1. G.R. No.

86932 June 27, 1990

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DOROTHY S.
ANCHETA, MA. MAGDALENA Y. ARMARILLE, CONSTANTE A.
ANCHETA, CONSTANTE B. BANAYOS, EVELYN BARRIENTOS, JOSE
BENAVIDEZ, LEONARDO BUENAAGUA, BENJAMIN BAROT, ERNESTO
S. CANTILLER, EDUARDO CANDA, ARMANDO CANDA, AIDA DE
LUNA, PACIFICO M. DE JESUS, ALFREDO ESTRERA, AURELIO A.
FARINAS, FRANCISCO GREGORIO, DOMELINA GONZALES, JUANA
JALANDONI, MANUEL MALUBAY, FELICIANO OCAMPO, MABEL PADO,
GEMINIANO PLETA, ERNESTO S. SALAMAT, JULIAN TRAQUENA,
JUSFIEL SILVERIO, JAMES CRISTALES, FRANCISCO BAMBIO, JOSE T.
MARCELO, JR., SUSAN M. OLIVAR, ERNESTO JULIO, CONSTANTE
ANCHETA, JR., ENRIQUE NABUA and JAVIER P.
MATARO, respondents.

FACTS: Philippine Smelters Corporation (PSC) obtained a loan from

DBP to finance its iron smelting and steel manufacturing business. PSC
mortgaged its real properties with all the buildings and improvements
thereon and chattels. By virtue of the said loan agreement, DBP
became the majority stockholder of PSC. When PSC failed to pay, it
foreclosed and acquired the mortgaged properties of PSC. Herein
private respondents then filed a complaint against PSC and DBP for
nonpayment of salaries and other benefits.
ISSUE: Could DBP, as foreclosing creditor, be held liable for the unpaid
wages and benefits of the employees of PSC?
HELD: No. The right to preference given to workers under Article 110
of the Labor Code cannot exist in any effective way prior to the time of
its presentation in distribution proceedings. It will find application
when, in proceedings such as insolvency, such unpaid wages shall be
paid in full before the 'claims of the Government and other creditors'
may be paid. But, for an orderly settlement of a debtor's assets, all
creditors must be convened, their claims ascertained and inventoried,
and thereafter the preference determined in the course of judicial
proceedings which have for their object the subjection of the property
of the debtor to the payment of his debts or other lawful obligations.
On the foregoing considerations and it appearing that an involuntary
insolvency proceeding has been instituted against PSC, private

respondents should properly assert their respective claims in said

proceeding.