Benjamin Yu Case

BENJAMIN YU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS COMPANY
LIMITED, WILLY CO, RHODORA D. BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN HO-
FU, respondents.
G.R. No. 97212 June 30, 1993
FACTS
Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble quarrying and
export business operated by a registered partnership with the firm name of "Jade Mountain Products
Company Limited" ("Jade Mountain") and was originally organized with the Bendals as general
partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, as limited partners.
Sometime in 1988, without his knowledge, the Bendals sold and transferred their interests in the
partnership and is constituted solely by Willy Co and Emmanuel Zapanta who continued to use the
old firm name of Jade Mountain, though they moved the firm's main office from Makati to
Mandaluyong, Metropolitan Manila. The actual operations of the business enterprise continued as
before. All the employees of the partnership continued working in the business, all, save petitioner
Benjamin Yu as it turned out.
Having learned of the transfer of the firm's main office, petitioner Benjamin Yu reported to the
Mandaluyong office for work and there met private respondent for the first time. Petitioner was
informed by the latter that he had bought the business from the original partners and that it was for
him to decide whether or not he was responsible for the obligations of the old partnership, including
petitioner's unpaid salaries. Petitioner was in fact not allowed to work anymore in the Jade Mountain
business enterprise.
Benjamin Yu filed a complaint for illegal dismissal against Jade Mountain, Mr. Willy Co and the other
private respondents. The partnership and Willy Co denied petitioner's charges, contending in the
main that Benjamin Yu was never hired as an employee by the present or new partnership.4
In due time, Labor Arbiter rendered a decision holding that petitioner had been illegally dismissed.
On appeal, the National Labor Relations Commission ("NLRC") reversed the decision of the Labor
Arbiter and dismissed petitioner's complaint. It held that the new partnership had not retained
petitioner Yu in his original position, and that there was no law requiring the new partnership to
absorb the employees of the old partnership.
Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari, asking us to set aside
and annul the Resolution of the NLRC.
The basic contention of petitioner is that the NLRC has overlooked the principle that a partnership
has a juridical personality separate and distinct from that of each of its members.
ISSUE
(1) Whether the partnership which had hired petitioner Yu had been extinguished and replaced by a
new partnerships composed of Willy Co and Emmanuel Zapanta;
(2) If indeed a new partnership had come into existence, whether petitioner Yu could nonetheless
assert his rights under his employment contract as against the new partnership.
RULING
(1) Yes. The applicable law in this connection is found in the Civil Code provisions relating to
partnerships. Article 1828 of the Civil Code provides as follows:
Art. 1828. The dissolution of a partnership is the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business. (Emphasis supplied)
The acquisition of 82% of the partnership interest by new partners, coupled with the retirement or
withdrawal of the partners who had originally owned such 82% interest, was enough to constitute a
new partnership.
the new partnership simply took over the business enterprise owned by the preceeding partnership,
and continued using the old name of Jade Mountain Products Company Limited, without winding up
the business affairs of the old partnership, paying off its debts, liquidating and distributing its net
assets, and then re-assembling the said assets or most of them and opening a new business
enterprise. What is important for present purposes is that, under the above described situation, not
only the retiring partners (Rhodora Bendal, et al.) but also the new partnership itself which continued
the business of the old, dissolved, one, are liable for the debts of the preceding partnership.
In Singson, et al. v. Isabela Saw Mill, et al,8 the Court held that under facts very similar to those in
the case at bar, a withdrawing partner remains liable to a third party creditor of the old partnership.9
(2) Yes. The liability of the new partnership, upon the other hand, in the set of circumstances
obtaining in the case at bar, is established in Article 1840 of the Civil Code
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the new Jade
Mountain which continued the business of the old one without liquidation of the partnership affairs.
Indeed, a creditor of the old Jade Mountain, like petitioner Benjamin Yu in respect of his claim for
unpaid wages, is entitled to priority vis-a-vis any claim of any retired or previous partner insofar as
such retired partner's interest in the dissolved partnership is concerned.
While the new Jade Mountain was entitled to decline to retain petitioner Benjamin Yu in its employ,
we consider that Benjamin Yu was very shabbily treated by the new partnership. The old partnership
certainly benefitted from the services of Benjamin Yu who previously ran the whole marble
quarrying, processing and exporting enterprise. His work constituted value-added to the business
itself
Nonetheless, the new Jade Mountain did not notify him of the change in ownership of the business,
the relocation of the main office of Jade Mountain from Makati to Mandaluyong and the assumption
by Mr. Willy Co of control of operations. The treatment (including the refusal to honor his claim for
unpaid wages) was so summary and cavalier as to amount to arbitrary, bad faith treatment, for which
the new Jade Mountain may legitimately be required to respond by paying moral damages.

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BENJAMIN YU, petitioner,

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