Case Digest: Zuellig Freight and Cargo Systems v. NLRC, 701 SCRA 561, July 22, 2013

  Corporation Law | Corporation Name

The mere change in the corporate name is not considered under the law as the creation of a new corporation; hence, the renamed corporation remains liable for the illegal dismissal of its employee separated under that guise. The renamed corporation remains liable for the illegal dismissal of its employees who were separated under the guise that a new corporation was created when the employer corporation was renamed. 

• Ronaldo V. San Miguel brought a complaint for unfair labor practice, illegal dismissal, non-payment of salaries and moral damages against petitioner Zuellig Freight and Cargo Systems, formerly known as Zeta Brokerage Corporation (Zeta) for his termination allegedly due to cessation of business operations.
• Labor Arbiter: Held that San Miguel had been illegally dismissed, that contrary to respondents’ claim that Zeta ceased operations and closed its business, there was merely a change of business name and primary purpose and upgrading of stocks of the corporation.
• NLRC: Affirmed the decision of the Labor Arbiter.
• CA: Dismissed the petition for certiorari.

WoN the closure of the business operation of Zeta had not been bona fide, thereby resulting in the illegal dismissal of San Miguel. YES

First of all, the outcome reached by the CA that the NLRC did not commit any grave abuse of discretion was borne out by the records of the case. We cannot undo such finding without petitioner making a clear demonstration to the Court now that the CA gravely erred in passing upon the petition for certiorari of petitioner.

Indeed, in a special civil action for certiorari brought against a court or quasi-judicial body with jurisdiction over a case, petitioner carries the burden of proving that the court or quasi-judicial body committed not a merely reversible error but a grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the impugned order. Showing mere abuse of discretion is not enough, for it is necessary to demonstrate that the abuse of discretion was grave. Grave abuse of discretion means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction. Under the circumstances, the CA committed no abuse of discretion, least of all grave, because its justifications were supported by the records and by the applicable laws and jurisprudence.

Secondly, it is worthy to point out that the Labor Arbiter, the NLRC, and the CA were united in concluding that the cessation of business by Zeta was not a bona fide closure to be regarded as a valid ground for the termination of employment of San Miguel within the ambit of Article 283 of the Labor Code. The provision pertinently reads:

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. x x x.

The unanimous conclusions of the CA, the NLRC and the Labor Arbiter, being in accord with law, were not tainted with any abuse of discretion, least of all grave, on the part of the NLRC. Verily, the amendments of the articles of incorporation of Zeta to change the corporate name to Zuellig Freight and Cargo Systems, Inc. did not produce the dissolution of the former as a corporation. For sure, the Corporation Code defined and delineated the different modes of dissolving a corporation, and amendment of the articles of incorporation was not one of such modes. The effect of the change of name was not a change of the corporate being, for, as well stated in Philippine First Insurance Co., Inc. v. Hartigan: "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."

The consequences, legal and otherwise, of the change of name were similarly dealt with in P.C. Javier & Sons, Inc. v. Court of Appeals, with the Court holding thusly:

From the foregoing documents, it cannot be denied that petitioner corporation was aware of First Summa Savings and Mortgage Bank’s change of corporate name to PAIC Savings and Mortgage Bank, Inc. Knowing fully well of such change, petitioner corporation has no valid reason not to pay because the IGLF loans were applied with and obtained from First Summa Savings and Mortgage Bank. First Summa Savings and Mortgage Bank and PAIC Savings and Mortgage Bank, Inc., are one and the same bank to which petitioner corporation is indebted. 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 to 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.

In short, Zeta and petitioner remained one and the same corporation. The change of name did not give petitioner the license to terminate employees of Zeta like San Miguel without just or authorized cause. The situation was not similar to that of an enterprise buying the business of another company where the purchasing company had no obligation to rehire terminated employees of the latter. Petitioner, despite its new name, was the mere continuation of Zeta's corporate being, and still held the obligation to honor all of Zeta's obligations, one of which was to respect San Miguel's security of tenure. The dismissal of San Miguel from employment on the pretext that petitioner, being a different corporation, had no obligation to accept him as its employee, was illegal and ineffectual.

And, lastly, the CA rightfully upheld the NLRC's affirmance of the grant of attorney's fees to San Miguel. Thereby, the NLRC did not commit any grave abuse of its discretion, considering that San Miguel had been compelled to litigate and to incur expenses to protect his rights and interest. In Producers Bank of the Philippines v. Court of Appeals, the Court ruled that attorney's fees could be awarded to a party whom an unjustified act of the other party compelled to litigate or to incur expenses to protect his interest. It was plain that petitioner's refusal to reinstate San Miguel with backwages and other benefits to which he had been legally entitled was unjustified, thereby entitling him to recover attorney's fees.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on November 6, 2002; and ORDERS petitioner to pay the costs of suit.