NAME: CIELO S.

YUMUL (BSA301)

CASE DIGEST
GR NO. 97212
BENJAMIN YU vs. NATIONAL LABOR RELATIONS COMMISSION
June 30, 1993
FACTS:
Benjamin Yu was the former Assistant General Manager of “Jade Mountain products Company Limited”
(Jade Mountain). This company initially established as a result of the partnership between Lea Bendal and
Rhodora Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang as limited partners. The
company was enaged in the exploitation of marble deposits found on the land owned by a Cruz spouses.
As the Assistant General Manager, Benjamin Yu received as his monthly salary theamount of P4,000.00.
However, in reality, he only receives the half of it with the understanding with the original partners that the other
half shall be paid unto him when the company had its expansion abroad.
However, sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea Bendal and
Rhodora Bendal sold and transferred their interests in the partnership to private respondent Willy Co and to one
Emmanuel Zapanta. The limited partners likewise sold their interests to the former. The new partners retained
the name “Jade Mountain” Upon knowing of the incident, Benjamin Yu confronted Willy Co for his unpaid salary,
but the latter said that in view of the fact that the original partners had already sold their interests to them, it is
now dependent upon his discretion whether he should continue his employment or not. Also that the payment
of the original partners’ obligations rests upon his discretion. As a result, Benjamin Yu’s position as Assistant
General Manager was abolished by the new partners.
Upon appeal to the NLRC on illegal dismissal case, the latter stated that: “there was no law requiring the
new partnership to absorb the employees of the old partnership. Benjamin Yu, therefore, had not been illegally
dismissed by the new partnership which had simply declined to retain him in his former managerial position or
any other position.”
ISSUE:
Whether or not the change of partners in a partnership shall affect its obligations over the third person. Or, simply
stated, whether or not the new partners shall be liable to the obligation incurred by the old partners with regard
to third persons.
RULING:
Yes, the new partners of a partnership are liable for the obligations of the old partners to third persons, if
the new partners continue the business of the old partnership without winding up the old partnership's business
affairs.
This is based on Article 1840 of the Civil Code of the Philippines, which states:
Article 1840. When a new partnership continues the business of an old partnership without winding up
the old partnership's business affairs, the new partnership is liable for the debts of the old partnership.
This ruling protects third persons from being harmed by the change in ownership of a partnership.