SME Bank Inc.

,
v.
De Guzman, et.al Gaspar
G.R. No. 186641
June 2, 2014

Facts:

This petition involves the illegality of the dismissal of the respondents as employees of
SME Bank, Inc. for lack of an authorized or justifiable cause. Due to financial difficulties, the
original principal shareholders and directors of the petitioner bank, namely De Guzman and
Agustin sold 86.365 of its shares to Spouses Samson, which the latter agreed to buy subject to
the condition that the employees shall be terminated or retired as mutually agreed upon by both
parties. In fulfillment of the condition, then General Manager of the bank persuaded the
employees to tender their resignation, with the promise that they shall be rehired upon
application. However, despite their application, all except for one was rehired by the new
principal stockholders of the bank, forcing the employees to file an illegal dismissal before the
NLRC as against the bank. NLRC ruled in favor of the employees and held that mere transfer of
shares was not a valid ground to terminate the bank employees, CA affirmed the decision, thus
this appeal.

Issue: Whether or not the change in a corporation’s stockholders is a valid ground to justify the
dismissal of its employees.

Ruling: No.

There was no transfer of the business establishment to speak of, but merely a change in
the new majority shareholders of the corporation, for what is involved here is merely a stocks
sale which transpires 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. In this case, the acquisition of 86.365% of the shares
of stock of SME Bank did not eliminate its liability for the payment of just claims of employees
illegally dismissed. 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.