Are separation payments to their respective members embodied in final awards of the
NLRC to be preferred over the claims of the Bureau of Customs and the BIR? (WON
separation pay is included in the term wages)? YES. CredTrans guyz
For the specific purposes of Article 110 and in the context of insolvency,
termination or separation pay is reasonably regarded as forming part of the
remuneration or other money benefits accruing to employees or workers by reason
of their having previously rendered services to their employer; as such, they fall
within the scope of "remuneration or earnings for services rendered or to be
rendered"
o Liability for separation pay might indeed have the effect of a penalty, so far
as the employer is concerned. For the employees, however, separation pay is
additional remuneration to which they become entitled because, having
previously rendered services, they are separated from the employer's
service.
o PCIB v. National Mines and Allied Workers Union : the Solicitor General took a
different view and there urged that the term "wages" under Article 110 of the
Labor Code may be regarded as embracing within its scope severance pay or
termination or separation pay the Court agrees.
The resolution of the issue of priority among the several claims filed in the
insolvency proceedings instituted by the Insolvent cannot, however, rest on a
reading of Article 110 of the Labor Code alone.
o Article 110 of the Labor Code, in determining the reach of its terms, cannot
be viewed in isolation but must be read in relation to the provisions of the
Civil Code concerning the classification, concurrence and preference of
credits , which provisions find particular application in insolvency
proceedings where the claims of all creditors, preferred or non-preferred,
may be adjudicated in a binding manner.
Worker preference in case of bankruptcy In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
o Union paid wages shall be paid in full before other creditors may establish
any claim to a share in the assets of the employer.