SECOND DIVISION

[G.R. No. 190187. September 28, 2016.]

PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION , petitioner, vs.

UNOCAL PHILIPPINES, INC. (now known as CHEVRON
GEOTHERMAL PHILIPPINES HOLDINGS, INC.) , respondent.

DECISION

LEONEN , J : p

The merger of a corporation with another does not operate to dismiss the
employees of the corporation absorbed by the surviving corporation. This is in keeping
with the nature and effects of a merger as provided under law and the constitutional
policy protecting the rights of labor. The employment of the absorbed employees
subsists. Necessarily, these absorbed employees are not entitled to separation pay on
account of such merger in the absence of any other ground for its award.
This resolves a Petition for Review on Certiorari 1 led by Philippine Geothermal,
Inc. Employees Union (Union) assailing the Decision 2 dated July 23, 2009 and the
Resolution 3 dated November 9, 2009 of the Court of Appeals Eighth Division in Unocal
Philippines, Inc. (now known as Chevron Geothermal Philippines Holdings, Inc.) v. The
Philippine Geothermal, Inc. Employees Union. The assailed Decision granted Unocal
Philippines, Inc.'s (Unocal Philippines) appeal and reversed the Secretary of Labor's
award of separation bene ts to the Union. The award was granted on the premise that
the merger of Unocal Philippines' parent corporation with another corporation impliedly
terminated the employment of the Union's members. The assailed Resolution denied
the Union's Motion for Reconsideration.
Philippine Geothermal, Inc. Employees Union is a legitimate labor union that
stands as the bargaining agent of the rank-and-file employees of Unocal Philippines. 4
Unocal Philippines, formerly known as Philippine Geothermal, Inc., is a foreign
corporation incorporated under the laws of the State of California, United States of
America, licensed to do business in the Philippines for the "exploration and
development of geothermal resources as alternative sources of energy." 5 It is a wholly
owned subsidiary of Union Oil Company of California (Unocal California), 6 which, in turn,
is a wholly owned subsidiary of Union Oil Corporation (Unocal Corporation). 7 Unocal
Philippines operates two (2) geothermal steam elds in Tiwi, Albay and Makiling,
Banahaw, Laguna, owned by the National Power Corporation. 8
On April 4, 2005, Unocal Corporation executed an Agreement and Plan of Merger
(Merger Agreement) with Chevron Texaco Corporation (Chevron) and Blue Merger Sub,
Inc. (Blue Merger). 9 Blue Merger is a wholly owned subsidiary of Chevron. 10 Under the
Merger Agreement, Unocal Corporation merged with Blue Merger, and Blue Merger
became the surviving corporation. 11 Chevron then became the parent corporation of
the merged corporations: 12 After the merger, Blue Merger, as the surviving
corporation, changed its name to Unocal Corporation. 13
On January 31, 2006, Unocal Philippines executed a Collective Bargaining
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 Agreement with the Union. 14
However, on October 20, 2006, the Union wrote Unocal Philippines asking for the
separation bene ts provided for under the Collective Bargaining Agreement. According
to the Union, the Merger Agreement of Unocal Corporation, Blue Merger, and Chevron
resulted in the closure and cessation of operations of Unocal Philippines and the
implied dismissal of its employees. 15 CAIHTE

Unocal Philippines refused the Union's request and asserted that the employee-
members were not terminated and that the merger did not result in its closure or the
cessation of its operations. 16
As Unocal Philippines and the Union were unable to agree, they decided to
submit the matter to the Department of Labor and Employment's Administrative
Intervention for Dispute Avoidance Program. 17 However, they were unable to arrive at
"a mutually acceptable agreement." 18
On November 24, 2006, the Union claimed that Unocal Philippines was guilty of
unfair labor practice and led a Notice of Strike. 19 Later, the Union withdrew its Notice
of Strike. 20
On February 5, 2007, the parties agreed to submit their dispute for voluntary
arbitration before the Department of Labor and Employment, with the Secretary of
Labor and Employment as Voluntary Arbitrator. 21 The case, entitled In Re: Labor
Dispute at Philippines, Inc./Chevron, was docketed as OS-VA-2007-04. 22
After the parties submitted their respective position papers, the Secretary of
Labor rendered the Decision 23 on January 15, 2008 ruling that the Union's members
were impliedly terminated from employment as a result of the Merger Agreement. The
Secretary of Labor found that the merger resulted in new contracts and a new employer
for the Union's members. The new contracts allegedly required the employees' consent;
otherwise, there was no employment contract to speak of. 24 Thus, the Secretary of
Labor awarded the Union separation pay under the Collective Bargaining Agreement. 25
The dispositive portion of the Decision reads:
WHEREFORE , this Of ce rules that Unocal and Chevron merged into one
corporate entity and the employees were impliedly terminated from
employment. Accordingly, they are entitled to the separation bene ts provided
under ARTICLE XII, SECTION 2 and ANNEX "B" of the collective bargaining
[agreement] between UNOCAL PHILIPPINES, INC. and the PHILIPPINE
GEOTHERMAL, INC. EMPLOYEES UNION.
Pursuant to Section 7, Rule XIX of Department Order No. 40-03 , series
of 2003, this Decision shall be nal and executory after ten (10) calendar days
from receipt hereof and it shall not be subject of a motion for reconsideration.
SO ORDERED. 26 (Emphasis in the original)
Unocal Philippines led before the Court of Appeals a Petition for Review 27
questioning the Secretary of Labor's Decision. Unocal Philippines claimed that the
Union was not entitled to separation bene ts given that Unocal Philippines was not a
party to the merger, 28 that it never closed nor ceased its business, and that it did not
terminate its employees after the merger. 29 It asserted that its operations continued in
the same manner, and with the same manpower complement. 30 Likewise, the
employees kept their tenure intact and experienced no changes in their salaries and
benefits. 31 DETACa

In the Decision 32 dated July 23, 2009, the Court of Appeals granted the appeal
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 of Unocal Philippines and reversed the Decision of the Secretary of Labor. 33 It held that
Unocal Philippines has a separate and distinct juridical personality from its parent
company, Unocal Corporation, which was the party that entered into the Merger
Agreement. 34 The Court of Appeals ruled that Unocal Philippines remained
undissolved and its employees were unaffected by the merger. 35 It found that this was
evidenced by the Union's assumption of its role as the duly recognized bargaining
representative of all rank-and-file employees a few months after the merger. 36
Moreover, the Court of Appeals found that although Unocal Corporation became
a part of Chevron, Unocal Philippines still remained as a wholly owned subsidiary of
Unocal California after the merger. 37 It ruled that in any case, the Collective Bargaining
Agreement only provided for the payment of separation pay if a reduction in workforce
results from redundancy, retrenchment or installation of labor-saving devices, or
closure and cessation of operations, all of which did not occur in this case. 38
The Court of Appeals also pointed out that the Union's members merely wanted
to discontinue their employment with Unocal Philippines, but there was nothing in the
Labor Code nor in the parties' Collective Bargaining Agreement that would sanction the
payment of separation pay to those who no longer wanted to work for Unocal
Philippines as a result of the merger. 39 The dispositive portion of the Decision reads:
WHEREFORE , premises considered, the Decision dated 15 January
2008, of the Department of Labor and Employment (DOLE) in OS-VA-2007-04 is
hereby REVERSED and SET ASIDE .
SO ORDERED. 40 (Emphasis in the original)
On November 9, 2009, the Court of Appeals denied the Union's Motion for
Reconsideration. 41
Hence, this Petition 42 was filed.
Petitioner Philippine Geothermal, Inc. Employees Union claims that respondent
Unocal Philippines, Inc. changed its theory of the case when, in the proceedings before
the Secretary of Labor, it claimed that it entered into a merger and not a sale, but later,
in its appeal before the Court of Appeals, argued that it was not a party to the merger.
43 Petitioner asserts that the Court of Appeals erred in allowing respondent to change
its theory of the case on appeal and in deciding the case on the basis of this changed
theory. 44
Petitioner further claims that the Court of Appeals erred in reversing the Decision
of the Secretary of Labor, who properly ruled that petitioner's members are entitled to
separation pay. 45 It claims that the merger resulted in (a) "the severance of the juridical
tie that existed between the employees and its original employer, Unocal Corporation,"
46 and (b) the implied termination of the employment of the Union's members, who had
the right to waive their continued employment with the absorbing corporation. 47
Petitioner insists that the "cessation of operations" contemplated in the Collective
Bargaining Agreement and the Memorandum of Agreement must be liberally
interpreted to include mergers, 48 and that doubts must be resolved in favor of labor. 49
In the Resolution 50 dated January 27, 2010, this Court directed respondent to
comment on the Petition.
Respondent led its Comment 51 on March 26, 2010. It argues that it did not
change its theory on appeal. It insists that it has been consistent in arguing before the
Secretary of Labor and the Court of Appeals that it was never a party to the merger
between Unocal Corporation and Blue Merger as it has always stated that it was Unocal
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 Corporation who entered into the Merger Agreement. 52 Respondent argues that even
assuming that it did change its theory on appeal, it may do so as an exception to the
rule since "a party may change [its] legal theory when its factual bases would not
require the presentation of further evidence by the adverse party in order to meet the
issue raised in the new theory." 53 It posits that the alleged new theory would still be
based on the evidence presented before the Secretary of Labor, hence, petitioner was
not placed at a disadvantage. 54 aDSIHc

Respondent further argues that in any case, petitioner's members still did not
lose their employment as to warrant the award of separation pay. 55 The Memorandum
of Agreement, the Collective Bargaining Agreement, and the contemporaenous acts of
the parties show that respondent shall pay separation pay only in case the employees
actually lose their jobs due to redundancy, retrenchment or installation of labor-saving
devices, or closure and cessation of operation. 56 As these circumstances did not
occur, respondent cannot grant petitioner's members separation pay.
Petitioner led its Reply 57 on July 6, 2010. It insists that respondent never
claimed before the Secretary of Labor that it was not covered by the merger. 58 It
maintains that respondent only insisted on this argument when it obtained the
unfavorable decision from the Secretary of Labor. 59 Moreover, the Secretary of Labor
was correct in ruling that, indeed, there was a cessation of operations of respondent
when it merged with Chevron. 60
We resolve the following issues:
First, whether respondent changed the theory of its case on appeal;
Second, whether the Merger Agreement executed by Unocal Corporation, Blue
Merger, and Chevron resulted in the termination of the employment of petitioner's
members; and
Lastly, whether petitioner's members are entitled to separation benefits.
As regards the rst issue, we rule that respondent did, indeed, change the theory
of its case on appeal.
In its Petition before the Court of Appeals, respondent asserted that it was not a
party to the merger as it was a subsidiary of Unocal California and, thus, had a separate
and distinct personality from Unocal Corporation.
However, the following statement can be found in respondent's Position Paper in
the proceedings before the Secretary of Labor:
3. . . . Following the merger, Blue Merger Sub Inc. which as above
stated is a wholly owned subsidiary of Chevron Corporation changed its name
to Unocal Corporation retaining Unocal Philippines, Inc. as its Philippine Branch
to continue to operate the aforenamed geothermal plants as, in fact[.] 61
(Emphasis supplied)
Respondent alleges that it is a branch of Unocal Corporation. Claiming that it is a
branch is inconsistent with its allegation (on appeal) that it is a subsidiary of another
corporation. A branch and a subsidiary differ in its corporate existence: a branch is not
a legally independent unit, while a subsidiary has a separate and distinct personality
from its parent corporation. In Philippine Deposit Insurance Corp. v. Citibank: 62
The Court begins by examining the manner by which a foreign
corporation can establish its presence in the Philippines. It may choose to
incorporate its own subsidiary as a domestic corporation, in which case such
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 subsidiary would have its own separate and independent legal personality to
conduct business in the country. In the alternative, it may create a branch in the
Philippines, which would not be a legally independent unit, and simply obtain a
license to do business in the Philippines. 63 (Emphasis supplied, citations
omitted)
Respondent likewise made the following assertions in its Position Paper in the
proceedings before the Secretary of Labor:
Based on the facts of this case, the Honorable Secretary of Labor would
certainly appreciate that the business transaction entered into by respondent
employer was in law and in fact, a merger. Hence, there is no basis to the
union's claim. ETHIDa

xxx xxx xxx

. . . In the present case, it is clear that the surviving corporation, i.e.
Unocal Philippines, Inc. has continued the business and operations of the
absorbed corporation in an unchanged manner, and using the same employees
with their tenure intact and under the same terms and conditions of
employment. 64 (Emphasis supplied)
These statements reveal that not only did respondent fail to assert that it was
not a party to the Merger Agreement, but it also referred to itself as the party who
entered into the transaction and became the surviving corporation in the merger. Thus,
the claim that respondent is not a party to the merger is a new allegation raised for the
first time on appeal before the Court of Appeals.
Raising a factual question for the rst time on appeal is not allowed. In Tan v.
Commission on Elections: 65
The aforementioned issue is now raised only for the rst time on appeal
before this Court. Settled is the rule that issues not raised in the proceedings
below (COMELEC en banc) cannot be raised for the rst time on appeal.
Fairness and due process dictate that evidence and issues not presented below
cannot be taken up for the first time on appeal.
Thus, in Matugas v. Commission on Elections , we reiterated this rule,
saying:
The rule in appellate procedure is that a factual question may not be
raised for the rst time on appeal, and documents forming no part of the proofs
before the appellate court will not be considered in disposing of the issues of an
action. This is true whether the decision elevated for review originated from a
regular court or an administrative agency or quasi-judicial body, and whether it
was rendered in a civil case, a special proceeding, or a criminal case. Piecemeal
presentation of evidence is simply not in accord with orderly justice.
Moreover, in Vda. De Gualberto v. Go, we also held:
I n Labor Congress of the Philippines v. NLRC , we have
made it clear that "to allow fresh issues on appeal is violative of
the rudiments of fair play, justice and due process." Likewise, in
Orosa v. Court of Appeals , the Court disallowed it because "it
would be offensive to the basic rule of fair play, justice and due
process if it considered [the] issue[s] raised for the rst time on
appeal." We cannot take an opposite stance in the present case. 66
(Citations omitted)
Respondent did state that Unocal Corporation was the party to the Merger
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 Agreement with Blue Merger and Chevron. Nonetheless, it did not use this allegation to
argue that it had a separate and distinct personality from Unocal Corporation and is,
thus, not a party to the Merger Agreement. Respondent only raised this argument in its
appeal before the Court of Appeals.
Respondent's contention that it falls within the exception to the rule likewise
does not lie. Respondent cites Quasha Ancheta Pena and Nolasco Law Of ce v. LCN
Construction Corp. 67 and claims that it falls within the exception since it did not
present any additional evidence on the matter:
In the interest of justice and within the sound discretion of the appellate court, a
party may change his legal theory on appeal, only when the factual bases
thereof would not require presentation of any further evidence by the adverse
party in order to enable it to properly meet the issue raised in the new theory. 68
cSEDTC

However, this paragraph states that it is the adverse party that should no longer
be required to present additional evidence to contest the new claim, and not the party
presenting the new theory on appeal. Thus, it does not matter that respondent no
longer presented additional evidence to support its new claim. The petitioner, as the
adverse party, should not have to present further evidence on the matter before the new
issue may be considered. However, the issue of whether respondent is a party to the
Merger Agreement may be proven otherwise by petitioner, through the presentation of
evidence that respondent is merely a branch and not a subsidiary of Unocal
Corporation. Thus, respondent's new allegation does not fall under the exception to the
rule.
Petitioner was denied the opportunity to present evidence to disprove
respondent's new claim. Therefore, the Court of Appeals erred in taking into
consideration this argument.
As to the remaining issues, we rule in favor of respondent and dismiss the
Petition.
Both the Secretary of Labor and the Court of Appeals found that what was
entered into by Unocal Corporation, Blue Merger, and Chevron is a merger. The primary
issue is what the effects of this merger on respondent's employees are.
We nd that, whether or not respondent is a party to the Merger Agreement,
there is no implied dismissal of its employees as a consequence of the merger.
A merger is a consolidation of two or more corporations, which results in one or
more corporations being absorbed into one surviving corporation. 69 The separate
existence of the absorbed corporation ceases, and the surviving corporation "retains its
identity and takes over the rights, privileges, franchises, properties, claims, liabilities
and obligations of the absorbed corporation(s)." 70
If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of
Unocal Corporation, then the merger of Unocal Corporation with Blue Merger and
Chevron does not affect respondent or any of its employees. Respondent has a
separate and distinct personality from its parent corporation.
Nonetheless, if respondent is indeed a party to the merger, the merger still does
not result in the dismissal of its employees.
The effects of a merger are provided under Section 80 of the Corporation Code:
SEC. 80. Effects of merger or consolidation. — The merger or
consolidation, as provided in the preceding sections shall have the following
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 effects:
1. The constituent corporations shall become a single corporation
which, in case of merger, shall be the surviving corporation
designated in the plan of merger; and, in case of consolidation, shall
be the consolidated corporation designated in the plan of
consolidation;
2. The separate existence of the constituent corporations shall cease,
except that of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the
rights, privileges, immunities and powers and shall be subject to all
the duties and liabilities of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and
franchises of each of the constituent corporations; and all property,
real or personal, and all receivables due on whatever account,
including subscriptions to shares and other choses in action, and all
and every other interest of, or belonging to, or due to each
constituent corporation, shall be taken and deemed to be transferred
to and vested in such surviving or consolidated corporation without
further act or deed; andSDAaTC

5. The surviving or the consolidated corporation shall be responsible

and liable for all the liabilities and obligations of each of the
constituent corporations in the same manner as if such surviving or
consolidated corporation had itself incurred such liabilities or
obligations; and any claim, action or proceeding pending by or
against any of such constituent corporations may be prosecuted by
or against the surviving or consolidated corporation, as the case
may be. Neither the rights of creditors nor any lien upon the property
of any of such constituent corporations shall be impaired by such
merger or consolidation. (Emphasis supplied)
Although this provision does not explicitly state the merger's effect on the
employees of the absorbed corporation, Bank of the Philippine Islands v. BPI
Employees Union-Davao Chapter-Federation of Unions in BPI Unibank 71 has ruled that
the surviving corporation automatically assumes the employment contracts of the
absorbed corporation, such that the absorbed corporation's employees become part
of the manpower complement of the surviving corporation, thus:
Taking a second look on this point, we have come to agree with Justice
Brion's view that it is more in keeping with the dictates of social justice and the
State policy of according full protection to labor to deem employment contracts
as automatically assumed by the surviving corporation in a merger, even in the
absence of an express stipulation in the articles of merger or the merger plan. In
his dissenting opinion, Justice Brion reasoned that:
To my mind, due consideration of Section 80 of the
Corporation Code, the constitutionally declared policies on work,
labor and employment, and the specific FEBTC-BPI situation — i.e.,
a merger with complete "body and soul" transfer of all that FEBTC
embodied and possessed and where both participating banks
were willing (albeit by deed, not by their written agreement) to
provide for the affected human resources by recognizing
continuity of employment — should point this Court to a
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 declaration that in a complete merger situation where there is total
takeover by one corporation over another and there is silence in
the merger agreement on what the fate of the human resource
complement shall be, the latter should not be left in legal limbo
and should be properly provided for, by compelling the surviving
entity to absorb these employees. This is what Section 80 of the
Corporation Code commands, as the surviving corporation has the
legal obligation to assume all the obligations and liabilities of the
merged constituent corporation.
Not to be forgotten is that the affected employees
managed, operated and worked on the transferred assets and
properties as their means of livelihood; they constituted a basic
component of their corporation during its existence. In a merger
and consolidation situation, they cannot be treated without
consideration of the applicable constitutional declarations and
directives, or, worse, be simply disregarded. If they are so treated, it
is up to this Court to read and interpret the law so that they are
treated in accordance with the legal requirements of mergers and
consolidation, read in light of the social justice, economic and
social provisions of our Constitution. Hence, there is a need for the
surviving corporation to take responsibility for the affected
employees and to absorb them into its workforce where no
appropriate provision for the merged corporation's human
resources component is made in the Merger Plan. 72 (Emphasis
supplied, citations omitted) acEHCD

The rationale for this ruling is anchored on the nature and effects of a merger as
provided under Section 80 of the Corporation Code, as well as the policies on work and
labor enshrined in the Constitution. 73
To reiterate, Section 80 of the Corporation Code provides that the surviving
corporation shall possess all the rights, privileges, properties, and receivables due of
the absorbed corporation. Moreover, all interests of, belonging to, or due to the
absorbed corporation "shall be taken and deemed to be transferred to and vested in
such surviving or consolidated corporation without further act or deed." 74 The
surviving corporation likewise acquires all the liabilities and obligations of the absorbed
corporation as if it had itself incurred these liabilities or obligations. 75
This acquisition of all assets, interests, and liabilities of the absorbed
corporation necessarily includes the rights and obligations of the absorbed corporation
under its employment contracts. Consequently, the surviving corporation becomes
bound by the employment contracts entered into by the absorbed corporation. These
employment contracts are not terminated. They subsist unless their termination is
allowed by law.
This interpretation is consistent with the constitutional provisions and policies
on work and labor, which provides:
ARTICLE II
xxx xxx xxx
State Policies
xxx xxx xxx
SECTION 18. The State af rms labor as a primary social economic force. It
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 shall protect the rights of workers and promote their welfare.
xxx xxx xxx
ARTICLE XIII
xxx xxx xxx
Labor
SECTION 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in
policy and decision-making processes affecting their rights and bene ts as may
be provided by law.
The State shall promote the principle of shared responsibility between workers
and employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.
The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns on investments, and to expansion and
growth.
These constitutional provisions ensure that workers' rights are protected as they
are imbued with public interest. They likewise prevent an interpretation of any law, rule,
or agreement, which may violate worker's rights acquired during their employment. SDHTEC

Associate Justice Arturo D. Brion's Dissenting Opinion in Bank of the Philippine

Islands v. BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank 76
was similarly premised on the constitutional protection afforded to labor and the public
interest carried by employment contracts:
An employment contract or contract of service essentially has value
because it embodies work — the means of adding value to basic raw materials
and the processes for producing goods, materials and services that become the
lifeblood of corporations and, ultimately, of the nation. Viewed from this
perspective, the employment contract or contract of service is not an ordinary
agreement that can be viewed in strictly contractual sense. It embodies work
and production and carries with it a very signi cant element of public interest;
thus, the Constitution, no less, accords full recognition and protection to workers
and their contribution to production.
xxx xxx xxx
These constitutional statements and directives, aside from telling us to
consider work, labor and employment beyond purely contractual terms, also
provide us directions on how our considerations should be made, i.e., with an
eye on the interests they represent — the individual, the corporate, and more
importantly, the national. 77
Associate Justice Brion likewise discussed the nature of a merger agreement
vis-à-vis the employment contracts:
This recognition is not to objectify the workers as assets and liabilities,
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 but to recognize — using the spirit of the law and constitutional standards —
their necessary involvement and need to be provided for in a merger situation.
Neither does this step, directly impacting on the employees' individual
employment contracts, detract from the in personam character of these
contracts. For in a merger situation, no change of employer is involved; the
change is in the internal personality of the employer rather than through the
introduction of a new employer which would have novated the contract. This
conclusion proceeds from the nature of a merger as a corporate development
regulated by law and the merger's implementation through the parties' merger
agreement.
xxx xxx xxx
In the BPI-FEBTC situation, these employment contracts are part of the
obligations that the merging parties have to account and make provisions for
under the Constitution and the Corporation Code; in the absence of any clear
agreement, these employment contracts subsist, subject to the right of the
employees to reject them as they cannot be compelled to render service but can
only be made to answer in damages if the rejection constitutes a breach. In
other words, in mergers and consolidations, these contracts should be held to be
continuing, unless rejected by the employees themselves or declared by the
merging parties to be subject to the authorized causes for termination of
employment under Sections 282 and 283 of the Labor Code. In this sense, the
merging parties' control and business decision on how employees shall be
affected, in the same manner that the affected employees' decision on whether
to abide by the merger or to opt out, remain unsullied. 78 (Emphasis in the
original)
Senior Associate Justice Antonio T. Carpio's Dissenting Opinion 79 likewise
discusses the constitutional and legal right to security of tenure as basis for ruling that
the employment contracts of the absorbed corporation subsist in case of a merger:
Upon merger, BPI, as the surviving entity, absorbs FEBTC and continues
the combined business of the two banks. BPI assumes the legal personality of
FEBTC, and automatically acquires FEBTC's rights, privileges and powers, as
well as its liabilities and obligations.
AScHCD

xxx xxx xxx

Among the obligations and liabilities of FEBTC is to continue the
employment of FEBTC employees. These employees have already acquired
certain employment status, tenure, salary and bene ts. They are regular
employees of FEBTC. Since after the merger, BPI has continued the business of
FEBTC, FEBTC's obligation to these employees is assumed by BPI, and BPI
becomes duty-bound to continue the employment of these FEBTC employees.
Under Article 279 of the Labor Code, regular employees acquire security
of tenure, and hence, may not be terminated by the employer except upon legal
grounds. . . . Without any of these legal grounds, the employer cannot validly
terminate the employment of regular employees; otherwise, the employees' right
to security of tenure would be violated.
The merger of two corporations does not authorize the surviving
corporation to terminate the employees of the absorbed corporation in the
absence of just or authorized causes as provided in Articles 282 and 283 of the
Labor Code. . . . Once an employee becomes permanent, he is protected by the
security of tenure clause in the Constitution, and he can be terminated only for
just or authorized causes as provided by law. 80
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 These theories were dissents to the Decision in Bank of the Philippine Islands.
However, in the Resolution resolving the Motion for Reconsideration in that case, this
Court found it necessary to interpret Section 80 of the Corporation Code and the
constitutional provisions on labor as to strengthen the "judicial protection of the right
to security of tenure of employees affected by a merger and [avoid] confusion
regarding the status of various bene ts." 81 Thus, this Court ruled that the surviving
corporation automatically assumes the employment contracts of the absorbed
corporation. The absorbed corporation's employees are not impliedly dismissed, but
become part of the manpower complement of the surviving corporation. 82
The merger of Unocal Corporation with Blue Merger and Chevron does not result
in an implied termination of the employment of petitioner's members. Assuming
respondent is a party to the merger, its employment contracts are deemed to subsist
and continue by "the combined operation of the Corporation Code and the Labor Code
under the backdrop of the labor and social justice provisions of the Constitution." 83
Petitioner insists that this is contrary to its freedom to contract, considering its
members did not enter into employment contracts with the surviving corporation.
However, petitioner is not precluded from leaving the surviving corporation. Although
the absorbed employees are retained as exployees of the merged corporation, the
employer retains the right to terminate their employment for a just or authorized cause.
Likewise, the employees are not precluded from severing their employment through
resignation or retirement. The freedom to contract and the prohibition against
involuntary servitude is still, thus, preserved in this sense. 84 This is the manner by
which the consent of the employees is considered by the law.
Hence, assuming respondent is a party to the merger, the merger still does not
operate to effect a termination of the employment of respondent's employees. Should
they be unhappy with the surviving corporation, the employees may retire or resign
from employment.
Given these considerations, we rule that petitioner is not entitled to the
separation benefits it claims from respondent. AcICHD

Separation bene ts are not granted to petitioner by law in case of voluntary

resignation, 85 or by any contract it entered into with respondent.
The Collective Bargaining Agreement 86 between petitioner and respondent
provides:
Article XII
RESPONSIBILITIES OF THE PARTIES AND INDUSTRIAL PEACE
xxx xxx xxx
Section 2. ADDITIONAL RESPONSIBILITIES
xxx xxx xxx
In the event of closure, cessation of operations, retrenchment, redundancy or
installation of labor saving devices, the COMPANY will pay just and fair
compensation for those who will be separated from the COMPANY. The
separation bene t is covered under a MEMORANDUM OF AGREEMENT as
agreed upon by both parties and shall serve as a part of this agreement (Annex
B). 87
Likewise, the Memorandum of Agreement 88 dated November 1, 2005 between
petitioner and respondent states:
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 WITNESSETH: That
WHEREAS, the COMPANY and the UNION recognize the possibility that
UNOCAL PHILIPPINES, INC. may undergo at its discretion reduction in workforce
as a result of redundancy, retrenchment or installation of labor saving devices,
or closure and cessation of operations.
WHEREAS, the COMPANY and the UNION agree that should any of the
above-cited conditions occur that may directly affect the tenure of existing
employees, the rights of the employees should be respected and that the
COMPANY will pay just and fair compensation for those who will be separated
from the COMPANY;
In view of the foregoing and in consideration of industrial peace and this
covenant, the parties hereby agree as follows:
xxx xxx xxx
2. The COMPANY will provide the following separation bene ts for
all regular and probationary employees in the event that they lose their jobs as a
result of the conditions cited above;
a. Separation Pay: 2.5 months multiplied by the current monthly base
pay plus monthly equivalent of the 13th month and 14th month pay
multiplied by the number of years service. 89
Merger is not one of the circumstances where the employees may claim
separation pay. The only instances where separation pay may be awarded to petitioner
are: (a) reduction in workforce as a result of redundancy; (b) retrenchment or
installation of labor-saving devices; or (c) closure and cessation of operations.
Redundancy has been defined by this Court as follows:
[W]e believe that redundancy, for purposes of our Labor Code, exists
where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. Succinctly put, a
position is redundant where it is super uous, and super uity of a position or
positions may be the outcome of a number of factors, such as overhiring of
workers, decreased volume of business, or dropping of a particular product line
or service activity previously manufactured or undertaken by the enterprise. The
employer has no legal obligation to keep in its payroll more employees than are
necessary for the operation of its business. 90 (Citations omitted) TAIaHE

Retrenchment, on the other hand, is the reduction of personnel to save on costs

on salaries and wages due to a considerable decline in the volume of business. 91
Cessation and closure of business contemplates the stopping of business
operations of the employer whether on the employer's prerogative or on account of
severe business losses. 92
None of these instances are present here. The terms do not provide that a
merger is one of the instances where petitioner may claim separation bene ts for its
members. Neither can these circumstances be interpreted as to contemplate a merger
with another corporation. In any case, if the parties intended that petitioner ought to be
granted separation pay in case of a merger, it should have been explicitly provided for in
the contract. Absent this express intention, petitioner cannot claim separation pay.
On the contention that petitioner must be awarded the separation pay in the
interest of social justice, this Court has held that this award is granted only under the
following exceptional cases: (1) the dismissal of the employee was not for serious
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 misconduct; and (2) it did not reflect on the moral character of the employee. 93
In this case, there is no dismissal of the employees on account of the merger.
Petitioner does not deny that respondent actually continued its normal course of
operations after the merger, and that its members, as employees, resumed their work
with their tenure, salaries, wages, and other bene ts intact. Petitioner was even able to
execute with respondent, after the merger, the Collective Bargaining Agreement from
which it anchors its claims.
Given these circumstances, petitioner is not entitled to separation pay. Although
the policy of the state is to rule in favor of labor in light of the social justice provisions
under the Constitution, this Court cannot unduly trample upon the rights of
management, which are likewise entitled to respect in the interest of fair play.
WHEREFORE , the Decision dated July 23, 2009 and the Resolution dated
November 9, 2009 of the Court of Appeals in CA-G.R. SP No. 102184 are AFFIRMED .
The Petition for Review is DENIED considering that no reversible error was committed
by the Court of Appeals.
SO ORDERED.
Leonardo-de Castro, ** Mendoza and Jardeleza, *** JJ., concur.
Velasco, Jr., * J., I concur but this case is to be differentiated from G.R. No.
195615 (Bank of Commerce vs. RPN)
Footnotes

* Designated additional member per Raffle dated January 6, 2010.

** Designated additional member per Raffle dated September 5, 2011.

*** Designated additional member per Raffle dated February 1, 2016.

1. Rollo, pp. 9-25.

2. Id. at 214-234. The Decision, docketed as C.A.-G.R. SP No. 102184, was penned by
Associate Justice Romeo F. Barza and concurred in by Associate Justices Jose na
Guevara-Salonga and Arcangelita M. Romilla-Lontok of the Eighth Division, Court of
Appeals, Manila.
3. Id. at 238. The Resolution was penned by Associate Justice Romeo F. Barza and concurred
in by Associate Justices Jose na Guevara-Salonga and Arcangelita M. Romilla-
Lontok of the Eighth Division, Court of Appeals, Manila.
4. Id. at 10.

5. Id. at 215.

6. Id.
7. Id.

8. Id. at 217.

9. Id. at 216.
10. Id.

11. Id.
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 12. Id.

13. Id.
14. Id. at 217.

15. Id.
16. Id. at 217-218.

17. Id. at 218.

18. Id.
19. Id.

20. Id.
21. Id. at 218-219.

22. Id. at 83.

23. Id. at 83-92. The Decision was penned by Former Secretary of Labor and Employment
(now Associate Justice of this Court) Arturo D. Brion.
24. Id. at 90-91.

25. Id. at 91.

26. Id. at 91-92.

27. Id. at 440-494. The Petition was filed under Rule 43 of the Rules of Court.

28. Id. at 461-466.

29. Id. at 455-461.

30. Id. at 471.

31. Id.

32. Id. at 214-234.

33. Id. at 233-234.

34. Id. at 226-228.

35. Id. at 226-227.

36. Id.

37. Id. at 230.

38. Id.
39. Id. at 231-232.

40. Id. at 233-234.

41. Id. at 238.

42. Id. at 9-25.

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 43. Id. at 17.

44. Id.

45. Id. at 18.

46. Id. at 19.

47. Id.
48. Id. at 18-20.

49. Id. at 20.

50. Id. at 239-240.

51. Id. at 251-297.

52. Id. at 271-272.

53. Id. at 294.

54. Id. at 294-295.

55. Id. at 275.

56. Id. at 280-281.

57. Id. at 1292-1297.

58. Id. at 1293.

59. Id.

60. Id. at 1294.

61. Id. at 417.

62. 685 Phil. 429 (2012) [Per J. Mendoza, Third Division].

63. Id. at 437.

64. Rollo, pp. 413-421, respondent's Position Paper.

65. 537 Phil. 510 (2006) [Per J. Velasco, Jr., En Banc].

66. Id. at 532-534.

67. 585 Phil. 416 (2008) [Per J. Chico-Nazario, Third Division].

68. Id. at 436, as cited in rollo, p. 294.

69. Bank of Commerce v. Radio Philippines Network, Inc. , 733 Phil. 491, 510 (2014) [Per J.
Abad, Third Division].

70. Id.
71. 674 Phil. 609, 617-618 (2011) [Per J. Leonardo-de Castro, En Banc].

72. Id. at 617-618.

73. Id.

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 74. CORP. CODE, sec. 80.
75. CORP. CODE, sec. 80.

76. 642 Phil. 47, 138-158 (2010) [Per J. Leonardo-de Castro, En Banc].

77. Id. at 145-147.

78. Id. at 148-152.

79. Id. at 117-137.

80. Id. at 127-129.

81. Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-Federation of

Unions in BPI Unibank, 674 Phil. 609, 617-618 (2011) [Per J. Leonardo-de Castro, En
Banc].
82. Id.

83. Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-Federation of

Unions in BPI Unibank, 642 Phil. 47, 148 (2010) [Per J. Leonardo-de Castro, En Banc].
84. Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-Federation of
Unions in BPI Unibank, 674 Phil. 609, 617-618 (2011) [Per J. Leonardo-de Castro, En
Banc].
85. LABOR CODE, art. 299.
86. Rollo, pp. 315-337.

87. Id. at 331.

88. Id. at 310-314.

89. Id. at 310-311.

90. Wiltshire File Co., Inc. v. National Labor Relations Commission , 271 Phil. 694, 703 (1991)
[Per J. Feliciano, Third Division].
91. Manila Polo Club Employees' Union v. Manila Polo Club, Inc. , 715 Phil. 18, 25 (2013) [Per
J. Peralta, Third Division].

92. Id.
93. Unilever Philippines, Inc. v. Rivera , 710 Phil. 124, 132-133 (2013) [Per J. Mendoza, Third
Division], citing Philippine Long Distance Telephone Co. v. National Labor Relations
Commission, 247 Phil. 641, 649 (1988) [Per J. Cruz, En Banc] . See Cutamora v.
Eastern Gold Corp., G.R. No. 220380 [Formerly UDK 15350] (Notice), October 12, 2015
[Per Clerk of Court Notice Unsigned Resolution, First Division].

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