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COMMERCIAL LAW REVIEW Batch 2

G.R. No. 170783 June 18, 2012

Zuellig Freight and Cargo Systems vs. NLRC and Ronaldo V. San Miguel, G.R. No. 157900, July
22, 2013 (SALMA)

FACTS:
Pursuant to the by-laws of Legaspi Towers 300, Inc., petitioners Lilia Marquinez Palanca, Rosanna D.
Imai, Gloria Domingo and Ray Vincent, the incumbent Board of Directors, set the annual meeting of
the members of the condominium corporation and the election of the new Board of Directors at the
lobby of Legaspi Towers 300, Inc. The Committee on Elections of Legaspi Towers 300, Inc., however,
found most of the proxy votes, at its face value, irregular, thus, questionable; and for lack of time to
authenticate the same, petitioners adjourned the meeting for lack of quorum. However, the group of
respondents challenged the adjournment of the meeting. Despite petitioners' insistence that no quorum
was obtained during the annual meeting held on April 2, 2004, respondents pushed through with the
scheduled election and were elected as the new Board of Directors and officers of Legaspi Towers 300,
Inc. and subsequently submitted a General Information Sheet to the Securities and Exchange
Commission (SEC).

Facts: This is a petition appealing the decision of CA, whereby it dismissed its petition for certiorari
and upheld the adverse decision of the NLRC finding San Miguel to have been illegally dismissed. San
Miguel, employed as checker/custom representative, brought a complaint for unfair labor practice,
illegal dismissal, non-payment of salaries and moral damages against petitioner, formerly known as
Zeta Brokerage Corporation (Zeta). He contended that amendments of the articles of incorporation of
Zeta were for the purpose of changing the corporate name, broadening the primary functions, and
increasing the capital stock; and that such amendments could not mean that Zeta had been thereby
dissolved. Petitioner countered that San Miguels termination from Zeta had been for a cause
authorized by the Labor Code; that its non-acceptance of him had not been by any means irregular or
discriminatory; that its predecessor-in-interest had complied with the requirements for termination due
to the cessation of business operations and that it had no obligation to employ San Miguel in the
exercise of its valid management prerogative.
NLRC and CA rendered its decision holding San Miguel to have been illegally dismissed ordering
Zuellig to pay San Miguel his back wages and Attorneys fees equivalent to ten percent (10%) of the
total award.
Issue: Whether or not the awarding of attorneys fees had basis in fact and in law.
Ruling: Yes, the court upheld the CA, NLRC and Labor Arbiter unanimous decision, where the
amendments of the articles of incorporation of Zeta to change the corporate name to Zuellig Freight
and Cargo Systems, Inc. did not produce the dissolution of the former as a corporation, therefore not
giving them the license to terminate employees without just or authorized cause and considering that
that San Miguel had been compelled to litigate and to incur expenses to protect his rights and interest
entitles him to recover attorneys fees.
In Producers Bank of the Philippines v. Court of Appeals, the Court ruled that attorneys fees could be
awarded to a party whom an unjustified act of the other party compelled to litigate or to incur expenses
to protect his interest.

LEGASPI TOWERS 300, vs. MUER, et al. (YAP)

On plaintiffs motion to admit amended complaint (to include Legaspi Towers 300, Inc. as plaintiff),the
RTC ruled denying the motion for being improper. Then, petitioners filed with the Court of Appeals
and held that Judge Antonio I. De Castro of the Regional Trial Court (RTC) of Manila, did not commit
grave abuse of discretion in issuing the Orders denying petitioners Motion to Admit Second Amended
Complaint and that petitioners the justified the inclusion of Legaspi Towers 300, Inc. as plaintiff by
invoking the doctrine of derivative suit.
Petitioners motion for reconsideration was denied by the Court of Appeals thereafter. Hence this
petition.
ISSUE: Whether or not Derivative Suit proper in this case.
RULING: The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of
Appeals. Derivative Suit is not applicable. Since it is the corporation that is the real party-ininterest in a derivative suit, then the reliefs prayed for must be for the benefit or interest of the
corporation.
When the reliefs prayed for do not pertain to the corporation, then it is an improper derivative suit. The
requisites for a derivative suit are as follows:
a) the party bringing suit should be a shareholder as of the time of the act or transaction complained of,
the number of his shares not being material;
b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors
for the appropriate relief but the latter has failed or refused to heed his plea; and
c) the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or
being caused to the corporation and not to the particular stockholder bringing the suit.
As stated by the Court of Appeals, petitioners complaint seek to nullify the said election, and to
protect and enforce their individual right to vote. The cause of action devolves on petitioners, not the
condominium corporation, which did not have the right to vote.
Hence, the complaint for nullification of the election is a direct action by petitioners, who were the

members of the Board of Directors of the corporation before the election, against respondents, who are
the newly-elected Board of Directors. Under the circumstances, the derivative suit filed by petitioners
in behalf of the condominium corporation in the Second Amended Complaint is improper.
Raul C. Cosare v. Broadcom Asia Inc. and Dante Arevalo (G.R. No. 201298, February 5, 2014)
(SANTOS)
The mere fact that an employee was a stockholder and an officer at the time he was illegally dismissed
will not necessarily make the case an intra-corporate dispute.
FACTS: Broadcom Asia Inc. (Broadcom) is engaged in the business of selling broadcast equipment
needed by television networks and production houses. One of its incorporators was Raul Cosare,
having been assigned 100 shares of stock.
Complainant claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television networks and
production houses. In December 2000, Arevalo set up the company Broadcom, still to continue the
business of trading communication and broadcast equipment. Cosare was named an incorporator of
Broadcom In October 2001, Cosare was promoted to the position of Assistant Vice President for
Sales (AVP for Sales) and Head of the Technical Coordination, having a monthly basic net salary and
average commissions of P18,000.00 and P37,000.00, respectively.
Thereafter, sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcoms Vice
President for Sales and thus, became Cosares immediate superior. On March 23, 2009, Cosare sent a
confidential memo to Arevalo to inform him of the following anomalies which were allegedly being
committed by Abiog against the company: (a) he failed to report to work on time, and would
immediately leave the office on the pretext of client visits; (b) he advised the clients of Broadcom to
purchase camera units from its competitors, and received commissions therefor; (c) he shared in the
under the-table dealings or confidential commissions which Broadcom extended to its clients
personnel and engineers; and (d) he expressed his complaints and disgust over Broadcoms
uncompetitive salaries and wages and delay in the payment of other benefits, even in the presence of
office staff. Cosare ended his memo by clarifying that he was not interested in Abiogs position, but
only wanted Arevalo to know of the irregularities for the corporations sake.
There appears to be no response from Defendant Arevalo regarding the above accusations.
Cosare claimed that he was instead called for a meeting by Arevalo on March 25, 2009, wherein he
was asked to tender his resignation in exchange for financial assistance in the amount of
P300,000.00. Cosare refused to comply with the directive, as signified in a letter dated March 26, 2009
which he sent to Arevalo.
Thereafter, on 30 March 2009, Complainant received a memo charging him with serious
misconduct and willful breach of trust and required him to respond within forty-eight (48) hours. The
memo was signed by Defendant Arevalo. The memo charging him of serious misconduct and willful
breach of trust and was, thus, suspended from having access to any and all company files/records and
use of company assets. He was likewise barred from entering the company premises and prevented
from retrieving his personal belongings. Aggrieved, Cosare filed a labor complaint against Broadcom
claiming that he was constructively dismissed from his employment.

The Labor Arbiter dismissed the complaint on the ground that Cosare failed to establish that he
was constructively dismissed. On appeal, the NLRC reversed the Labor Arbiters decision.
Broadcom assailed the NLRCs ruling, raising the new argument that the case involved an intracorporate controversy and thus, within the jurisdiction of the RTC and not of the Labor Arbiter.
The CA granted Broadcoms petition and agreed that the case involved an intra-corporate
controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the exclusive
jurisdiction of the RTC. The CA found that Cosare was indeed a stockholder of Broadcom, and that he
was listed as one of the directors. Moreover, he held the position of AVP for Sales which is listed as a
corporate office
ISSUE:
1.

WON there was an intra-corporate controversy.

2.

WON there was constructive dismissal.

RULING:
1. NO. The Supreme Court reversed the CA and explained the definition of corporate officers for
the purpose of identifying an intra-corporate controversy. Citing Garcia v. Eastern Telecommunications
Philippines Inc. (G.R. No. 173115, April 16, 2009), the Court said that corporate officers, in the
context of PD 902-A, are those officers of the corporation who are given that character by the
Corporation Code or by the corporations by-laws. The Court further held that an office is created by
the charter of the corporation and the officer is elected by the directors and stockholders of the
corporation.
Thus, the Court explained that two circumstances must concur in order for an individual to be
considered a corporate officer, namely: (1) the creation of the position is under the corporations bylaws; and (2) the election of the officer is by the directors or stockholders. It is only when the officer
claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed
an intra-corporate dispute which falls within the jurisdiction of the trial courts.
In Cosare, Broadcom failed to sufficiently establish that the position of AVP for Sales was
created by virtue of an act of its board of directors, and that Cosare was specifically elected or
appointed to such position by the directors.
Considering that the dispute particularly relates to Cosares rights and obligations as a regular
officer of Broadcom, instead of a stockholder of the corporation, the controversy cannot be deemed
intra-corporate, the Court concluded.
2. Defendant Corporation and Individual Arevalo are jointly and solidarily liable. Constructive
and illegal dismissal were present. Constructive dismissal occurs when there is cessation of work
because continued employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee leaving the latter with no other option but to quit.

Citing jurisprudence, the test of constructive dismissal is whether a reasonable person in the
employees position would have felt compelled to give up his position under the circumstances. It is an
act amounting to dismissal but is made to appear as if it were not. Constructive dismissal is therefore a
dismissal in disguise. The law recognizes and resolves this situation in favor of employees in order to
protect their rights and interests from the coercive acts of the employer.
Based on the records, [defendants] already rejected Cosares continued involvement with the
company. Even their refusal to accept the explanation which Cosare tried to tender on April 2, 2009
further evidenced the resolve to deny Cosare of the opportunity to be heard prior to any decision on the
termination of his employment. The [defendants] allegedly refused acceptance of the explanation as it
was filed beyond the mere 48-hour period which they granted to Cosare under the memo dated March
30, 2009. However, even this limitation was a flaw in the memo or notice to explain which only further
signified the [defendants] discrimination, disdain and insensibility towards Cosare, apparently
resorted to by the [defendants] in order to deny their employee of the opportunity to fully explain his
defenses and ultimately, retain his employment.

pay or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to

the employee leaving the latter with no other option but to quit.
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION vs. RICARDO R.
COROS, GR 157802, October 13, 2010 (BALUYOT)
FACTS: After his dismissal by Matling as its Vice President for Finance and Administration, the
respondent filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal against
Matling and some of its corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch
XII, Iligan City.
The petitioners moved to dismiss the complaint, raising the ground, among others, that the complaint
pertained to the jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy
being intra-corporate inasmuch as the respondent was a member of Matlings Board of Directors aside
from being its Vice-President for Finance and Administration prior to his termination.

Evidently, defendants were already resolute on a severance of their working relationship with Cosare,
notwithstanding the facts which could have been established by his explanations and the respondents
full investigation on the matter. In addition to this, the fact that no further investigation and final
disposition appeared to have been made by the respondents on Cosares case only negated the claim
that they actually intended to first look into the matter before making a final determination as to the
guilt or innocence of their employee. This also manifested from the fact that even before Cosare was
required to present his side on the charges of serious misconduct and willful breach of trust, he was
summoned to Arevalos office and was asked to tender his immediate resignation in exchange for
financial assistance.

The respondent opposed the petitioners motion to dismiss, insisting that his status as a member of
Matlings Board of Directors was doubtful, considering that he had not been formally elected as such;
that he did not own a single share of stock in Matling, considering that he had been made to sign in
blank an undated indorsement of the certificate of stock he had been given in 1992; that Matling had
taken back and retained the certificate of stock in its custody; and that even assuming that he had been
a Director of Matling, he had been removed as the Vice President for Finance and Administration, not
as a Director, a fact that the notice of his termination dated April 10, 2000 showed.

As for abandonment, there is no merit to the claim. Abandonment is the deliberate and unjustified
refusal of an employee to resume his employment. To constitute abandonment of work, two elements
must concur: (1) the employee must have failed to report for work or must have been absent without
valid or justifiable reason; and (2) there must have been a clear intention on the part of the employee to
sever the employer-employee relationship manifested by some overt act.

Labor Arbiter: Granted the petitioners motion to dismiss. It ruled that the respondent was a corporate
officer because he was occupying the position of Vice President for Finance and Administration and at
the same time was a Member of the Board of Directors of Matling; and that, consequently, his removal
was a corporate act of Matling and the controversy resulting from such removal was under the
jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of Presidential Decree No. 902.

Here, complainants failure to report to work beginning April 1, 2009 was neither voluntary nor
indicative of an intention to sever his employment with Broadcom. It was illogical to be requiring him
to report for work, and imputing fault when he failed to do so after he was specifically denied access to
all of the companys assets.

NLRC: The NLRC set aside the dismissal, concluding that the respondents complaint for illegal
dismissal was properly cognizable by the LA, not by the SEC, because he was not a corporate officer
by virtue of his position in Matling, albeit high ranking and managerial, not being among the positions
listed in Matlings Constitution and By-Laws.

As there is constructive dismissal in this case, an illegally or constructively dismissed employee is

entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and
(2) backwages. The award of exemplary damages was also justified given the NLRCs finding that the
respondents acted in bad faith and in a wanton, oppressive and malevolent manner when they
dismissed Cosare. It is also by reason of such bad faith that Arevalo was correctly declared solidarily
liable for the monetary awards.

The petitioners sought reconsideration, reiterating that the respondent, being a member of the Board of
Directors, was a corporate officer whose removal was not within the LAs jurisdiction.

Constructive dismissal occurs when there is cessation of work because continued employment is
rendered impossible, unreasonable, or unlikely as when there is a demotion in rank or diminution in

Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for reconsideration.
CA: Dismissed the petition for certiorari.
For a position to be considered as a corporate office, or, for that matter, for one to be considered as a
corporate officer, the position must, if not listed in the by-laws, have been created by the corporation's

board of directors, and the occupant thereof appointed or elected by the same board of directors or
stockholders. This is the implication of the ruling in Tabang v. National Labor Relations Commission,
which reads:

Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be
considered as a corporate office. Thus, the creation of an office pursuant to or under a By-Law
enabling provision is not enough to make a position a corporate office.

"The president, vice president, secretary and treasurer are commonly regarded as the principal or
executive officers of a corporation, and modern corporation statutes usually designate them as the
officers of the corporation. However, other offices are sometimes created by the charter or by-laws of a
corporation, or the board of directors may be empowered under the by-laws of a corporation to create
additional offices as may be necessary.

Pursuant to Section 25 of the Corporation Code, whoever are the corporate officers enumerated in the
by-laws are the exclusive Officers of the corporation and the Board has no power to create other
Offices without amending first the corporate By-laws. However, the Board may create appointive
positions other than the positions of corporate Officers, but the persons occupying such positions
are not considered as corporate officers within the meaning of Section 25 of the Corporation
Code and are not empowered to exercise the functions of the corporate Officers, except those functions
lawfully delegated to them. Their functions and duties are to be determined by the Board of
Directors/Trustees.

It has been held that an 'office' is created by the charter of the corporation and the officer is elected by
the directors or stockholders. On the other hand, an 'employee' usually occupies no office and generally
is employed not by action of the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such employee."
The CA denied the petitioners motion for reconsideration on April 2, 2003.
ISSUE:
(1) Whether or not the respondent was a corporate officer of Matling.
(2) Did Respondents Status as Director and Stockholder Automatically Convert his Dismissal into an
Intra-Corporate Dispute?
RULING:
(1) No. Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a corporation
must formally organize by the election of a president, who shall be a director, a treasurer who may or
may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such
other officers as may be provided for in the by-laws. Any two (2) or more positions may be held
concurrently by the same person, except that no one shall act as president and secretary or as president
and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law
and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate business, and every decision of
at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be
valid as a corporate act, except for the election of officers which shall require the vote of a majority of
all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.

Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate
office to the President, in light of Section 25 of the Corporation Code requiring the Board of Directors
itself to elect the corporate officers. Verily, the power to elect the corporate officers was a discretionary
power that the law exclusively vested in the Board of Directors, and could not be delegated to
subordinate officers or agents. The office of Vice President for Finance and Administration created by
Matlings President pursuant to By Law No. V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the officers to occupy them
vested by By-Law No. V merely allowed Matlings President to create non-corporate offices to be
occupied by ordinary employees of Matling. Such powers were incidental to the Presidents duties as
the executive head of Matling to assist him in the daily operations of the business.
(2) The fact that the parties involved in the controversy are all stockholders or that the parties involved
are the stockholders and the corporation does not necessarily place the dispute within the ambit of the
jurisdiction of SEC. The better policy to be followed in determining jurisdiction over a case should be
to consider concurrent factors such as the status or relationship of the parties or the nature of the
question that is the subject of their controversy. In the absence of any one of these factors, the SEC will
not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the
corporation and its stockholders would involve such corporate matters as only the SEC can resolve in
the exercise of its adjudicatory or quasi-judicial powers. 29
The criteria for distinguishing between corporate officers who may be ousted from office at will, on
one hand, and ordinary corporate employees who may only be terminated for just cause, on the other
hand, do not depend on the nature of the services performed, but on the manner of creation of the
office. In the respondents case, he was supposedly at once an employee, a stockholder, and a Director
of Matling. The circumstances surrounding his appointment to office must be fully considered to
determine whether the dismissal constituted an intra-corporate controversy or a labor termination
dispute. We must also consider whether his status as Director and stockholder had any relation at all to
his appointment and subsequent dismissal as Vice President for Finance and Administration.
Even though he might have become a stockholder of Matling in 1992, his promotion to the position of
Vice President for Finance and Administration in 1987 was by virtue of the length of quality service he

had rendered as an employee of Matling. His subsequent acquisition of the status of

Director/stockholder had no relation to his promotion. Besides, his status of Director/stockholder was
unaffected by his dismissal from employment as Vice President for Finance and Administration.
SME Bank, Inc. vs. De Guzman, 707 SCRA 35, G.R. No. 184517 October 8, 2013 (ABIQUIBIL)
FACTS: Respondent were employees of SME Bank. Originally, the principal shareholders and
corporate directors of the bank were Agustin and De Guzman. In June 2001, SME Bank experienced
financial difficulties. To remedy the situation, the bank officials sold SME Banks shares of stock to
Samson.
Espiritu, then general manager of SME Bank, persuaded all the employees of the head office and of the
Talavera and Muoz branches of SME Bank to tender their resignations, with the promise that they
would be rehired upon reapplication. Relying on this representation, Elicerio, Ricardo, Fidel, Simeon,
Jr., and Liberato tendered their resignations. As for Eufemia, the records show that she first tendered a
resignation letter and then a retirement letter. Elicerio, Ricardo, Fidel, Simeon, Jr., and
Liberato submitted application letters on 11 September 2001. On the same date, 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., were not rehired. After a month in service, Simeon, Jr.
resigned again.
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
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.
ISSUES: Whether 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.

their argument that they merely submitted courtesy resignation letters because it was demanded of
them, and that they had no real intention of leaving their posts.
RETIREMENT, like resignation, should be an act completely voluntary on the part of the employee. If
the intent to retire is not clearly established or if the retirement is involuntary, it is to be treated as a
discharge. Involuntary retirement is tantamount to dismissal, as employees can only choose the means
and methods of terminating their employment, but are powerless as to the status of their employment
and have no choice but to leave the company. This rule squarely applies to Eufemias case. Indeed, she
could only choose between resignation and retirement, but was made to understand that she had no
choice but to leave SME Bank. Thus, we conclude that, similar to her other co-employees, she was
illegally dismissed from employment.
NO CESSATION OF OPERATIONS DUE TO SERIOUS BUSINESS LOSSES IS ONE OF THE
AUTHORIZED CAUSES OF TERMINATION UNDER ARTICLE 283 OF THE LABOR CODE:
The law permits an employer to dismiss its employees in the event of closure of the business
establishment. However, the employer is required to serve written notices on the worker and the
Department of Labor at least one month before the intended date of closure. Moreover, the dismissed
employees are entitled to separation pay, except if the closure was due to serious business losses or
financial reverses. However, to be exempt from making such payment, the employer must justify the
closure by presenting convincing evidence that it actually suffered serious financial reverses.
In this case, the records do not support the contention of SME Bank that it intended to close the
business establishment. Even assuming that the parties intended to close the bank, the records do not
show that the employees and the Department of Labor were given written notices at least one month
before the dismissal took place. Moreover, aside from their bare assertions, the parties failed to
substantiate their claim that SME Bank was suffering from serious financial reverses.
THE PRESENT CASE INVOLVES A STOCK SALES: 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.

ELICERIO, RICARDO, FIDEL, LIBERATO EUFEMIA WERE ILLEGALLY DISMISSED.

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.

RESIGNATION: In order to withstand the test of validity, resignations must be made voluntarily and
with the intention of relinquishing the office, coupled with an act of relinquishment. In order to
determine whether the employees truly intended to resign from their respective posts, we cannot
merely rely on the tenor of the resignation letters, but must take into consideration the totality of
circumstances in each particular case. Elicerio, Ricardo, Fidel, and Liberato only tendered resignation
letters because they were led to believe that, upon reapplication, they would be reemployed by the new
management. Their reliance on the representation that they would be reemployed gives credence to

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 share holders are not entitled to
lawfully dismiss corporate employees absent a just or authorized cause.

RULING:

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. 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.
SIMEON, JR. WAS LIKEWISE ILLEGALLY DISMISSED FROM HIS EMPLOYMENT:
Constructive dismissal is an involuntary resignation by the employee due to the harsh, hostile, and
unfavorable conditions set by the employer and which arises when a clear discrimination, insensibility,
or disdain by an employer exists and has become unbearable to the employee. Constructive dismissal
exists where there is cessation of work, because "continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay" and other
benefits. These circumstances are clearly availing in Simeon, Jr.s case. He was made to resign, then
rehired under conditions that were substantially less than what he was enjoying before the illegal
termination occurred. Thus, for the second time, he involuntarily resigned from his employment.
SME BANK, EDUARDO M. AGUSTIN, JR. AND PEREGRIN DE GUZMAN, JR. ARE LIABLE
FOR ILLEGAL DISMISSAL.

bad faith, they may be held solidarily liable with SME Bank for the satisfaction of the employees
lawful claims.
Spouses Samson: Nowhere in the records does it appear that they were either corporate directors or
officers of SME Bank at the time the illegal termination occurred, except that the Samson Group had
already taken over as new management when Simeon, Jr. was constructively dismissed. Not being
corporate directors or officers, spouses Samson were not in legal control of the bank and consequently
had no power to dismiss its employees.
As regards Aurelio Villaflor, while he may be considered as a corporate officer, being the president of
SME Bank, the records are bereft of any evidence that indicates his actual participation in the
termination of respondent employees. Not having participated at all in the illegal act, he may not be
held individually liable for the satisfaction of their claims.
RESPONDENT EMPLOYEES ARE ENTITLED TO SEPARATION PAY, FULL BACKWAGES,
MORAL DAMAGES, EXEMPLARY DAMAGES AND ATTORNEYS FEES.

SME Bank: None of the parties dispute that SME Bank was the employer of respondent employees.
The fact that there was a change in the composition of its shareholders did not affect the employeremployee relationship between the employees and the corporation, because an equity transfer affects
neither the existence nor the liabilities of a corporation. Thus, SME Bank continued to be the employer
of respondent employees notwithstanding the equity change in the corporation. As the employer of the
illegally dismissed employees before and after the equity transfer, petitioner SME Bank is liable for the
satisfaction of their claims.
Unless they have exceeded their authority, corporate officers are, as a general rule, not personally
liable for their official acts, because a corporation, by legal fiction, has a personality separate and
distinct from its officers, stockholders and members. In order to determine the respective liabilities of
Agustin, De Guzman and the Samson Group under the afore-quoted rule, we must determine, first,
whether they may be considered as corporate directors or officers; and, second, whether the
terminations were done maliciously or in bad faith.
Both Agustin and De Guzman were corporate directors of SME Bank. An analysis of the facts
likewise reveals that the dismissal of the employees was done in bad faith. Motivated by their desire to
dispose of their shares of stock to Samson, they agreed to and later implemented the precondition in
the Letter Agreements as to the termination or retirement of SME Banks employees. However, instead
of going through the proper procedure, the bank manager induced respondent employees to resign or
retire from their respective employments, while promising that they would be rehired by the new
management. Fully relying on that promise, they tendered courtesy resignations or retirements and
eventually found themselves jobless. Clearly, this sequence of events constituted a gross circumvention
of our labor laws and a violation of the employees constitutionally guaranteed right to security of
tenure. We therefore rule that, as Agustin and De Guzman are corporate directors who have acted in

Arroyo vs. Rosal Homeowners Association, Inc., G.R. No. 175155, October 22, 2012 (JUNAID)

FACTS: Respondent Rosal Homeowners Association, Incorporated (RHAI) is a non-stock, non-profit

organization duly organized and existing under the laws of the Philippines. Its membership is
composed mainly of occupants of a parcel of land and was formerly owned by PCIB.
Petitioners were among the actual occupants of the subject land. They occupied the land by
mere tolerance long before the said land was acquired by PCIB. To evade eviction from PCIB and in
order to avail of the benefits of acquiring land under the Community Mortgage Program (CMP) of the
National Home Mortgage Finance Corporation (NHMFC), the said occupants formally organized
themselves into an association, the RHAI. With the aid and representation of the Bacolod Housing
Authority (BHA), RHAI was able to obtain a loan from the NHMFC and acquired the subject land
from PCIB. Thus, a TCT was issued under the name of RHAI.
To fully avail of the benefits of the CMP, the NHMFC required the RHAI members to sign the
Lease Purchase Agreement (LPA) and to maintain their membership in good standing in accordance
with the provisions of the By-Laws of RHAI. Petitioners, however, refused to sign the LPA as a
precondition under the CMP. They likewise failed to attend the regular meetings and pay their
membership dues as required by the RHAI By-Laws. As a result, RHAI through its Board of Directors,
approved a resolution to enforce the eviction of petitioners and recover possession of the portions of
land which they were occupying. Pursuant to the said resolution, RHAI, through written letters of
demand, called for petitioners to vacate the premises and deliver possession thereof to RHAI.
Petitioners, however, ignored the demand.
RHAI filed an action for recovery of possession against the petitioners that was decided by
the RTC in its favor and was affirmed by CA. Hence, this case.
ISSUE: Whether petitioners were denied of their right to own a piece of land for their homes under the
socialized housing program of the government.
RULING: NO. Petitioners refusal to sign and submit the LPA, the most important requirement of the
NHMFC for the acquisition of the land, disqualified them as loan beneficiaries. As such, they acquire
no better rights than mere occupants of the subject land.
The Court does not lose sight of the fact that petitioners were actual occupants of the subject
land. True enough, the RHAI was purposely formed to enable the dwellers, including petitioners, to
purchase the lots they were occupying, being the ultimate beneficiaries of the CMP of the NHMFC.
Petitioners, however, must be reminded that they have to comply with certain requirements and
obligations to qualify as beneficiaries and be entitled to the benefits under the program. Their
unreasonable refusal to join RHAI and their negative response to comply with their obligations
compelled RHAI to either expel them or declare them as non-members of the association. Petitioners
cannot now claim that they were denied the right to own the portions of land they were occupying for
their homes under the CMP.
It should be noted that petitioners were never prevented from becoming members of RHAI. In
fact, they were strongly encouraged to join and comply with the requirements of the CMP, not only by
the RHAI, but also by the BHA.