Thursday July 19, 2018

Almirante: Liability of corporate officer

ON Oct. 13, 1997, respondent Magtanggol Mendoza was employed as a technician by VSL Service Center, a single proprietorship owned and managed by petitioner Valentin S. Lozada. Sometime in August 2003, the VSL Service Center was incorporated and changed its business name to LB&C Services Corp.

On Jan. 21, 2004, the respondent filed a complaint against LB&C Services Corp. for illegal dismissal with money claims. The Labor Arbiter (LA) ruled in favor of the respondent. When his decision attained finality, he issued a writ of execution ordering the sheriff to levy on petitioner’s real property.

LB&C Services Corp. moved for the lifting of the levy because the real property levied upon had been constituted by the petitioner as the family home; and that the decision of the Labor Arbiter did not adjudge the petitioner as jointly and solidarily liable for the obligation in favor of the respondent.

When the case reached the Court of Appeals (CA), it opined that the petitioner was still liable, LB&C Services Corp. being an artificial being, must have an officer who could be presumed to be the employer, being the person acting in the interest of the corporate employer. Is the CA ruling justified?

Ruling: No.

A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred as a result of the acts of the directors and officers as the corporate agents are not their personal liability but the direct responsibility of the corporation they represent. As a general rule, corporate officers are not held solidarily liable with the corporation for separation pay because the corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.

To hold a director or officer personally liable for corporate obligations, two requisites must concur, to wit: (1) the complaint must allege that the director or officer assented to the patently unlawful acts of the corporation, or that the director or officer was guilty of gross negligence or bad faith; and (2) there must be proof that the director or officer acted in bad faith.

A perusal of the respondent’s position paper and other submissions indicates that he neither ascribed gross negligence or bad faith to the petitioner nor alleged that the petitioner had assented to patently unlawful acts of the corporation. The respondent only maintained that the petitioner had asked him to sign a new employment contract, but that he had refused to do the petitioner’s bidding.

The respondent did not thereby clearly and convincingly prove that the petitioner had acted in bad faith. Indeed, there was no evidence whatsoever to corroborate the petitioner’s participation in the respondent’s illegal dismissal. Accordingly, the twin requisites of allegation and proof of bad faith necessary to hold the petitioner personally liable for the monetary awards in favor of the respondent were lacking (Bersamin, J., SC 1st Division, Valentin S. Lozada vs. Magtanggol Mendoza, G.R. No. 196134, October 12, 2016).