Case Digest: Pefrancia Tours v. Sarmiento & Catimbang

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




A meeting was called by petitioners 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. Respondents received their last pay with a letter informing them that their application with the company had been held in abeyance.

While respondents case for illegal dismissal was pending before the Labor Arbiter (LA), a notice was issued by to all employees of petitioner, stating that the management of the company shall revert to its former President, Bonifacio Cu.

LA rendered a Joint Decision dismissing the complaints for illegal dismissal. Aggrieved, respondents sought recourse from the National Labor Relations Commission (NLRC). NLRC rendered a decisionin favor of respondents, finding that no sale of the business actually took place.

Petitioner filed a motion for reconsideration, which the NLRC, however, denied. Undaunted, petitioner assailed the NLRCs ruling before the CA on certiorari.

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 NLRCs findings that petitioner did not actually sell its business to the Perez family and to SCBC.

Whether or not respondents were legally terminated from employment by reason of the sale of the business enterprise and the consequent change or transfer of ownership/management?


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.

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.

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., we held that a change of ownership in a business concern is not proscribed by law. Lest petitioner forget, however, we also held therein thatthe sale or disposition must be motivated by good faith as a condition for exemption from liability. Thus, where the charge of ownership is done in bad faith, or is used 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.

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.