DBP v. NLRC, G.R. No. 86227, 19 January 1994.

Facts: A petition for certiorari was filed by the Development Bank of the
Philippines(DBP), which seeks the reversal of the decision of the National Labor
Relations Commission, affirming that of the Labor Arbiter, which holds the petitioner,
along with Atlas Textile Development Corporation (ATLAS), liable to the private
respondents for wage differentials, "illegal" salary deductions, separation pay, and
similar money claims. The private respondents were employees of ATLAS, a textile
firm, which hypothecated its certain assets to DBP. After ATLAS defaulted in its
obligations, DBP foreclosed on the mortgage in March 1985. The latter acquired the
mortgaged assets by virtue of the foreclosure sale. The private respondents filed their
aforementioned claim,on 30 October 1985, against both ATLAS and DBP. The Labor
Arbiter ruled for the private respondents. On appeal by DBP, the decision was
sustained by the NLRC. Hence, the instant petition. The petitioner contends that it is
error on the part of the public respondent to consider the workers' preference under
Article 110 of the Labor Code over that of DBP's mortgage lien.

ISSUE: Whether or not public respondent erred in considering the workers'

preference under Article 110 of the Labor Code over that of DBP's mortgage lien.

RULING: The case at bench concerns monetary claims of workers that are not
involved in judicial proceedings in rem in adjudication of claims of creditors vis-a-
vis the assets of the debtor, nor have such claims accrued after the effectivity of
Republic Act 6715. The petition thus raises issues heretofore squarely resolved in our
aforequoted decisions. To recapitulate.

(1) Article 110 of the Labor Code, as amended, must be viewed and read in
conjunction with the provisions of the Civil Code on concurrence and preferences of
credits;
(2) The aforesaid provisions of the Civil Code, including Article 110 of the Labor
Code, require judicial proceedingsin rem in adjudication of creditors' claims against
the debtor's assets to become operative;

(3) Republic Act No. 6715 has the effect of expanding the "worker preference" to
cover not only unpaid wages but also other monetary claims of laborers, to which
even claims of the Government must be deemed subordinate; and

(4) The amendatory provisions of Republic Act 6715, which took effect on 21 March
1989, should only be given prospective application.

Wherefore, the petition is GRANTED.