ZUELLIG FREIGHT AND CARGO SYSTEMS, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND RONALDO V. SAN MIGUEL, RESPONDENTS.

Zuellig Freight and Cargo Systems versus National Labor Relations Commission

The Case

This is a petition for review on certiorari brought by Zuellig Freight and Cargo Systems against the National Labor Relations Commission and its former employee Ronaldo V. San Miguel. The employer asks the Supreme Court to overturn the finding that San Miguel was illegally dismissed. The case matters because it settles a question every labor lawyer must answer: does a mere change of corporate name create a new corporation, one free of the old corporation's obligations to its employees? The Court answers no, and that answer carries the whole case.

Procedural History

San Miguel filed a complaint for unfair labor practice, illegal dismissal, non-payment of salaries, and moral damages before the Labor Arbiter. Labor Arbiter Francisco A. Robles ruled in his favor, finding him illegally dismissed and ordering Zuellig to pay backwages and attorney's fees. Zuellig appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter by resolution, and later denied the employer's motion for reconsideration. Zuellig then filed a petition for certiorari in the Court of Appeals, imputing grave abuse of discretion to the Commission. The Court of Appeals dismissed the petition and affirmed the Commission. Hence, the employer came to the Supreme Court by petition for review on certiorari.

Facts

San Miguel had been a checker and customs representative of Zeta Brokerage Corporation since December 16, 1985. In January 1994, he and other employees were told that Zeta would cease operations and that all affected employees would be separated. By letter dated February 28, 1994, Zeta informed him of his termination effective March 31, 1994. He reluctantly accepted his separation pay, but only on the strength of a standing offer to be hired back to his former position.

On April 15, 1994, he was summarily terminated, without any valid cause and without due process. It turned out that Zeta had not dissolved at all. It had merely amended its articles of incorporation to change its corporate name to Zuellig Freight and Cargo Systems, to broaden its primary purpose, and to increase its capital stock. The employer's own counsel had written the Bureau of Internal Revenue in June 1994 treating Zuellig and Zeta as one and the same entity.

Zuellig's defense was that Zeta's closure was a valid authorized cause, that it had no obligation to rehire Zeta's employees, and that San Miguel had failed to accept its offer of employment within the deadline it had set. The Labor Arbiter, the Commission, and the Court of Appeals all rejected this defense, finding that no genuine closure had taken place.

Issues

• Whether or not the Court of Appeals erred in holding that the National Labor Relations Commission did not act with grave abuse of discretion in ruling that the closure of Zeta's business was not bona fide, resulting in the illegal dismissal of San Miguel.
• Whether or not the Court of Appeals erred in holding that the National Labor Relations Commission did not act with grave abuse of discretion in ordering the employer to pay attorney's fees.

Applicable Provisions

Article 283 of the Labor Code, as quoted in the decision, provides:

Article 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 a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof.

This is the provision the employer invoked as its authorized cause, and it is the provision the Court found was never satisfied because there was no real closure.

Ruling

On the first issue, the Court denied the petition. In a special civil action for certiorari against a quasi-judicial body, the petitioner must show not a mere reversible error but grave abuse of discretion amounting to lack or excess of jurisdiction. The Court defined grave abuse of discretion as the exercise of judicial or quasi-judicial power in an arbitrary or despotic manner by reason of passion or personal hostility, or an evasion of a positive duty, or action so capricious and whimsical as to be equivalent to lack of jurisdiction. The Labor Arbiter, the Commission, and the Court of Appeals were unanimous that the cessation of business was not a bona fide closure, and that conclusion was supported by the records and the law.

The Court then laid down the core rule. The amendment of Zeta's articles of incorporation to change its name did not dissolve the corporation, because amendment of the articles is not one of the modes of dissolution under the Corporation Code. Quoting Philippine First Insurance Company versus Hartigan, the Court said:

The changing of the name of a corporation is no more the creation of a corporation than the changing of the name of a natural person is begetting of a natural person. The act, in both cases, would seem to be what the language which we use to designate it imports – a change of name, and not a change of being.

And quoting P.C. Javier and Sons versus Court of Appeals, the Court added:

A change in the corporate name does not make a new corporation, whether effected by a special act or under a general law. It has no effect on the identity of the corporation, or on its property, rights, or liabilities. The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is the same corporation with a different name, and its character is in no respect changed.

Zeta and Zuellig therefore remained one and the same corporation. The change of name gave the employer no license to terminate Zeta's employees without just or authorized cause, and the dismissal on the pretext that it was a different corporation was illegal and ineffectual.

On the second issue, the Court upheld the award of attorney's fees. San Miguel had been compelled to litigate and to incur expenses to protect his rights because of the employer's unjustified refusal to reinstate him with backwages and benefits. Following Producers Bank of the Philippines versus Court of Appeals, attorney's fees may be awarded to a party whom an unjustified act of the other party compelled to litigate.

Doctrine

A change in corporate name does not create a new corporation. It has no effect on the identity of the corporation or on its property, rights, or liabilities. The renamed corporation remains the same juridical person, bound by all the obligations of its former self, including the obligation to respect its employees' security of tenure. A purported closure of business that is in truth a mere change of corporate name is not a bona fide closure under Article 283 of the Labor Code, and any termination grounded on it is illegal. Separation pay received by the employee does not estop him from questioning the legality of his dismissal. Finally, grave abuse of discretion is a high bar: it means arbitrary or despotic exercise of power, or evasion of a positive duty, not mere error.

Disposition

The Supreme Court affirmed the decision of the Court of Appeals and ordered the petitioner to pay the costs of suit. San Miguel won.

Remember This

Memorize this line: a change in corporate name does not make a new corporation, so the renamed corporation remains liable for the illegal dismissal of its employee. Examiners use this case to test the effects of corporate name change on corporate identity and liabilities, and to test the requisites of a valid closure of business under Article 283 of the Labor Code.