Title
Corral vs. National Labor Relations Commission
Case
G.R. No. 96795
Decision Date
Jul 12, 1996
A yardman, illegally dismissed, won reinstatement and backwages. PCPPI, as PCD's successor, was held liable for obligations despite claiming separate entity status. SC ruled in favor of due process and execution.
liabilities
obligations
illegal dismissal

Case Summary (G.R. No. 96795)

Factual Background: The Dismissal and the Final Judgment

The Supreme Court’s 11 May 1993 decision ordered petitioner’s reinstatement to his former position without loss of seniority rights and awarded three (3) years of backwages. After that decision became final and executory, petitioner pursued execution because PCD did not satisfy the judgment. The writ of execution was carried out through garnishment.

Petitioner later explained that on 25 July 1989, PCD transferred its assets and business to PCPPI. Invoking this alleged transfer, petitioner contended that PCPPI, as successor-in-interest, was liable for PCD’s obligations under the Supreme Court’s ruling. In the execution stage, petitioner sought the release of funds garnished from PNB, Cubao Branch, Quezon City, in the amount of P134,162.71. The bank refused to release the garnished amount on the ground that the garnished account belonged to PCPPI, which petitioner’s opponents argued was not a respondent in the labor case.

Execution Attempts and the Garnishment Issue

When no action was taken on the writ of execution, petitioner served a notice of garnishment on 15 March 1994 on PCD’s depository bank, the PNB Cubao Branch. The bank’s refusal set in motion additional labor proceedings. On 11 April 1994 and 25 May 1994, petitioner filed a motion and a supplemental motion with the Labor Arbiter to compel PCPPI to comply with the writ of execution.

Private respondents opposed petitioner’s efforts. They argued that PCPPI was not impleaded as a party and that it had not been given an opportunity to adduce evidence, hence the issuance and enforcement of the writ against PCPPI allegedly violated due process.

Labor Arbiter’s Order Directing Compliance by PCPPI

On 22 July 1994, Labor Arbiter Manuel R. Caday issued an order directing PCPPI to comply with the writ of execution and directing PNB Cubao Branch to release the garnished amount of P134,162.71. The Labor Arbiter relied heavily on the Supreme Court’s ruling in Pepsi-Cola Bottling Co. v. NLRC.

PCPPI then filed a Special Entry of Appearance With Motion to Quash Writ of Execution and Levy On Garnishment on 2 August 1994 through Atty. Luis Dado, praying that PCPPI be allowed to present evidence to prove that it had not assumed and could not be held liable for the obligations incurred by PCD.

Denial of the Motion to Quash and Related Orders

On 19 September 1994, Labor Arbiter Caday denied PCPPI’s motion for lack of merit. He reiterated the earlier order requiring PCPPI to reinstate petitioner to his former position and required PNB Cubao Branch to release the garnished amount. The Labor Arbiter also ordered the payment of petitioner’s salary starting March 1994.

PCPPI’s Petition for Injunction Before the NLRC and the Temporary Restraining Order

On 30 September 1994, PCPPI filed a Petition for Injunction with Application for Temporary Restraining Order before the NLRC, again on due process grounds, insisting that it was not afforded the opportunity to defend itself in the execution proceedings. On 26 October 1994, the NLRC granted PCPPI a temporary restraining order and directed Labor Arbiter Daniel C. Cueto to proceed with the reception of evidence for the application for a writ of injunction “speedily and objectively and in the best interest of due process.”

Petitioner later moved to lift the temporary restraining order on 29 March 1995, arguing that the temporary restraining order had expired and that no permanent injunction had been issued within the relevant timeframe. Petitioner alleged that the NLRC did not act, which prompted the present omnibus petition for relief from the Supreme Court. Petitioner requested the immediate execution of the Supreme Court’s 11 May 1993 decision and also asked that private respondents’ counsel be required to show cause why he should not be cited in contempt for disrespecting the Supreme Court decision.

The Parties’ Contentions: Successor Liability and Due Process

Petitioner anchored his position on four principal points. First, he maintained that PCPPI was liable as successor-in-interest of PCD for PCD’s obligations under the Supreme Court’s decision, relying on Pepsi Cola Bottling Co. v. NLRC. Second, he contended that PCPPI was afforded due process during the 9 June 1994 hearing because Atty. Luis Dado appeared on behalf of PCPPI, manifested consent to submit the issue of whether PCPPI was successor-in-interest for resolution, and thereby allowed the Labor Arbiter and the case to proceed on that issue. Third, petitioner asserted that the NLRC’s temporary restraining order had already expired, leaving no legal impediment to enforcement. Fourth, petitioner argued that PCPPI and its counsel employed tactics intended solely to delay the administration of justice.

PCPPI countered that it was a separate and distinct corporation from PCD and was therefore free from PCD’s liabilities. It argued that the decision in Pepsi Cola Bottling Co. v. NLRC was inapplicable and insisted it was ready to present evidence to show it had not assumed liability for PCD’s obligations. Most importantly for due process, PCPPI argued that it was never made a party-respondent, and thus it claimed that due process required it to be given an opportunity to present its side.

Supreme Court’s Framing of the Core Issue

The Court recognized that the crucial matter was whether PCPPI could be made to answer for the obligations incurred by PCD. It limited its discussion to that issue, as the petition sought enforcement of the earlier final and executory labor judgment and the alleged impediment was tied to PCPPI’s claimed lack of liability and alleged deprivation of due process.

Application of Pepsi-Cola Jurisprudence: Rejection of PCPPI’s Defense

The Court held that PCPPI’s separate corporate identity defense had already been rejected in earlier cases involving the same parties’ corporate line. The Court referred to Pepsi-Cola Bottling Co. v. NLRC and Pepsi Cola Distributors of the Philippines, Inc. v. NLRC, stating that those cases were substantially similar to the instant facts.

In Pepsi-Cola Bottling Co. v. NLRC, a maintenance manager’s dismissal had been declared illegal, and the Labor Arbiter ordered reinstatement. Execution against the successor-in-interest was resisted after PCD allegedly closed down and the franchise holder was claimed to be a distinct entity. The Court explained that even if the previous corporation ceased operations and a new company acquired the franchise, it did not necessarily follow that no one could be held liable for the illegal acts committed by the earlier firm. The complaint had been filed when PCD was still in existence, and the Court stressed that Pepsi-Cola had not stopped doing business in the Philippines, that the same soft drink products continued to be sold, and that there was no evidence that the new entity was free from liabilities incurred by the former corporation.

In Pepsi Cola Distributors of the Philippines, Inc. v. NLRC, the Court addressed the illegal dismissal of a maintenance electrician whose reinstatement had been ordered pending PCD’s appeal. Reinstatement was allegedly thwarted by a sale of business interests to PCPPI. PCPPI denied liability on several grounds, including that it was the owner, manufacturer, and operator of properties and assets of PCD, that it had a separate legal personality, that enforcement of writs against it without due process was improper, and that the takeover was a supervening fact altering issues. PCPPI also asserted that reinstatement or payroll hire was no longer possible because the complainants had not been regular employees at the time of the takeover. The NLRC nonetheless ruled against PCD and PCPPI and ordered reinstatement, and the Supreme Court later rejected PCD’s attempt to dismiss again and to evade liability by removing the employee from the payroll after claiming that its business interests had been sold.

The Supreme Court in those prior cases categorically treated the successor-in-interest inquiry as already settled. It held that PCPPI, as PCD’s successor-in-interest, was answerable for the liabilities incurred by PCD and that PCPPI could not evade its responsibilities in the face of those pronouncements.

Supreme Court’s Disposition on Execution and the Continuation of Liability

Guided by those precedents, the Court in the instant petition ruled that

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