G.R. No. 97212 June 30, 1993
BENJAMIN YU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D. BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN HO-FU, respondents.
Jose C. Guico for petitioner.
Wilfredo Cortez for private respondents.
FELICIANO, J.:
Petitioner
Benjamin Yu was formerly the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership with
the firm name of "Jade Mountain Products Company Limited" ("Jade
Mountain"). The partnership was originally organized on 28 June 1984
with Lea Bendal and Rhodora Bendal as general partners and Chin Shian
Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic of China
(Taiwan), as limited partners. The partnership business consisted of
exploiting a marble deposit found on land owned by the Sps. Ricardo and
Guillerma Cruz, situated in Bulacan Province, under a Memorandum
Agreement dated 26 June 1984 with the Cruz spouses. 1 The partnership had its main office in Makati, Metropolitan Manila.
Benjamin Yu was hired by virtue of a Partnership
Resolution dated 14 March 1985, as Assistant General Manager with a
monthly salary of P4,000.00. According to petitioner Yu, however, he
actually received only half of his stipulated monthly salary, since he
had accepted the promise of the partners that the balance would be paid
when the firm shall have secured additional operating funds from abroad.
Benjamin Yu actually managed the operations and finances of the
business; he had overall supervision of the workers at the marble quarry
in Bulacan and took charge of the preparation of papers relating to the
exportation of the firm's products.
Sometime in
1988, without the knowledge of Benjamin Yu, the general partners Lea
Bendal and Rhodora Bendal sold and transferred their interests in the
partnership to private respondent Willy Co and to one Emmanuel Zapanta.
Mr. Yu Chang, a limited partner, also sold and transferred his interest
in the partnership to Willy Co. Between Mr. Emmanuel Zapanta and
himself, private respondent Willy Co acquired the great bulk of the
partnership interest. The partnership now constituted solely by Willy Co
and Emmanuel Zapanta continued to use the old firm name of Jade
Mountain, though they moved the firm's main office from Makati to
Mandaluyong, Metropolitan Manila. A Supplement to the Memorandum
Agreement relating to the operation of the marble quarry was entered
into with the Cruz spouses in February of 1988. 2 The
actual operations of the business enterprise continued as before. All
the employees of the partnership continued working in the business, all,
save petitioner Benjamin Yu as it turned out.
On 16
November 1987, having learned of the transfer of the firm's main office
from Makati to Mandaluyong, petitioner Benjamin Yu reported to the
Mandaluyong office for work and there met private respondent Willy Co
for the first time. Petitioner was informed by Willy Co that the latter
had bought the business from the original partners and that it was for
him to decide whether or not he was responsible for the obligations of
the old partnership, including petitioner's unpaid salaries. Petitioner
was in fact not allowed to work anymore in the Jade Mountain business
enterprise. His unpaid salaries remained unpaid. 3
On
21 December 1988. Benjamin Yu filed a complaint for illegal dismissal
and recovery of unpaid salaries accruing from November 1984 to October
1988, moral and exemplary damages and attorney's fees, against Jade
Mountain, Mr. Willy Co and the other private respondents. The
partnership and Willy Co denied petitioner's charges, contending in the
main that Benjamin Yu was never hired as an employee by the present or
new partnership. 4
In
due time, Labor Arbiter Nieves Vivar-De Castro rendered a decision
holding that petitioner had been illegally dismissed. The Labor Arbiter
decreed his reinstatement and awarded him his claim for unpaid salaries,
backwages and attorney's fees. 5
On
appeal, the National Labor Relations Commission ("NLRC") reversed the
decision of the Labor Arbiter and dismissed petitioner's complaint in a
Resolution dated 29 November 1990. The NLRC held that a new partnership
consisting of Mr. Willy Co and Mr. Emmanuel Zapanta had bought the Jade
Mountain business, that the new partnership had not retained petitioner
Yu in his original position as Assistant General Manager, and that there
was no law requiring the new partnership to absorb the employees of the
old partnership. Benjamin Yu, therefore, had not been illegally
dismissed by the new partnership which had simply declined to retain him
in his former managerial position or any other position. Finally, the
NLRC held that Benjamin Yu's claim for unpaid wages should be asserted
against the original members of the preceding partnership, but these
though impleaded had, apparently, not been served with summons in the
proceedings before the Labor Arbiter. 6
Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari,
asking us to set aside and annul the Resolution of the NLRC as a
product of grave abuse of discretion amounting to lack or excess of
jurisdiction.
The basic
contention of petitioner is that the NLRC has overlooked the principle
that a partnership has a juridical personality separate and distinct
from that of each of its members. Such independent legal personality
subsists, petitioner claims, notwithstanding changes in the identities
of the partners. Consequently, the employment contract between Benjamin
Yu and the partnership Jade Mountain could not have been affected by
changes in the latter's membership. 7
Two (2)
main issues are thus posed for our consideration in the case at bar:
(1) whether the partnership which had hired petitioner Yu as Assistant
General Manager had been extinguished and replaced by a new partnerships
composed of Willy Co and Emmanuel Zapanta; and (2) if indeed a new
partnership had come into existence, whether petitioner Yu could
nonetheless assert his rights under his employment contract as against
the new partnership.
In respect of the first issue, we agree with the
result reached by the NLRC, that is, that the legal effect of the
changes in the membership of the partnership was the dissolution of the
old partnership which had hired petitioner in 1984 and the emergence of a
new firm composed of Willy Co and Emmanuel Zapanta in 1987.
The applicable law in this connection — of which the
NLRC seemed quite unaware — is found in the Civil Code provisions
relating to partnerships. Article 1828 of the Civil Code provides as
follows:
Art. 1828. The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. (Emphasis supplied)
Article 1830 of the same Code must also be noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the partners;
xxx xxx xxx
(b) by the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified;
xxx xxx xxx
(2) in contravention of the agreement between the
partners, where the circumstances do not permit a dissolution under any
other provision of this article, by the express will of any partner at any time;
xxx xxx xxx
(Emphasis supplied)
In the case
at bar, just about all of the partners had sold their partnership
interests (amounting to 82% of the total partnership interest) to Mr.
Willy Co and Emmanuel Zapanta. The record does not show what happened to
the remaining 18% of the original partnership interest. The acquisition
of 82% of the partnership interest by new partners, coupled with the
retirement or withdrawal of the partners who had originally owned such
82% interest, was enough to constitute a new partnership.
The occurrence of events which precipitate the legal
consequence of dissolution of a partnership do not, however,
automatically result in the termination of the legal personality of the
old partnership. Article 1829 of the Civil Code states that:
[o]n dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.
In the
ordinary course of events, the legal personality of the expiring
partnership persists for the limited purpose of winding up and closing
of the affairs of the partnership. In the case at bar, it is important
to underscore the fact that the business of the old partnership was
simply continued by the new partners, without the old partnership
undergoing the procedures relating to dissolution and winding up of its
business affairs. In other words, the new partnership simply took over
the business enterprise owned by the preceeding partnership, and
continued using the old name of Jade Mountain Products Company Limited,
without winding up the business affairs of the old partnership, paying
off its debts, liquidating and distributing its net assets, and then
re-assembling the said assets or most of them and opening a new business
enterprise. There were, no doubt, powerful tax considerations which
underlay such an informal approach to business on the part of the
retiring and the incoming partners. It is not, however, necessary to
inquire into such matters.
What is important for present purposes is that, under the above described situation, not only the retiring partners (Rhodora Bendal, et al.) but also the new partnership itself which continued the business of the old, dissolved, one, are liable for the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al, 8 the
Court held that under facts very similar to those in the case at bar, a
withdrawing partner remains liable to a third party creditor of the old
partnership. 9 The
liability of the new partnership, upon the other hand, in the set of
circumstances obtaining in the case at bar, is established in Article
1840 of the Civil Code which reads as follows:
Art. 1840. In the following cases creditors of the dissolved partnership are also creditors of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing
partnership, or when any partner retires and assigns (or the
representative of the deceased partner assigns) his rights in
partnership property to two or more of the partners, or to one or more
of the partners and one or more third persons, if the business is continued without liquidation of the partnership affairs;
(2) When all but one partner retire and assign (or
the representative of a deceased partner assigns) their rights in
partnership property to the remaining partner, who continues the business without liquidation of partnership affairs, either alone or with others;
(3) When any Partner retires or dies and the business of the dissolved partnership is continued as
set forth in Nos. 1 and 2 of this Article, with the consent of the
retired partners or the representative of the deceased partner, but
without any assignment of his right in partnership property;
(4) When all the partners or their representatives assign their rights in partnership property to one or more third persons who promise to pay the debts and who continue the business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and remaining partners continue the business under the provisions of article 1837, second paragraph, No. 2, either alone or with others, and without liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining partners continue the business either alone or with others without liquidation of the partnership affairs;
The liability of a third person becoming a partner in
the partnership continuing the business, under this article, to the
creditors of the dissolved partnership shall be satisfied out of the
partnership property only, unless there is a stipulation to the
contrary.
When the business of a partnership after dissolution
is continued under any conditions set forth in this article the
creditors of the retiring or deceased partner or the representative of
the deceased partner, have a prior right to any claim of the retired
partner or the representative of the deceased partner against the person
or partnership continuing the business on account of the retired or
deceased partner's interest in the dissolved partnership or on account
of any consideration promised for such interest or for his right in
partnership property.
Nothing in this article shall be held to modify any right of creditors to set assignment on the ground of fraud.
xxx xxx xxx
(Emphasis supplied)
Under
Article 1840 above, creditors of the old Jade Mountain are also
creditors of the new Jade Mountain which continued the business of the
old one without liquidation of the partnership affairs. Indeed, a
creditor of the old Jade Mountain, like petitioner Benjamin Yu in
respect of his claim for unpaid wages, is entitled to priority vis-a-vis any
claim of any retired or previous partner insofar as such retired
partner's interest in the dissolved partnership is concerned. It is not
necessary for the Court to determine under which one or mare of the
above six (6) paragraphs, the case at bar would fall, if only because
the facts on record are not detailed with sufficient precision to permit
such determination. It is, however, clear to the Court that under
Article 1840 above, Benjamin Yu is entitled to enforce his claim for
unpaid salaries, as well as other claims relating to his employment with
the previous partnership, against the new Jade Mountain.
It is at
the same time also evident to the Court that the new partnership was
entitled to appoint and hire a new general or assistant general manager
to run the affairs of the business enterprise take over. An assistant
general manager belongs to the most senior ranks of management and a new
partnership is entitled to appoint a top manager of its own choice and
confidence. The non-retention of Benjamin Yu as Assistant General
Manager did not therefore constitute unlawful termination, or
termination without just or authorized cause. We think that the precise
authorized cause for termination in the case at bar was redundancy. 10 The
new partnership had its own new General Manager, apparently Mr. Willy
Co, the principal new owner himself, who personally ran the business of
Jade Mountain. Benjamin Yu's old position as Assistant General Manager
thus became superfluous or redundant. 11 It
follows that petitioner Benjamin Yu is entitled to separation pay at
the rate of one month's pay for each year of service that he had
rendered to the old partnership, a fraction of at least six (6) months
being considered as a whole year.
While the new Jade Mountain was entitled to decline
to retain petitioner Benjamin Yu in its employ, we consider that
Benjamin Yu was very shabbily treated by the new partnership. The old
partnership certainly benefitted from the services of Benjamin Yu who,
as noted, previously ran the whole marble quarrying, processing and
exporting enterprise. His work constituted value-added to the business
itself and therefore, the new partnership similarly benefitted from the
labors of Benjamin Yu. It is worthy of note that the new partnership did
not try to suggest that there was any cause consisting of some
blameworthy act or omission on the part of Mr. Yu which compelled the
new partnership to terminate his services. Nonetheless, the new Jade
Mountain did not notify him of the change in ownership of the business,
the relocation of the main office of Jade Mountain from Makati to
Mandaluyong and the assumption by Mr. Willy Co of control of operations.
The treatment (including the refusal to honor his claim for unpaid
wages) accorded to Assistant General Manager Benjamin Yu was so summary
and cavalier as to amount to arbitrary, bad faith treatment, for which
the new Jade Mountain may legitimately be required to respond by paying
moral damages. This Court, exercising its discretion and in view of all
the circumstances of this case, believes that an indemnity for moral
damages in the amount of P20,000.00 is proper and reasonable.
In addition, we consider that petitioner Benjamin Yu is entitled to interest at the legal rate of six percent (6%) per annum on
the amount of unpaid wages, and of his separation pay, computed from
the date of promulgation of the award of the Labor Arbiter. Finally,
because the new Jade Mountain compelled Benjamin Yu to resort to
litigation to protect his rights in the premises, he is entitled to
attorney's fees in the amount of ten percent (10%) of the total amount
due from private respondent Jade Mountain.
WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED DUE COURSE, the Comment filed by private respondents is treated as their Answer to the Petition for Certiorari,
and the Decision of the NLRC dated 29 November 1990 is hereby NULLIFIED
and SET ASIDE. A new Decision is hereby ENTERED requiring private
respondent Jade Mountain Products Company Limited to pay to petitioner
Benjamin Yu the following amounts:
(a) for unpaid wages which, as found by the Labor
Arbiter, shall be computed at the rate of P2,000.00 per month multiplied
by thirty-six (36) months (November 1984 to December 1987) in the total
amount of P72,000.00;
(b) separation pay computed at the rate of P4,000.00
monthly pay multiplied by three (3) years of service or a total of
P12,000.00;
(c) indemnity for moral damages in the amount of P20,000.00;
(d) six percent (6%) per annum legal interest computed on items (a) and (b) above, commencing on 26 December 1989 and until fully paid; and
(e) ten percent (10%) attorney's fees on the total amount due from private respondent Jade Mountain.
Costs against private respondents.
SO ORDERED.
Bidin, Davide, Jr., Romero and Melo, JJ., concur.
# Footnotes
2 Id., pp. 31, 43 and 68.
3 Id., pp. 36 and 44.
4 Id., pp. 40-41.
5 Id., pp. 36-38.
6 Id., pp. 45-46.
7 Id., pp. 9-10.
8 88 SCRA 623 (1979).
9 88 SCRA 642-643.
10 Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this title, by serving written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses or in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (½) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (This provision is identical with that existing in 1987, except that the provision was numerically designated in 1987 as "Article 284"), Labor Code.
11 See, in this connection, Wiltshire File Co., Inc. v. National Labor Relations Commission, et al., 193 SCRA 665 (1991).
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