GR 85939; (April, 1991) (Digest)
G.R. No. 85939 and G.R. No. 86968; April 19, 1991
NEW PANGASINAN REVIEW, INC. vs. NATIONAL LABOR RELATIONS COMMISSION, et al.; and LABOR ARBITER RICARDO N. OLAIREZ, et al. vs. JUDGE TEODORO J. SISON, et al.
FACTS
Private respondents were employees of Pangasinan Review, Inc. (PRI), whose corporate life expired on October 27, 1982. Despite this, PRI continued operations until advised by the SEC in 1985 to liquidate. The PRI Board then passed a resolution to liquidate and, on April 29, 1985, resolved to convey PRI’s corporate properties to the newly incorporated New Pangasinan Review, Inc. (NPRI). A Deed of Assignment was executed, transferring assets to NPRI in exchange for shares and, crucially, NPRI undertook to pay all liabilities and obligations of the defunct PRI. The employees filed a complaint for separation pay due to the cessation of PRI’s operations, which was granted by the Labor Arbiter and affirmed by the NLRC.
ISSUE
The primary issue is whether NPRI can be held liable for the separation pay awarded to the employees of the defunct PRI.
RULING
Yes, NPRI is liable. The Supreme Court affirmed the NLRC decision. The legal logic rests on two grounds. First, under Article 110 of the Labor Code, workers enjoy first preference regarding unpaid wages and monetary claims in the event of liquidation of an employer’s business. The cessation of PRI’s operations due to the expiration of its corporate term constituted a liquidation scenario, entitling the employees to separation pay as a priority credit.
Second, and decisively, NPRI assumed the liability by its own contractual undertaking. The Resolution and Deed of Assignment explicitly stated that NPRI would “pay all the liabilities and obligations of the defunct Pangasinan Review, Inc. of every kind” and that “claims against the defunct Pangasinan Review, Inc. may be presented as long as the New Pangasinan Review, Inc. exists.” By virtue of this clear assumption of debt and being the successor-employer that took over PRI’s operations and assets, NPRI became legally obligated to satisfy the judgment. The Court also found no denial of due process, as NPRI was notified of proceedings but refused to participate. Consequently, the NLRC’s order for satisfaction of the judgment against NPRI and the remaining assets of PRI was upheld. The Court dismissed the petition in G.R. No. 85939 and granted the petition in G.R. No. 86968, dismissing the civil case filed in the RTC for lack of jurisdiction over a labor matter.