Corral v. NLRC

G.R. No. 96795 (July 12, 1996)

Pepsi-Cola's illegal dismissal of Corral led to Supreme Court reinstatement, confirming successor liability.

Facts:

Antonio M. Corral, a yardman employed by Pepsi-Cola Distributors of the Philippines, Inc. (PCD), was dismissed from his position. He contested the legality of his dismissal, leading to a decision by the Supreme Court on May 11, 1993, which ruled that his dismissal was illegal. The Court ordered PCD to reinstate Corral to his former position without loss of seniority rights and to pay him three years' worth of back wages. PCD filed a motion for reconsideration, which was denied, and the judgment became final and executory on July 1, 1993.

Subsequently, a writ of execution was issued on November 16, 1993, but PCD did not comply. A notice of garnishment was served on PCD's depository bank, PNB, which refused to release the garnished amount, claiming that the account belonged to Pepsi-Cola Products Philippines, Inc. (PCPPI), a separate entity that had acquired PCD's assets and business in 1989. Corral argued that PCPPI, as the successor-in-interest to PCD, was liable for PCD's obligations, citing a precedent case.

PCPPI opposed Corral's motions, asserting that it was not a party to the original case and had not been given the opportunity to present evidence regarding its liability. The Labor Arbiter ruled in favor of Corral, ordering PCPPI to comply with the writ of execution. PCPPI then filed a motion to quash the writ, claiming it had not assumed PCD's liabilities and was entitled to due process.

The NLRC granted a temporary restraining order in favor of PCPPI, which led to further motions and petitions from both parties. Corral maintained that PCPPI was liable for PCD's obligations, while PCPPI reiterated its position as a distinct entity.

Legal Issues:

  1. Is PCPPI liable for the obligations incurred by PCD as its successor-in-interest?
  2. Did PCPPI receive due process in the proceedings concerning the enforcement of the writ of execution?

Arguments:

Petitioner (Corral):

  • PCPPI is liable for PCD's obligations based on the precedent set in the case of Pepsi Cola Bottling Co. v. NLRC, which established that a successor corporation can be held accountable for the liabilities of its predecessor.
  • During the proceedings, PCPPI's counsel consented to the issue of its liability being resolved, thus affording it due process.
  • The temporary restraining order issued by the NLRC had expired, allowing for the enforcement of the writ of execution.

Respondent (PCPPI):

  • PCPPI is a separate and distinct corporation from PCD and should not be held liable for PCD's obligations.
  • PCPPI was not a party to the original case and had not been given the opportunity to present evidence regarding its liability, thus claiming a violation of due process.
  • The arguments presented by Corral were based on a misapplication of the precedent case, as PCPPI was prepared to demonstrate its non-liability.

Court's Decision and Legal Reasoning:

The Supreme Court ruled in favor of Corral, affirming that PCPPI, as the successor-in-interest of PCD, is liable for the obligations incurred by PCD. The Court reiterated its previous rulings in similar cases, emphasizing that the mere existence of a new corporate entity does not absolve it of liabilities incurred by its predecessor, especially when the business operations continue under the new entity.

The Court rejected PCPPI's claims of being a separate entity, stating that the circumstances surrounding the transition from PCD to PCPPI did not eliminate the latter's responsibility for the former's illegal acts. The Court also noted that PCPPI's arguments regarding due process were unfounded, as it had been given the opportunity to contest the issue of liability during the proceedings.

The case was remanded to the NLRC for the execution of the Supreme Court's decision, ensuring that Corral would receive the relief ordered.

Significant Legal Principles Established:

  • A successor corporation can be held liable for the obligations of its predecessor if the business operations continue and there is no clear evidence of a complete severance of liabilities.
  • The principle of due process must be upheld, but a party cannot evade liability simply by claiming a lack of opportunity to present evidence if it has already participated in the proceedings.