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FIRST DIVISION G.R. Nos. 148263 and 148271-72 : April 21, 2009 ARMANDO DAVID, Petitioner, v. NATIONAL FEDERATION OF LABOR UNION and MARIVELES APPAREL CORPORATION, Respondents. D E C I S I O N CARPIO, J.: The Case This is a petition for review on certiorari 1 assailing the Joint Decision2 dated 29 February 2000 and the Resolution3 dated 27 March 2001 of the Court of Appeals (appellate court) in CA-G.R. SP Nos. 54404-06. The appellate court affirmed the Decision4 dated 17 June 1994 of Labor Arbiter Isabel Panganiban-Ortiguerra (Arbiter Ortiguerra) in RAB-III-08-5198-93 where petitioner Armando David (David) was held solidarily liable, along with Mariveles Apparel Corporation (MAC) and MAC Chairman of the Board Antonio Carag (Carag), for money claims of the employees of MAC. The Facts The present case arose from the same circumstances as Antonio C. Carag v. National Labor Relations Commission, et al.5 cra MAC hired David as IMPEX and Treasury Manager on 16 September 1988. David began serving as MAC's President in May 1990. David served as President in the nature of a nominee as he did not own any of MAC's shares. David tendered his irrevocable resignation from MAC on 30 September 1993. David's resignation was made effective on 15 October 1993. In a complaint for illegal dismissal dated 12 August 1993, National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union (MACLU) alleged that MAC ceased operations on 8 July 1993 without prior notice to its employees. MAC allegedly gave notice of its closure on the same day that it ceased operations. MACLU and NAFLU further alleged that, at the time of MAC's closure, employees who had rendered one to two weeks work were not paid their corresponding salaries. Arbiter Ortiguerra immediately summoned the parties for settlement of the case. However, MAC failed to appear before Arbiter Ortiguerra. MAC's non-appearance compelled Arbiter Ortiguerra to declare the case submitted for resolution based on the pleadings. On 3 January 1994, MACLU and NAFLU filed their position paper wherein MACLU and NAFLU also moved to implead Carag and David to guarantee satisfaction of any judgment award in MACLU and NAFLU's favor. Atty. Joshua Pastores, as MAC's counsel, submitted a position paper dated 21 February 1994 and argued that Carag and David should not be held liable because MAC is owned by a consortium of banks. Carag's and David's ownership of MAC shares only served to qualify them to serve as officers in MAC. The Ruling of the Labor Arbiter Arbiter Ortiguerra proceeded to render her Decision on 17 June 1994 without further proceedings or submissions from the parties. Arbiter Ortiguerra granted MACLU and NAFLU's motion to implead Carag and David, as well as declared Carag and David solidarily liable with MAC to complainants. Pertinent portions of Arbiter Ortiguerra's decision are quoted below:cra:nad The complainants claim that Atty. Antonio Carag and Mr. Armando David should be held jointly and severally liable with respondent corporation [MAC]. This bid is premised on the belief that the impleader of the aforesaid officers will guarantee payment of whatever may be adjudged in complainants' favor by virtue of this case. It is a basic principle in law that corporations have personality [sic] distinct and separate from the stockholders. This concept is known as corporate fiction. Normally, officers acting for and in behalf of a corporation are not held personally liable for the obligation of the corporation. In instances where corporate officers dismissed employees in bad faith or wantonly violate labor standard laws or when the company had already ceased operations and there is no way by which a judgment in favor of employees could be satisfied, corporate officers can be held jointly and severally liable with the company. This Office after a careful consideration of the factual backdrop of the case is inclined to grant complainants' prayer for the impleader of Atty. Antonio Carag and Mr. Armando David, to assure that valid claims of employees would not be defeated by the closure of [MAC]. x x x WHEREFORE, premises considered, judgment is hereby rendered declaring respondents jointly and severally guilty of illegal closure and they are hereby ordered as follows:
The claims for moral, actual and exemplary damages are dismissed for lack of evidence. SO ORDERED.6 cra David claimed that he was not notified of Arbiter Ortiguerra's decision. David alleged that it was only during a chance encounter with Carag that he learned of Arbiter Ortiguerra's decision against him. Neither did David know that MAC filed an appeal on his behalf before the NLRC. David then filed a petition for certiorari under Rule 65, docketed as G.R. No. 118880, before this Court. We also consolidated David's petition with that of MACLU and NAFLU (G.R. No. 118880) and of MAC and Carag (G.R. No. 118820). On 12 July 1999, after all the parties had filed their memoranda, we referred the consolidated cases to the appellate court in accordance with our decision in St. Martin Funeral Home v. NLRC.7 MAC, Carag, and David filed separate petitions before the appellate court. David asked the appellate court to rule on whether the labor arbiter acquired jurisdiction over his person. David emphasized that he was impleaded as a party respondent not in a separate order prior to the promulgation of the decision, but in the decision itself. David also questioned his solidary liability with his co- Respondents. The Ruling of the Appellate Court In its Joint Decision dated 29 February 2000, the appellate court affirmed the decision of Arbiter Ortiguerra and the resolution of the NLRC. The appellate court stated that "petitioner DAVID cannot just evade his liability by the simple expedien[ce] of alleging that he had not affirmed nor adopted the position paper filed by petitioner MAC."8 David's resignation from MAC took place only on 15 October 1993, long after MAC's closure took place. According to the appellate court, this meant that David willfully and knowingly assented to the unlawful closure of the company without any notice to the employees. David was thus solidarily liable, along with MAC and Carag, for the unpaid wages of MAC's employees. The dispositive portion of the appellate court's decision reads as follows:cra:nad IN VIEW WHEREOF, the petitions are DISMISSED. The decision of Labor Arbiter Isabel Panganiban-Ortiguerra dated June 17, 1994, and the Resolution dated January 5, 1995, issued by the National Labor Relations Commission are hereby AFFIRMED. As a consequence of dismissal, the temporary restraining order issued on March 2, 1995, by the Third Division of the Supreme Court is LIFTED. Costs against petitioners. SO ORDERED.9 cra The appellate court denied David's motion for reconsideration in a Resolution promulgated on 27 March 2001. The Issues David raises the following issues before this Court:
The Ruling of the Court The petition has merit. The issues raised by David can be limited to denial of due process and the propriety of David's solidary liability. Denial of Due Process The proceedings before the Labor Arbiter deprived David of due process. MACLU and NAFLU filed their complaint against MAC on 12 August 1993. Arbiter Ortiguerra's decision shows that MACLU, NAFLU, and MAC were the only parties summoned to a conference for a possible settlement. Because of MAC's failure to appear, Arbiter Ortiguerra deemed the case submitted for resolution. David's resignation from MAC took effect on 15 October 1993. NAFLU and MACLU moved to implead Carag and David for the first time only in their position paper dated 3 January 1994. David did not receive any summons and had no knowledge of the decision against him. The records of the present case fail to show any order from Arbiter Ortiguerra summoning David to attend the preliminary conference. Despite this lack of summons, in her Decision dated 17 June 1994, Arbiter Ortiguerra not only granted MACLU and NAFLU's motion to implead Carag and David, she also held Carag and David solidarily liable with MAC. Arbiter Ortiguerra's zeal to rule in favor of MACLU and NAFLU should have been tempered by observance of due process. Like Carag, David 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."11 Unlike Carag, David did not even know that Arbiter Ortiguerra issued a decision against him. David was not even able to file an appeal before the NLRC. David's participation in the present case, albeit belated, questioned his inclusion in the decisions of the tribunals below. David's protestations are not without basis, as can be seen from Sections 2,12 3,13 4,14 5(b),15 and 11(c)16 of Rule V of the New Rules of Procedure of the NLRC.17 cra The records of the case show that NAFLU and MACLU moved to implead Carag and David for the first time only in their position paper dated 3 January 1994. Arbiter Ortiguerra's decision shows that MACLU, NAFLU, and MAC were the only parties summoned to a conference for a possible settlement. Therefore, at the time of the conference, David was not yet a party to the case. The position paper subsequently filed by MAC was filed at a time when David had already resigned from MAC. David's knowledge of a labor case against MAC did not serve the same purpose as a summons. David did not receive any summons and had no knowledge of the decision against him. The Labor Arbiter and the NLRC did not have jurisdiction over David. This utter lack of jurisdiction voids any liability of David for any monetary award or judgment in favor of MACLU and NAFLU. Corporate President's Solidary Liability Assuming arguendo that the NLRC and the Labor Arbiter had jurisdiction over David, we rule that it was still improper to hold David liable for MAC's obligations to its employees. Arbiter Ortiguerra held David liable for MAC's debts pursuant to Article 212(e) of the Labor Code, which reads:cra:nad 'Employer' includes any person acting in the interest of an employer, directly or indirectly. The term shall not include any labor organization or any of its officers or agents except when acting as employer. However, Article 212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation because Section 31 of the Corporation Code is still the governing law on personal liability of officers for the debts of the corporation. Section 31 of the Corporation Code provides:cra:nad 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 any 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 There was no showing of David willingly and knowingly voting for or assenting to patently unlawful acts of the corporation, or that David was guilty of gross negligence or bad faith. WHEREFORE, we GRANT the petition. We SET ASIDE the Joint Decision dated 29 February 2000 and the Resolution dated 27 March 2001 of the Court of Appeals in CA-G.R. SP Nos. 54404-06. SO ORDERED. ANTONIO T. CARPIO WE CONCUR: REYNATO S. PUNO
LUCAS P. BERSAMIN C E R T I F I C A T I O N Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. REYNATO S. PUNO Endnotes:
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