Benguet Electric Cooperative, Inc. vs. National Labor Relations Commission

Directors or officers of a corporation who act in bad faith, without lawful cause, and in violation of procedural due process in dismissing an employee may be held jointly and severally liable with the corporation for damages under Section 31 of the Corporation Code, even if they purported to act in their official capacity.

Peter Cosalan was the General Manager of BENECO, an electric cooperative. After assuming his position, he received several Audit Memoranda from the Commission on Audit (COA) detailing serious financial irregularities and mismanagement within the cooperative. Upon initiating the remedial measures recommended by the COA, the BENECO Board of Directors adopted a series of resolutions that progressively stripped Cosalan of his allowances, suspended him indefinitely, and ultimately terminated his services. The Board did not provide any notice of charges or a hearing, nor did it secure the prior approval of the National Electrification Administration (NEA) as required by its charter and loan agreement.

• Nature of the Action: The case originated from an illegal dismissal complaint filed by Peter Cosalan against his employer, BENECO, and its Board of Directors.
• Cosalan's Appointment and COA Findings: Cosalan was elected BENECO General Manager effective 16 October 1982. Shortly after, the COA issued memoranda and an audit report (1982-1983) flagging significant financial irregularities, including unauthorized write-offs of cash advances and inconsistent per diems, totaling millions of pesos.
• Board's Retaliatory Actions: Upon Cosalan's attempt to implement COA's recommended reforms, the Board adopted resolutions (June-July 1984) reducing his salary and allowances and removing him as a signatory. Subsequently (July-September 1984), it passed resolutions indefinitely suspending and ultimately terminating his services.
• Denial of Due Process: The Board never informed Cosalan of any charges against him or afforded him an opportunity to be heard. It also withheld his salary and allowances despite his demands.
• Illegal Nature of Suspension/Termination: Both the Labor Arbiter and the NLRC found the suspension and dismissal illegal. The suspension exceeded the 30-day maximum under labor rules, and no lawful cause for dismissal was proven. The Board also failed to obtain prior NEA approval as required.

• Timeliness of Appeal: Petitioner BENECO argued that the NLRC committed grave abuse of discretion in giving due course to the Board members' appeal, as their Memorandum on Appeal was filed out of time. The appeal was mailed via private carrier on 3 May 1988, beyond the reglementary period that ended on 2 May 1988.
• Solidary Liability: Petitioner contended that the NLRC gravely abused its discretion in releasing the Board members from solidary liability. It asserted that the Board members acted in bad faith and beyond their authority, making them personally liable under the law.

• Timeliness of Appeal (Board Members): The respondent Board members countered that their appeal was timely because they delivered their Memorandum on Appeal to a private letter carrier on 1 May 1988, which they considered the date of filing.
• Corporate Liability (NLRC & Board Members): The NLRC, in its assailed decision, reasoned that the Board members were acting in their official capacities and not with malice or bad faith. Therefore, any liability should be borne solely by BENECO, the corporation they represented.

• Perfection of Appeal: Whether the NLRC acted with grave abuse of discretion in accepting the Board members' appeal despite its being filed out of time.
• Liability for Backwages: Whether the NLRC acted with grave abuse of discretion in holding BENECO solely liable and exonerating the individual Board members from solidary liability for Cosalan's backwages and allowances.

• Perfection of Appeal: The appeal was filed out of time. The established rule is that filing via a private carrier is not a recognized mode; the date of actual receipt by the court, not the date of delivery to the private carrier, is deemed the date of filing. The ten-day reglementary period is mandatory and jurisdictional. The NLRC should have dismissed the appeal.
• Liability for Backwages: The NLRC's conclusion that the Board members were not motivated by bad faith was contrary to the evidence. The Board members acted "with indecent haste" and in reprisal against Cosalan for implementing COA-mandated reforms. They were guilty of gross negligence or bad faith under Section 31 of the Corporation Code, which is applicable to BENECO as a corporation created under P.D. No. 269. Their acts were contra legem and cannot be considered within the scope of their authority. Thus, they are solidarily liable with BENECO. Furthermore, BENECO has a right to be reimbursed by the Board members for any amounts it pays to Cosalan.

• Liability of Directors for Bad Faith (Section 31, Corporation Code) — Directors or officers who are guilty of gross negligence or bad faith in directing the affairs of the corporation are jointly and severally liable for all damages resulting therefrom. The Court applied this to the Board members of an electric cooperative, finding their act of illegally dismissing an employee in retaliation for exposing irregularities constituted bad faith, making them personally liable alongside the corporation.
• Filing of Pleadings via Private Carrier — The date of delivery of a pleading to a private letter-forwarding agency is not considered the date of filing. The date of actual receipt by the court is deemed the date of filing, making the appeal in this case late.
• Right of Reimbursement — When corporate directors act in bad faith and ultra vires, generating liability, the corporation has a right to be reimbursed by the directors for any amounts it is compelled to pay. This protects innocent members of the corporation from being penalized for the directors' personal acts.

• "The dismissal of an officer or employee in bad faith, without lawful cause and without procedural due process, is an act that is contra legem. It cannot be supposed that members of boards of directors derive any authority to violate the express mandates of law or the clear legal rights of their officers and employees by simply purporting to act for the corporation they control." — This passage underscores that acting under the guise of corporate authority does not shield directors from liability for illegal acts.
• "The liability-generating acts here are the personal and individual acts of respondent Board members, and are not properly attributed to Beneco itself." — This clarifies the distinction between corporate acts and the personal, bad-faith acts of directors, justifying the right to reimbursement.

• Pabalan, et al. v. National Labor Relations Commission, et al., 184 SCRA 495 (1990) — Cited for the general rule that corporate officers acting within their authority and in good faith are not personally liable for corporate acts. The Court distinguished the present case by finding the presence of bad faith.
• Eslabon v. Spouses Ramon Magbanua, G.R. No. 76571; Pelonio v. Lebrillo, G.R. No. 83556 — Cited to support the rule that filing via a private carrier is not recognized, and the date of receipt by the court is the reckoning point.
• Armigos v. Court of Appeals, 179 SCRA 1 (1989); Jocson v. Baguio, 179 SCRA 550 (1989); Chong Guan Trading v. National Labor Relations Commission, 172 SCRA 831 (1989) — Cited for the doctrine that the reglementary period to perfect an appeal is mandatory and jurisdictional.

• Section 31, Corporation Code of the Philippines (Batas Pambansa Blg. 68) — Provides for the joint and several liability of directors who are guilty of gross negligence or bad faith in directing corporate affairs. The Court applied this to hold the BENECO Board members liable.
• Section 4, Rule XIV, Omnibus Rules Implementing the Labor Code — Limits preventive suspension to a maximum of thirty (30) days. Cosalan's indefinite suspension violated this provision.
• Section 1, Rule 13, Rules of Court — Governs the filing of pleadings. The Court applied the principle therein that filing is complete upon receipt by the court clerk, not upon delivery to a private carrier.
• P.D. No. 269, as amended (NEA Charter) — Describes electric cooperatives as "corporations," making them subject to supplementary provisions of the Corporation Code, including Section 31. It also requires NEA approval for certain acts, which the Board failed to secure for Cosalan's dismissal.

• Justice Hugo E. Gutierrez, Jr.
• Justice Abdulwahid A. Bidin
• Justice Hilario G. Davide, Jr.
• Justice Flerida Ruth P. Romero