A.C. Ransom Labor Union-CCLU vs. NLRC

The President of a corporation and his successors in office may be held personally, jointly, and severally liable with the corporation for the payment of back wages to illegally dismissed employees, particularly when the corporation has ceased operations and disposed of its assets to evade labor obligations, thereby preventing the corporation from using its separate juridical personality to shield responsible officers from liability for violations of the Labor Code.

The case arose from a 1961 strike involving employees of A.C. Ransom (Phils.) Corporation, a family-owned ink manufacturing company established in 1933. After the Court of Industrial Relations ordered the reinstatement of 22 strikers with back wages in 1972, the corporation ceased operations in 1973 and subsequently organized a new corporation, Rosario Industrial Corporation, in the same compound to continue the same business. The corporation's assets were disposed of, leaving insufficient leviable assets to satisfy the back wages award, prompting the labor union to seek execution against the corporate officers personally.

• Respondent A.C. Ransom (Philippines) Corporation (RANSOM) was established in 1933 by Maximo C. Hernandez, Sr. as a family corporation engaged in the manufacture of ink and associated articles in Las Piñas, Rizal.
• On June 6, 1961, employees of RANSOM, mostly members of petitioner Labor Union, went on strike and established a picket line which was lifted on June 21, 1961, with most strikers returning to work; however, 22 strikers were refused reinstatement by the Company.
• In 1969, the same Hernandez family organized another corporation, Rosario Industrial Corporation (ROSARIO), which engaged in the same business of manufacturing ink and associated products within the RANSOM Compound.
• On December 19, 1972, the Court of Industrial Relations ordered RANSOM, its officers and agents, to reinstate the 22 strikers with back wages from July 25, 1969.
• On April 2, 1973, RANSOM filed an application for clearance to close or cease operations effective May 1, 1973, which was granted by the Ministry of Labor and Employment on June 7, 1973.
• Back wages were subsequently computed at P164,984.00 in early 1974.
• Up to September 9, 1976, petitioner Union had filed approximately ten motions for execution against RANSOM, all of which could not be implemented due to failure to find leviable assets; in 1975, RANSOM sold machineries and equipment for P28 million to Revelations Manufacturing Corporation.
• On December 18, 1978, petitioner Union filed a Motion for Execution asking that officers and agents of RANSOM be held personally liable for payment of the back wages.
• On March 11, 1980, Labor Arbiter Tito F. Genilo granted the Motion (the Genilo Order), expressly authorizing a Writ of Execution for P164,984.00 against RANSOM and seven officers and directors of the Company.
• RANSOM appealed to the NLRC, which affirmed the Genilo Order on July 31, 1984, except as modified regarding the personal liability of officers.

• The corporation ceased operations and disposed of its assets to evade payment of back wages, demonstrating bad faith and fraudulent intent to circumvent the judgment.
• The officers should be held personally liable because they organized a new corporation (Rosario Industrial Corporation) to replace RANSOM and continue the same business, effectively using the corporate form to defraud employees of their rights.
• The five-year period for execution under Section 6, Rule 39 of the Rules of Court should not apply, or alternatively, should be counted from the time back wages were determined in early 1974, not from the 1972 decision, making the December 1978 motion timely.
• Under Article 212(c) of the Labor Code, officers acting in the interest of the employer are considered "employers" themselves and may be held personally liable for labor law violations.

• Execution proceedings must stop after the lapse of five years under Section 6, Rule 39 of the Rules of Court, and a motion to revive is necessary since the decision became final in 1972 and execution was sought in 1980.
• The judgment against the corporation is not enforceable against its officers and agents in their individual, private, and personal capacities because they were not parties to the case where the judgment was rendered.
• As a general rule, officers of a corporation are not personally liable for official acts unless they have exceeded the scope of their authority, and there is no evidence showing that the named officers exceeded their authority.
• The individual officers were not given a chance to be heard regarding the imposition of personal liability, violating their right to due process.

• Procedural:
  • Whether the decision of the Court of Industrial Relations having become final and executory in 1972 is enforceable by a writ of execution issued in 1980, more than five years after the finality of the decision, under Section 6, Rule 39 of the Rules of Court.
• Substantive Issues:
  • Whether the judgment against a corporation to reinstate its dismissed employees with back wages is enforceable against its officers and agents in their individual, private, and personal capacities who were not parties in the case where the judgment was rendered.
  • Whether the corporate veil may be pierced to hold corporate officers personally liable for the corporation's labor obligations when the corporation has ceased operations and disposed of assets to evade payment.

• Procedural:
  • The Supreme Court held that Section 6, Rule 39 is not invocable by RANSOM, and even if applicable, the five-year period should be counted only from the time the back wages were determined in early 1974, not from the 1972 decision, so the motion filed in December 1978 was timely. The Court emphasized that the statute of limitations operates primarily against those who sleep on their rights, not against those who assert their rights but fail for causes beyond their control.
• Substantive:
  • The Court set aside the NLRC decision regarding the non-personal liability of individual respondents and reinstated the Genilo Order with modification.
  • The Court held that under Article 212(c) of the Labor Code, "employer" includes any person acting in the interest of an employer directly or indirectly, and the responsible officer of an employer corporation can be held personally liable for non-payment of back wages.
  • In the absence of definite proof identifying the specific officer responsible, the President is presumed to be the responsible officer as the chief operating officer of the corporation.
  • Personal liability for the back wages is limited to Ruben Hernandez, who was President of RANSOM in 1974, jointly and severally with other Presidents of the same corporation who had been elected as such after 1972 or up to the time the corporate life was terminated, to prevent deprivation of employees' rights through changes in corporate leadership.

• Piercing the Veil of Corporate Fiction — While not explicitly using the phrase "piercing the veil," the Court applied this principle by disregarding the separate corporate personality of RANSOM to hold its president personally liable for corporate obligations. The Court looked at the reality that the corporation organized another entity (Rosario Industrial Corporation) to replace itself and continue the same business while evading labor liabilities, thereby preventing the corporate form from being used as a shield to defraud employees.
• Personal Liability of Corporate Officers for Labor Violations — Corporate officers, specifically the President as the chief operating officer, can be held personally liable for violations of the Labor Code, particularly for non-payment of back wages to illegally dismissed employees, when they act in the interest of the employer under Article 212(c) of the Labor Code.
• Continuing Personal Liability of Successive Presidents — The personal liability for unpaid back wages attaches not only to the president at the time the liability was incurred, but extends jointly and severally to successors in office to prevent circumvention of liability through the election of presidents without leviable assets.

• "Suffice it to state also that the statute of limitations has been devised to operate primarily against those who sleep on their rights, not against those who assert their right but fail for causes beyond their control."
• "If the policy of the law were otherwise, the corporation employer can have devious ways for evading payment of back wages."
• "The responsible officer of an employer corporation can be held personally, not to say even criminally, liable for non-payment of back wages. That is the policy of the law."
• "Considering that non-payment of the back wages of the 22 strikers has been a continuing situation, it is our opinion that the personal liability of the RANSOM President, at the time the back wages were ordered to be paid should also be a continuing joint and several personal liabilities of all who [may] have thereafter succeeded to the office of president; otherwise, the 22 strikers may be deprived of their rights by the election of a president without leviable assets."

• Article 265 of the Labor Code — Entitles workers terminated due to unlawful lockout to reinstatement with full back wages; forms the basis for the monetary award sought to be enforced against the corporation and its officers.
• Article 273 of the Labor Code — Provides penal sanctions (fine and/or imprisonment) for violations of Article 265, supporting the policy that responsible officers can be held personally liable for labor law violations.
• Article 212(c) of the Labor Code — Defines "employer" to include any person acting in the interest of an employer directly or indirectly, forming the statutory basis for holding corporate officers personally liable as employers.
• Section 15(b) of Republic Act No. 602 (Minimum Wage Law) — Provides that in case of violations by corporations, the manager or person acting as such shall be responsible, cited as supporting precedent for the principle of personal liability of corporate officers.
• Presidential Decree No. 525 — Cited regarding penalties imposed upon guilty officers of corporations for failure to pay emergency allowances, reinforcing the principle that corporate officers can be held personally liable for corporate violations.
• Section 6, Rule 39 of the Rules of Court — Discussed regarding the five-year period for execution of judgments; the Court ruled this was inapplicable or that the period had not yet lapsed when the motion was filed in December 1978.