CHRISTIAN K.

AYUNGO
LLB-2B

DOLE Philppines vs Esteva (2006) G.R. 161115

Facts:

Petitioner is a corporation duly organized and existing in accordance with Philippine

laws, engaged principally in the production and processing of pineapple for the export
market. Its plantation is located in Polomolok, South Cotabato.

Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO).

CAMPCO was organized in accordance with Republic Act No. 6938, otherwise known as
the Cooperative Code of the Philippines, and duly-registered with the Cooperative
Development Authority (CDA) on 6 January 1993. Members of CAMPCO live in
communities surrounding petitioner's plantation and are relatives of petitioner's
employees. On 17 August 1993, petitioner and CAMPCO entered into a Service
Contract. The Service Contract referred to petitioner as "the Company," while
CAMPCO was "the Contractor."

Pursuant to the foregoing Service Contract, CAMPCO members rendered services to

petitioner. The number of CAMPCO members that report for work and the type of
service they performed depended on the needs of petitioner at any given time.
Although the Service Contract specifically stated that it shall only be for a period of
six months, i.e., from 1 July to 31 December 1993, the parties had apparently
extended or renewed the same for the succeeding years without executing another
written contract. It was under these circumstances that respondents came to work for
petitioner.

The Task Force submitted a report on 3 June 1993 identifying six cooperatives that
were engaged in labor-only contracting, one of which was CAMPCO. The DOLE
Regional Office No. XI held a conference on 18 August 1993 wherein the
representatives of the cooperatives named by the Task Force were given the
opportunity to explain the nature of their activities in relation to petitioner. On 19
October 1993, Director Parel of DOLE Regional Office No. XI issued an Order, directing
the cooperatives to cease and desist from engaging in labor-only contracting.

On 15 September 1994, DOLE Undersecretary Cresencio B. Trajano, by the authority of

the DOLE Secretary, issued an Order dismissing the appeal of the Cooperatives.
Respondents started working for petitioner at various times in the years 1993 and
1994, by virtue of the Service Contract executed between CAMPCO and petitioner. All
of the respondents had already rendered more than one year of service to petitioner.
While some of the respondents were still working for petitioner, others were put on
"stay home status" on varying dates in the years 1994, 1995, and 1996 and were no
longer furnished with work thereafter. Together, respondents filed a Complaint, on 19
December 1996, with the National Labor Relations Commission (NLRC), for illegal
dismissal, regularization, wage differentials, damages and attorney's fees.

Respondents thus argued that they should be considered regular employees of

petitioner given that: (1) they were performing jobs that were usually necessary and
desirable in the usual business of petitioner; (2) petitioner exercised control over
respondents, not only as to the results, but also as to the manner by which they
performed their assigned tasks; and (3) CAMPCO, a labor-only contractor, was merely
a conduit of petitioner. As regular employees of petitioner, respondents asserted that
they were entitled to security of tenure and those placed on "stay home status" for
more than six months had been constructively and illegally dismissed. Respondents
further claimed entitlement to wage differential, moral damages, and attorney's fees.

Petitioner, in its Position Paper filed before the NLRC, denied that respondents were
its employees.

Petitioner explained that it found the need to engage external services to augment its
regular workforce, which was affected by peaks in operation, work backlogs,
absenteeism, and excessive leaves. It used to engage the services of individual
workers for definite periods specified in their employment contracts and never
exceeding one year. However, such an arrangement became the subject of a labor
case, in which petitioner was accused of preventing the regularization of such
workers. The Labor Arbiter who heard the case, rendered his Decision 18 on 24 June
1994 declaring that these workers fell squarely within the concept of seasonal
workers as envisaged by Article 280 of the Labor Code, as amended, who were hired
by petitioner in good faith and in consonance with sound business practice; and
consequently, dismissing the complaint against petitioner.

The NLRC, in its Resolution, 19 dated 14 March 1995, affirmed in toto the Labor
Arbiter's Decision and further found that the workers were validly and legally engaged
by petitioner for "term employment," wherein the parties agreed to a fixed period of
employment, knowingly and voluntarily, without any force, duress or improper
pressure being brought to bear upon the employees and absent any other
circumstance vitiating their consent. The said NLRC Resolution became final and
executory on 18 June 1996. Despite the favorable ruling of both the Labor Arbiter and
the NLRC, petitioner decided to discontinue such employment arrangement. Yet, the
problem of petitioner as to shortage of workforce due to the peaks in operation, work
backlogs, absenteeism, and excessive leaves, persisted. Petitioner then found a
solution in the engagement of cooperatives such as CAMPCO to provide the necessary
additional services.

Petitioner contended that respondents were owners-members of CAMPCO; that

CAMPCO was a duly-organized and registered cooperative which had already grown
into a multi-million enterprise; that CAMPCO was engaged in legitimate job-
contracting with its own owners-members rendering the contract work; that under
the express terms and conditions of the Service Contract executed between petitioner
(the principal) and CAMPCO (the contractor), the latter shall undertake the contract
work on its own account, under its own responsibility, and according to its own
manner and method free from the control and direction of the petitioner in all
matters connected with the performance of the work, except as to the result thereof;
and since CAMPCO held itself out to petitioner as a legitimate job contractor,
respondents, as owners-members of CAMPCO, were estopped from denying or refuting
the same.

Petitioner further averred that Department Order No. 10, amending the rules
implementing Books III and VI of the Labor Code, as amended, promulgated by the
DOLE on 30 May 1997, explicitly recognized the arrangement between petitioner and
CAMPCO as permissible contracting and subcontracting.

The LA and the NLRC decided the case in favor of the Petitioner Company and against
the complaint of the private respondents (employees). On appeal by certiorari, the CA
reversed the rulings of the LA and NLRC. Thus, the petitioner Company appealed to
the SC for Petition for Review on Certiorari under Rule 45 of the revised Rules of Civil
Procedure, questioning the decision of the Court of Appeals concerning the herein
assailed issues.

Issues:

1 Whether or not department order no. 10, series of 1997 is the applicable
regulation in this case. Whether or not there should be a retroactive
application to department order no. 3, series of 2001.
2 Whether or not its retroactive application violated the constitutional provision
against impairment of contracts and deprived petitioner of the due process of
the law.
Held:

The second assignment of error delves into the significance and application to the
case at bar of the two department orders issued by DOLE. Department Order No. 10,
series of 1997, amended the implementing rules of Books III and VI of the Labor Code,
as amended. Under this particular DOLE department order, the arrangement between
petitioner and CAMPCO would qualify as permissible contracting. Department Order
No. 3, series of 2001, revoked Department Order No. 10, series of 1997, and
reiterated the prohibition on labor-only contracting.

Attention is called to the fact that the acts complained of by the respondents
occurred well before the issuance of the two DOLE department orders in 1997 and
2001. The Service Contract between DOLE and CAMPCO was executed on 17 August
1993. Respondents started working for petitioner sometime in 1993 and 1994. While
some of them continued to work for petitioner, at least until the filing of the
Complaint, others were put on "stay home status" at various times in 1994, 1995, and
1996. Respondents filed their Complaint with the NLRC on 19 December 1996.

A basic rule observed in this jurisdiction is that no statute, decree, ordinance, rule or
regulation shall be given retrospective effect unless explicitly stated. Since there is
no provision at all in the DOLE department orders that expressly allowed their
retroactive application, then the general rule should be followed, and the said orders
should be applied only prospectively.

Which now brings this Court to the question as to what was the prevailing rule on
labor-only contracting from 1993 to 1996, the period when the occurrences subject of
the Complaint before the NLRC took place.

Article 106 of the Labor Code, as amended, permits legitimate job contracting, but
prohibits labor-only contracting. The said provision reads

ART. 106. Contractor or subcontractor. Whenever an employer enters into a

contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall be paid in
accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code.
In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.

To implement the foregoing provision of the Labor Code, as amended, Sections 8 and
9, Rule VIII, Book III of the implementing rules, in force since 1976 and prior to their
amendment by DOLE Department Order No. 10, series of 1997, provided as follows

Sec. 8. Job contracting. There is job contracting permissible under the Code
if the following conditions are met;

(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof;
and

(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:

(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the employer in
which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent as if
the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is permissible
in the light of the circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the
workers.

Since these statutory and regulatory provisions were the ones in force during the
years in question, then it was in consideration of the same that DOLE Regional
Director Parel and DOLE Undersecretary Trajano issued their Orders on 19 September
1993 and 15 September 1994, respectively, both finding that CAMPCO was engaged in
labor-only contracting. Petitioner, in its third assignment of error, questions the
weight that the Court of Appeals gave these orders in its Decision, dated 20 May 2002,
and Amended Decision, dated 27 November 2003.
CHRISTIAN K. AYUNGO
LLB-2B

Neri vs NLRC (1993) 224 SCRA 717

Facts:

Petitioners instituted complaints against FEBTC and BCC to compel the bank to accept
them as regular employees and for it to pay the differential between the wages being
paid them by BCC and those received by FEBTC employees with similar length of
service. They contended that BCC in engaged in labor-only contracting because it
failed to adduce evidence purporting to show that it invested in the form of tools,
equipment, machineries, work premises and other materials which are necessary in
the conduct of its business. Moreover, petitioners argue that they perform duties
which are directly related to the principal business or operation of FEBTC.

Issue: Whether or not BCC was engaged in labor-only contracting.

Held:

It is well-settled that there is labor-only contracting where: (a) the person supplying
workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others; and, (b) the workers
recruited and placed by such person are performing activities which are directly
related to the principal business of the employer.

BCC need not prove that it made investments in the form of tools, equipment,
machineries, work premises, among others, because it has established that it has
sufficient capitalization. This fact was both determined by the Labor Arbiter and the
NLRC as BCC had a capital stock of P1 million fully subscribed and paid for. BCC is
therefore a highly capitalized venture and cannot be deemed engaged in labor-only
contracting.

While there may be no evidence that it has investment in the form of tools,
equipment, machineries, work premises, among others, it is enough that it has
substantial capital, as was established before the Labor Arbiter as well as the NLRC.
The law does not require both substantial capital and investment in the form of tools,
equipment, machineries, etc. This is clear from the use of the conjunction "or"
instead of and. Having established that it has substantial capital, it was no longer
necessary for BCC to further adduce evidence to prove that it does not fall within the
purview of "labor-only" contracting. There is even no need for it to refute petitioners'
contention that the activities they perform are directly related to the principal
business of respondent bank.

On the other hand, the Court has already taken judicial notice of the general practice
adopted in several government and private institutions and industries of hiring
independent contractors to perform special services. These services range from
janitorial, security and even technical or other specific services such as those
performed by petitioners Neri and Cabelin. While these services may be considered
directly related to the principal business of the employer, nevertheless, they are not
necessary in the conduct of the principal business of the employer.

On June 18, 1993, during the pendency of the appeal, Prime paid private
respondent the amount of P24,480.00 as separation pay in lieu of reinstatement. This
was in partial satisfaction of the judgment rendered by the Labor Arbiter. Private
respondent, for his part, waived his right to be reinstated to his former position in
Prime and/or PCI-AC. Accordingly, Prime and private respondent executed and filed
before the office of the Labor Arbiter a document entitled Partial Satisfaction of
Judgment and Waiver of Right.
On December 29, 1993, public respondent NLRC affirmed the Decision of the
Labor Arbiter, but deleted the award of moral and exemplary damages and attorneys
fees.
PCI-AC filed the present petition on the following ground:
. . . the public respondent acted with grave abuse of discretion amounting to lack of
jurisdiction when it disregarded the substantial evidence in this case clearly showing
that private respondent was not illegally dismissed by petitioner

Petitioner contends that private respondent, being a project employee, was

validly dismissed when the project for which he was hired was completed on March
15, 1991. Petitioner avers that the 4th GL Environment Conversion Project involved a
phase-by-phase conversion of PCIBs computer system. Private respondent was
assigned to work as data encoder in the Consolidated Financing System/Budget
Monitoring phase of the said computer conversion project. Allegedly, this phase was
completed on March 15, 1991. Petitioner makes the submission that the completion of
the work therein terminated further need for private respondents services.
The public respondent, however, held otherwise after assessing the evidence on
record. It affirmed the findings of the Labor Arbiter, thus:

Going now to the second point of inquiry, which is the completion or non-completion
of the 4GL conversion system project, the testimony of Danilo Calauag, the assistant
vice-president and manager of International Operations of Prime Manpower is most
explicit. He testified on July 22, 1992.
CHRISTIAN K. AYUNGO
LLB-2B

PCI AUTOMATION CENTER, INC, vs. NLRC

[G.R. No. 115920. January 29, 1996]

Facts:
posited by respondents. There was therefore no reason for complainants dismissal on
March 15, 1991 on the pretended ground which is completion of the project.
We find no valid reason to disturb public respondents findings. No less than the
assistant vice-president and manager for International Operations of Prime testified
that the project for which private respondent was hired was still existing at the time
of his dismissal. It is settled that factual findings of quasi-judicial agencies like the
Labor Arbiter and the NLRC are generally accorded not only respect but even finality
if such findings are supported by substantial evidence.
The petitioner also faults the public respondent in affirming the disposition of the
Labor Arbiter holding it solidarily liable with Prime for all the monetary claims of
private respondent. It insists that it is not an employer of private respondent. It
contends that private respondent is an employee of Prime and he was merely assigned
by Prime to the petitioner to work on the 4th GL Environment Conversion Project of
PCIB.
We are not persuaded.
The petitioner, through PCIB, contracted Prime to provide it with qualified
personnel to work on the computer conversion project of PCIB. The External Job
Contract between Prime and PCIB must be read in conjunction with the Computer
Services Agreement between PCIB and the petitioner. Under the Computer Services
Agreement, the petitioner shall direct and supervise the computer conversion project
of PCIB while PCIB shall provide the petitioner with data encoders and computer
attendants to work on the project. Pursuant to said Agreement, PCIB called on Prime
to furnish the petitioner with the needed personnel, one of whom was private
respondent. Hence, although the parties in the External Job Contract are only Prime
and PCIB, the legal consequences of such contract must also be made to apply to the
petitioner. Under the circumstances, PCIB merely acted as a conduit between the
petitioner and Prime.The project was under the management and supervision of the
petitioner and it was the petitioner which exercised control over the persons working
on the project.

Issue:

weather or not public respondent did not commit grave abuse of discretion in
affirming the ruling of the Labor Arbiter adjudging the petitioner solidarily liable with
Prime for the payment of all the monetary claims of private respondent

Held:

No.the Court made the following distinction: "the legitimate job contractor provides
services while the labor-only contractor provides only manpower. The legitimate job
contractor undertakes to perform a specific job for the principal employer while the
labor-only contractor merely provides the personnel to work for the principal
employer."The services provided by employees of Digiserv are directly related to the
business of Digitel. It is undisputed that as early as March 1994, the affected
employees, except for two, were already performing their job as Traffic Operator
which was later renamed as Customer Service Representative (CSR). It is equally
undisputed that all throughout their employment, their function as CSR remains the
same until they were terminated effective May 30, 2005. Their long period of
employment as such is an indication that their job is directly related to the main
business of DIGITEL which is telecommunications. Furthermore, Digiserv does not
exercise control over the affected employees. Digiserv shared the same Human
Resources, Accounting, Audit and Legal Departments with Digitel which manifested
that it was Digitel who exercised control over the performance of the affected
employees. The NLRC also relied on the letters of commendation, plaques of
appreciation and certification issued by Digitel to the Customer Service
Representatives as evidence of control. Considering that Digiserv has been found to be
engaged in labor-only contracting, the dismissed employees aredeemed employees of
Digitel.
CHRISTIAN K. AYUNGO
LLB-2B

Filipinas Synthetic Fiber Corporation vs. NLRC, et al.

[257 SCRA 336 June 14, 1996]

Facts:

On 4 April 1991 FILSYN, a domestic corporation engaged in the manufacture of

polyester fiber, contracted with De Lima Trading andGeneral Services (DE LIMA) for
the performance of specific janitorial services Pursuant to the agreement Felipe
Loterte, among others, wasdeployed at
FILSY

to take care of the plants and maintain general cleanliness around the premises.On 24
February 1992 Loterte sued FILSYN and DE LIMA as alternative defendants for illegal
dismissal, underpayment of wages,non-payment of legal holiday pay, service incentive
leave pay and 13th month pay alleging that he was first assigned to perform janitorial
work atFILSYN in 1981 by the La Saga General Services; that the La Saga was changed
to DE LIMA on August 1991; that when a movement todemand increased wages and
13th month pay arose among the workers on December 1991 he was accused by a
certain Dodie La Flores of havingposted in the bulletin board at FILSYN an article
attributing to management a secret understanding to block the demand; and, for
denyingresponsibility, his gate pass was unceremoniously cancelled on 6 February
1992 and he was subsequently dismissed

Loterte was classified by the Labor Arbiter as a regular employee on the ground that
he performed tasks usually necessary or desirablein the main business of FILSYN for
more than ten (10) years or since 1981. FILSYN was declared to be the real employer
of Loterte and DELIMA as a mere labor contractor. Hence, FILSYN was adjudged liable
for Loterte's reinstatement, payment of salary differentials and back wages and other
benefits. Hence, this petition for certiorari by FILSYN.

Issue:
Whether or not there exists an employer-employee relationship between FILSYN and
private respondent Felipe Loterte.

Held:

DE LIMA is an independent job contractor, therefore no direct employer-employee

relationship exists between petitioner FILSYN andprivate respondent Felipe Loterte.
The relationship between petitioner Filipinas Synthetic Fiber Corporation (FILSYN) and
private respondent DeLima Trading and General Services (DE LIMA) is one of job-
contractorship.

Under the Labor Code, two (2) elements must exist for a finding of labor-only
contracting: (a) the person supplying workers to anemployer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises,
among others, and (b) theworkers recruited and placed by such persons
are performing activities directly related to the principal business of such employer.
CHRISTIAN K. AYUNGO
LLB-2B

DBP vs NLRC (1995) G.R. 108031

Facts:

In September 1983, petitioner Development Bank of the Philippines, as mortgagee of

TPWII, foreclosed its plant facilities and equipment. Nevertheless, TPWII continued its
business operations interrupted only by brief shutdowns for the purpose of servicing
its plant facilities and equipment. In January 1986 petitioner took possession of the
foreclosed properties. From then on the company ceased its operations. As a
consequence private respondent Leonor A. Ang was on 15 April 1986 verbally
terminated from the service.

After hearing on a complaint for separation pay, 13th month pay, vacation and sick
leave pay, salaries and allowances against TPWII, its General Manager, and petitioner,
the Labor Arbiter found TPWII primarily liable to private respondent but only for her
separation pay and vacation and sick leave pay because her claims for unpaid wages
and 13th month pay were later paid after the complaint was filed. The General
Manager was absolved of any liability. But with respect to petitioner, it was held
subsidiarily liable in the event the company failed to satisfy the judgment. The Labor
Arbiter rationalized that the right of an employee to be paid benefits due him from
the properties of his employer is superior to the right of the latter's mortgagee, citing
this Court's resolution in PNB v. Delta Motor Workers Union.

On 16 November 1992 public respondent National Labor Relations Commission

affirmed the ruling of the Labor Arbiter.Petitioner argues that the decision of public
respondent runs counter to the consistent rulings of this Court in a long line of cases
emphasizing that the applicant of Art. 110 of the Labor Code is contingent upon the
institution of bankruptcy or judicial liquidation proceedings against the employer.

Issue:

Whether or not Art. 110 of the Labor Code, as amended, which refers to worker
preference in case of bankruptcy or liquidation of an employer's business, is
applicable to the present case notwithstanding the absence of any formal declaration
of bankruptcy or judicial liquidation of TPWII.
Held:

Article 110 is applicable NOT applicable in the absence of any formal declaration of
bankruptcy or judicial liquidation of TPWII.We hold that public respondent gravely
abused its discretion in affirming the decision of the Labor Arbiter. Art. 110 should not
be treated apart from other laws but applied in conjunction with the pertinent
provisions of the Civil Code and the Insolvency Law to the extent that piece-meal
distribution of the assets of the debtor is avoided. Art. 110, then prevailing, provides:

ARTICLE 110. 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 to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may
establish any claim to a share in the assets of the employer.

Complementing Art. 110, Sec. 10, Rule VIII, Book III, of the Revised Rules and
Regulations Implementing the Labor Code provides:

SECTION 10. Payment of wages in case of bankruptcy. Unpaid wages earned

by the employees before the declaration of bankruptcy or judicial liquidation
of the employer's business shall be given first preference and shall be paid in
full before other creditors may establish any claim to a share in the assets of
the employer.

We interpreted this provision in Development Bank of the Philippines v. Santos

to mean that

. . . 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 rationale is that to hold Art. 110 to be applicable also to extrajudicial

proceedings would be putting the worker in a better position than the State which
could only assert its own prior preference in case of a judicial proceeding. Art. 110,
which was amended by R.A. 6715 effective 21 March 1989, now reads:

ARTICLE 110. 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 their unpaid wages and other monetary claims, any
provision of law to the contrary notwithstanding. Such unpaid wages and
 monetary claims shall be paid in full before the claims of the Government and
other creditors may be paid.

Obviously, the amendment 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. The Rules and Regulations Implementing
R.A. 6715, approved 24 May 1989, also amended the corresponding implementing
rule, and now reads:

SECTION 10. Payment of wages and other monetary claims in case of

bankruptcy. In case of bankruptcy or liquidation of the employer's business,
the unpaid wages and other monetary claims of the employees shall be given
first preference and shall be paid in full before the claims of government and
other creditors may be paid.

Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been
notably eliminated, still in Development Bank of the Philippines v. NLRC , 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 effect, we reiterated our previous interpretation in
Development Bank of the Philippines v. Santos where we said:

It (worker preference) 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 preferences 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. Thereby, an orderly determination of preference of creditors'
claims is assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2, 1983,
124 SCRA 476); the adjudication made will be binding on all parties-in-interest since
those proceedings are proceedings in rem; and the legal scheme of classification,
concurrence and preference of credits in the Civil Code, the Insolvency Law, and the
Labor Code is preserved in harmony.