HOLDING THE DIRECTOR PERSONALLY LIABLE AFTER THE DECISION HAD BECOME FINAL WILL VIOLATE IMMUTABILITY OF JUDGMENT

Lazada vs. Mendoza
G.R. No. 196134, October 12, 2016

Facts:

Respondent Magtanggol Mendoza was employed as a technician by VSL Service Center, a single proprietorship, owned and managed by Valentin Lozada. Sometime in August 2003, the VSL Service Center was incorporated and changed its business name to LB&C Services Corporation.

Subsequently, Mendoza was asked by Lozada to sign a new employment contract. Mendoza did not accede because the company did not consider the number of years of service that he had rendered to VSL Service Center. From then on, his work schedule was reduced to one to three days a week.

On January 12, 2004, he was advised by the respondent company’s Executive Officer not to report for work and just wait for a call from the company regarding his work schedule. He patiently waited for the company’s call regarding his work schedule. However, he did not receive any.

Considering that his family depends on him for support, he asked his wife to call the company and inquire on when he would report back to work. Still, he was not given any work schedule by the company. Aggrieved, Mendoza filed a complaint against the company for illegal dismissal with a prayer for the payment of his 13th month pay, service incentive leave pay, holiday pay and separation pay and with a claim for moral and exemplary damages, and attorney’s fees.

Mendoza alleged that he was constructively dismissed as he was not given any work assignment for his refusal to sign a new contract of employment. He was dismissed from his work without any valid authorized cause. He was not given any separation pay for the services that he rendered for almost six (6) years that he worked with VSL Service Center.

He thus claimed that his termination from employment was effected illegally, hastily, arbitrarily and capriciously.

The company vehemently denied the allegation of the petitioner that he was dismissed from employment. Mendoza was still reporting for work with the company even after he filed a complaint with the NLRC.

It further averred that respondent Lozada was not an officer or employee of the respondent company nor (sic) its authorized representative. The respondent company finally claimed that it was the petitioner who severed his relationship with it.

LA Ruling:

The Labor Arbiter declared the dismissal of the petitioner from employment as illegal ordering his reinstatement with full backwages plus payment of his 13th month pay (less P.500.00 pesos) and service incentive leave pay all computed three years backward.

LB&C Services Corporation appealed, but the NLRC dismissed the appeal for non-perfection thereof due to failure to deposit the required cash or surety bond. Thus, the Labor Arbiter’s decision attained finality on August 4, 2006, and the entry of judgment was issued by the NLRC on August 16, 2006.

The respondent moved for the issuance of the writ of execution, which the Labor Arbiter granted. The petitioner and LB&C Services Corporation filed a motion to quash the writ of execution, alleging that there was no employer-employee relationship between the petitioner and the respondent; and that LB&C Services Corporation “has been closed and no longer in operation due to irreversible financial losses.” The Labor Arbiter denied the motion to quash the writ of execution. In due course, the sheriff garnished P5,767.77. The Labor Arbiter directed the sheriff to proceed with further execution of the properties of the petitioner for the satisfaction of the monetary award in favor of the respondent.

The sheriff issued to the petitioner a notice of levy upon realty. The sheriff notified the Registry of Deeds of Las Piñas City on the levy made on the petitioner’s real property. LB&C Services Corporation 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. After the Labor Arbiter denied its motion for the lifting of the levy, LB&C Services Corporation appealed the denial to the NLRC.

NLRC Ruling:

The NLRC reversed the Labor Arbiter. The respondent assailed the reversal by motion for reconsideration, which the NLRC thereafter denied. Thence, a petition for certiorari was filed in the CA to assail the ruling of the NLRC on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction.

CA Ruling:

The CA promulgated the assailed decision granting the petition for certiorari, and reinstating the Labor Arbiter’s decision. It opined that the petitioner was still liable despite the fact that the Labor Arbiter’s decision had not specified his being jointly and severally liable for the monetary awards in favor of the respondent; that LB&C Services Corporation, 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; that with LB&C Services Corporation having already ceased its operation, the respondent could no longer recover the monetary benefits awarded to him, thereby rendering the entire procedure and the award nugatory; and that the petitioner was the corporate officer liable by virtue of his having acted on behalf of the corporation.

Hence, the petition for review.

Issue/s:

Is the owner of a petitioner corporation liable for the monetary awards granted to the employee despite the absence of a pronouncement him being solidarily liable with the company?

SC Ruling:

The SC held in the negative.

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 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.

Where complainant did not even ascribe gross negligence or bad faith to the director or alleged that he assented to patently unlawful acts of the corporation, will not establish the personal liability of the director.

The Labor Arbiter did not render any findings about the petitioner perpetrating the wrongful act against the respondent, or about the petitioner being personally liable along with LB&C Services Corporation for the monetary award. The lack of such findings was not assailed by the respondent. On its part, the NLRC did not discuss the matter at all in its decision of May 31, 2006, which ultimately attained finality. To hold the petitioner liable after the decision had become final and executory would surely alter the tenor of the decision in a manner that would exceed its terms.

The modification was impermissible because the decision had already become immutable, even if the modification was intended to correct erroneous conclusions of fact and law. The only recognized exceptions to the immutability of the decision are the corrections of clerical errors, the making of so-called nunc pro tune entries that cause no prejudice to any party, and where the judgment is void. None of such exceptions applied herein.