Rubberworld (Phils.), Inc., or Julie Yap Ong vs. National Labor Relations Commission, et al.

Upon the appointment by the SEC of a management committee or rehabilitation receiver pursuant to P.D. 902-A, all actions for claims against the corporation — including labor claims pending before the NLRC — are ipso jure suspended; the law makes no exception in favor of labor claims.

Rubberworld (Phils.), Inc. was a domestic corporation engaged in the manufacture of footwear, bags, and garments, while the private respondents claimed to be its employees. The dispute implicated the interplay between Presidential Decree 902-A — which empowers the Securities and Exchange Commission to appoint a management committee or rehabilitation receiver and to suspend actions for claims against corporations under such management or receivership — and the Labor Code's grant of jurisdiction to Labor Arbiters and the NLRC over labor disputes, together with the workers' preferential right under Article 110 of the Labor Code.

Rubberworld (Phils.), Inc. was a domestic corporation engaged in the manufacture of footwear, bags, and garments. On November 24, 1994, it filed with the Securities and Exchange Commission a petition for suspension of payments, praying that it be declared in a state of suspension of payments and that the SEC issue an order restraining its creditors from enforcing their claims against the corporation. It further prayed for the creation of a management committee and for the approval of a proposed rehabilitation plan and memorandum of agreement between the corporation and its creditors.

In an order dated December 28, 1994, the SEC granted the petition. With the creation of the Management Committee, all actions for claims against Rubberworld pending before any court, tribunal, office, board, body, Commission or Sheriff were deemed suspended, and all pending incidents for preliminary injunctions, writs of attachment, foreclosures and the like were rendered moot and academic.

Thereafter, from April to July 1995, the private respondents — who claimed to be employees of Rubberworld — filed their respective complaints against the petitioners for illegal dismissal, unfair labor practice, damages, and payment of separation pay, retirement benefits, 13th month pay, and service incentive pay. Petitioners moved to suspend the proceedings in the labor cases on the strength of the December 28, 1994 SEC Order, citing BF Homes vs. Court of Appeals, Alemar's Sibal & Sons, Inc. vs. Elbinias, and Bank of the Philippine Islands vs. Court of Appeals.

In an Order dated September 25, 1995, Labor Arbiter Voltaire A. Balitaan denied the motion, holding that the injunction contained in the SEC Order applied only to the enforcement of established rights and did not include the suspension of proceedings involving claims against petitioners which had yet to be ascertained. The Labor Arbiter further held that the SEC order suspending all actions for claims did not cover the private respondents' claims because those claims and the concomitant liability of petitioners still had to be determined, thus carrying no dissipation of the corporation's assets.

Petitioners appealed to the NLRC, which in a Resolution dated April 26, 1996 dismissed the appeal for lack of merit and sustained the Labor Arbiter's rulings. Petitioners' motion for reconsideration was denied in a Resolution dated June 20, 1996, prompting the filing of the present petition.

• Suspension of Proceedings: Petitioner moved to suspend the proceedings in the labor cases on the strength of the December 28, 1994 SEC Order, invoking BF Homes vs. Court of Appeals, Alemar's Sibal & Sons, Inc. vs. Elbinias, and Bank of the Philippine Islands vs. Court of Appeals.
• Grave Abuse of Discretion: Petitioner argued that the NLRC acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack of jurisdiction, in affirming the Labor Arbiter's order denying the motion to suspend proceedings despite the SEC Order under Sec. 6(c) of P.D. 902-A directing the suspension of all actions against a company under the first stages of insolvency proceedings.

• Automatic Stay Not Frustrated: The Solicitor General, representing public respondent NLRC, argued that the rationale for an automatic stay would not be frustrated even if the NLRC proceeded with the disposition of the labor cases, because any favorable ruling obtained by the private respondents would only establish their rights as creditors, and the private respondents would still present their claims before the management committee.
• NLRC Jurisdiction: The Solicitor General insisted that since Article 217 of the Labor Code vested the NLRC with jurisdiction to hear and decide the labor cases, the NLRC did not exceed its jurisdiction when it refused to suspend the proceedings.
• Article 110 Preference: The private respondents contended that the automatic stay under P.D. 902-A was not applicable, otherwise the preference granted to workers by Article 110 of the Labor Code would be rendered ineffective.
• Duration of the SEC Order: The private respondents posited that under Section 6 of the Insolvency Law, the December 28, 1994 SEC Order should have expired after three months in the absence of an agreement between the company and the corporate creditors, and accused the SEC of abusing its power by allowing the suspension order to remain pending for many years.

• Suspension of Proceedings: Whether the NLRC acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack of jurisdiction, in affirming the Labor Arbiter's order denying petitioners' motion to suspend proceedings despite the SEC Order under Sec. 6(c) of P.D. 902-A.
• Coverage of Labor Claims: Whether the automatic stay under P.D. 902-A extends to labor claims pending before the NLRC.
• Article 217 of the Labor Code: Whether Article 217 of the Labor Code, vesting jurisdiction in the NLRC, prevails over the suspension mandated by P.D. 902-A.
• Article 110 Preference: Whether the workers' preferential right under Article 110 of the Labor Code is applicable.
• Duration of the Automatic Stay: Whether the SEC suspension order expired after three months under Section 6 of the Insolvency Law.

• Suspension of Proceedings: Yes. The NLRC gravely abused its discretion in refusing to heed the SEC Order of Suspension; the petition is meritorious.
• Coverage of Labor Claims: Yes. All actions for claims are suspended, and no exception in favor of labor claims is mentioned in the law.
• Article 217 of the Labor Code: No. Article 217 must be construed in harmony with P.D. 902-A; the NLRC's authority is deemed suspended when P.D. 902-A is put into effect by the SEC.
• Article 110 Preference: No. The preference may be invoked only upon the institution of insolvency or judicial liquidation proceeding; the present case involves rehabilitation, not liquidation.
• Duration of the Automatic Stay: No. Neither P.D. 902-A nor the SEC Order provides a time limit; the suspensive effect remains in force as long as reasonably necessary.

• Suspension of Proceedings: P.D. 902-A, Sec. 6(c), provides that upon appointment of a management committee or rehabilitation receiver, all actions for claims against corporations under management or receivership pending before any court, tribunal, board or body shall be suspended. The justification for the automatic stay is to enable the management committee or rehabilitation receiver to effectively exercise its powers free from judicial or extra-judicial interference that might unduly hinder the rescue of the debtor company; to allow other actions to continue would add to the burden of the committee, whose time, effort, and resources would be wasted in defending claims instead of being directed toward restructuring and rehabilitation. The rehabilitation of a financially distressed corporation benefits its employees, creditors, stockholders, and the general public, and in considering rehabilitation the SEC gives preference to the interest of creditors, including employees.
• Coverage of Labor Claims: The law is clear that upon creation of a management committee or appointment of a rehabilitation receiver, all actions for claims shall be suspended accordingly, and no exception in favor of labor claims is mentioned. Since the law makes no distinction or exemptions, neither should the Court, pursuant to ubi lex non distinguit nec nos distinguere debemos. Allowing labor cases to proceed defeats the purpose of the automatic stay and encumbers the management committee's resources, and even if the NLRC awards the claims, its ruling could not be enforced as long as the corporation is under the management committee. Chua vs. National Labor Relations Commission held that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, since these claims would spawn needless controversy, delays, and confusion.
• Article 217 of the Labor Code: Article 217 of the Labor Code should be construed not in isolation but in harmony with P.D. 902-A, according to the basic rule in statutory construction that implied repeals are not favored, and each statute must be construed to avoid conflict with existing laws. While the NLRC has the power to hear and decide labor disputes, such authority is deemed suspended when P.D. 902-A is put into effect by the SEC.
• Article 110 Preference: The preferential right of workers and employees under Article 110 of the Labor Code may be invoked only upon the institution of insolvency or judicial liquidation proceeding; a declaration of bankruptcy or a judicial liquidation must be present before preferences over various money claims may be enforced. Debtors resort to preference of credit only when their assets are insufficient to pay their debts fully. The present case involves the rehabilitation, not the liquidation, of the petitioner-corporation, and the purpose of rehabilitation is precisely to enable the company to gain a new lease on life and allow creditors to be paid from its earnings; hence, the preference of credit under Article 110 is not applicable.
• Duration of the Automatic Stay: P.D. 902-A itself does not provide for the duration of the automatic stay, nor does the SEC Order. Hence, the suspensive effect has no time limit and remains in force as long as reasonably necessary to accomplish the purpose of the Order. The attack against the SEC's alleged abuse of power is misplaced, since what is under review in the Petition for Certiorari are the Resolutions of the NLRC, not of the SEC; the scope of review is limited to whether the NLRC gravely abused or exceeded its jurisdiction in refusing to heed the SEC Order of Suspension. The bare allegation of inaction is insufficient to condemn the SEC and the management committee where all affected parties, including the labor union in the company, are represented.

• Automatic Stay (Ipso Jure Suspension) under P.D. 902-A — Upon the appointment by the SEC of a management committee or rehabilitation receiver pursuant to P.D. 902-A, all actions for claims against the corporation pending before any court, tribunal, board or body are ipso jure suspended. The suspension is intended to give enough breathing space for the management committee or rehabilitation receiver to make the business viable again, without having to divert attention and resources to litigations in various fora. The Court applied this doctrine to hold that the NLRC's refusal to suspend the labor cases constituted grave abuse of discretion.
• Ubi Lex Non Distinguit Nec Nos Distinguere Debemos — Where the law makes no distinction or exemption, neither should the Court. Because P.D. 902-A mentions no exception in favor of labor claims, the Court refused to carve out such an exception.
• Harmonization of Statutes / Implied Repeals Not Favored — Every statute must be construed in a way that avoids conflict with existing laws, and implied repeals are not favored. Article 217 of the Labor Code was construed in harmony with P.D. 902-A, such that the NLRC's authority is deemed suspended when P.D. 902-A is put into effect by the SEC.
• Preference of Credit Requires Bankruptcy or Judicial Liquidation — The preferential right of workers and employees under Article 110 of the Labor Code may be invoked only upon the institution of insolvency or judicial liquidation proceeding; a declaration of bankruptcy or a judicial liquidation must be present before preferences over various money claims may be enforced. The doctrine was applied to hold Article 110 inapplicable to a rehabilitation proceeding.
• Duration of the Automatic Stay — P.D. 902-A provides no time limit for the automatic stay. The suspensive effect remains in force as long as reasonably necessary to accomplish the purpose of the SEC Order.

• "It is plain from the foregoing provisions of law that 'upon the appointment [by the SEC] of a management committee or a rehabilitation receiver,' all actions for claims against the corporation pending before any court, tribunal or board shall ipso jure be suspended." — States the ratio decidendi on the automatic and self-executing nature of the suspension under P.D. 902-A.
• "The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims for actions 'shall be suspended accordingly.' No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court." — The Court's canonical formulation that labor claims are covered by the suspension, applying ubi lex non distinguit nec nos distinguere debemos.
• "The preferential right of workers and employees under Article 110 of the Labor code may be invoked only upon the institution of insolvency or judicial liquidation proceeding." — Defines the condition precedent for invoking the workers' preference, distinguishing rehabilitation from liquidation.
• "Hence, the suspensive effect has no time limit and remains in force as long as reasonably necessary to accomplish the purpose of the Order." — Resolves the duration of the automatic stay in the absence of a statutory or SEC-imposed time limit.

• Ching vs. Land Bank of the Philippines, 201 SCRA 190 — Cited for the rule distinguishing the applicable law (P.D. 902-A versus the Insolvency Law) based on the nature of the petitioning corporation's assets and status.
• Barotac Mills, Inc. vs. Court of Appeals, 275 SCRA 497 — Cited for the rule that the suspension of actions upon appointment of a management committee or rehabilitation receiver is ipso jure.
• BF Homes, Incorporated vs. Court of Appeals, 190 SCRA 262 — Cited for the justification for the automatic stay and for the rule that the suspensive effect has no time limit and remains in force as long as reasonably necessary.
• Chua vs. National Labor Relations Commission, 190 SCRA 558 — Followed; held that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, since these claims would spawn needless controversy, delays, and confusion.
• Development Bank of the Philippines vs. Secretary of Labor, 179 SCRA 630 — Cited for the rule that a declaration of bankruptcy or judicial liquidation must be present before preferences over money claims may be enforced.
• Colgate Palmolive vs. Gimenez, 1 SCRA 267 — Cited for the maxim ubi lex non distinguit nec nos distinguere debemos.
• Sajonas vs. Court of Appeals, 258 SCRA 79 — Cited for the rule that every statute must be construed to avoid conflict with existing laws.
• Alemar's Sibal & Sons, Inc. vs. Elbinias, 186 SCRA 94 and Bank of the Philippine Islands vs. Court of Appeals, 229 SCRA 223 — Cited by petitioner in support of its motion to suspend the labor proceedings.

• Section 6(c), Presidential Decree 902-A (as amended) — Provides that upon appointment of a management committee, rehabilitation receiver, board or body, all actions for claims against corporations under management or receivership pending before any court, tribunal, board or body shall be suspended. This is the core provision applied to hold that the labor cases must be suspended.
• Section 5(d), Presidential Decree 902-A (as amended) — Confers on the SEC original and exclusive jurisdiction over petitions of corporations to be declared in a state of suspension of payments where the corporation possesses sufficient property to cover its debts but foresees impossibility of meeting them when due, or has insufficient assets but is under a rehabilitation receiver or management committee. Cited to establish that P.D. 902-A, not the Insolvency Law, governs the case.
• Article 217, Labor Code — Vests Labor Arbiters with original and exclusive jurisdiction over labor disputes and the NLRC with exclusive appellate jurisdiction. Construed in harmony with P.D. 902-A, such that the NLRC's authority is deemed suspended when P.D. 902-A is put into effect by the SEC.
• Article 110, Labor Code — Grants workers first preference as regards their wages and other monetary claims in the event of bankruptcy or liquidation of an employer's business. Held inapplicable because the case involves rehabilitation, not liquidation.
• Section 6, Insolvency Law (Act 1956) — Invoked by the private respondents to argue that the SEC suspension order should have expired after three months. The Court held that P.D. 902-A, not the Insolvency Law, governs, and that the automatic stay has no time limit.
• Rule 65, Rules of Court — The procedural basis for the Petition for Certiorari assailing the NLRC Resolutions.

Romero, Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.