February 2010 - Philippine Supreme Court Resolutions
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[G.R. No. 190411 : February 10, 2010] SAMAHANG MANGAGAWA NG ECONOTRADE INC., REPRESENTED BY ALBERTO SOLOMON, ET AL VS. ECONOTRADE INC. AND/OR MANUEL CORLETO:
[G.R. No. 190411 : February 10, 2010]
SAMAHANG MANGAGAWA NG ECONOTRADE INC., REPRESENTED BY ALBERTO SOLOMON, ET AL VS. ECONOTRADE INC. AND/OR MANUEL CORLETO
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court dated 10 February 2010:
G.R. No. 190411 - (Samahang Mangagawa ng Econotrade Inc., represented by Alberto Solomon, et al vs. Econotrade Inc. and/or Manuel Corleto).-
Can the officers of a corporation who were not impleaded in the proceedings before the Labor Arbiter and the National Labor Relations Commission (NLRC) in a Complaint for Illegal Shutdown against the corporation, be later on impleaded as respondents in the Court of Appeals?
This is the basic question raised in this Petition for Review on Certiorari.
The Facts and the Case
On December 20, 2005, respondent Econotrade Inc. filed with the Department of Labor and Employment (DOLE) a Notice of Shutdown for a period of three weeks from December 27, 2005 to January 15, 2006. Contending that the same was illegal, petitioner Samahang Manggagawa ng Econotrade, Inc. (petitioner Union) filed a Complaint for Illegal Shutdown against respondent Econotrade, Inc. During the pendency of said complaint, respondent Econotrade, Inc. again implemented another shutdown and on May 22, 2006, it finally informed the DOLE of its indefinite cessation or shutdown of operation. Respondent Econotrade, Inc. then padlocked the company premises. This prompted petitioner Union to move for the amendment of the Complaint for Illegal Shutdown it earlier filed so as to include therein the subsequent shutdown as well as the indefinite shutdown of operation and/or business closure of respondent Econotrade. However, this was not granted since at the time the said motion for amendment was filed, the case was already submitted for decision.
In his Decision dated September 29, 2006, Labor Arbiter Antonio R. Macam found that respondent Econotrade, Inc. has substantially proven that it was indeed suffering considerable losses, enough to make it decide to temporarily shutdown its operations. He likewise ruled that the complaining employees, as represented by petitioner Union, were not entitled to be paid their claims corresponding to the wages due them for the duration of the shutdown. Ultimately, Labor Arbiter Macam dismissed petitioner Union's complaint.
The NLRC, on appeal, affirmed the decision of the Labor Arbiter. Thus, petitioner Union filed a Petition for Certiorari before the Court of Appeals (CA). On April 15, 2008, petitioner Union, through a Manifestation and Motion, sought the inclusion of respondent Econotrade, Inc.'s corporate officers as additional respondents, the names, positions and addresses of whom are as follows:
In a Resolution[2] dated June 26, 2008, the CA denied the prayer to implead said officers as additional respondents because they will be deprived of due process of law if they are to be impleaded at this late stage considering that they were not given the opportunity to participate in the proceedings below. The CA likewise did not give credence to the contention that there is a need to implead the said officers because the allegation that Econotrade, Inc. is selling its business is mere speculation and without basis.
Petitioner Union moved for reconsideration[3] invoking the doctrine of piercing the veil of corporate fiction. It contended that the rule applies squarely to the case as said corporate officers, while announcing in public through newspapers, paid ads and poster that the factory is "FOR SALE", were at the same time denying the obvious fact of company closure. To prove this, petitioner Union attached pictures of a building with a "FOR SALE" sign posted in front of the gate. Petitioner Union further contended that if a company ceases its operation and satisfaction of judgment is not feasible, then its corporate officers can be held liable.
In the Resolution dated November 25, 2009,[4] the CA denied said motion for reconsideration. It held that there was no showing that the pictures attached comprised the business premises of respondent Econotrade, Inc. And, even assuming that the factory is indeed for sale, the sale or disposal of all or substantially all of respondent Econotrade Inc.'s assets and properties is within the ambit of management prerogative. Moreover, it ruled that in order to justify the piercing of the corporate veil, it must prove that the sale is for the purpose of committing fraud, or for the evasion of corporate obligations, or that the transferee is a mere conduit of respondent Econotrade, which, petitioner Union failed to prove.
Hence, this petition.
We find that the CA correctly denied the motion to implead as additional respondents the corporate officers of respondent Econotrade, Inc.
In Carag vs. National Labor Relations Commission,[5] the Labor Arbiter granted complainants' motion to implead Carag (as the corporation's responsible officer) and at the same time, found him personally liable for the debts of MAC (the corporation) consisting of P49,101,621.00 in separation pay to complainants. In reversing the decision of the CA which affirmed those of the NLRC and the Labor Arbiter, we held viz:
The doctrine of piercing the veil of corporate fiction finds no application here.
The doctrine applies only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. In the absence of malice, bad faith or a specific provision of the law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities. From the records, neither was there any sufficient allegation nor evidence showing malice, bad faith or fraud on the part of the corporate officers as to justify the application of the doctrine.
There is no merit to the assertion that when the company has already ceased operations, then a judgment in favor of employees could no longer be satisfied, consequently, the corporate officers should be held liable for their claim. It was already explained in Carag that the Labor Code does not expressly make the corporate officer liable for the debts of the corporation. The liability of corporate officers is still governed by Sec. 31 of the Corporation Code, to wit:
Thus, in the absence of any allegation or evidence showing that the corporate officers sought to be impleaded willfully and knowingly voted for or assented to patently unlawful acts of the corporation, or are guilty of gross negligence or bad faith in directing the affairs of the corporation, said officers cannot be held personally liable for the claims of petitioner Union. Thus, there is no reason for them to be joined as party-respondents in this case.
At any rate, should petitioner Union obtain a favorable judgment in its Complaint for Illegal Shutdown in the future and if at such time respondent Econotrade is already dissolved, the former may still enforce its claims against the latter within three years from said dissolution as provided for by the Corporation Code. In fact, it may still do so even beyond the said period, pursuant to Section 122 of the Corporation Code, in which case, the enforcement shall be against the trustee appointed by respondent Econotrade, Inc.
WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court of Appeals dated June 26, 2008 denying petitioners' Manifestation and Motion to implead additional respondents and the Resolution dated November 25, 2009, denying the Motion for Reconsideration, are AFFIRMED.
SO ORDERED.
WITNESS the Honorable Antonio T. Carpio, Chairperson, Honorable Arturo D. Brion, Mariano C. Del Castillo, Roberto A. Abad and Jose P. Perez, Members, Second Division, this 10th day of February, 2010.
G.R. No. 190411 - (Samahang Mangagawa ng Econotrade Inc., represented by Alberto Solomon, et al vs. Econotrade Inc. and/or Manuel Corleto).-
Can the officers of a corporation who were not impleaded in the proceedings before the Labor Arbiter and the National Labor Relations Commission (NLRC) in a Complaint for Illegal Shutdown against the corporation, be later on impleaded as respondents in the Court of Appeals?
This is the basic question raised in this Petition for Review on Certiorari.
The Facts and the Case
On December 20, 2005, respondent Econotrade Inc. filed with the Department of Labor and Employment (DOLE) a Notice of Shutdown for a period of three weeks from December 27, 2005 to January 15, 2006. Contending that the same was illegal, petitioner Samahang Manggagawa ng Econotrade, Inc. (petitioner Union) filed a Complaint for Illegal Shutdown against respondent Econotrade, Inc. During the pendency of said complaint, respondent Econotrade, Inc. again implemented another shutdown and on May 22, 2006, it finally informed the DOLE of its indefinite cessation or shutdown of operation. Respondent Econotrade, Inc. then padlocked the company premises. This prompted petitioner Union to move for the amendment of the Complaint for Illegal Shutdown it earlier filed so as to include therein the subsequent shutdown as well as the indefinite shutdown of operation and/or business closure of respondent Econotrade. However, this was not granted since at the time the said motion for amendment was filed, the case was already submitted for decision.
In his Decision dated September 29, 2006, Labor Arbiter Antonio R. Macam found that respondent Econotrade, Inc. has substantially proven that it was indeed suffering considerable losses, enough to make it decide to temporarily shutdown its operations. He likewise ruled that the complaining employees, as represented by petitioner Union, were not entitled to be paid their claims corresponding to the wages due them for the duration of the shutdown. Ultimately, Labor Arbiter Macam dismissed petitioner Union's complaint.
The NLRC, on appeal, affirmed the decision of the Labor Arbiter. Thus, petitioner Union filed a Petition for Certiorari before the Court of Appeals (CA). On April 15, 2008, petitioner Union, through a Manifestation and Motion, sought the inclusion of respondent Econotrade, Inc.'s corporate officers as additional respondents, the names, positions and addresses of whom are as follows:
In a Resolution[2] dated June 26, 2008, the CA denied the prayer to implead said officers as additional respondents because they will be deprived of due process of law if they are to be impleaded at this late stage considering that they were not given the opportunity to participate in the proceedings below. The CA likewise did not give credence to the contention that there is a need to implead the said officers because the allegation that Econotrade, Inc. is selling its business is mere speculation and without basis.
Petitioner Union moved for reconsideration[3] invoking the doctrine of piercing the veil of corporate fiction. It contended that the rule applies squarely to the case as said corporate officers, while announcing in public through newspapers, paid ads and poster that the factory is "FOR SALE", were at the same time denying the obvious fact of company closure. To prove this, petitioner Union attached pictures of a building with a "FOR SALE" sign posted in front of the gate. Petitioner Union further contended that if a company ceases its operation and satisfaction of judgment is not feasible, then its corporate officers can be held liable.
In the Resolution dated November 25, 2009,[4] the CA denied said motion for reconsideration. It held that there was no showing that the pictures attached comprised the business premises of respondent Econotrade, Inc. And, even assuming that the factory is indeed for sale, the sale or disposal of all or substantially all of respondent Econotrade Inc.'s assets and properties is within the ambit of management prerogative. Moreover, it ruled that in order to justify the piercing of the corporate veil, it must prove that the sale is for the purpose of committing fraud, or for the evasion of corporate obligations, or that the transferee is a mere conduit of respondent Econotrade, which, petitioner Union failed to prove.
Hence, this petition.
We find that the CA correctly denied the motion to implead as additional respondents the corporate officers of respondent Econotrade, Inc.
In Carag vs. National Labor Relations Commission,[5] the Labor Arbiter granted complainants' motion to implead Carag (as the corporation's responsible officer) and at the same time, found him personally liable for the debts of MAC (the corporation) consisting of P49,101,621.00 in separation pay to complainants. In reversing the decision of the CA which affirmed those of the NLRC and the Labor Arbiter, we held viz:
xxx Here Carag was not issued summons, not accorded a conciliatory conference, not ordered to submit a position paper, not accorded a hearing, not given an opportunity to present his evidence and not notified that the case was submitted for resolution. Thus, we hold that Arbiter Ortiguerra's Decision is void as against Carag for utter absence of due process. It was error for the HLRC and the Court of Appeals to uphold Arbiter Ortiguerra's decision as against Carag.
The doctrine of piercing the veil of corporate fiction finds no application here.
The doctrine applies only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. In the absence of malice, bad faith or a specific provision of the law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities. From the records, neither was there any sufficient allegation nor evidence showing malice, bad faith or fraud on the part of the corporate officers as to justify the application of the doctrine.
There is no merit to the assertion that when the company has already ceased operations, then a judgment in favor of employees could no longer be satisfied, consequently, the corporate officers should be held liable for their claim. It was already explained in Carag that the Labor Code does not expressly make the corporate officer liable for the debts of the corporation. The liability of corporate officers is still governed by Sec. 31 of the Corporation Code, to wit:
Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons, x x x
Thus, in the absence of any allegation or evidence showing that the corporate officers sought to be impleaded willfully and knowingly voted for or assented to patently unlawful acts of the corporation, or are guilty of gross negligence or bad faith in directing the affairs of the corporation, said officers cannot be held personally liable for the claims of petitioner Union. Thus, there is no reason for them to be joined as party-respondents in this case.
At any rate, should petitioner Union obtain a favorable judgment in its Complaint for Illegal Shutdown in the future and if at such time respondent Econotrade is already dissolved, the former may still enforce its claims against the latter within three years from said dissolution as provided for by the Corporation Code. In fact, it may still do so even beyond the said period, pursuant to Section 122 of the Corporation Code, in which case, the enforcement shall be against the trustee appointed by respondent Econotrade, Inc.
WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court of Appeals dated June 26, 2008 denying petitioners' Manifestation and Motion to implead additional respondents and the Resolution dated November 25, 2009, denying the Motion for Reconsideration, are AFFIRMED.
SO ORDERED.
WITNESS the Honorable Antonio T. Carpio, Chairperson, Honorable Arturo D. Brion, Mariano C. Del Castillo, Roberto A. Abad and Jose P. Perez, Members, Second Division, this 10th day of February, 2010.
Very truly yours,
(Sgd)MA. LUISA L. LAUREA
Clerk of Court
(Sgd)MA. LUISA L. LAUREA
Clerk of Court
Endnotes:
[1] While his name does not appear as a party-respondent in the caption of the Decision of the Labor Arbiter dated September 29, 2006 and in the NLRC Resolution dated July 31, 2007, the captions of the assailed Resolutions of the CA dated June 26, 2008 and June 25, 2009 indicate Ms name as respondent together with Econotrade, Inc.. So does the caption of this present petition.
[2] Rollo, pp. 23-24; penned by Associate Justice Rodrigo V. Cosico and concurred in by Associate Justices Hakim S. Abdulwahid and Mariflor P, Punzalan-Castillo.
[3] Id. at 28-31.
[4] Id. at 25-27; penned by Associate Justice Marifior P. Punzalan Castillo and concurred in by Associate Justices Hakim S. Abdulwahid and Antonio L. Villamor.
[5] G.R.No. 147590, April 2,2007,520 SCRA 28.
