Case Digest: Rubberworld Inc v. NLRC, G.R. No. 126773 April 14, 1999

 Labor Code Art. 110 | Rehabilitation Proceedings

  • Rubberworld Philippines, Inc., a domestic corporation engaged in manufacturing footwear, bags and garments, filed a petition for suspension of payments and prayed for the approval of the proposed rehabilitation plan with the Securities and Exchange Commission (SEC).
  • The SEC ordered the creation of a management committee and the suspension of all actions for claims against Rubberworld. 
  • Private respondents, claiming to be employees of Rubberworld, filed complaints for illegal dismissal, unfair labor practice, damages and payment of separation pay, among others.
  • Rubberworld moved to suspend these labor cases based on the SEC order.
  • LA: Denied the motion.
  • NLRC: Sustained the rulings of the LA.

WoN NLRC erred in affirming the order of Labor Arbiter denying petitioners' motion to suspend proceedings despite the Order of the Securities and Exchange Commission.   YES 

The Court ruled in favor of Rubberworld, stating that the SEC's suspension order, under PD 902-A, automatically stays all actions for claims against a corporation upon the appointment of a management committee or rehabilitation receiver. This suspension applies without exceptions.

The purpose of the automatic stay is to allow the management committee or rehabilitation receiver to effectively exercise its powers without interference, thereby facilitating the rehabilitation of the corporation.

The Court clarified that the preference given to workers under Article 110 of the Labor Code applies only in insolvency or judicial liquidation proceedings, not in rehabilitation cases like this one.

The purpose of rehabilitation proceedings is precisely to enable the company to gain a new lease on life and thereby allow creditors to be paid their claims from its earnings. In insolvency proceedings, on the other hand, the company stops operating, and the claims of creditors are satisfied from the assets of the insolvent corporation. The present case involves the rehabilitation, not the liquidation, of petitioner-corporation. Hence, the preference of credit granted to workers or employees under Article 110 of the Labor Code is not applicable.


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