Professional Documents
Culture Documents
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Facts:
Villarama
entered
into
a
Contract
of
Sale
with
PANTRANCO
for
2
certificates
of
public
convenience
(first
set)
which
authorizes
the
owner
to
operate
32
units
of
buses
along
the
Pangasinan
to
Manila
route.
The
contract
contains
a
stipulation
that
prohibits
Villarama
from
applying
for
pay
for
his
own
obligations,
and
that
he
also
bought
money
into
the
corporations
coffers.
Evidence
further
shows
that
the
initial
cash
capitalization
of
the
corporation
of
P105,000
was
mostly
financed
by
Villarama.
Further,
the
evidence
shows
that
when
the
Corporation
was
in
its
initial
months
of
operation,
Villarama
purchased
and
paid
with
his
personal
checks
Ford
trucks
for
the
Corporation.
Villarama
had
co-
mingled
his
personal
funds
and
transactions
with
those
made
in
the
name
of
the
Corporation.
The
clear
intention
of
the
parties
was
to
prevent
the
seller
from
conducting
any
competitive
line
for
10
years
since,
anyway,
he
has
bound
himself
not
to
apply
for
authorization
to
operate
along
such
lines
Doctrine:
B.
Types
of
Acquisitions\Transfers
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
the
former
acted
in
good
faith
and
paid
adequate
consideration
for
such
assets,
except
when
any
of
the
following
circumstances
is
present:
(1)
where
the
purchasers
expressly
or
impliedly
agrees
to
assume
the
debts;
(2)
where
the
selling
corporation
fraudulently
enters
into
the
transactions
to
escape
liability
for
those
debts
(3)
where
the
purchasing
corporation
is
merely
a
continuation
of
the
selling
corporation,
and
(4)
where
the
transaction
amounts
to
a
consolidation
or
merger
of
the
corporations.
Edward
J.
Nell
Co.
v.
Pacific,
15
SCRA
415
(1965).1
Edward
J.
Nell
Co.
v.
Pacific
Facts:
Edward
J.
Nell
Company
(EJNC)
secured
a
judgment
against
Insular
Farms,
Inc.
representing
unpaid
balance
of
the
price
of
a
pump
sold
by
EJNC
to
the
former.
The
writ
of
execution
was
returned
stating
that
Insular
Farms
had
no
leviable
property.
A
few
months
later,
EJNC
filed
this
present
action
against
Pacific
Farms,
Inc.
for
the
collection
of
the
judgment
against
Insular
Farms,
upon
the
theory
that
Pacific
Farms
is
the
alter
ego
of
Insular
Farms.
Issue:
Whether
or
not
Pacific
Farms
is
liable
for
the
unpaid
obligation
of
Insular
Farms.
Held:
NO.
The
theory
of
EJNC
that
Pacific
Farms
is
an
alter
ego
of
Insular
Farms,
arose
because
the
former
purchased
all
or
substantially
all
of
the
shares
of
stock,
as
well
as
the
real
and
personal
properties
of
the
latter,
Philippines
National
Bank
v.
Andrada
Electric
&
Engineering
Co.,
381
SCRA
244
(2002);
McLeod
v.
NLRC,
512
SCRA
222
(2007);
Jiao
v.
NLRC,
670
SCRA
184
(2012).
Even
under
the
provisions
of
the
Civil
Code,
a
creditor
has
a
real
interest
to
go
after
any
person
to
whom
the
debtor
fraudulently
transferred
its
assets.
Caltex
(Phils.),
Inc.
v.
PNOC
Shipping
and
Transport
Corp.,
498
SCRA
400
(2006).
Caltex
(Phils.),
Inc.
v.
PNOC
Shipping
and
Transport
Corp.
Facts:
The
PNOC
Shipping
and
Transport
Corporation
(PSTC)
and
the
Luzon
Stevedoring
Corporation
(LUSTEVECO)
entered
into
an
Agreement
of
Assumption
of
Obligations,
which
provides
that
PSTC
shall
assume
all
obligations
of
LUSTEVECO
with
respect
to
certain
claims
enumerated
in
the
Annexes
of
the
Agreement.
This
Agreement
also
provides
that
PSTC
shall
control
the
conduct
of
any
litigation
pending
which
may
be
filed
with
respect
to
such
claims,
and
that
LUSTEVECO
appoints
and
constitutes
PSTC
as
its
attorney-in-fact
to
demand
and
receive
any
claim
out
of
the
countersuits
and
counterclaims
arising
from
said
claims.
Among
the
actions
mentioned
is
Caltex
(Phils)
v.
Luzon
Stevedoring
Corporation,
which
was
then
pending
appeal.
Caltex
won
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Held:
YES.
The
Agreement
provides
that
PSTC
shall
assume
all
the
obligations
of
LUSTEVECO.
LUSTEVECO
transferred,
conveyed
and
assigned
to
PSTC
all
of
LUSTEVECOs
business,
properties
and
assets
pertaining
to
its
tanker
and
bulk
business
together
with
all
the
obligations
relating
to
the
said
business,
properties
and
assets.
The
assumption
of
obligations
was
stipulated
not
only
in
the
Agreement
of
Doctrine:
To
allow
an
assignor
to
make
a
transfer
without
the
consent
of
its
creditors
and
without
requiring
the
assignee
to
assume
the
formers
obligations
will
defraud
creditors.
PSALM
took
ownership
over
most
of
NPCs
assets
by
operation
of
lawthese
properties
may
be
used
to
satisfy
the
Courts
judgment,
and
such
being
the
case,
the
employees
may
go
after
such
properties.
NPC
Drivers
and
Mechanics
Association
(NPC
DAMA)
v.
NPC,
606
SCRA
409
(2009).
1. "Assets-Only" Level.1
the
case
and
a
writ
of
execution
was
issued
in
its
favor
but
was
not
satisfied.
When
it
learned
about
the
agreement
between
PSTC
and
LUSTEVECO,
it
sued
PSTC
and
brought
an
action.
Issue:
Whether
or
not
Caltex
may
recover
from
PTSC.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
3. "Equity" Level. 1
D.
Business
Enterprise
Transfers:
1. Nature
of
Business-Enterprise.8
C.
Assets
Only
Transfers
1. Rationale
for
Non-Assumption
of
Liability.2
Sales
Law,4
would
affect
the
transferee
in
the
sense
that
if
the
sale
has
not
complied
with
the
requirements
of
the
Law,
the
sale
could
be
classified
as
fraudulent
and
void,
and
therefore
The
Court
of
Appeals
in
People
v.
Wong,
50
O.G.
4867,
has
held
that
the
Bulk
Sales
Law
applies
only
to
merchandising
business
or
establishments,
and
has
no
application
to
other
forms
of
activities
such
as
in
that
case
the
sale
of
the
equipment,
tools
and
machineries
of
a
foundry
shop.
6
Villanueva,
C.
L.,
&
Villanueva-Tiansay,
T.
S.
(2013).
Philippine
Corporate
Law.
(2013
ed.).
Manila,
Philippines:
Rex
Book
Store.
7
Villanueva,
C.
L.,
&
Villanueva-Tiansay,
T.
S.
(2013).
Philippine
Corporate
Law.
(2013
ed.).
Manila,
Philippines:
Rex
Book
Store.
8
Villanueva,
C.
L.,
&
Villanueva-Tiansay,
T.
S.
(2013).
Philippine
Corporate
Law.
(2013
ed.).
Manila,
Philippines:
Rex
Book
Store.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
juridical
entity
under
which
it
operates.
This
is
what
is
termed
as
the
"economic
unit",
"the
enterprise",
"the
going
concern",
or
the
"financial
unit",
recognized
in
other
disciplines,
such
as
Economics
and
Accounting.
Facts:
A.D.
Santos,
Inc.
operates
taxicabs.
Ventura
Vasquez
was
one
of
his
taxi
drivers.
While
driving
A.D.
Santos,
Inc.s
taxi
cab,
Vasquez
vomited
blood.
The
companys
physician,
Dr.
Roman,
treated
him.
He
was
sent
to
and
confined
in
Santo
Tomas
Hospital.
Afterwards,
he
was
admitted
at
the
Quezon
Institute
where
he
was
diagnosed
with
pulmonary
tuberculosis.
He
did
not
resume
work.
Vasquez
filed
a
claim
with
the
Workmens
Compensation
Commission.
A.D.
Santos,
Inc.
was
ordered
to
pay
compensation
and
reimburse
Vasquez
the
amount
he
spent
for
his
treatment.
Issue:
Whether
or
not
A.D.
Santos
is
liable
for
the
expenses
of
Vasquez
Held:
YES.
Vasquez
cause
of
action
against
A.D.
Santos,
Inc.
is
complete.
In
its
answer
to
Vasquezs
claim,
A.D.
Santos,
Inc.
categorically
admitted
that
Vasquez
was
its
taxi
driver.
Further,
Vasquez
contracted
pulmonary
tuberculosis
by
reason
of
his
employment.
Vasquez
cited
in
his
testimony
that
he
worked
for
City
Cab,
a
company
operated
by
a
certain
Amador
Santos.
This
does
not
detract
the
validity
of
Vasquez
right
to
compensation.
Amador
Santos
was
the
sole
owner
and
operator
of
City
Cab
(sole
proprietorship).
It
was
subsequently
transferred
to
A.D.
Santos,
Inc.
in
which
Amador
Santos
was
a
majority
stockholder.
In
business
enterprise
transfers,
the
transferee
is
liable
for
the
liabilities
of
his
transferor
arising
from
the
business
enterprise
transferred.
Mentioning
Amador
Santos
as
his
employer
should
not
confuse
the
facts
relating
to
the
employer-employee
relationship.
In
this
case,
the
veil
of
the
corporate
fiction
is
used
as
a
shield
to
perpetrate
a
fraud
or
confuse
legitimate
issues.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Doctrine:
In
business
enterprise
transfers,
the
transferee
is
liable
for
the
liabilities
of
his
transferor
arising
from
the
business
enterprise
transferred.
Laguna
Trans.
Co.,
Inc.
v.
SSS
Facts:
In
1940
the
Bian
Transportation
Co.,
a
corporation
duly
registered
with
the
SEC,
sold
part
of
the
lines
and
equipment
it
operates
to
G.
Mercado,
A.
Mercado,
Mata
and
Vera
Cruz.
After
this,
the
vendees
formed
an
unregistered
partnership
under
the
name
of
Laguna
Transportation
Company
which
continued
to
operate
the
lines
and
equipment
bought
from
Bian
Transportation
Co.
Later
on,
the
original
partners
forming
Laguna
Transport
Company
along
with
2
new
members
organized
a
corporation
known
as
the
Laguna
Transportation
Co.,
Inc.
and
the
corporation
was
registered
in
the
SEC
on
June
20,
1956,
which
continued
the
same
transportation
business
of
the
unregistered
partnership.
Laguna
Trans.
Co.
Inc.
requested
for
exemption
from
coverage
by
the
System
on
the
ground
that
it
started
operation
only
on
June
20,
1956,
when
it
was
registered
with
the
Securities
and
Exchange
Commission
but
on
November
11,
1957,
the
Social
Security
System
notified
plaintiff
that
it
was
covered.
Issue:
Whether
or
not
Laguna
Trans
Co.
Inc.
was
bound
by
the
compulsory
coverage
of
the
Social
Security
Act
Held:
YES.
While
it
is
true
that
a
corporation
once
formed
is
conferred
a
juridical
personality
separate
and
district
from
the
persons
composing
it,
it
is
but
a
legal
fiction
introduced
for
purposes
of
convenience
and
to
subserve
the
ends
of
justice.
To
adopt
Laguna
Trans.
Co.
Inc.s
argument
would
defeat,
rather
than
promote,
the
ends
for
which
the
Social
Security
Act
was
enacted.
An
employer
could
easily
circumvent
the
statute
by
simply
changing
his
form
of
organization
every
other
year,
and
then
claim
exemption
from
contribution
to
the
System
as
required,
on
the
theory
that,
as
a
new
entity,
it
has
not
been
in
operation
for
a
period
of
at
least
2
years.
In
this
case,
it
can
be
said
that
there
was
only
a
change
in
the
form
of
organization
of
the
entity
in
the
common
carrier
business.
This
is
said
to
be
so
because
when
the
unregistered
partnership
was
turned
into
a
corporation,
the
firm
name
was
not
altered
save
for
the
fact
that
Inc.
was
added
to
show
that
it
was
duly
incorporated
under
existing
laws.
Doctrine:
The
law
provides
that
the
Commission
may
not
compel
any
employer
to
become
a
member
of
the
System
unless
he
shall
have
been
in
operation
for
at
least
two
years,
such
is
not
applicable
to
a
corporation
that
merely
changed
its
form
of
organization.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
being
only
on
the
date
of
its
incorporation
but
from
the
date
the
partnership
started
the
business.
Oromeca
Lumber
Co.
v.
SSS,
4
SCRA
1188
(1962);
San
Teodoro
Dev.
v.
SSS,
8
SCRA
96
(1963).
Facts:
John
F.
McLeod
filed
a
complaint
for
unpaid
benefits
and
damages,
against
Filipinas
Synthetic
Corporation
(Filsyn),
Far
Eastern
Textile
Mills,
Inc.,
Sta.
Rosa
Textiles,
Inc.,
Patricio
Lim
and
Eric
Hu
(respondents).
McLeod
said
that
he
is
an
expert
in
textile
manufacturing
process,
and
was
hired
as
the
Manager
of
Universal
Textiles,
Inc.
(UTEX)
under
its
President,
Patricio
Lim.
Lim
later
formed
Peggy
Mills,
Inc.
(with
Filsyn
having
controlling
interest),
and
it
absorbed
McLeod.
Filsyn
then
counsel
holds
office
in
the
same
address,
and
that
all
respondents
have
the
same
key
personnel
such
as
Lim.
Issue:
Whether
or
not
an
employer-employee
relationship
exists
between
private
respondents
and
McLeod
Held:
YES
BUT
he
was
an
employee
of
Peggy
Mills
ONLY.
What
happened
between
Peggy
Mills
and
Sta.
Rosa
textile
was
dation
in
payment
with
lease.
Peggy
Mills
had
ceded,
conveyed
and
transferred
all
of
its
rights,
title
and
interests
in
and
to
the
assets
to
Sta.
Rosa
Textile
to
settle
its
obligations.
Doctrine:
See
above.
sold
Peggy
Mills
to
Far
Eastern
Textile
Mills
with
Lim
as
the
chairman
and
president.
Peggy
Mills
was
renamed
Sta.
Rosa
Textile.
When
McLeod
reached
retirement
age,
he
was
only
given
a
reduced
13
month
pay.
Lim
offered
McLeod
a
compromise
settlement
but
was
rejected.
UTEX
Peggy
Mills
Far
Eastern
Textile
Mills
Sta.
Rosa
Textile
Respondents
allege
that
Filsyn
and
Far
Eastern
Textiles
are
separate
legal
entities
and
have
no
employer
relationship
with
McLeod.
Sta.
Rosa
only
acquired
the
assets
and
NOT
the
liabilities
of
Peggy
Mills.
In
McLeods
reply,
he
alleged
that
all
the
respondents
are
solidarily
liable
for
all
salaries
and
benefits
he
is
entitled
to,
being
one
and
the
same
entity.
McLeod
said
that
their
offices
were
all
in
the
same
building,
their
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Pantranco
Employees
Association
(PEA-PTGWO)
v.
NLRC
Facts:
The
Gonzales
family
owned
two
corporations,
PANTRANCO
North
Express
Inc.
(PNEI)
and
Macris
Realty
Corporation
(Macris).
PNEI
provided
transportation
services
and
its
terminals
were
on
the
Pantranco
properties
registered
under
the
name
of
Macris.
Due
to
financial
losses,
creditors
took
over
both
corporations
and
later
transferred
to
the
National
Investment
Development
Corporation
(NIDC),
a
subsidiary
of
the
Philippine
National
Bank.
Macris
was
later
renamed
and
merged
to
another
corporation
to
form
the
new
PNB
subsidiary,
the
PNB-Madecor.
NIDC
sold
PNEI
to
North
Express
Transport,
Inc.
(NETI),
PNEI
was
later
placed
under
sequestration
by
the
PCGG.
Eventually
PNEI
ceased
its
operation
which
came
with
the
various
labor
claims
commenced
by
the
former
employees
of
PNEI
where
the
employees
won.
The
employees
now
seek
to
attach
on
the
properties
registered
to
PNB-Madecor
to
satisfy
their
claim.
Issue:
Whether
or
not
the
former
PNEI
employees
can
attach
the
properties
(specifically
the
Pantranco
properties)
of
PNB,
PNB-Madecor
and
Mega
Prime
to
satisfy
their
unpaid
labor
claims
against
PNEI
Held:
NO.
First,
the
subject
property
is
not
owned
by
the
judgment
debtor,
PNEI.
The
properties
were
owned
by
Macris,
the
predecessor
of
PNB-Madecor.
Hence,
they
cannot
be
pursued
against
by
the
creditors
of
PNEI.
It
is
a
settled
rule
that
the
court
in
executing
judgments
extends
only
to
properties
unquestionably
belonging
to
the
judgment
debtor
alone.
Second,
the
general
rule
is
that
a
corporation
has
a
personality
separate
and
distinct
from
those
of
its
stockholders
and
other
corporations
to
which
it
may
be
connected.
Obviously,
PNB,
PNB-
Madecor,
Mega
Prime,
and
PNEI
are
corporations
with
their
own
personalities.
PNB
was
only
a
stockholder
of
PNB-Madecor
which
later
sold
its
shares
to
Mega
Prime;
and
that
PNB-Madecor
was
the
owner
of
the
Pantranco
properties.
Neither
can
we
merge
the
personality
of
PNEI
with
PNB
simply
because
the
latter
acquired
the
former.
Doctrine:
See
above.
4. Rationale
of
Doctrine
in
Business
Enterprise
Transfers
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
E.
Equity
Transfers
1. Rationale
of
Doctrine.
1
Facts:
On
March
29,
Violeta
M.
Borres
was
injured
in
an
accident
which
the
trial
court
ruled
was
due
to
the
negligence
of
PHIVIDEC
Railways,
Inc.
(PRI).
Prior,
on
May
25,
PHIVIDEC
sold
all
its
rights
and
interests
in
operate
the
railway
assets
of
PHIVIDEC.
Borres
sued
PRI
and
Panay,
and
Panay
disclaimed
liability
on
the
ground
that
in
the
Agreement
concluded
between
PHIVIDEC
and
PHILSUCOM,
it
was
provided
that
PHIVIDEC
holds
PHILSUCOM
free
from
any
action
that
might
arise
from
any
act
of
omission
prior
to
the
turn-over.
Issue:
Whether
or
not
PHIVIDEC
should
be
held
liable.
Held:
YES.
It
is
clear
from
the
evidence
of
record
that
by
virtue
of
the
agreement
between
PHIVIDEC
and
PHILSUCOM,
particularly
the
stipulation
exempting
the
latter
from
any
claim
or
liability
arising
out
of
any
act
or
transaction
prior
to
the
turn-over,
PHIVIDEC
had
expressly
assumed
liability
for
any
claim
against
PRI.
Since
the
accident
happened
before
that
agreement
and
PRI
ceased
to
exist
after
the
turn-over,
it
should
follow
that
PHIVIDEC
cannot
evade
its
liability
for
the
injuries
sustained
by
the
private
respondent.
In
the
interest
of
justice
and
equity,
and
to
prevent
the
veil
of
corporate
fiction
from
denying
her
the
reparation
to
which
she
is
entitled,
that
veil
must
be
pierced
and
PHIVIDEC
and
PRI
regarded
as
one
and
the
same
entity.
Doctrine:
See
above.
the
PRI
to
the
PHILSUCOM.
Two
days
later,
PHILSUCOM
caused
the
creation
of
a
wholly-owned
subsidiary,
the
Panay
Railways
Inc.
to
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
the
transferee
by
contract
assumes
such
obligations,
or
there
is
basis
for
piercing
the
veil
of
corporate
fiction.
1
II.
MERGER
AND
CONSOLIDATIONS
A.
Concepts
(McLeod
v.
NLRC,
512
SCRA
222
[2007]).
B.
Procedure:
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Upon
approval
by
majority
vote
of
each
of
the
board
of
directors
or
trustees
of
the
constituent
corporations
of
the
plan
of
merger
or
consolidation,
the
same
shall
be
submitted
for
approval
by
the
stockholders
or
members
of
each
of
such
corporations
at
separate
corporate
meetings
duly
called
for
the
purpose.
Notice
of
such
3.
As
to
each
corporation,
the
number
of
shares
or
members
voting
for
and
against
such
plan,
respectively.
(n)
not
earlier
than
120
days
prior
to
the
date
of
filing
of
the
application
and
the
long-form
audit
report
for
absorbed
corporation(s)
are
always
required.
Long
form
audit
report
for
the
surviving
corporation
is
required
if
it
is
insolvent.
(SEC
Opinion
14,
s.
of
2002,
15
November
2002).
5. Approval
by
SEC
(Section
79)
3. Articles
of
Merger
or
Consolidation
(Section
78)
4. Submission
of
Financial
Statements
Requirements:
For
applications
of
merger,
the
audited
financial
statements
of
the
constituent
corporations
(surviving
and
absorbed)
as
of
the
date
Section
79.
Effectivity
of
merger
or
consolidation.
The
articles
of
merger
or
of
consolidation,
signed
and
certified
as
herein
above
required,
shall
be
submitted
to
the
Securities
and
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
transferred
to
and
vested
in
the
surviving
corporation.
Poliand
Industrial
Ltd.
V.
NDC,
467
SCRA
500
(2005).1
C.
Effects
of
Merger
or
Consolidation
(Section
80):
Associated
Bank
v.
CA,
291
SCRA
511
(1998).
Section
80.
Effects
of
merger
or
consolidation.
The
merger
or
consolidation
shall
have
the
following
effects:
1.
The
constituent
corporations
shall
become
a
single
corporation
Mindanao Savings and Loan Asso. V. Willkom, 634 SCRA 291 (2010).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
4.
The
surviving
or
the
consolidated
corporation
shall
thereupon
and
thereafter
possess
all
the
rights,
privileges,
immunities
and
franchises
of
each
of
the
constituent
corporations;
and
all
property,
real
or
personal,
and
all
receivables
due
on
whatever
account,
including
subscriptions
to
shares
and
other
choses
in
action,
and
all
and
every
Issue:
Whether
or
not
Associated
Bank,
the
surviving
corporation,
may
enforce
the
promissory
note
made
by
private
respondent
in
favor
of
CBTC,
the
absorbed
company.
and
powers,
as
well
as
their
liabilities.
The
merger,
however,
does
not
become
effective
upon
the
mere
agreement
of
the
constituent
corporations.
The
procedure
to
be
followed
is
prescribed
under
the
Corporation
Code.
Assuming
that
the
effectivity
date
of
the
merger
was
the
date
of
its
execution,
we
still
cannot
agree
that
petitioner
no
longer
has
any
interest
in
the
promissory
note.
The
agreement
itself
clearly
provides
that
all
contracts
irrespective
of
the
date
of
execution
Associated
Bank
v.
CA
Facts:
Associated
Banking
Corporation
(ABC)
and
Citizens
Bank
and
Trust
Company
(CBTC)
merged
to
form
just
one
banking
corporation
known
as
Associated
Citizens
Bank
(ACB),
which
changed
its
name
to
Associated
Bank
(AB).
Lorenzo
Sarmiento
Jr.
executed
in
favor
of
AB
a
promissory
note
whereby
the
former
undertook
to
pay
on
or
before
March
6,
1978.
Sarmiento
still
owes
AB
today
despite
repeated
demands.
He
alleges
that
AB
is
not
the
proper
party
in
interest
because
the
promissory
note
was
executed
in
favor
of
Citizens
Bank
and
Trust
Company.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
stockholders
of
the
constituent
corporations.
3. Merger
shall
be
effective
only
upon
the
issuance
by
the
SEC
of
a
certificate
of
merger.
4. The
effectivity
date
of
the
merger
is
crucial
for
determining
when
the
merged
or
absorbed
corporation
ceases
to
exist;
and
when
its
rights,
privileges,
properties
as
well
as
liabilities
pass
on
to
the
surviving
corporation.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
deal
with
each
other.
Thus,
the
absorption
of
the
employees
of
Mabuhay
may
not
be
imposed
on
Sundowner.
In
a
tripartite
agreement
that
was
entered
into
by
Sundowner
with
NUWHRAIN
and
Mabuhay,
it
is
clear
that
Sundowner
has
no
liability
whatsoever
to
the
employees
of
Mabuhay
and
its
responsibility
if
at
all,
is
only
to
consider
them
for
re-
Facts:
Bana-ay,
Cosculluela,
and
Palma
were
among
the
regular
and
permanent
employees
of
Central
Danao,
the
owner
and
operator
of
a
sugar
mill.
Central
Danao
later
sold
its
sugar
mill
to
DADECO.
DADECO
actually
took
over
operations
of
the
mill
pursuant
to
the
Deed
of
Sale.
Although
the
Deed
made
no
mention
of
currently
employed
employees,
DADECO
did
hire
regular
and
permanent
employees
pursuant
to
its
own
hiring
and
selection
processes,
including
Bana-Ay,
Cosculluela,
and
Palma.
During
the
period
of
their
employment,
they
were
terminated
by
DADECO.
Bana-Ay,
Cosculluela,
and
Palma
filed
a
complaint
against
Central
Danao
and
DADECO.
Central
Danao
claimed
that
DADECO
was
the
employer
during
that
time
since
the
former
had
already
transferred
its
assets
to
DADECO
at
the
time
of
termination.
DADECO
claims
that
it
was
Central
Danao
who
was
liable
since
the
termination
happened
during
the
time
that
Central
Danao
was
there
employer.
Issue:
Whether
or
not
Central
Danao
is
liable
Yu
v.
NLRC,
245
SCRA
134
(1995);
Sunio
v.
NLRC,
127
SCRA
390
(1984);
San
Felipe
Neri
School
of
Mandaluyong,
Inc.
v.
NLRC,
201
SCRA
478
(1991).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Held:
YES,
CENTRAL
DANAO
IS
LIABLE.
The
Deed
reveals
no
express
stipulation
whatsoever
relative
to
the
continued
employment
by
Dadeco
of
the
former
employees
of
Central
Danao.
There
was
in
fact,
an
interruption
of
the
employment
of
the
private
respondents
in
the
sugar
central.
In
reality
then,
they
were
rehired
anew
by
Dadeco,
their
new
the
employees
that
it
was
left
with
no
alternative
but
to
close
down
the
operations
of
Lite-On.
The
Union
pushed
for
a
retrenchment
pay
equivalent
to
1
month
salary
for
every
year
of
service,
which
Complex
refused.
employer.
The
records
also
reveal
that
negotiations
for
the
sale
were
made
behind
the
back
of
the
employees
who
were
taken
by
surprise
upon
its
consummation.
Technically
then,
the
employees
were
terminated
on
the
date
of
the
sale.
Worse,
they
were
not
even
given
the
required
notice
of
termination.
Doctrine:
The
sale
or
disposition
must
be
motivated
by
good
faith.
personnel
were
also
holding
office
there.
Ionics
contended
that
it
was
an
entity
separate
and
distinct
from
Complex
and
had
been
in
existence
8
years
before
the
labor
dispute
arose.
Ionics
further
argued
that
the
hiring
of
some
displaced
workers
of
Complex
was
an
exercise
of
management
prerogatives.
Issue:
Whether
or
not
there
was
transfer
of
business
from
Complex
to
Complex
Electronics
Employees
Assn.
v.
NLRC
Facts:
Complex
was
engaged
in
the
manufacture
of
electronic
products.
There
were
different
lines,
including
Ionics
and
Lite-On.
The
rank
and
file
workers
of
Complex
were
organized
into
the
Complex
Electronics
Employees
Association
(Union).
Complex
received
a
fax
message
from
Lite-On,
requiring
it
to
lower
its
price
by
10%.
Complex
informed
its
Lite-On
personnel
that
such
request
of
lowering
their
selling
price
was
not
feasible
as
they
were
already
incurring
losses
at
the
present
prices
of
their
products.
Complex
regretfully
informed
Ionics
Held:
NO.
There
was
no
transfer
of
business.
A
runaway
shop
is
defined
as
an
industrial
plant
moved
by
its
owners
from
one
location
to
another
to
escape
union
labor
regulations
or
state
laws,
but
the
term
is
also
used
to
describe
a
plant
removed
to
a
new
location
in
order
to
discriminate
against
employees
at
the
old
plant
because
of
their
union
activities.
A
runaway
shop
in
this
sense,
is
a
relocation
motivated
by
anti-union
animus
rather
than
for
business
reasons.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
earlier
firm.
Pepsi-Cola
Bottling
Co.,
v.
NLRC,
210
SCRA
277
(1992).
In
this
case,
however,
Ionics
was
not
set
up
merely
for
the
purpose
of
transferring
the
business
of
Complex.
At
the
time
the
labor
dispute
arose
at
Complex,
Ionics
was
already
existing
as
an
independent
company.
It
cannot,
therefore,
be
said
that
the
temporary
closure
in
Complex
and
its
subsequent
transfer
of
business
to
Ionics
was
for
anti-
union
purposes.
The
Union
failed
to
show
that
the
primary
reason
for
the
closure
of
the
establishment
was
due
to
the
union
activities.
Doctrine:
The
mere
fact
that
one
or
more
corporations
are
owned
or
controlled
by
the
same
or
single
stockholder
is
not
a
sufficient
ground
for
disregarding
separate
corporate
personalities.
Ionics
may
be
engaged
in
the
same
business
as
that
of
Complex,
but
this
fact
alone
is
Encabo
filed
a
complaint
for
illegal
dismissal
and
unfair
labor
practice
claiming
that
he
was
denied
due
process.
The
NLRC
found
in
favor
of
Encabo
and
issued
a
writ
of
execution
addressed
to
Pepsi
Cola
Bottling
Corp
(PBC)
ordering
PCD
to
reinstate
him.
The
writ
was
delivered
to
Pepsi-Cola
Products
Philippines
(PCPPI).
PCCPI
alleged
that
reinstatement
is
no
longer
possible
since
PCD
had
closed
down
its
business
on
the
ground
of
serious
business
losses
and
the
new
franchise
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
complaint
was
initiated
continue
to
be
sold
now.
The
sale
of
products
did
not
stop
at
the
time
PCD
bowed
out
and
PCPPI
came
into
being.
There
is
no
evidence
presented
showing
that
PCCPI,
as
the
new
entity
or
purchasing
company
is
free
from
any
liabilities
incurred
by
the
former
company.
In
fact,
in
the
surety
bond
put
up
by
petitioners,
both
PCD
and
PCPPI
bound
themselves
to
answer
for
monetary
awards
which
clearly
implies
that
the
PCPPI
as
a
result
of
the
transfer
of
the
franchise
bound
itself
to
answer
for
the
liability
of
PCD
to
its
employees.
Doctrine:
See
above.
NLRC
issued
a
writ
of
execution
ordering
PCD
to
pay
the
salaries.
PCPPI
filed
in
the
case
a
motion
praying
that
the
change
of
ownership
of
the
company
be
taken
cognizance
of
by
the
NLRC
saying
that
PCPPI
has
a
separate
personality
from
PCD
and
therefore,
not
a
party
to
the
cases
filed.
Not
being
a
party,
they
cannot
be
subjected
to
the
issue
writ
of
execution.
NLRC
in
resolving
the
MR
modified
its
decision
by
ordering
both
PCD
and
PCPPI
to
reinstate
Yute.
PCD
was
further
ordered
to
pay
Robledo
v.
NLRC,
238
SCRA
52
(1994);
Pepsi-Cola
Bottling
Co.
v.
NLRC,
210
SCRA
277
(1992);
DBP
v.
NLRC,
186
SCRA
841
(1990);
Coral
v.
NLRC,
258
SCRA
704
(1996);
Avon
Dale
Garments,
Inc.
v.
NLRC,
246
SCRA
733
(1995).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
Yutes
separation
pay.
Issue:
Whether
or
not
the
dismissal
of
Yute
on
the
ground
that
the
company
already
sold
its
business
interest
to
PCCPI
was
proper
petitioners
continued
to
work
for
the
new
owner
and
were
considered
terminated,
with
their
conformity
much
later
when
they
received
their
separation
pay
and
all
other
benefits
due
them.
Each
of
them
then
executed
a
Release
and
Waiver
which
they
acknowledged
before
Atty.
Nolasco
Discipulo,
Hearing
Officer
of
the
Butuan
City
District
Office
of
DOLE.
The
new
owner
caused
the
publication
of
a
notice
for
the
hiring
of
workers,
indicating
therein
who
of
the
separated
employees
could
be
accepted
on
probationary
basis.
The
petitioners
were
hired
on
probationary
basis
for
six
months
as
patchers
or
tapers,
but
were
compensated
on
piece-rate
or
task
basis.
firm.
The
complaint
was
filed
when
PCD
was
still
in
existence.
Pepsi-Cola
never
stopped
doing
business
in
the
Philippines.
The
same
soft
drinks
products
sold
in
1988
when
the
complaint
was
initiated
continue
to
be
sold
now.
Doctrine:
The
sale
of
products,
purchases
of
materials,
payment
of
obligations,
and
other
business
acts
did
not
stop
at
the
time
PCD
bowed
For
their
alleged
absence
without
leave,
Perla
Cumpay
and
Virginia
Etic
were
considered
to
have
abandoned
their
work.
The
rest
were
dismissed
later
because
they
allegedly
committed
acts
prejudicial
to
the
interest
of
the
new
management
which
consisted
of
their
"including
unrepaired
veneers
in
their
reported
productions
on
output
as
well
as
untaped
corestock
or
whole
sheets
in
their
supposed
taped
out
and
PCPPI
came
into
being.
There
is
no
evidence
presented
showing
that
PCPPI,
as
the
new
entity
or
purchasing
company
is
free
from
any
liabilities
incurred
by
the
former
corporation.
veneers/corestock."
The
employee-petitioners
allege
that
they
remained
regular
employees
of
the
corporation
because
the
change
in
ownership
and
management
of
Super
Mahogany
left
its
separate
juridical
personality
unaffected.
In
their
defense,
the
corporation
claims
that
it
was
within
their
management
prerogative
to
terminate
the
employee-petitioners,
as
they
were
re-
hired
by
the
new
management
under
probationary
status.
Manlimos
v.
NLRC
Facts:
Manlimos
along
with
15
others
were
employees
of
Mahogany
Plywood
Corporation.
A
new
owner/management
group
headed
by
Alfredo
Roxas
acquired
complete
ownership
of
the
corporation.
The
petitioners
were
advised
of
such
change
of
ownership;
however,
the
Issue:
Whether
or
not
an
innocent
transferee
of
a
business
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
establishment
has
liability
to
the
employees
of
the
transfer
or
to
continue
employing
them.
Held:
NO.
The
change
in
ownership
of
the
management
was
done
bona
fide
and
the
petitioners
did
not
for
any
moment
before
the
filing
of
their
complaints
raise
any
doubt
on
the
motive
for
the
change.
On
the
contrary,
upon
being
informed
thereof
and
of
their
eventual
termination
from
employment,
they
freely
and
voluntarily
accepted
their
separation
pay
and
other
benefits
and
individually
executed
the
Release
or
Waiver
which
they
acknowledged
before
no
less
than
a
hearing
officer
of
the
DOLE.
Since
the
petitioners
were
effectively
separated
from
work
due
to
a
bona
fide
change
of
ownership
and
they
were
accordingly
paid
their
separation
pay,
which
they
freely
and
voluntarily
accepted,
the
private
respondent
corporation
was
under
no
obligation
to
employ
them;
it
may,
however,
give
them
preference
in
the
hiring.
The
private
respondent
in
fact
hired,
but
on
probationary
basis,
was
legally
permissible.
The
hiring
of
employees
on
a
probationary
basis
is
an
exclusive
management
prerogative.
The
employer
has
the
right
or
privilege
to
choose
who
will
be
hired
and
who
will
be
denied
employment.
Doctrine:
Where
such
transfer
of
ownership
is
in
good
faith,
the
transferee
is
under
no
legal
duty
to
absorb
the
transferor
employees
as
there
is
no
law
compelling
such
absorption.
The
most
that
the
transferee
may
do,
for
reasons
of
public
policy
and
social
justice,
is
to
give
preference
to
the
qualified
separated
employees
in
the
filling
of
Reiterated
in
Filipinas
Port
Services
v.
NLRC,
200
SCRA
773
(1991);
National
Union
Bank
Employees
v.
Lazaro,
156
SCRA
123
(1988);
First
Gen.
Marketing
Corp.
v.
NLRC,
223
SCRA
337
(1993).
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
for
the
differential
retirement
pay
of
an
employee
earned
by
him
when
he
was
still
under
the
employment
of
the
predecessor-in-interest.
Held:
NO.
Petitioner
cannot
be
held
liable
for
the
payment
of
the
retirement
pay
of
private
respondent
while
in
the
employ
of
DAMASTICOR.
It
is
the
latter
who
is
responsible
for
the
same
as
the
labor
contract
of
private
respondent
with
DAMASTICOR
is
in
personam
and
cannot
be
passed
on
to
the
petitioner.
Doctrine:
Unless
expressly
assumed,
labor
contracts
are
not
enforceable
against
a
transferee
of
an
enterprise,
labor
contracts
being
in
personam.
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)
NOTES
BY
RACHELLE
ANNE
GUTIERREZ
(UPDATED
APRIL
3,
2014)