Cojuangco vs.

Sandigandayan

IMELDA O. COJUANGCO et al. v. SANDIGANBAYAN et al. 586 SCRA 790 (2009)

While the general rule is that the portion of a decision that becomes the subject of execution is that
ordained or decreed in the dis-positive part thereof, there are recognized exceptions to this rule,
one of which is where extensive and explicit discussion and settlement of the issue is found in the
body of the decision. The Republic of the Philippines (Republic) filed before the Sandiganbayan
a “Complaint for Reconveyance, Reversion, Accounting, Restitution and Damages,” of the alleged
ill-gotten wealth of the Marcoses which have been invested in the Philippine Long Distance
Telecommunication Corporation (PLDT). Ramon and Imelda Cojuangco (Spouses Cojuangco)
were subsequently impleaded. The Sandiganbayan dismissed the complaint with respect to the
recovery of the PLDT shares. The Republic appealed to the Supreme Court, and the same issued
a favorable ruling. The Republic thereafter filed with the Sandiganbayan a Motion for the Issuance
of a Writ of Execution, praying for the cancellation of the shares of stock registered in the name
of Prime Holdings and the annotation of the change of ownership on PTIC‘s Stock and Transfer
Book. The Republic further prayed for the issuance of an order for PTIC to account for all cash
and stock dividends declared by PLDT in favor of PTIC from 1986 up to the present including
compounded interests. The Sandiganbayan granted the same, except its prayer for accounting of
dividends. The Republic moved for reconsideration with respect to the denial of accounting of
dividends, which the Sandiganbayan granted. The Cojuangcos protested, alleging that the SC‘s
decision did not include in its dispositive portion the grant of dividends and interests accruing to
the shares adjudicated in favor of the Republic.

ISSUE:

Whether or not the Republic is entitled to the dividends and interests accruing to the shares despite
its non-inclusion in the dis-positive portion of the decision

HELD:

The Cojuangcos insist on a literal reading of the dis-positive portion of the SC‘s Decision,
excluding the dividends, interests, and earnings accruing to the shares of stock from being
accounted for and remitted. The SC, in directing the re-conveyance to the Republic of the 111,415
shares of PLDT stock owned by PTIC in the name of Prime Holdings, declared the Republic as
the owner of said shares and, necessarily, the dividends and interests accruing thereto. Ownership
is a relation in law by virtue of which a thing pertaining to one person is completely subjected to
his will in everything not prohibited by law or the concurrence with the rights of another. Its
traditional elements or attributes include jus utendi or the right to receive from the thing that it
produces. Contrary to the Cojuangcos‘ contention, while the general rule is that the portion of a
decision that becomes the subject of execution is that ordained or decreed in the dis-positive part
thereof, there are recognized exceptions to this rule, viz: (a) where there is ambiguity or
uncertainty, the body of the opinion may be referred to for purposes of construing the judgment,
because the dis-positive part of a decision must find support from the decision‘s ratio decidendi;
and (b) where extensive and explicit discussion and settlement of the issue is found in the body of
the decision. In the Decision, although the inclusion of the dividends, interests, and earnings of the
111,415 PTIC shares as belonging to the Republic was not mentioned in the dis-positive portion
of the Court‘s Decision, it is clear from its body that what was being adjudicated in favor of the
Republic was the whole block of shares and the fruits thereof, said shares having been found to be
part of the Marcoses‘ ill- gotten wealth, and therefore, public money

TOPIC: STOCKHOLDERS

G.R. No. 133969 January 26, 2000

NEMESIO GARCIA, petitioner,

vs. NICOLAS JOMOUAD, Ex-officio Provincial Sheriff of Cebu and SPOUSES JOSE ATINON & SALLY
ATINON, respondents.

Doctrine: All transfers not so entered on the books of the corporation are absolutely void; not because
they are without notice or fraudulent in law or fact, but because they are made so void by statute.

FACTS:

1. Jaime Dico used to be employed as the manager of Young Auto Supply, which was owned by the
petitioner, Nemesio Garcia. In order to assist Dico in entertaining the clients, Garcia “lent” his
Proprietary Ownership Certificate (POC) in Cebu Country Club so that Dico could enjoy the “signing
provileges” of its members.

2. Thereafter, Dico resigned from the Company and returned the POC. He then executed a Deed of
Transfer covering the POC in favor of Garcia. The Club was furnished with a copy of the said deed but
the transfer was not recorded in the books of the Club because Garcia failed to present proof of
payment of the requisite capital gains tax.

3. The Spouses Atinon, respondents, filed a collection case against Jaime Dico for the amount of
P900,000.00. After the judgment became final and executory, the respondent sheriff proceeded with its
execution and levied on the POC share of Dico in the Cebu Country Club, and scheduled it for public
auction.

4. Claiming ownership over the POC, Garcia filed an action for injunction to enjoin respondents from
proceeding with the auction.

5. The RTC dismissed the complaint of Garcia for injunction for lack of merit, and on appeal, such was
likewise affirmed by the CA. Garcia claimed the POC although in the name of Dico cannot be levied
upon on execution to satisfy the judgment debt because even prior to the institution of the case:

a. The spouses Atinon had knowledge that Dico already conveyed back the ownership of the subject,
certificate to petitioner;

b. Dico executed a deed of transfer, dated 18 November 1992, covering the subject certificate in favor of
petitioner and the Club was furnished with a copy thereof; and
c. Dico resigned as a proprietary member of the Club and his resignation was accepted by the board of
directors at their meeting on 4 May 1993.

ISSUE: "Whether a bona fide transfer of the shares of a corporation, not registered or noted in the
books of the corporation, is valid as against a subsequent lawful attachment of said shares, regardless of
whether the attaching creditor had actual notice of said transfer or not."

HELD: NO, such is not valid.

1. Sec. 63 of the Corporation Code reads:

Sec. 63 Certificate of stock and transfer of shares. — The capital stock of corporations shall be divided
into shares for which certificates signed by the president or vice-president, countersigned by the
secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by
delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall be valid, except as between the
parties, until the transfer is recorded in the books of the corporation showing the names of the parties
to the transaction, the date of the transfer, the number of the certificate or certificates and the
number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be transferable in the
books of the corporation.

2. The transfer of the subject certificate made by Dico to petitioner was not valid as to the spouses
Atinon, the judgment creditors, as the same still stood in the name of Dico, the judgment debtor, at the
time of the levy on execution. In addition, as correctly ruled by the CA, the entry in the minutes of the
meeting of the Club's board of directors noting the resignation of Dico as proprietary member thereof
does not constitute compliance with Section 63 of the Corporation Code. Said provision of law strictly
requires the recording of the transfer in the books of the corporation, and not elsewhere, to be valid as
against third parties. Accordingly, the CA committed no reversible error in rendering the assailed
decision.

DISPOSITIVE:

IN VIEW OF THE FOREGOING, the Court RESOLVED to DENY the petition.

Rural Bank of Lipa City vs CA Case Digest

The Rural Bank of Lipa City Inc., etc. vs. Court of Appeals

[GR 124535, 28 September 2001]

Facts: Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of Lipa City, executed a Deed of
Assignment, wherein he assigned his shares, as well as those of 8 other shareholders under his control
with a total of 10,467 shares, in favor of the stockholders of the Bank represented by its directors
Bernardo Bautista, Jaime Custodio and Octavio Katigbak. Sometime thereafter, Reynaldo Villanueva, Sr.
and his wife, Avelina, executed an Agreement wherein they acknowledged their indebtedness to the
Bank in the amount of P4,000,000.00, and stipulated that said debt will be paid out of the proceeds of
the sale of their real property described in the Agreement. At a meeting of the Board of Directors of the
Bank on 15 November 1993, the Villanueva spouses assured the Board that their debt would be paid on
or before December 31 of that same year; otherwise, the Bank would be entitled to liquidate their
shareholdings, including those under their control. In such an event, should the proceeds of the sale of
said shares fail to satisfy in full the obligation, the unpaid balance shall be secured by other collateral
sufficient therefor. When the Villanueva spouses failed to settle their obligation to the Bank on the due
date, the Board sent them a letter demanding: (1) the surrender of all the stock certificates issued to
them; and (2) the delivery of sufficient collateral to secure the balance of their debt amounting to
P3,346,898.54.

The Villanuevas ignored the bank's demands, whereupon their shares of stock were converted into
Treasury Stocks. Later, the Villanuevas, through their counsel, questioned the legality of the conversion
of their shares. On 15 January 1994, the stockholders of the Bank met to elect the new directors and set
of officers for the year 1994. The Villanuevas were not notified of said meeting. In a letter dated 19
January 1994, Atty. Amado Ignacio, counsel for the Villanueva spouses, questioned the legality of the
said stockholders' meeting and the validity of all the proceedings therein. In reply, the new set of
officers of the Bank informed Atty. Ignacio that the Villanuevas were no longer entitled to notice of the
said meeting since they had relinquished their rights as stockholders in favor of the Bank. Consequently,
the Villanueva spouses filed with the Securities and Exchange Commission (SEC), a petition for
annulment of the stockholders' meeting and election of directors and officers on 15 January 1994, with
damages and prayer for preliminary injunction (SEC Case 02-94-4683_. Joining them as co-petitioners
were Catalino Villanueva, Andres Gonzales, Aurora Lacerna, Celso Laygo, Edgardo Reyes, Alejandro
Tonogan, and Elena Usi. Named respondents were the newly-elected officers and directors of the Rural
Bank, namely: Bernardo Bautista, Jaime Custodio, Octavio Katigbak, Francisco Custodio and Juanita
Bautista. On 6 April 1994, the Villanuevas' application for the issuance of a writ of preliminary injunction
was denied by the SEC Hearing Officer on the ground of lack of sufficient basis for the issuance thereof.

However, a motion for reconsideration was granted on 16 December 1994, upon finding that since the
Villanuevas' have not disposed of their shares, whether voluntarily or involuntarily, they were still
stockholders entitled to notice of the annual stockholders' meeting was sustained by the SEC.
Accordingly, a writ of preliminary injunction was issued enjoining Bautista, et. al. from acting as directors
and officers of the bank. Thereafter, Bautista, et al. filed an urgent motion to quash the writ of
preliminary injunction, challenging the propriety of the said writ considering that they had not yet
received a copy of the order granting the application for the writ of preliminary injunction. With the
impending 1995 annual stockholders' meeting only 9 days away, the Villanuevas filed an Omnibus
Motion praying that the said meeting and election of officers scheduled on 14 January 1995 be
suspended or held in abeyance, and that the 1993 Board of Directors be allowed, in the meantime, to
act as such. 1 day before the scheduled stockholders meeting, the SEC Hearing Officer granted the
Omnibus Motion by issuing a temporary restraining order preventing Bautista, et al. from holding the
stockholders meeting and electing the board of directors and officers of the Bank. A petition for
Certiorari and Annulment with Damages was filed by the Rural Bank, its directors and officers before the
SEC en banc. On 7 June 1995, the SEC en banc denied the petition for certiorari. A subsequent motion
for reconsideration was likewise denied by the SEC en banc in a Resolution dated 29 September 1995. A
petition for review was filed before the Court of Appeals (CA-GR SP 38861), assailing the Order dated 7
June 1995 and the Resolution dated 29 September 1995 of the SEC en banc in SEC EB 440. The appellate
court upheld the ruling of the SEC. Bautista, et al.'s motion for reconsideration was likewise denied by
the Court of Appeals in an Order dated 29 March 1996. The bank, Bautista, et al. filed the instant
petition for review.

Issue: Whether there was valid transfer of the shares to the Bank.

Held: For a valid transfer of stocks, there must be strict compliance with the mode of transfer prescribed
by law. The requirements are: (a) There must be delivery of the stock certificate: (b) The certificate must
be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the
transfer; and (c) To be valid against third parties, the transfer must be recorded in the books of the
corporation. As it is, compliance with any of these requisites has not been clearly and sufficiently shown.
Still, while the assignment may be valid and binding on the bank, et al. and the Villanuevas, it does not
necessarily make the transfer effective. Consequently, the bank et al., as mere assignees, cannot enjoy
the status of a stockholder, cannot vote nor be voted for, and will not be entitled to dividends, insofar as
the assigned shares are concerned. Parenthetically, the Villanuevas cannot, as yet, be deprived of their
rights as stockholders, until and unless the issue of ownership and transfer of the shares in question is
resolved with finality.
Guy vs. Guy (680 SCRA 214 [2012])
Sundowner Dev’t Corp vs. Drilon 1989

FACTS:

 Mabuhay Hotel leased the premises belonging to Syjuco.

 However, due to non-payment of rentals, a case for ejectment was filed by Syjuco against
Mabuhay in the MTC court of Manila. Mabuhay Hotel offered to amicably settle by
surrendering the premises and to sell its assets and personal property to any interested
party.
 Syjuco offered the said premises for lease to Sundower. Mabuhay Hotel offered to sell its
assets and personal properties in the premises to Sundower to which Sundower agreed.
 The employees of Mabuhay Hotel subsequently sought labor rights against Sundower,
and the Secretary of Labor directed the latter to absorb the old employees of Mabuhay
Hotel which had completely ceased operations.

ISSUE: whether or not the purchaser of the assets of an employer corporation can be considered a
successor employer of the latter’s employees

HELD:

 The court overturned the Secretary and laid down the principle involved in assets only
transfer.
 The rule that unless expressly assumed, labor contracts such as employment contracts
and collective bargaining agreements are not enforceable against a transferee of an
enterprise, labor contracts being in personam, thus binding only between the parties. A
labor contract merely creates an action in personam and does not create any real right
which should be respected by third parties.

 As a general rule, there is no law requiring a bonafide purchaser of assets of a on-going

concern to absorb in its employ the employees of the latter. While it is true that petitioner
is using the leased property for the same type of business as that of respondent Mabuhay,
there can be no continuity of the business operations of the predecessor employer by the
successor employer as respondent Mabuhay had not retained control of the business.

 What is obvious is that the petitioner, by purchasing the assets of respondent Mabuhay
in the hotel premises, enabled Mabuhay to pay its obligations to its employees. There
being no employer-employee relationship between the petitioner and the Mabuhay
employees, the petition must fail.
  However, although the purchaser of the assets or enterprise is not legally bound to absorb
in its employ the employees of the seller of such assets or enterprise, the parties are liable
to the employees if the transaction between the parties is colored or clothes with bad
faith.

G.R. No. 178397 : October 20, 2010

PEÑAFRANCIA TOURS AND TRAVEL TRANSPORT, INC., Petitioner, v. JOSELITO P. SARMIENTO and
RICARDO S. CATIMBANG, Respondents.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure,
cra1aw

seeking the reversal of the Court of Appeals (CA) Decision2 dated August 31, 2006. cra1aw

Since October 1993, until his alleged termination on October 30, 2002, respondent Joselito Sarmiento
(Sarmiento) worked as a bus inspector of petitioner Peñafrancia Tours and Travel Transport, Inc.
(petitioner), earning a daily wage of P198.00. In his complaint3 for illegal dismissal filed on November 26,
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2002, Sarmiento prayed for his reinstatement, and charged petitioner with underpayment of wages; non-
payment of overtime, holiday pay, premium pay for holiday and rest day, service incentive leave pay,
13th month pay, and separation pay; unfair labor practice; damages; and attorney’s fees. Meanwhile,
respondent Ricardo Catimbang (Catimbang) also worked for petitioner as a bus inspector from February
1997 until his termination on October 30, 2002. He was also paid a daily wage of P198.00. He averred that
petitioner was guilty of union-busting, and prayed for reinstatement with payment of full backwages,
benefits, damages, and attorney’s fees.4 chan roblesv irt uallawl ibra ry

Both Sarmiento and Catimbang (respondents) averred that they were required to work seven (7) days a
week, and that they had no rest day and worked even during the holidays, except Good Friday, Christmas
Eve, and New Year’s Eve. Sometime in the first week of October 2002, they received notices of termination
on the ground of petitioner’s alleged irreversible business losses.

In the middle of October 2002, a meeting was called by petitioner’s President and General Manager,
Bonifacio Cu, wherein respondents were introduced to Alfredo Perez, the owner of ALPS Transportation, as
the new owner of petitioner, having allegedly bought the same. On October 30, 2002, respondents received
their last pay with a letter informing them that their application with the company had been held in
abeyance. Sarmiento was paid P26,730.00 as separation pay and P4,686.00 as 13th month pay; while
Catimbang was paid P17,820.00 as separation pay and P4,851.00 as 13th month pay. Respondents,
however, learned that, several days after their termination, Bonifacio Cu continued to operate petitioner bus
company.

Traversing the complaint, petitioner admitted that respondents were among its bus inspectors. It
asseverated, however, that due to severe business losses, petitioner made the painful decision to stop its
operation and sell the business enterprise to the Perez family of ALPS Transportation. It alleged that due
notice was given to the Department of Labor and Employment,5 and that all its employees were duly cra1aw

notified6 and were paid their corresponding separation pay, as well as their 13th month pay. The new
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owners maintained the business name of petitioner, and the management of petitioner was entrusted to the
new owners in October 2002, with Edilberto Perez7 as Vice-President for Finance and Operations.
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Subsequently, several memoranda were issued by Edilberto Perez in behalf of petitioner. Petitioner argued
that the matter of rehiring respondents rested on the sound discretion of its new owners, and the latter
could not be compelled to absorb petitioner’s former employees since the same was not part of the deal.
Petitioner alleged that respondents submitted their application for reemployment but, after evaluation, the
new owners opted not to hire respondents.

While respondents’ case for illegal dismissal was pending before the Labor Arbiter (LA), a notice8 was issued cra1aw

by Edilberto Perez to all employees of petitioner, stating that, effective February 11, 2003, the management
of the company shall revert to its former President, Bonifacio Cu. On February 28, 2003, Bonifacio Cu wrote
Alfredo Perez relative to the latter’s failure to comply with their agreement and the decision to rescind the
sale involving petitioner.9 Thereafter, sometime in March 2003, Bonifacio Cu entered into a transaction,
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denominated as a “Deed of Sale with Assignment of Franchise (By Way of Dation in Payment),” with
Southern Comfort Bus Co., Inc. (SCBC), represented by its President and General Manager, Willy
Deterala.10
chanrob lesvi rtua llawli bra ry

On July 31, 2003, the LA rendered a Joint Decision,11 the dispositive portion of which reads:
c ra1aw chanro blesvi rtua lawlib rary

WHEREFORE, finding no substantial evidence to support the action of the complainants for illegal dismissal,
the same is hereby ordered DISMISSED for lack of merit. Nonetheless, respondents PTTTI and Bonifacio L.
Cu are hereby ordered to pay complainants with their established service incentive leave pay, equivalent
to P2,750.00 each for three (3) years for 1999, 2000, and 2001.

All other claims are hereby DISMISSED for lack of merit.

SO ORDERED.

Aggrieved, respondents sought recourse from the National Labor Relations Commission (NLRC). On August
31, 2005, the NLRC rendered a decision12 in favor of respondents, finding that no sale of the business
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actually took place. Thus: chanroble svi rtualawl ib ra ry

WHEREFORE, as above-discussed, the appeal is given due course. Accordingly, the decision appealed from is
REVERSED and SET ASIDE and a NEW ONE ENTERED ordering the respondents to reinstate Joselito P.
Sarmiento and Ricardo Catimbang with full backwages. The amounts already received by complainants shall
be deducted from the awards they are entitled computed as follows: chan roble svirtualawl ibra ry

Backwages from day after date of dismissal (Nov. 1, 2002) to cut off date (August 30, 2005)

a. Salary: P198/day x 26 days/mo. x 34months = P175,032.00

b. 13th month pay P175,032 -:- 12 = 14,586.00

c. Service Incentive Leave Pay: P198 x 15 days = 2,970.00

P192,588.00

Joselito Sarmiento – P192,588.00

Less received – 31,416.00 (separation pay- P 26,730.00 13th mo. pay – 4,686.00)

P161,172.00

Ricardo Catimbang – P192,588.00

Less received – 22,671.00 (separation pay- P17,820.00 13th mo. pay – 4,851.00)

169,917.00

TOTAL P331, 089.00

==========

SO ORDERED.

Petitioner filed a motion for reconsideration, which the NLRC, however, denied in its Resolution13 dated c ra1aw

November 15, 2005. Undaunted, petitioner assailed the NLRC’s ruling before the CA on certiorari.

On August 31, 2006, the CA ruled in favor of respondents. It held that petitioner failed to establish its
allegation that it was suffering from business reverses. Likewise, the CA affirmed the NLRC’s findings that
petitioner did not actually sell its business to the Perez family and to SCBC. Accordingly, the CA disposed of
the case in this wise: chan roblesv irtualawli bra ry

WHEREFORE, premises considered, the instant PETITION FOR CERTIORARI is DISMISSED. Accordingly,
petitioner Peñafrancia Tours and Travel Transport, Inc. is hereby ordered to reinstate private respondents
Joselito Sarmiento and Ricardo S. Catimbang to their previous positions without loss of seniority rights and
to pay their full backwages from the time their actual compensation was withheld from them up to the time
of their actual reinstatement. The separation pay already received by private respondents Sarmiento and
Catimbang shall be deducted from the full backwages they are entitled to receive from petitioner PTTTI.

Let the entire record of the case be remanded to public respondent National Labor Relations Commission for
the proper computation of backwages.

SO ORDERED.14 chanroblesv irtuallawl ib rary

On September 26, 2006, petitioner filed a Motion for Reconsideration which the CA denied in its
Resolution15 dated May 21, 2007.
c ra1aw

Hence, this petition based on the sole issue of whether respondents were legally terminated from
employment by reason of the sale of the business enterprise and the consequent change or transfer of
ownership/management.16 chanrob lesvi rtua ll awlibra ry

Petitioner claims that a change of ownership in a business concern is not proscribed; that it is a right of an
employer, as management prerogative, to close his business and terminate the employment of his
employees as a consequence of such closure; that an innocent transferee of the business has no liability to
the employees for their continued employment; and that, based on its annual income tax return, it suffered
financial losses. Relying on the LA’s findings, petitioner avers that it sold the business in good faith, and that
respondents, as a result of said sale, were paid all the monetary benefits due them. Moreover, petitioner
manifests that there was no compelling reason at that time, like a dispute and/or rift existing among the
parties, to warrant the termination of respondents’ employment. It also claims that, while it had a perfected
contract of sale with the Perez family, the same was not consummated, and that the Perez family did not
pay the amount of P60 Million as agreed upon and as claimed by respondents.17 cha nro blesvi rtu allawli bra ry

On the other hand, respondents argue that petitioner raised questions of fact that are beyond the province
of a petition for review under Rule 45 – questions which were already passed upon by both the NLRC and
the CA. Further, respondents aver that Bonifacio Cu continues to run the business of petitioner, particularly
through his son, Bonifacio Bryan Cu, as Operations Manager, and his nephew, Antonio Cu, as Corporate
Secretary; that petitioner continues to operate the business under the same name, franchises, routes, and
circumstances as before the alleged sale; that while petitioner has the prerogative of closing its business,
the same must not be tainted with bad faith; and that petitioner failed to establish that it was indeed under
severe financial constraints, and that the respective sales to the Perez family and to SCBC were not at all
fictitious.18
cha nrob lesvi rtua llawli bra ry

The petition is bereft of merit.

Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of
business operations and/or an actual locking-up of the doors of the establishment, usually due to financial
losses. Closure of business, as an authorized cause for termination of employment, aims to prevent further
financial drain upon an employer who can no longer pay his employees since business has already
stopped.19 chan roble svi rtual lawlib rary

Closure or cessation of operation of the establishment is an authorized cause for terminating an employee,
as provided in Article 283 of the Labor Code, to wit: chanrob lesvi rtua lawlib rary

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers
and the Department of Labor and Employment at least one (1) month before the intended date thereof. x x
x. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

On this ground, petitioner terminated the employment of respondents. However, what petitioner apparently
made was a transfer of ownership. It is true that, as invoked by petitioner, in Manlimos, et al. v. NLRC, et
al.,20 we held that a change of ownership in a business concern is not proscribed by law. Lest petitioner
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forget, however, we also held therein that the sale or disposition must be motivated by good faith as a
condition for exemption from liability.21 Thus, where the charge of ownership is done in bad faith, or is used
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to defeat the rights of labor, the successor-employer is deemed to have absorbed the employees and is held
liable for the transgressions of his or her predecessor.22 chan roble svirtua llawli bra ry

But, in this case, there is no successor-employer because there was no actual change of ownership. We
sustain the uniform factual finding of both the NLRC and the CA that no actual sale transpired and, as such,
there is no closure or cessation of business that can serve as an authorized cause for the dismissal of
respondents. Notable in this regard are the following observations of the CA: chanroble svi rtualaw lib rary

Petitioner PTTTI sent notices of termination to private respondents Sarmiento and Catimbang on the alleged
ground that it would cease operations effective 30 October 2002 due to business reverses and it would
eventually sell the same to another company. (Id. at p. 77) However, the records explicitly show that it
(PTTTI) failed to establish its allegation that it was suffering from business reverses. Neither was there proof
that indeed a sale was made and executed on 01 October 2002 involving the company’s assets in favor of
ALPS Transportation owned by the Perez family. It did not present any documentary evidence to support its
claim that it sold the same to ALPS Transportation. On the contrary, it (PTTTI) continuously operates under
the same name, franchises and routes and under the same circumstances as before the alleged sale. It
(PTTTI) tried to convince us that it is under a new management, by presenting series of memoranda where
the signatory thereon is Edelberto E. Perez, VP-Finance/Operations (Id. at pp. 78-83). To us, the series of
memoranda do not conclusively show that there had been a sale in favor of ALPS Transportation. And
considering that there was no sale which transpired, we also find no basis for the rescission thereof. The
letter dated 19 March 2003 addressed to its employees, informing the latter that it had rescinded its sale to
ALPS Transportation and thus, there is a change of management, ownership and operation of the company
and it (PTTTI) is intending to sell the company to Southern Comfort Bus Co., Inc. headed by Mr. Willy D.
Deterala (Id. at p. 89) could not convince us that there was actually a rescission of sale. If indeed there was
sale and a consequent rescission thereof which transpired, why is it that the ALPS Transportation did not
give much a fight when the contract of sale was unilaterally rescinded by Bonifacio Cu who signed as
President/General Manager of petitioner PTTTI in a letter dated 28 February 2003. It is quite unconceivable
for a company like ALPS Transportation which had already parted a considerable sum not to question the
rescission undertaken by petitioner PTTTI. This only confirms the public respondent NLRC’s finding, that the
sale was indeed a sham, designed to circumvent the law on the rights of the workers. There is thus, no basis
for us to believe that there was a consequent rescission of the alleged sale made by petitioner PTTTI in favor
of ALPS Transportation.

Corollarily, we opine that the alleged second sale made by petitioner PTTTI, this time in favor of Southern
Comfort Bus Co., Inc. represented by one Willy D. Deter[a] la is also simulated considering that the ten
million pesos consideration is unbelievably too small for thirty five (35) aircon buses including its franchise
and facilities thereon. It is quite an illogical move for the company to have allegedly rescinded the previous
sale involving a higher consideration of sixty million pesos (P60,000,000.00) made in favor of ALPS
Transportation and to resell the same, this time just for a measly amount of ten million pesos
(P10,000,000.00). Additionally, the observation of private respondents Sarmiento and Catimbang is quite
impressive when they claimed that the Southern Comfort Bus Co., Inc., presided by one Willy D. Deterala is
a dummy corporation since it has not operated any single bus under its name, even prior to the sale and up
to the present. In fact, its principal business office at No. 4 Cathedral St., Ateneo Avenue 4400 NagaCity is
not even known. Suffice it to stress, these private respondents’ allegations/observations have not at all been
refuted nor controverted by petitioner PTTTI.23 chanrob lesvi rtua llawli bra ry

It is likewise evident that, even in the petition before this Court, Bonifacio Bryan Cu signed the Verification
and Certification of Non-Forum Shopping24 and Antonio Cu signed the Secretary’s Certificate.25 The fact
cra1aw c ra1aw

remains that the Cu family continues to operate petitioner’s business. Despite the alleged recent sale to
SCBC, represented by Willy Deterala, petitioner failed to refute the allegations of respondents that the Cu
family still continues to own and operate petitioner, or even to show that Willy Deterala is actually in charge
of petitioner’s business. Petitioner did not confront this issue head-on, and its failure to do so is fatal to its
cause. Petitioner having failed to discharge its burden of submitting sufficient and convincing evidence
required by law, we hold that respondents were illegally dismissed.

Finally, the CA affirmed the ruling of the NLRC and adopted as its own the latter's factual findings. Long-
established is the doctrine that findings of fact of quasi-judicial bodies like the NLRC are accorded respect,
even finality, if supported by substantial evidence. When passed upon and upheld by the CA, they are
binding and conclusive upon this Court and will not normally be disturbed. Though this doctrine is not
without exceptions, the Court finds that none are applicable to the present case.26 chanro blesvi rtua ll awlibra ry

All told, we find no reversible error to justify disturbing, much less, reversing the assailed CA Decision.

WHEREFORE, the instant petition is DENIED, and the Court of Appeals Decision dated August 31, 2006 is
hereby AFFIRMED. Costs against petitioner

SME BANK v. De Guzman et al.

FACTS:

Security of tenure is a constitutionally guaranteed right.1 Employees may not be terminated from their
regular employment except for just or authorized causes under the Labor Code2 and other pertinent
laws. A mere change in the equity composition of a corporation is neither a just nor an authorized cause
that would legally permit the dismissal of the corporation’s employees en masse.

Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr. (Ricardo), Eufemia Rosete
(Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato Mangoba (Liberato) were
employees of Small and Medium Enterprise Bank, Incorporated (SME Bank). Originally, the principal
shareholders and corporate directors of the bank were Eduardo M. Agustin, Jr. (Agustin) and Peregrin de
Guzman, Jr. (De Guzman). SME Bank experienced financial difficulties. To remedy the situation, the bank
officials proposed its sale to Abelardo Samson (Samson).

negotiations ensued, and a formal offer was made to Samson. Through his attorney-in-fact, Tomas S.
Gomez IV, Samson then sent formal letters (Letter Agreements) to Agustin and De Guzman, demanding
the following as preconditions for the sale of SME Bank’s shares of stock: 1. You shall guarantee the
peaceful turn over of all assets as well as the peaceful transition of management of the bank and shall
terminate/retire the employees we mutually agree upon, upon transfer of shares in favor of our group’s
nominees; 2. All retirement benefits, if any of the above officers/stockholders/board of directors are
hereby waived upon cosummation [sic] of the above sale. The retirement benefits of the rank and file
employees including the managers shall be honored by the new management in accordance with B.R.
No. 10, S. 1997

Agustin and De Guzman accepted the terms and conditions proposed by Samson and signed the
conforme portion of the Letter Agreements.Simeon Espiritu (Espiritu), then the general manager of SME
Bank, held a meeting with all the employees of the head office and of the Talavera and Muñ oz branches
of SME Bank and persuaded them to tender their resignations,11 with the promise that they would be
rehired upon reapplication. His directive was allegedly done at the behest of petitioner Olga Samson.
Relying on their representation All of them tendered their resignation , Eufemia first tendered
resignation then after tendered retirement.

Agustin and De Guzman signified their conformity to the Letter Agreements and sold 86.365% of the
shares of stock of SME Bank to spouses Abelardo and Olga Samson. Spouses Samson then became the
principal shareholders of SME Bank, while Aurelio Villaflor, Jr. was appointed bank president. As it
turned out, respondent employees, except for Simeon, Jr.,26 were not rehired. After a month in service,
Simeon, Jr. again resigned Respondent-employees demanded the payment of their respective
separation pays, but their requests were denied.

Aggrieved by the loss of their jobs, respondent employees filed a Complaint before the National Labor
Relations Commission (NLRC)– Regional Arbitration Branch No. III and sued SME Bank, spouses Abelardo
and Olga Samson and Aurelio Villaflor (the Samson Group) for unfair labor practice; illegal dismissal;
illegal deductions; underpayment; and nonpayment of allowances, separation pay and 13th month pay.
Subsequently, they amended their Complaint to include Agustin and De Guzman as respondents to the
case.

the labor arbiter ruled that the buyer of an enterprise is not bound to absorb its employees, unless
there is an express stipulation to the contrary. However, he also found that respondent employees were
illegally dismissed, because they had involuntarily executed their resignation letters after relying on
representations that they would be given their separation benefits and rehired by the new
management. Accordingly, the labor arbiter decided the case against Agustin and De Guzman, but
dismissed the Complaint against the Samson Group. Thus ordering Agustin and De Guzman to pay
separation pay to the employees.

respondent employees, Agustin and De Guzman brought separate appeals to the NLRC. Respondent
employees questioned the labor arbiter’s failure to award backwages, while Agustin and De Guzman
contended that they should not be held liable for the payment of the employees’ claims. The NLRC
found that there was only a mere transfer of shares – and therefore, a mere change of management –
from Agustin and De Guzman to the Samson Group. As the change of management was not a valid
ground to terminate respondent bank employees, the NLRC ruled that they had indeed been illegally
dismissed. It further ruled that Agustin, De Guzman and the Samson Group should be held jointly and
severally liable for the employees’ separation pay and backwages, CA affirming NLRC decision. Hence
this appeal.

ISSUE: WON respondent employees were illegally dismissed and, if so, which of the parties are liable for
the claims of the employees and the extent of the reliefs that may be awarded to these employees.?

HELD: Petition was partially granted.

Petitioner bank also argues that, there being a transfer of the business establishment, the innocent
transferees no longer have any obligation to continue employing respondent employees,56 and that the
most that they can do is to give preference to the qualified separated employees; hence, the employees
were validly dismissed. The argument is misleading and unmeritorious. Contrary to petitioner bank’s
argument, there was no transfer of the business establishment to speak of, but merely a change in the
new majority shareholders of the corporation.

There are two types of corporate acquisitions: asset sales and stock sales. In asset sales, the corporate
entity sells all or substantially all of its assets to another entity. In stock sales, the individual or corporate
shareholders sell a controlling block of stock to new or existing shareholders.

In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected employees, but
is liable for the payment of separation pay under the law.The buyer in good faith, on the other hand, is
not obliged to absorb the employees affected by the sale, nor is it liable for the payment of their claims.
The most that it may do, for reasons of public policy and social justice, is to give preference to the
qualified separated personnel of the selling firm.

In contrast with asset sales, in which the assets of the selling corporation are transferred to another
entity, the transaction in stock sales takes place at the shareholder level. Because the corporation
possesses a personality separate and distinct from that of its shareholders, a shift in the composition of
its shareholders will not affect its existence and continuity. Thus, notwithstanding the stock sale, the
corporation continues to be the employer of its people and continues to be liable for the payment of
their just claims. Furthermore, the corporation or its new majority shareholders are not entitled to
lawfully dismiss corporate employees absent a just or authorized cause.

In the case at bar, the Letter Agreements show that their main object is the acquisition by the Samson
Group of 86.365% of the shares of stock of SME Bank.66 Hence, this case involves a stock sale,
whereby the transferee acquires the controlling shares of stock of the corporation. Thus, following the
rule in stock sales, respondent employees may not be dismissed except for just or authorized causes
under the Labor Code.

The rule should be different in Manlimos, as this case involves a stock sale. It is error to even discuss
transfer of ownership of the business, as the business did not actually change hands. The transfer only
involved a change in the equity composition of the corporation. To reiterate, the employees are not
transferred to a new employer, but remain with the original corporate employer, notwithstanding an
equity shift in its majority shareholders. This being so, the employment status of the employees
should not have been affected by the stock sale. A change in the equity composition of the corporate
shareholders should not result in the automatic termination of the employment of the corporation’s
employees. Neither should it give the new majority shareholders the right to legally dismiss the
corporation’s employees, absent a just or authorized cause.

The right to security of tenure guarantees the right of employees to continue in their employment
absent a just or authorized cause for termination. This guarantee proscribes a situation in which the
corporation procures the severance of the employment of its employees – who patently still desire to
work for the corporation – only because new majority stockholders and a new management have come
into the picture. This situation is a clear circumvention of the employees’ constitutionally guaranteed
right to security of tenure, an act that cannot be countenanced by this Court.

We therefore see it fit to expressly reverse our ruling in Manlimos insofar as it upheld that, in a stock
sale, the buyer in good faith has no obligation to retain the employees of the selling corporation; and
that the dismissal of the affected employees is lawful, even absent a just or authorized cause.