DOJ Opinion No. 105, s. 1998

DOJ OPINION NO. 105 , s. 1998 August 31, 1998 MR. EDIJER A. MARTINEZ Associate Commissioner Securities and Exchange Commission SEC Building, EDSA, Greenhills Mandaluyong City Sir : This refers to your request for opinion on whether the provisions of Article 110 ( Workers preference in case of bankruptcy ) of P.D. No. 442, otherwise known as the Labor Code of the Philippines, as amended, shall still apply to pre-need companies. You likewise request information on the coverage of wages and monetary claims. dctai The question, it appears, came out in connection with a liquidation case pending before the Securities and Exchange Commission (SEC). You state that the SEC has initially directed a SEC-appointed liquidator that the pre-need company subjected to a liquidation order issued by the Commission may not be liable to pay separation pay to its employees. The Liquidation Order is issued upon recommendation of the Receiver that the company's financial condition is no longer viable to warrant further issuance of investment contracts/pre-need plans to the public, which is the main business of the company. With regret, we are unable to render the desired opinion on the subject matter/s adverted to above. The resolution of the query would involve an interpretation of the Labor Code of the Philippines, and therefore properly falls within the jurisdiction of the Department of Labor and Employment (DOLE). By settled practice and precedents, the Secretary of Justice has consistently refrained from ruling on issues which fall within the primary jurisdiction of another government office or agency, in this case the DOLE, out of respect for the expertise of the office having primary jurisdiction over the matter involved ( Secretary of Justice Op. No. 142, s. 1994 ; Op. No. 40, s. 1997 ), or over which this Department possesses no revisory authority ( Sec. of Justice Ops. No. 196, s. 1958 : No. 203, s. 1961 ; and No. 149, s. 1976 ), unless the request comes from such office or agency ( Sec. of Justice Ops. Nos. 47 & 159, s. 1993 ). Moreover, the query involves the substantive rights of private parties, in this case, the employees of the company subject of liquidation, upon whom the opinion of the Secretary of Justice would have no binding force, and who might, in all probability question our action before the courts, in the event that our position be adverse to them. Pursuant to settled policy and precedents, this Department does not rule on matters which are justiciable in nature or which might subsequently be litigated judicially. ( id . , No. 43, s. 1979, citing opinions ; Nos. 6 & 17, s. 1997 ). Nonetheless, for your information and guidance only, we invite your attention to a decision by the Supreme Court en banc on the matter, to wit: "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 the workers. It is but a preference of credit in their favor, a preference in application." The High Court, in the same case, further said that: "In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in an 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 to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claim 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 ( Development Bank of the Philippines vs . NLRC, 183 SCRA 328 [1990] )." dctai Very truly yours, (SGD.) JUSTICE SERAFIN R. CUEVAS Secretary