Case Summary (G.R. No. 184517)
Petitioners
SME Bank, Inc.; Abelardo P. Samson; Olga Samson; Aurelio Villaflor, Jr.; Eduardo M. Agustin, Jr.; Peregrin T. De Guzman.
Respondents
Elicerio Gaspar; Ricardo Gaspar Jr.; Fidel Espiritu; Simeon Espiritu Jr.; Liberato Mangoba; Eufemia Rosete.
Key Dates
June 2001 – SME Bank seeks buyer.
27 August–September 2001 – Employees tender resignation/retirement letters.
11 September 2001 – Share sale to Samson group (86.365% equity) consummated.
October 2001 – Reapplication by employees; limited rehiring; second resignation by Simeon Jr.
2002–2004 – Labor complaint and arbiter’s decision.
2006 – NLRC Decision and denial of reconsideration.
2008–2009 – Court of Appeals decisions and resolutions.
21 July 2014 – Supreme Court en banc decision.
Applicable Law
– 1987 Constitution, Art. XIII, Sec. 3 (security of tenure)
– Labor Code, Art. 279 (just causes), Art. 283 (authorized causes)
Factual Background
SME Bank, facing financial difficulties, agreed in mid-2001 to sell a controlling share block to Abelardo Samson on condition that agreed-upon employees be “terminated/retired.” Bank manager Simeon Espiritu convened employees and induced them to submit resignation or retirement letters with assurances of reemployment. Samson group acquired majority control on 11 September 2001, while appointing Villaflor as president; most employees were not rehired.
Procedural History
Respondent employees filed before the NLRC unfair labor practice and illegal dismissal claims against SME Bank, the Samson group, Agustin, and De Guzman. The labor arbiter found illegal dismissal only as to Agustin and De Guzman. The NLRC and later the Court of Appeals reversed, holding sellers and buyers jointly liable. Spouses Samson and Villaflor sought relief via separate Rule 65 petitions; on consolidating Rule 45 petitions, the Supreme Court en banc took up the appeal.
Issues Presented
- Whether the change in corporate equity constituted a just or authorized cause for mass termination of regular employees.
- Which parties are liable for illegal dismissal.
- Appropriate relief for abruptly separated employees.
Legal Analysis – Illegal Dismissal
Security of tenure under the Constitution prohibits dismissal of regular employees except for just causes (Art. 279) or authorized causes (Art. 283) properly observed. A mere shift in corporate shareholding is neither a just cause nor an authorized cause. The employees’ resignation and retirement letters were executed under false pretenses of guaranteed reemployment and are thus involuntary, amounting to illegal dismissal. Simeon Espiritu Jr.’s demotion and benefit reduction, followed by his second resignation, constitute constructive dismissal.
Distinction Between Stock Sale and Asset Sale
In asset sales, the buyer need not absorb employees but pays separation pay; in stock sales, the corporate identity remains unchanged and the corporation continues as employer. A change in equity composition does not justify termination of regular employees absent lawful cause. The Court expressly overruled its prior application in Manlimos (312 Phil. 178) to stock sales, reaffirming that new majority shareholders cannot legally dismiss employees without just or authorized cause.
Liability of Parties
– SME Bank, Inc.: As the employing entity before and after the share transfer, it remains liable for illegal dismissal.
– Eduardo M. Agustin, Jr. & Peregrin T. De Guzman: As corporate directors who acted in bad faith to effect employee separation, they are solidarily liable with the corporation.
– Abelardo & O
Case Syllabus (G.R. No. 184517)
Facts of the Case
- Respondent employees (Elicerio Gaspar, Ricardo Gaspar Jr., Eufemia Rosete, Fidel Espiritu, Simeon Espiritu Jr., Liberato Mangoba) were regular staff of SME Bank Inc.
- In June 2001, SME Bank faced financial difficulties; its principal shareholders and directors were Eduardo M. Agustin Jr. and Peregrin T. De Guzman
- Abelardo P. Samson proposed to acquire 86.365% of SME Bank’s shares; Letter Agreements required the “termination/retirement” of mutually agreed employees as precondition to sale
- General Manager Simeon Espiritu convened employees and secured resignation or retirement letters with promise of rehire by new management
- Resignation letters dated August 27, 2001 and, for Eufemia Rosete, a retirement letter in September 2001 were tendered and transmitted to Samson’s representative on September 11, 2001
- On September 11, 2001, Agustin and De Guzman sold controlling shares to spouses Abelardo and Olga Samson; Aurelio Villaflor Jr. was appointed bank president
- Except for Simeon Espiritu Jr., none of the employees were rehired; Simeon Espiritu Jr. resigned again in October 2001
- Employees demanded separation pay; their claims were denied by the Samson Group, prompting labor complaints for illegal dismissal, unfair labor practice, underpayment, and nonpayment of benefits
Procedural History
- Labor Arbiter (October 27, 2004): held employees illegally dismissed due to involuntary resignations; ordered Agustin and De Guzman to pay separation pay; dismissed claims against Samson Group
- NLRC Decision (May 8, 2006): ruled all respondents (Agustin, De Guzman, Samson Group) jointly and severally liable for separation pay, backwages, moral/exemplary damages, attorney’s fees; denied motions for reconsideration (November 28, 2006)
- Court of Appeals G.R. SP No. 97510 (March 13, 2008): denied petition of Agustin and De Guzman; affirmed NLRC decision and resolution; denied reconsideration (September 1, 2008)
- Court of Appeals G.R. SP No. 97942 (January 15, 2008): denied petition of Samson Group; affirmed NLRC decision and resolution; denied reconsideration (Feb