1

Gaa vs Court of Appeals (1985) 140 SCRA 304

Facts:
It appears that respondent Europhil Industries Corporation was formerly one of the tenants in
Trinity Building at T.M. Kalaw Street, Manila, while petitioner Gaa was then the building
administrator.
On December 12, 1973, Europhil commenced an action in CFI Manila for damages against
petitioner for having perpetrated certain acts that Europhil considered a trespass upon its
rights, namely, cutting of its electricity, and removing its name from the building directory and
gate passes of its officials and employees",
On June 28, 1974, said court rendered judgment in favor of respondent Europhil, ordering petitioner to
pay the former the sum of P10,000.00 as actual damages, P5,000.00 as moral damages, P5,000.00 as
exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment was issued pursuant to which
Deputy
Sheriff Roxas on August 1, 1975 served a Notice of Garnishment upon El Grande Hotel, where
petitioner was then employed, garnishing her "salary, commission and/or remuneration."
Petitioner then filed with the CIF of Manila a motion to lift said garnishment on the ground that her
salaries, commission and or remuneration" are exempted from execution under Article 1708 of the New Civil
Code.
Said motion was denied by the lower Court
CA dismissed the petition holding that petitioner is not a mere laborer as contemplated under
Article 1708 as the term laborer does not apply to one who holds a managerial or supervisory
position like that of petitioner, but only to those laborers occupying the lower strata.
Issue: WON the Petitioner is covered by Article 1708 of the New Civil Code.
RULING: Petitioner is not covered by Article 1708 since she does not fall within the criteria of
laborer.
Article 1708 of the Civil Code provides: The laborer's wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical attendance."
It is beyond dispute that petitioner is not an ordinary or rank and file laborer but a responsibly place
employee, of El Grande Hotel, responsible for planning, directing, controlling, and coordinating the
activities of all housekeeping personnel so as to ensure the cleanliness, maintenance and
orderliness of all guestrooms, function rooms, public areas, and the surroundings of the hotel.
Considering the importance of petitioner's function in El Grande Hotel, it is undeniable that petitioner
is occupying a position equivalent to that of a managerial or supervisory position. We do not think that the
legislature intended the exemption in Article 1708 of the New Civil Code to operate in favor of any but those
who are laboring men or women in the sense that their work is manual.
Persons belonging to this class usually look to the reward of a day's labor for immediate or present support, and such
persons are more in need of the exemption than any others. Petitioner is definitely not within that class.
Millares vs. National Labor Relations Commission, 305 SCRA 500 (1999)
Posted by Pius Morados on November 15, 2011
(Labor Standards wages, customary facilities)

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Facts: Article 97, par. (f), of the Labor Code defined wage as the remuneration or earnings,
however designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece, or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by
the employer to the employee.
116 employees of Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur
were terminated under a retrenchment program as a solution to a major financial setback. Aside
from their one month basic pay, petitioners believe that the allowances they allegedly regularly
received on a monthly basis should have also been included in the computation of their separation.
PICOP grants the following allowances:
Staff allowance/managers allowance to those who live in rented houses near the mill site which
ceases whenever a vacancy occurs in the companys free housing facilities.
Transportation allowance in the form of advances for actual transportation expenses subject to
liquidation is given to key officers and managers who use their own vehicles in the performance of
their duties. This privilege is discontinued when the conditions no longer obtain.
Bislig allowance is given to managers and officers on account of the hostile environment prevailing
therein. Once the recipient is transferred elsewhere, the allowance ceases.
Applying Art. 97, par (f) of the Labor Code which defines wage, the Executive Labor Arbiter opined
that the subject allowances, being customarily furnished by respondent PICOP and regularly
received by petitioners, formed part of the latters wage.
However, the NLRC decreed that the allowances did not form part of the salary base used in
computing separation pay since the same were contingency-based.
Issue: Whether or not the allowances in question are considered facilities customarily furnished.
Held: No. Customary is founded on long established and constant practice connoting regularity.
The receipt of allowance on a monthly basis does not ipso facto characterize it as regular and
forming part of salary because the nature of the grant is a factor worth considering.
The subject allowances were temporarily, not regularly received by petitioners because once the
conditions for the availment ceased to exist, the allowance reached the cutoff point. The petitioners
continuous enjoyment of the disputed allowances was based on contingencies the occurrence of
which wrote finis to such enjoyment.

Songco vs. NLRC [G.R. No. L-50999 March 23, 1990]

Facts: Zuellig (M) Inc. filed with the Department of Labor (Regional Office No. 4) a clearance to
terminate the services of petitioners Jose Songco, Romeo Cipres and Amancio Manuel due to
alleged financial losses. However, the petitioners argued that the company is not suffering any
losses and the real reason for their termination was their membership in the union. At the last
hearing of the case, the petitioner manifested that they no longer contesting their dismissal,
however, they argued that they should be granted a separation pay. Each of the petitioners was
receiving a monthly salary of P40, 000.00 plus commissions for every sale they made. Under the
CBA entered by the Zuellig Inc. and the petitioners, in Article XIV, Section 1(a), Any employee, who
is separated from employment due to old age, sickness, death or permanent lay-off not due to the
fault of said employee shall receive from the company a retirement gratuity in an amount equivalent
to one months salary per year of service. One month of salary as used in this paragraph shall be

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deemed equivalent to the salary at date of retirement; years of service shall be deemed equivalent to
total service credits, a fraction of at least six months being considered one year, including
probationary employment. Other basis for petitioners contention are Article 284 of the Labor Code
with regards to reduction of personnel and Sections 9(b) and 10 of Rule 1, Book VI of the Rules
Implementing the Labor Code. The Labor Arbiter rendered his decision directing the company to pay
the complainants separation pay equivalent to their one month salary (exclusive of commissions,
allowances, etc.) for every year of service that they have worked with the company. The petitioners
appealed to the NLRC but it was denied. Petitioner Romeo Cipres filed a Notice of Voluntary
Abandonment and Withdrawal of petition contending that he had received, to his full and complete
satisfaction, his separation pay. Hence, this petition.
Issue: Whether or not earned sales commissions and allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation pay.
Held: The petition is granted. Petitioners contention that in arriving at the correct and legal amount
of separation pay due to them, whether under the Labor Code or the CBA, their basic salary, earned
sales commissions and allowances should be added together. Insofar as whether the allowances
should be included in the monthly salary of petitioners for the purpose of computation of their
separation pay is concerned, this has been settled in the case of Santos vs. NLRC, 76721, in the
computation of backwages and separation pay, account must be taken not only of the basic salary of
petitioner but also of her transportation and emergency living allowances. In the issue of whether
commission should be included in the computation of their separation pay, it is proper to define first
commission. Blacks Law Dictionary defined commission as the recompensed, compensation or
reward of an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his transactions or on the profit to the principal. The
nature of the work of a salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that the commission are part of petitioners wage and salary. Some salesmen do
not receive any basic salary but depend on commission and allowances or commissions alone, are
part of petitioners wage and salary. Some salesman do not received any basic salary but depend on
commission and allowances or commissions alone, although an employer-employee relationship
exist. In Soriano v. NLRC, it is ruled then that, the commissions also claimed by petitioner (override
commission plus net deposit incentive) are not properly includible in such base figure since such
commissions must be earned by actual market transactions attributable to petitioner. Applying this by
analogy, since the commissions in the present case were earned by actual market transactions
attributable to petitioners, these should be included in their separation pay. In the computation
thereof, what should be taken into account is the average commissions earned during their last year
of employment.

PNB V PNB EMPLOYEES ASSOCIATION

NATURE
Appeal from decision of the Court of Industrial Relations (CIR)
FACTS
PNB and PNB Employees Association (PEMA) had a dispute regarding the proper computation of
overtime pay. PEMA wanted the cost of living allowance (granted in 1958) and longevity pay
(granted in 1961) to be included in the computation. PNB disagreed and the 2 parties later went
before the CIR to resolve the dispute.

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CIR decided in favor of PEMA and held that PNB should compute the overtime pay of its
employees on the basis of the sum total of the employees basic salary or wage plus cost of living
allowance and longevity pay. The CIR relied on the ruling in NAWASA v NAWASA Consolidated
Unions, which held that for purposes of computing overtime compensation, regular wage includes
all payments which the parties have agreed shall be received during the work week, including
differentiated payments for working at undesirable times, such as at night and the board and lodging
customarily furnished the employee. This prompted PNB to appeal, hence this case.
ISSUE
WON the cost of living allowance and longevity pay should be
included in the computation of overtime pay as held by the CIR

HELD
NO
Ratio Overtime pay is for extra effort beyond that
contemplated in the employment contract; additional pay given for any other purpose cannot be
included in the basis for the computation of overtime pay.
Absent a specific provision in the CBA, the bases for the
computation of overtime pay are 2 computations, namely:

1. WON the additional pay is for extra work done or service

rendered
2. WON the same is intended to be permanent and regular, not contingent nor temporary as a given
only to remedy a situation which can change any time.
Reasoning
Longevity pay cannot be included in the computation of
overtime pay for the very simple reason that the contrary is expressly stipulated in the CBA, which
constitutes the law between the parties.
As regards cost of living allowance, there is nothing in Commonwealth Act 444 [or the 8-hour
Labor Law, now Art. 87 Labor Code] that could justify PEMAs posture that it should be added to the
regular wage in computing overtime pay. C.A. 444 prescribes that overtime work shall be paid at the
same rate as their regular wages or salary, plus at least 25% additional. The law did not define what
is a regular wage or salary. What the law emphasized is that in addition to regular wage, there must
be paid an additional 25% of that regular wage to constitute overtime rate of pay. Parties were thus
allowed to agree on what shall be mutually considered regular pay from or upon which a 25%
premium shall be based and added to makeup overtime compensation.
No rule of universal application to other cases may be justifiably extracted from the NAWASA case.
CIR relies on the part of the NAWASA decision where the SC cited American decisions whose

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legislation on overtime is at variance with the law in this jurisdiction. The US legislation considers
work in excess of forty hours a week as overtime; whereas, what is
generally considered overtime in the Philippines is work in
excess of the regular 8 hours a day. It is understandably
material to refer to precedents in the US for purposes of computing weekly wages under a 40-hour
week rule, since the particular issue involved in NAWASA is the conversion of prior weekly regular
earnings into daily rates without allowing diminution or addition.
To apply the NAWASA computation would require a different formula for each and every employee.
It would require reference to and continued use of individual earnings in the past, thus multiplying
the administrative difficulties of the Company. It would be cumbersome and tedious a process to
compute overtime pay and this may again cause delays in payments, which in turn could lead to
serious disputes. To apply this mode of computation would retard and stifle the growth of unions
themselves as Companies would be irresistibly drawn into denying, new and additional fringe
benefits, if not those already existing, for fear of bloating their overhead expenses through overtime
which, by reason of being unfixed, becomes instead a veritable source of irritant in labor relations.
**Overtime Pay Rationale Why is a laborer or employee who works beyond the regular hours of work
entitled to extra compensation called, in this enlightened time, overtime pay?
Verily, there can be no other reason than that he is made to work longer than what is commensurate
with his agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is
supposed to do. When he thus spends additional time to his work, the effect upon him is multifaceted; he puts in more effort, physical and/or mental; he is delayed in going home to his family to
enjoy the comforts thereof; he might have no time for relaxation, amusement or sports; he might
miss important pre-arranged engagements; etc. It is thus the additional work, labor or service
employed and the adverse effects just mentioned of his longer stay in his place of work that justify
and are the real reasons for the extra compensation that is called overtime pay.
**Overtime Pay Definition The additional pay for service or
work rendered or performed in excess of 8 hours a day by employees or laborers in employment
covered by the 8 hour Labor Law [C.A. 444, now Art. 87 Labor Code] and not exempt from its
requirements. It is computed by multiplying the overtime hourly rate by the number of hours worked
in excess of eight.
Disposition decision appealed from is REVERSED.

ACIWU vs NLRC, 247 SCRA 256

Posted by Pius Morados on November 10, 2011
(Labor Standards Bus drivers and conductors on a purely commission basis are entitled to 13th
month pay)
Facts: Petitioner union complaint for payment of 13th month pay to the drivers and conductors of
respondent company, on the ground that although said drivers and conductors are compensated on
a purely commission basis as described in their CBA, they are automatically entitled to the basic
minimum pay mandated by law should said commission be less than their basic minimum for eight
(8) hours work.

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Respondent Vallacar Transit, Inc. contended that since said drivers are compensated on a purely
commission basis, they are not entitled to 13th month pay pursuant to the exempting provisions
enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the 13th Month Pay
Law. Section of Article XIV of the CBA expressly provides that drivers and conductors paid on a
purely commission are not legally entitled to 13th month pay. Said CBA, being the law between the
parties, must be respected.
Issue: WON the bus drivers and conductors of respondent Vallacar Transit, Inc. are entitled to 13th
month pay.
Held: Yes. For purposes of entitling rank and file employees a 13th month pay, it is immaterial
whether the employees concerned are paid a guaranteed wage plus commission or a commission
with guaranteed wage inasmuch as the bottom line is that they receive a guaranteed wage. Thus is
correctly construed in the MOLE Explanatory Bulletin No. 86-12.
The 13th month pay of bus drivers and conductors must be one-twelfth (1/12) of their total earnings
during the calendar year.

LMG vs.SEC. OF LABOR

G.R. No. 127422

April 17, 2001

FACTS: LMG Chemicals Corp, (petitioner) is a domestic corp engaged in the manufacture and sale
of various kinds of chemical substances, including aluminum sulfate which is essential in purifying
water, and technical grade sulfuric acid used in thermal power plants. Petitioner has three divisions,
namely: the Organic Division, Inorganic Division and the Pinamucan Bulk Carriers. There are two
unions within petitioners Inorganic Division. One union represents the daily paid employees and the
other union represents the monthly paid employees. Chemical Workers Union, respondent, is a duly
registered labor organization acting as the collective bargaining agent of all the daily paid employees
of petitioners Inorganic Division.
Sometime in December 1995, the petitioner and the respondent started negotiation for a new CBA
as their old CBA was about to expire. They were able to agree on the political provisions of the new
CBA, but no agreement was reached on the issue of wage increase. The economic issues were not
also settled.
With the CBA negotiations at a deadlock (StrikeSecretary assumed jurisdiction)
Secretary of Labor and Employment granted an increase of P140 (higher than the offer of petitionercompany of P135). Also, as to the effectivity of the new CBASec held:
3. Effectivity of the new CBA
Article 253-A of the Labor Code, as amended, provides that when no new CBA is signed during a
period of six months from the expiry date of the old CBA, the retroactivity period shall be according
to the parties agreement, Inasmuch as the parties could not agree on this issue and since this Office
has assumed jurisdiction, then this matter now lies at the discretion of the Secretary of labor and
Employment. Thus the new Collective Bargaining Agreement which the parties will sign pursuant to
this Order shall retroact to January 1, 1996.
petitioner contends that public respondent committed grave abuse of discretion when he ordered
that the new CBA which the parties will sign shall retroact to January 1, 1996
ISSUE: Whether or not the new CBA shall retroact?

HELD:
Petitioner insists that public respondents discretion on the issue of the date of the effectivity of the
new CBA is limited to either: (1) leaving the matter of the date of effectivity of the new CBA is limited
to either: (1) leaving the matter of the date of effectivity of the new CBA to the agreement of the
parties or (2) ordering that the terms of the new CBA be prospectively applied.
It must be emphasized that respondent Secretary assumed jurisdiction over the dispute because it is
impressed with national interest. As noted by the Secretary, the petitioner corp was then supplying
the sulfate requirements of MWSS as well as the sulfuric acid of NAPOCOR, and consequently, the
continuation of the strike would seriously affect the water supply of Metro Manila and the power
supply of the Luzon Grid. Such authority of the Secretary to assume jurisdiction carries with it the
power to determine the retroactivity of the parties CBA.
It is well settled in our jurisprudence that the authority of the Secretary of Labor to assume
jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry
indispensable to national interest includes and extends to all questions and controversies arising
therefrom. The power is plenary and discretionary in nature to enable him to effectively and
efficiently dispose of the primary dispute.
This Court held in St. Lukes Medical Center, Inc. vs. Torres:
Therefore in the absence of the specific provision of law prohibiting retroactivity of the effectivity of
the arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code,
such as herein involved, public respondent is deemed vested with plenary powers to determine the
effectivity thereof.
PETITION DENIED.

SPECIAL STEEL PRODUCTS, INC. v. VILLAREAL

Doctrine:
Article 116 of the Labor Code, as amended, provides:

ART. 116.Withholding of wages and kickbacks prohibited. It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages (and benefits) of a worker or
induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other
means whatsoever without the workers consent.

The above provision is clear and needs no further elucidation.Indeed, petitioner has no legal
authority to withhold respondents 13th month pay and other benefits.What an employee has worked
for, his employer must pay. Thus, an employer cannot simply refuse to pay the wages or benefits of

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its employee because he has either defaulted in paying a loan guaranteed by his employer; or
violated their memorandum of agreement; or failed to render an accounting of his employers
property.

Fast Facts:
Villareal (Assistant Sales Manager) and So (Salesman) were Special Steels EEs.
Case of Villareal:
May 1993 - Respondent obtained a car loan from the Bank of Commerce with Special Steel as
surety as shown by a continuing suretyship agreement and promissory note wherein they jointly and
severally agreed to pay the bank the monthly installments.
January 15, 1997 Villareal resigned and joined Hi-Grade Industrial and Technical Products, Inc. as
executive VP.
Case of So:
As reward for Sos outstanding sales performance, he was sponsored by Special Steel to attend a
training course in Austria, conducted by BOHLER, Special Steels principal company. When So
returned after nine months of training, he was directed to sign a memo which says that BOHLER
requires trainees to stay with Special Steel for 3 years after the training. Otherwise, he will have to
refund BOHLER $6k by way of set-off or compensation. 2 years and 4 months later, January 16,
1997, So resigned.

Immediately, Special Steel ordered So and Villareal to render an accounting of its various Christmas
giveaways they received. These were intended for distribution to petitioners customers.

In protest, the two demanded from Special Steel payment of their separation benefits, commissions,
vacation and sick leave benefits, and proportionate 13th month pay.But petitioner refused and
instead, withheld their 13th month pay and other benefits.

LA decided in favor of the two. NLRC affirmed.

Special Steel does not question the decision. What it contends is that it is witholding the wages and
benefits of the two as lien to protect its interest as a surety in Villareals car loan and for Sos training
expenses abroad.

CA held it could not withhold such wages and benefits. SC affirmed.

Regarding Villareals debt, Special Steel may only protect its right as surety by instituting an action to
demand a security. It may not take the law in its own hands.

As for Sos case, the CA held that he has already substantially complied with the 3-year requirement.
The SC also said that compensation cannot take place between So and Special Steel since they are
not the principal creditor and debtor each other. Sos creditor is BOHLER and not Special Steel.

MAYON HOTEL & RESTAURANT vs. ADANA

FACTS:
Petitioner Mayon Hotel & Restaurant (MHR) hired herein 16 respondents as employees in its
business in Legaspi City. Its operation was suspended on March 31, 1997 due to the expiration and
non-renewal of the lease contract for the space it rented. While waiting for the completion of the
construction of its new site, MHR continued its operation in another site with 9 of the 16 employees.
When the new site constructed and MHR resumed its business operation, none of the 16 employees
was recalled to work.
MHR alleged business losses as the reason for not reinstating the respondents. On various dates,
respondents filed complaints for underpayment of wages, money claims and illegal dismissal.
ISSUES:
1. Whether or not respondents were illegally dismissed by petitioner;
2. Whether or not respondents are entitled to their money claims due to underpayment of wages,
and nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift
differential pay.
HELD:
1. Illegal Dismissal: claim for separation pay
Since April 1997 until the time the Labor Arbiter rendered its decision in July 2000, or more than
three (3) years after the supposed temporary lay-off, the employment of all the respondents with
petitioner had ceased, notwithstanding that the new premises had been completed and the same
resumed its operation. This is clearly dismissal or the permanent severance or complete
separation of the worker from the service on the initiative of the employer regardless of the reasons
therefor.
Article 286 of the Labor Code is clear there is termination of employment when an otherwise bona
fide suspension of work exceeds six (6) months. The cessation of employment for more than six
months was patent and the employer has the burden of proving that the termination was for a just or
authorized cause.
While we recognize the right of the employer to terminate the services of an employee for a just or
authorized cause, the dismissal of employees must be made within the parameters of law and

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pursuant to the tenets of fair play. And in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just or authorized cause. Where there is no showing
of a clear, valid and legal cause for termination of employment, the law considers the case a matter
of illegal dismissal.
If doubts exist between the evidence presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter the employer must affirmatively show rationally
adequate evidence that the dismissal was for a justifiable cause. It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writing should be resolved in the former's favor. The policy is to
extend the doctrine to a greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum aid and protection of
labor.
2. Money claims
The Supreme Court reinstated the award of monetary claims granted by the Labor Arbiter.
The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of
respondents' minimum wage. As stated in the Labor Arbiter's decision.
Even granting that meals and snacks were provided and indeed constituted facilities, such facilities
could not be deducted without compliance with certain legal requirements. As stated in Mabeza v.
NLRC, the employer simply cannot deduct the value from the employee's wages without satisfying
the following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are
charged at fair and reasonable value. The law is clear that mere availment is not sufficient to allow
deductions from employees' wages.
As for petitioners repeated invocation of serious business losses, suffice to say that this is not a
defense to payment of labor standard benefits. The employer cannot exempt himself from liability to
pay minimum wages because of poor financial condition of the company. The payment of minimum
wages is not dependent on the employer's ability to pay.
SALARY-CEILING METHOD

EMPLOYERS CONFEDERATION vs. NWPC

FACTS

On October 15, 1990, the Regional Board of NCR issued Wage Order No. NCR-01, increasing
the minimum wage by P17 daily.
The Trade Union Congress of the Philippines (TUCP) and Personnel Management Association
of the Philippines (PMAP) moved for reconsideration. Petitioner Employers Confederation of the
Philippines (ECOP) opposed.
Board then issued Wage Order No. NCR-01-A, amending the wage order by stating that all
workers and employees in the private sector already receiving wages above the statutory
minimum wage rates up to P125 per day shall also receive the P17 daily increase.
Petitioner ECOP appealed to respondent National Wages and Productivity Commission
(NWPC).
NWPC: Appeal dismissed for lack of merit.
Motion for reconsideration denied. Hence, this petition.

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ISSUE:
Whether or not respondent NWPC committed grave abuse of discretion. NO.
REASONING:
Petitioner says

Wage Order No. NCR-01-A is an excess of authority as under RA 6727, the boards may only
prescribe minimum wages, not determine salary ceilings.
RA 6727 is meant to promote collective bargaining as the primary mode of settling wages, so
boards cannot preempt CBAs by establishing ceilings
Boards may only adjust floor wages

Solicitor-General (for NWPC) comments

The across-the-board hike did not grant additional or other benefits to workers and
employees, but rather fixed minimum wages according to the salary-ceiling method
RA 6727 is to correct wage distortions and the salary-ceiling method does just that

Court rules
The Court is inclined to agree with the Government.
The NWPC noted that the determination of wages involved 2 methods: the floor-wage method and
the salary-ceiling method.

Floor-wage method- involves the fixing of a determinate amount that would be added to the
prevailing statutory minimum wage
-adopted in earlier wage orders

Salary-ceiling method- wage adjustment is applied to employees receiving a certain denominated

salary ceiling
-used in RAs 6640 and 6727 as well as 11 COLA issuances

The shift is due to the labor disputes arising from wage distortions.
RA 6727 was intended to rationalize wages.
This is done by:

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1. providing full-time boards to police wages round-the-clock
2. giving the boards enough power to achieve this objective
SO, if RA 6727 only intended boards to set floor wages only, the Act would not need a board but only
an accountant to keep track of the latest consumer price index or have Congress do it when the
need arises.

The Board did not perform an unlawful act of legislation.

Congress may delegate he power to fix rates, provided that it leaves sufficient standards. RA 6727
gave statutory standards for fixing the minimum wage.

ART. 124. Standards/Criteria for Minimum Wage Fixing The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general well-being
of the employees within the framework of the national economic and social development program. In
the determination of such regional minimum wages, the Regional Board shall, among other relevant
factors, consider the following:
(a)

The demand for living wages;

(b)

Wage adjustment vis-a-vis the consumer price index;

(c)

The cost of living and changes or increases therein;

(d)

The needs of workers and their families;

(e)

The need to induce industries to invest in the countryside;

(f)

Improvements in standards of living;

(g)

The prevailing wage levels;

(h)

Fair return of the capital invested and capacity to pay of employers;

(i)

Effects of employment generation and family income; and

(j)
The equitable distribution of income and wealth along the imperatives of economic and
social development."
The wage order was not acted in excess of boards authority. The law gave reasonable limitations to
the delegated power of the board.

ECOP is of the mistaken impression that RA 6727 leaves labor and management alone to
decide wages.

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The Court does not believe RA 6727 is meant to deregulate the relation between labor and capital
for several reasons:
1. The Constitution calls upon the State to protect labor
2. The Constitution calls upon the State to intervene when the common goal so demands I
regulating property and property relations
3. The Charter urges Congress to diffuse the wealth of the nation and regulate the use of
property
4. The Charter recognizes the just share of labor in the fruits of production
5. Under the LC, the State shall regulate the relations between labor and management
6. Under RA 6727, the State is interested in seeing that workers receive fair and equitable
wages
7. The Constitution is primarily a document of Social Justice and has not fully embraced the
concept of laissez-faire
Court cannot give an Act a meaning that will conflict with these basic principles.

The concept of minimum wage is more than setting of a floor wage to upgrade existing wages as
ECOP believes.
Minimum wages underlies the rationales of RA 6727 and the Constitution.

The salary-cap method serves the purposes of RA 6727. Whether or not it is a permanent policy of
the Board s a question we may only speculate. At the moment, it is a reasonable policy.
Dispositive: Petition denied.

PRUBANKE`RS ASSOCIATION vs.PRUDENTIAL BANK

FACTS: The Regional Tripartite Wages and Productivity Board (RTWPB) Region V issued Wage
Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to workers in the private
sector who had rendered service for at least three (3) months before its effectivity, and for the same
period thereafter. RTWPB Region VII however followed suit but the COLA amounts in other cities
nationwide were different from that issued by RTWPN region V. This caused Prubankers Association
to write the petitioner requesting that the Labor Management Committee be immediately convened
to discuss and resolve the alleged wage distortion created in the salary structure upon the
implementation of the said wage orders. As the grievance could not be settled in the meetings, the
parties agreed to submit the matter to voluntary arbitration.
Respondent brought the case to appeal and was favored by CA, petitioner then sought the review by
SC. It argued that a wage distortion exists, because the implementation of the two Wage Orders has
resulted in the discrepancy in the compensation of employees of similar pay classification in different
regions.
ISSUE: WON two wage orders resulting in the discrepancy of employees compensation in different
regions also results to a wage distortion.

14
HELD: No.
There is no wage distortion since the wage order implementation covers all the branches of the
bank. The hierarchy of positions was still preserved.
Also, petitioners claim of wage distortion must also be denied for one other reason. The difference
in wages between employees in the same pay scale in different regions is not the mischief sought to
be banished by the law. Republic Act No. 6727 (the Wage Rationalization Act), recognizes existing
regional disparities in the cost of living as provided in Section 2 of said law.

***Notes: The levels of different pay classes was not eliminated. The statutory definition of wage
distortion is found in Article 124 of the Labor Code, as amended by Republic Act No. 6727, which
reads: Standards/Criteria for Minimum Wage Fixing. As used herein, a wage distortion shall mean
a situation where an increase in prescribed wage results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based
on skills, length of service, or other logical bases of differentiation. Wage distortion involves four
elements: (1) An existing hierarchy of positions with corresponding salary rates; (2) A significant
change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a
higher one; (3)The elimination of the distinction between the two levels and (4) The existence of the
distortion in the same region of the country.
A disparity in wages between employees holding similar positions but in different regions does not
constitute wage distortion as contemplated by law. As stated, it is the hierarchy of positions and the
disparity of their corresponding wages and other emoluments that are sought to be preserved by the
concept of wage distortion.

BANKARD EMPLOYEES vs.NLRC

FACTS: Bankard, Inc. classifies its employees according to level: Level I, Level II, Level III, Level IV
and Level V (See Note #1 for corresponding salary rates). On May 28, 1993, the directors of
respondent Bankard, Inc. approved a new salary scale for the purpose of making its hiring rate
competitive in the labor market. The new salary scale increased the hiring rates of new employees,
to wit: Levels I and V were increased by P1,000.00 while Levels II, III and IV were increased by
P900.00 (see Note # 1). The salaries of employees who fell below the new minimum rates were also
adjusted accordingly to reach such rates under their levels. As a result, Bankard Employees UnionWorkers Alliance Trade Unions (Bankard Union) demanded for salary increase of its old, regular
employees. Bankard refused on the ground that it had no obligation to grant all its employees the
same increase. Bankard Union filed a Notice of Strike on the ground of discrimination and other acts
of Unfair Labor Practice. This was initially treated as a preventive mediation case on the ground that
the issues raised were not strikable. Upon the second notice of strike, the dispute was certified for
compulsory arbitration. The NLRC dismissed the case for lack of merit, finding no wage distortion.
The CA denied the same for lack of merit. Hence, this petition.
ISSUE:
Whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring
rates of new employees without increasing the salary rates of old employees resulted in wage
distortion within the contemplation of Article 124 of the Labor Code.

15

RULING:
No. The Court held that wage distortion does not exist in this case as all the elements were not met.
There are four elements of wage distortion (See note #2), namely: (1) An existing hierarchy of
positions with corresponding salary rates, (2) a significant change in the salary rate of a lower pay
class without a concomitant increase in the salary rate of a higher one, (3) the elimination of the
distinction between the two levels and (4) the existence of the distortion in the same region of the
country. In a problem dealing with "wage distortion," the basic assumption is that there exists a
grouping or classification of employees that establishes distinctions among them on some relevant
or legitimate bases. Various factors such as the degrees of responsibility, the skills and knowledge
required, the complexity of the job, or other logical basis of differentiation are involved in such
classifications.
According to the NLRC, to determine the existence of wage distortion, the "historical" classification
of the employees prior to the wage increase must be established. In this case, the employees of
Bankard have been historically classified into levels (I-V), and not on the basis of their length of
service. New employees are automatically placed under any of these levels upon their entry. This is
the wage structure formulated by Bankard, a recognized management prerogative which Bankard
Union may not encroach upon by creating their own independent classification (ie, based on newly
hired and old employees) to use as a basis for demanding an across-the-board salary increase.
According to established jurisprudence, the formulation of a wage structure through the classification
of employees is a matter of management judgment and discretion.
Based on the wage structure, there is no hierarchy of positions between the newly hired and regular
employees of Bankard since it is a structure which is based on level, not seniority. The first element
of wage distortion is therefore lacking.
Second, the third element of wage distortion ie the elimination of the distinction between the two
levels, is also missing. Even if there was indeed a resulting decrease in the wage gap between the
salary of the old and new employees, the gap was held to be insignificant as to result in severe
contraction of the intentional quantitave differences in the salary rates between the employee group
as the classification under the wage structure is based on rank, and not seniority.
Third, pursuant to Article 124 of the Labor Code, Bankard cannot be legally obligated to correct the
alleged wage distortion, should it have existed in this case, because the increase in the wages and
salaries of the newly-hired was not due to a prescribed law or wage order. (See Note #3) The
fixing of hiring rates which resulted to wage increases was a voluntary and unilateral increase made
by Bankard. The Court held that Article 124 is to be construed in relation to minimum wage fixing, the
intention of the law being that in case of an increase in minimum wage, the distinctions in the wage
structure will be preserved. The case of Metro Transit Organization Inc. v. NLRC (See Note #4) is not
applicable in this case as in the former, there was no CBA but instead, an existing company practice
"that whenever rank-and-file employees were paid a statutorily mandated salary increase,
supervisory employees were, as a matter of practice, also paid the same amount plus an added
premium. The mere existence of a wage distortion does not ipso facto result to an obligation to
rectify it, absent a law or other source of obligation which requires its rectification. Furthermore,
Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and to
adjust the rates of employees affected thereby is embodied under the parties CBA (See Note #5).
The CBA is a valid and legally enforceable source of rights between the parties and as such, will not
be interfered with by the Courts absent any bad faith on the part of the employer.

DBP vs. NLRC

16
Development Bank of the Philippines vs. NLRC and Malayang Samahan ng mga Manggagawa sa
Atlas Textile Development Corporation
January 19, 1994
Short version: When ATLAS mortgaged properties were foreclosed, ATLAS workers filed a claim for
unpaid wages etc. pursuant to Article 110 of the Labor Code. Court said that workers claims do not
create a lien on employers properties. Principles as to why are summarized at the end of the case.
FACTS
ATLAS, a textile firm, hypothecated its certain assets to DBP. After ATLAS defaulted in its
obligations, DBP foreclosed on the mortgage in March 1985. The latter acquired the mortgaged
assets by virtue of the foreclosure sale.
Malayang Samahan filed a claim with the Labor Arbiter for wage differentials, illegal salary
deduction, separation pay and similar money claims against ATL AS and DBP. The LAbor Arbiter
ruled in favour of Malayang Samahan and held ATLAS and DBP liable to pay the workers claims.
NLRC sustained the decision upon appeal.
DBP filed the present petition, contending that it was error on the NLRCs part to consider the
workers preference under Article 110 of the Labor Code over that of DBPs mortgage lien.
ISSUE: Whether the claims of Malayang Samahan should be preferred over that of DBPs mortgage
lien (NO)
REASONING
Republic vs. Peralta: Article 110 of the Labor Code does not purport to create a lien in favour of
workers or employees for unpaid wages either upon all of the properties or upon any particular
property owned by their employer.

Claims for unpaid wages does not therefore fall at all within the category of specially preferred
claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such
claims for unpaid wages are already covered by Article 2241, number 6: "claims for laborers' wages,
on the goods manufactured or the work done;" or by Article 2242, number 3: "claims of laborers and
other workers engaged in the construction, reconstruction or repair of buildings, canals and other
works upon said buildings, canals or other works."
To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242,
number 3, they would come within the ambit of the category of ordinary preferred credits under
Article 2244.
Applying Article 2241, number 6 to the instant (Peralta) case, the claims of the Unions for separation
pay of their members constitute liens attaching to the processed leaf tobacco, cigars and cigarettes
and other products produced or manufactured by Insolvent, but not to other assets owned by the
Insolvent. And even in respect of such tobacco and tobacco products produced by Insolvent, the
claims of the Unions may be given effect only after the Bureau of Internal Revenue's claim for unpaid

17
tobacco inspection fees shall have been satisfied out of the products so manufactured by the
Insolvent.
Article 110 of the Labor Code was later amended by RA 6715 which became effective on March 21,
1989.
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.
Effects of the amendment:
Development Bank of the Philippines vs. National Labor Relations Commission:
The amendment expands worker preference to cover not only unpaid wages but also other monetary
claims to which even claims of the Government must be deemed subordinate.
Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. Does
this mean then that liquidation proceedings have been done away with?
NO. Considerations:
1. Because of its impact on the entire system of credit, Article 110 of the labor Code cannot be
viewed in isolation but must be read in relation to the Civil Code scheme on classification and
preference of credits.
2. In the same way that the Civil Code provisions on classification of credits and the Insolvency Law
have been brought into harmony, so also must the kindered provisions of the Labor Law be made to
harmonize with those laws.

3. In the event of insolvency, a principal objective should be to effect an equitable distribution of the
insolvent's property among his creditors. To accomplish this there must first be some proceeding
where notice to all of the insolvent's creditors may be given and where the claims of preferred
creditors may be bindingly adjudicated.
4. A distinction should be made between a preference of credit and a lien. A preference applies only
to claims which do not attach to specific properties. A lien creates a charge on a particular property.
The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a
lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their
favor, a preference in application. It is a method adopted to determine and specify the order in which
credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to
a first preference in the discharge of the funds of the judgment debtor.
6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean
"absolute preference," the same should be given only prospective effect in line with the cardinal rule
that laws have no retroactive effect, unless the contrary is provided (Article 4, Civil Code). Thereby,

18
any infringement on the constitutional guarantee on non-impairment of the obligation of contracts
(Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit
antedated by several years the amendatory law, RA No. 6715. To give Article 110 retroactive effect
would be to wipe out the mortgage in DBP's favor and expose it to a risk which is sought to protect
itself against by requiring a collateral in the form of real property.
In fine, the right of 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 preferences determined in the course of judicial proceedings which have for their
object the subjection of the property of the debtor of the payment of his debts and other lawful
obligations. Thereby, an orderly determination of preference of creditors' claims is assured; the
adjudication made will be binding on all parties-in-interest, since those proceedings are
proceeding 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.
The case at bench concerns monetary claims of workers that are not involved in judicial
proceedings in rem in adjudication of claims of creditors vis-a-vis the assets of the debtor, nor have
such claims accrued after the effectivity of Republic Act 6715.
To recapitulate.
(1) Article 110 of the Labor Code, as amended, must be viewed and read in conjunction with the
provisions of the Civil Code on concurrence and preferences of credits;
(2) The aforesaid provisions of the Civil Code, including Article 110 of the Labor Code, require
judicial proceedings in rem in adjudication of creditors' claims against the debtor's assets to
become operative;

(3) RA 6715 has the effect of expanding the "worker preference" to cover not only unpaid wages
but also other monetary claims of laborers, to which even claims of the Government must be
deemed subordinate; and
(4) The amendatory provisions of R 6715, which took effect on March 21, 1989, should only be
given prospective application.
Petition GRANTED. The assailed decision of public respondent, National Labor Relations
Commission and that of the Labor Arbiter, insofar as the latter holds the petitioner liable for monetary
claims of private respondents, are hereby REVERSED and SET ASIDE.

DBP vs NLRC (1995) G.R. 108031

Facts:

19
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.

20
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.
In ruling, as we did, in Development Bank of the Philippines v. Santos, we took into account the
following pronouncements:In the event of insolvency, a principal objective should be to effect an

21
equitable distribution of the insolvent's property among his creditors. To accomplish this there must
first be some proceeding where notice to all of the insolvent's creditors may be given and where the
claims of preferred creditors may be bindingly adjudicated. The rationale therefore has been
expressed in the recent case of DBP v. Secretary of Labor (G.R. No. 79351, 28 November 1989),
which we quote:
A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied
first ahead of other claims which may be established against the debtor. Logically, it becomes
material only when the properties and assets of the debtors are insufficient to pay his debts in full;
for if the debtor is amply able to pay his various creditors in full, how can the necessity exist to
determine which of his creditors shall be paid first or whether they shall be paid out of the proceeds
of the sale (of) the debtor's specific property. Indubitably, the preferential right of credit attains
significance only after the properties of the debtor have been inventoried and liquidated, and the
claims held by his various creditors have been established.
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.The additional ratiocination of
public respondent that "under Article 110 of the Labor Code complainant enjoys a preference of
credit over the properties of TPWII being held in possession by DBP," is a dismal misconception of
the nature of preference of credit, a subject matter which we have already discussed in clear and
simple terms and even distinguished from a lien in Development Bank of the Philippines v. NLRC:
. . . A preference applies only to claims which do not attach to specific properties. A lien creates a
charge on a particular property. The right of first preference as regards unpaid wages recognized by
Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is
but a preference of credit in their favor, a preference in application. It is a method adopted to
determine and specify the order in which credits should be paid in the final distribution of the
proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of
the judgment debtor. . . . In the words of Republic v. Peralta, supra: 'Article 110 of the Labor Code
does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of
the properties or upon any particular property owned by their employer. Claims for unpaid wages do
not therefore fall at all within the category of specially preferred claims established under Articles
2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages are already
covered by Article 2241, number 6: 'claims for laborers' wages, on the goods manufactured or the
work done'; or by Article 2242, number 3: 'claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and other works, upon said buildings,
canals and other works. . . . To the extent that claims for unpaid wages fall outside the scope of
Article 2241, number 6, and 2242, number 3, they would come within the ambit of the category of
ordinary preferred credits under Article 2244.
The DBP anchors its claims on a mortgage credit. A mortgage directly and immediately subjects the
property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation
for whose security it was constituted (Article 2176, Civil Code). It creates a real right which is
enforceable against the whole world. It is a lien on an identified immovable property, which a
preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of
the Civil Code on classification of credits. The preference given by Article 110, when not falling within
Article 2241 (6) and Article 2242 (3) of the Civil Code and not attached to any specific property, is an

22
ordinary preferred credit although its impact is to move it from second priority to first priority in order
of preference established by Article 2244 of the Civil Code.
The present controversy could have been easily settled by public respondent had it referred to
ample jurisprudence which already provides the solution. Stare decisis et non quieta movere. Once
a case is decided by this Court as the final arbiter of any justiciable controversy one way, then
another case involving exactly the same point at issue should be decided in the same manner.
Public respondent had no choice on the matter. It could not have ruled any other way. This Court
having spoken in a string of cases against public respondent, its duty is simply to obey judicial
precedents. Any further disregard, if not defiance, of our rulings will be considered a ground to hold
public respondent in contempt.