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126773 | 4-14-1999
Panganiban, J.:

Rubberworld, Inc. (petitioner) is a domestic corporation which used to be in the business of
manufacturing footwear, bags and garments. On 24 Nov 1994, it filed with the SEC a petition
requesting that their corporation be declared in a state of suspension of payments and that their
creditors be restrained from enforcing their claims against the corporation. A creation of
management committee and the approval of a proposed rehabilitation plan were also prayed
for. The SEC ruled in favor of the corporation. Accordingly, because of the creation of a
management committee, ALL ACTIONS FOR CLAIMS against Rubberworld, Inc. pending
before any court are hereby deemed SUSPENDED. Private petitioners, on the other hand, are
employees of the said corporation. They filed against the latter several complaints, among
others: illegal dismissal, unfair labor practice, etc. (take note that these are labor-related issues)
The petitioner moved to have the complaints dismissed on the strength of the SEC order (that
which suspends all actions for claims against them) The labor arbiter denied the petitioner’s
motion. Petitioner then appealed to the NLRC but the same also dismissed their motion. NLRC
contended that the SEC order does not cover labor cases because those are within their
exclusive jurisdiction to hear and decide labor cases, quoting Article 217 of the Labor Code.
They further contended that the right of workers and employees must be preferred.

WON NLRC was correct in affirming labor arbiter’s order despite SEC’s order?

No. NLRC should not have upheld decision of labor arbiter. The applicable law in this case PD
902-A and not the Labor Code. NLRC’s contention that labor cases are not within the scope of
the SEC order was misplaced as there was no exception mentioned in the law. Elementary in
statcon: when the law does not distinguish, you do not distinguish. Hence, article 217 of the
Labor Code should be construed in harmony with PD 902-A in order to avoid conflict. As for the
preferential right of workers and employees (article 110, LC), it may only be invoked ONLY upon
the institution of insolvency or judicial liquidation. REHABILITATION PROCEEDINGS: to enable
the company to gain a new lease on life and thereby allow creditors to be paid their claims from
its earnings. INSOLVENCY PROCEEDINGS: the company stops operating, and the claims of
the creditors are satisfied from the assets of the insolvent corporation. The present case
involves rehabilitation and not insolvency or liquidation. The petition is granted. NLRC’s decision
was reversed and set aside.