BRIEFED BY Mitra Karyll Ann G
RUBBERWORLD (PHILS), INC. v. NLRC, GR no. 126773 | 4-14-
1999
Panganiban, J.:
FACTS:
 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.
 And now we’re here.
 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.
ISSUE:
WON NLRC was correct in affirming labor arbiter’s order despite
SEC’s order?
HELD:
 No. NLRC should not have upheld decision of labor arbiter.
 The applicable law in this case PD 902-A and not the
Labor Code.
 PD 902-A will apply when the petition filed is:
(1) for declaration of a state of suspension of payments due to
a recognition of the inability to pay one’s debts and
liabilities, and
(2) where the petitioning corporation either:
a] has sufficient property to cover all its debts but
foresees the impossibility of meeting them when
they fall due (solvent but illiquid)
b] has no sufficient property (insolvent) but
is under the management of a rehabilitation
receiver or management committee.
 Section 6 (c) provides that: “upon appointment of a
management committee, the rehabilitation receiver, board or
body … ALL ACTIONS for claims against corporations … shall be
SUSPENDED accordingly.”
 It is to enable the mgmt committee or any rehabilitation
receiver to effectively exercise its/his powers free from any
judicial or extrajudicial interference that might unduly hinder or
prevent the rescue of the debtor company.
 Such claims would only pose as burden to the mgmt committee,
whose time would be severely wasted in defending claims
against the corporation instead of focusing on rehabilitation
alone.
 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 stat con: 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.
BRIEFED BY Mitra Karyll Ann G
2

 The present case involves rehabilitation and not insolvency or  The petition is granted. NLRC’s decision was reversed and set
liquidation. aside.