Case Digest: Development Bank of the Philippines v. NLRC and Ang, G.R. No. 108031 March 1, 1995

Labor Code Art. 110 | Declaration of Bankruptcy, Judicial Liquidation

  • Leonor A. Ang worked for Tropical Philippines Wood Industries, Inc. (TPWII) from 1977 to 1986.
  • In 1983, TPWII faced financial issues, leading to the foreclosure of its properties by petitioner Development Bank of the Philippines. In 1986, TPWII ceased operations and Ang was verbally terminated.
  • Ang filed a complaint seeking separation pay, 13th-month pay, vacation and sick leave pay, salaries, and allowances from TPWII and Development Bank of the Philippines.
  • LA: Found TPWII primarily liable for separation pay and vacation and sick leave pay. Development Bank of the Philippines was held subsidiarily liable if TPWII failed to pay.
  • NLRC: Affirmed the LA.

WoN the declaration of bankruptcy or judicial liquidation required before the worker's preference may be invoked under Art. 110 of the Labor Code.  YES 

A declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this case absent a formal declaration of bankruptcy or a liquidation order

The 1989 amendment of Article 110 expanded the concept of "worker preference" to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate. Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably eliminated, this Court did not alter its original position that the right to preference given to workers under Art. 110 cannot exist in any effective way prior to the time of its presentation in distribution proceedings. 

In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would be premature to enforce the worker's preference.


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