REPUBLIC V PERALTA150 SCRA 37FELICIANO; May 20, 1987NATURE:Review on certiorariFACTS:- The Republic of the Philippines seeks the review on certiorariof the Order of the CFI of Manila in its Civil Case No. 108395entitled "In the Matter of Voluntary Insolvency of QualityTobacco Corporation, Quality Tobacco.”- In its questioned Order, the trial court held that the above enumeratedclaims of USTC and FOITAF (hereafter collectivelyreferred to as the "Unions") for separation pay of theirrespective members embodied in final awards of the NLRC wereto be preferred over the claims of the Bureau of Customs andthe BIR. The trial court, in so ruling, relied primarily upon Article110 of the Labor Code.- The Solicitor General, in seeking the reversal of the questionedOrders, argues that Article 110 of the Labor Code is notapplicable as it speaks of "wages," a term which he assertsdoes not include the separation pay claimed by the Unions."Separation pay," the Solicitor General contends: is given to alaborer for a separation from employment computed on thebasis of the number of years the laborer was employed by the7 SEC. 1. Requirements for Issuance of License. Every applicant for license to operatea private employment agency or manning agency shall submit a written applicationtogether with the following requirements:xxx xxxf. A verified undertaking stating that the applicant:xxx xxx xxx(3) Shall assume joint and solidary liability with the employer for all claims andliabilities which may arise in connection with the implementation of the contract;including but not limited to payment of wages, health and disability compensationand reparation.

employer; it is a form of penalty or damage against theemployer in favor of the employee for the latter's dismissal orseparation from serviceISSUEWON separation pay of their respective members embodied infinal awards of the NLRC were to be preferred over the claims ofthe Bureau of Customs and the BIR (WON separation pay isincluded in the term “wages”8)HELD1. YESRatio For the specific purposes of Article 1109 and in thecontext of insolvency termination or separation pay isreasonably regarded as forming part of the remuneration orother money benefits accruing to employees or workers byreason of their having previously rendered services to theiremployer; as such, they fall within the scope of "remunerationor earnings — for services rendered or to be rendered — ."Liability for separation pay might indeed have the effect of apenalty, so far as the employer is concerned. So far as concernsthe employees, however, separation pay is additionalremuneration to which they become entitled because, havingpreviously rendered services, they are separated from theemployer's service.Reasoning- We note, in this connection, that in Philippine Commercial andIndustrial Bank (PCIB) us. National Mines and Allied WorkersUnion, the Solicitor General took a different view and thereurged that the term "wages" under Article 110 of the LaborCode may be regarded as embracing within its scope severancepay or termination or separation pay. In PCIB, this Court agreedwith the position advanced by the Solicitor General. We see noreason for overturning this particular position.- The resolution of the issue of priority among the severalclaims filed in the insolvency proceedings instituted by theInsolvent cannot, however, rest on a reading of Article 110 ofthe labor Code alone.- Article 110 of the Labor Code, in determining the reach of its

terms, cannot be viewed in isolation. Rather, Article 110 mustbe read in relation to the provisions of the Civil Code concerningthe classification, concurrence and preference of credits, whichprovisions find particular application in insolvency proceedingswhere the claims of all creditors, preferred or non-preferred,may be adjudicated in a binding manner.Disposition MODIFIED and REMANDED to the trial court forfurther proceedings in insolvency.Article 97 (f) of the Labor Code defines "wages" in the following terms:Wage' paid to any employee shall mean 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, orother method of calculating the same, which is payable by an employer toan employee under a written or unwritten contract of employment for workdone or to be done, or for services rendered or to be rendered, and includesthe fair and reasonable value, as determined by the Secretary of Labor, ofboard, lodging, or other facilities customarily furnished by the employer tothe employee. 'Fair and reasonable value' shall not include any profit to theemployer or to any person affiliated with the employer.(emphasis supplied)9Article 110. Worker preference in case of bankruptcy — In the event of bankruptcyor liquidation of an employer's business, his workers shall enjoy first preference asregards wages due them for services rendered during the period prior to thebankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unionpaid wages shall be paid in full before other creditors may establish any claim to ashare in the assets of the employer. (emphasis supplied).