FACTS:

The case involves respondent employees who were employees of Small and Medium Enterprise Bank, Incorporated (SME Bank). Due to financial difficulties, the bank officials proposed its sale to Abelardo Samson. Negotiations ensued and a formal offer was made to Samson, who demanded, among other conditions, the termination/retirement of employees agreed upon by both parties.

At the behest of petitioner Olga Samson, the general manager of SME Bank held a meeting with all employees and persuaded them to tender their resignations, with the promise of rehiring them upon reapplication. Relying on this representation, the respondent employees tendered their resignations and subsequently reapplied.

After the sale of the bank to Samson, all the employees were not rehired, except for one who resigned after a month of service. The respondent employees demanded separation pays, which were denied. They then filed a Complaint before the National Labor Relations Commission (NLRC), suing SME Bank, Abelardo and Olga Samson, and Aurelio Villaflor for various labor violations.

The labor arbiter ruled that the employees were illegally dismissed, as they had involuntarily executed resignation letters after relying on promises of separation benefits and rehiring. The labor arbiter held the former shareholders liable for separation pay. The NLRC affirmed the labor arbiter's ruling but modified the awards. The CA affirmed the NLRC's decision, prompting the Samson Group to file separate Rule 45 Petitions.

ISSUES:

1. Whether the respondent employees were illegally dismissed.

2. Whether the retirement of Eufemia was voluntary or involuntary.

3. Whether the closure of the business establishment constitutes an authorized cause for termination.

4. Whether there was a transfer of the business establishment in this case.

5. Whether the dismissal of the respondent employees was lawful.

6. Whether the transfer of shares in a corporation through a stock sale constitutes a change in ownership that justifies the termination of the employees' employment.

7. Whether the employees who accepted separation pay are estopped from questioning the legality of their dismissal.

8. Whether the circumstances in this case constitute constructive dismissal.

9. Who among the parties are liable for the claims of the illegally dismissed employees.

10. Whether the spouses Samson should be held solidarily liable for the illegal dismissal of the employees

11. Whether Aurelio Villaflor should be held individually liable for the termination of the employees

RULING:

1. The respondent employees were illegally dismissed. The resignation letters they submitted, although couched in terms of gratitude, were not conclusive proof of voluntary resignation. Resignations must be made voluntarily and with the intention of relinquishing the office, coupled with an act of relinquishment. In this case, the employees only tendered resignation letters because they were led to believe that they would be reemployed by the new management. Their reliance on this representation indicates that they submitted courtesy resignation letters out of demand and without the intent to leave their posts.

2. The retirement of Eufemia was considered involuntary and, as such, tantamount to dismissal. Although she submitted a retirement letter, it was shown that she was given the option to resign or retire in order to fulfill a precondition in the letter agreements. She had no choice but to leave the company. Involuntary retirement is treated as discharge or dismissal.

3. The closure of the business establishment did not constitute an authorized cause for termination. The employer failed to serve written notices to the employees and the Department of Labor at least one month before the intended closure. Additionally, there was no sufficient evidence presented to justify the closure due to serious financial reverses. Therefore, the closure as a defense for termination was not valid.

4. There was no transfer of the business establishment in this case, but merely a change in the new majority shareholders of the corporation.

5. The dismissal of the respondent employees was unlawful since this case involves a stock sale. In stock sales, the corporation continues to be the employer of its employees and remains liable for the payment of their just claims. The corporation or its new majority shareholders are not entitled to lawfully dismiss corporate employees absent a just or authorized cause under the Labor Code.

6. The transfer of shares in a corporation through a stock sale does not constitute a change in ownership that justifies the termination of the employees' employment. The employment status of the employees should not be affected by the stock sale, and the new majority shareholders do not have the right to legally dismiss the corporation's employees without a just or authorized cause.

7. Acceptance of separation pay does not bar the employees from subsequently contesting the legality of their dismissal. The employees are not estopped from challenging the legality of their separation from the service.

8. The circumstances in this case constitute constructive dismissal.

9. SME Bank, Eduardo M. Agustin, Jr., and Peregrin de Guzman, Jr. are liable for illegal dismissal.

10. • SME Bank, as the employer of the illegally dismissed employees before and after the equity transfer, is liable for the satisfaction of their claims.
11. • Agustin and De Guzman, as corporate directors who acted in bad faith, may be held solidarily liable with SME Bank.
12. • Spouses Samson are not liable as they were not corporate directors or officers of SME Bank at the time of the illegal termination.

13. The Supreme Court held that there is no legal basis to hold the spouses Samson solidarily liable for the illegal dismissal of the employees. They were not corporate officers or directors at the time the dismissal took place, and there was no showing that they were in control of the corporation or acted maliciously or in bad faith.

14. The Supreme Court ruled that Aurelio Villaflor cannot be held individually liable for the termination of the employees. There was no evidence to indicate his actual participation in the illegal act.

PRINCIPLES:

• Resignations must be made voluntarily and with the intention of relinquishing the office, coupled with an act of relinquishment. Resignation letters couched in terms of gratitude are not conclusive proof of voluntary resignation.

• Involuntary retirement is tantamount to dismissal. Employees can only choose the means and methods of terminating their employment, but are powerless as to the status of their employment.

• Closure of a business establishment can be an authorized cause for termination, but certain requirements must be met, such as serving written notices and providing evidence of serious financial reverses.

• In asset sales, the seller in good faith is authorized to dismiss the affected employees but is liable for the payment of separation pay. The buyer in good faith is not obliged to absorb the affected employees or liable for their claims. The buyer may only give preference to the qualified separated personnel.

• In stock sales, a shift in the composition of shareholders does not affect the existence and continuity of the corporation. Thus, the corporation continues to be the employer of its employees and remains liable for their just claims. The corporation or its new majority shareholders may not lawfully dismiss corporate employees except for just or authorized causes under the Labor Code.

• In cases of stock sales, the new owners are not legally obligated to absorb the seller's employees. However, they may give preference to qualified separated employees.

• The right to security of tenure guarantees the right of employees to continue in their employment absent a just or authorized cause for termination.

• 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.

• Acceptance of separation pay does not remove the taint of illegal dismissal and does not estop employees from challenging the legality of their separation from service.

• Constructive dismissal occurs when an employee is forced to resign due to harsh, hostile, and unfavorable conditions set by the employer.

• Constructive dismissal exists when there is a clear discrimination, insensibility, or disdain by an employer that renders continued employment impossible, unreasonable or unlikely.

• An equity transfer does not affect the employer-employee relationship between the employees and the corporation.

• A corporation has a personality separate and distinct from that of its individual shareholders or members.

• Corporate directors and officers may be held solidarily liable with the corporation for illegal dismissal if the terminations were done maliciously or in bad faith.

• Illegally dismissed employees are entitled to reinstatement or separation pay and backwages.

• Courts may grant separation pay in lieu of reinstatement if the relations between the employer and employee have been severely strained or if reinstatement is no longer viable or practical.

• Separation pay is not an adequate substitute for both reinstatement and backwages.

• A grant of backwages restores the income lost by reason of unlawful dismissal, while separation pay provides the employee with the means during the period of looking for new employment.

• Moral damages, exemplary damages, and attorney's fees may be awarded if the forced resignations and retirement were fraudulently done and attended by bad faith.