Gudez vs. NLRC

The president of an employer-corporation is solidarily liable with the corporation for separation pay and other money claims due its employees as a person acting in the interest of the employer under Article 212(c) of the Labor Code, especially where the corporation has closed and can no longer satisfy the judgment.

Eladio A. Gudez and his co-petitioners served as executive director, security guards and supervisors of Retired Army Protective and Security Agency Inc. (RAPSA), a corporation engaged in providing security services. Herminia A. Crisologo served as its president and treasurer. Article 212(c) of the Labor Code defines employer to include any person acting in the interest of an employer, a definition central to disputes over the personal liability of corporate officers for labor money claims.

Petitioners were formerly employed by Retired Army Protective and Security Agency Inc. as executive director, security guards and supervisors. RAPSA, engaged in providing security services, had Herminia A. Crisologo as its president and treasurer.

In a letter dated July 3, 1986, Col. Ricardo A. Carranceja of the Philippine Constabulary, Supervisory Unit for Security and Investigation Agencies ordered RAPSA to cease operations and to turn over its firearms to the Firearms and Explosive Unit of the Philippine Constabulary. In another letter dated July 18, 1986, the same unit allowed RAPSA to continue operations up to August 15, 1986 for the winding up of its affairs. On that date RAPSA ceased operations and terminated petitioners' employment. Thereafter RAPSA's clients obtained the security services of another agency, Emilio Salting Alviar Protective and Security Agency.

Because of the closure, petitioners filed separate complaints with the Labor Arbiter against RAPSA, Herminia Crisologo, ESAPSA and Malou Alviar for separation pay, recovery of lost tool deposit, allowances and other monetary claims. On the same day the Labor Arbiter promulgated its September 25, 1987 decision in their favor, RAPSA filed a petition for voluntary insolvency with the Regional Trial Court of Makati. The Labor Arbiter had found the employments terminated by closure without separation pay and ordered RAPSA and Crisologo to pay separation pay equivalent to one-half month pay for every year of service plus lost tool and cash bond deposits, while dismissing certain other complaints without prejudice for failure to prosecute.

• Validity of Appeal and Authority of Counsel: Petitioner argued that the memorandum of appeal filed by Jose T. Collado, counsel for RAPSA, could not be considered the appeal of Crisologo because her name was merely inserted by handwriting, Collado had no authority to represent her as she was represented by a different lawyer before the Labor Arbiter, and the procedure on substitution of counsel was not complied with.
• Personal Liability of Corporate President: Petitioner maintained that under the legal definition of employer in Article 212, par. c of the Labor Code, not only the juridical entity but also the responsible natural person acting in its interest is liable for money claims, and that Crisologo as president of RAPSA should therefore be held jointly and severally liable with the corporation.

• Appeal by Corporate Officer: Whether an appeal was made by respondent Herminia Crisologo from the decision of the Labor Arbiter to the respondent Commission.
• Solidary Liability of Corporate Officer: Whether respondent Crisologo may be held solidarily liable with respondent corporation for separation pay and other monetary claims due to petitioners.

• Appeal by Corporate Officer: No. No valid appeal by Crisologo was shown, counsel for RAPSA having no authority to appeal for her without compliance with the required procedure for substitution of counsel.
• Solidary Liability of Corporate Officer: Yes. The corporate president is liable jointly and severally with the corporation for labor money claims as the person acting in the employer's interest under Article 212(c) of the Labor Code.

• Appeal by Corporate Officer: Although administrative and quasi-judicial bodies like the NLRC are not bound by technical rules of procedure, the rule on substitution or employment of additional counsel is still observed in labor cases. Valid substitution requires (a) written application, (b) written consent of the client, (c) written consent of the attorney to be substituted if obtainable, and (d) otherwise proof of service of notice on the attorney to be substituted. Records showed no compliance therewith, so no valid substitution occurred and RAPSA's counsel was unauthorized to appeal for Crisologo, whose name was merely intercalated by handwriting in the memorandum of appeal.
• Solidary Liability of Corporate Officer: Under Article 212(c), employer includes any person acting in the interest of an employer, culled from the Minimum Wage Law; since a corporation is an artificial person, it must have an officer presumed to be the employer, the corporation being the employer only in the technical sense, and absent definite proof of the directly responsible officer, the president as chief operating officer is presumed responsible. Crisologo was undisputedly RAPSA's president, RAPSA had closed upon Philippine Constabulary order and terminated petitioners without the separation pay required under the Labor Code, and RAPSA had ceased to exist and filed for voluntary insolvency when judgment was rendered, leaving no one against whom an award could otherwise be enforced.

• Substitution of Counsel in Labor Cases — There can be no valid substitution of counsel until four requisites are met: (1) written application for substitution must be filed; (2) written consent of the client to the substitution must be filed; (3) written consent of the attorney to be substituted must be filed, if obtainable; and (4) if such consent cannot be procured, proof of service of notice of the motion in the manner required by the rules on the attorney to be substituted must be filed with the application. Applied here to reject the supposed appeal by Crisologo through RAPSA's counsel.
• Corporate Officer as Employer under Article 212(c) — Employer includes any person acting in the interest of an employer, directly or indirectly. Since a corporation is an artificial person, it must have an officer presumed to be the employer as the person acting in the employer's interest, the corporation being the employer only in the technical sense; absent definite proof of the officer directly responsible for nonpayment, the president is presumed to be the responsible officer as chief operating officer. Applied to hold Crisologo, RAPSA's president, jointly and severally liable for separation pay and deposits.
• Liability Where Corporation No Longer Exists — Where the employer corporation is no longer existing and unable to satisfy the judgment in favor of the employee, the officer acting on behalf of the corporation should be held liable; otherwise a decision in the employee's favor would be useless and ineffective. Applied because RAPSA had ceased operations, closed its business, and filed for voluntary insolvency, making Crisologo's liability necessary for enforcement.

• "The corporation, only in the technical sense, is the employer." — States the controlling construction of Article 212(c) that justifies looking beyond the juridical entity to the natural person acting in its interest for satisfaction of labor claims.
• "Since RANSOM is an artificial person, it must have an officer who can be presumed to be the employer, being the 'person acting in the interest of (the) employer' RANSOM." — Defines the doctrinal basis, drawn from A.C. Ransom Labor Union-CCLU vs. National Labor Relations Commission, for presuming the corporate officer as employer.
• "Thus, where the employer corporation is no longer existing and unable to satisfy the judgment in favor of the employee, the officer should be held liable for acting on behalf of the corporation (see Lim v. NLRC, G.R. 79907 and Sweet Lines Inc. v. NLRC, G.R. 79975, March 16, 1989)." — Articulates the enforcement rationale for imposing liability on the president after RAPSA's closure and insolvency filing.

• A.C. Ransom Labor Union-CCLU vs. National Labor Relations Commission, June 10, 1986, 142 SCRA 269 — Controlling precedent settling that the president of the corporation may be held liable for the corporation's obligations to its workers under Article 212(c); followed to impose liability on Crisologo.
• Chua vs. National Labor Relations Commission, G.R. No. 81450, February 15, 1990 — Recent affirmation of the Ransom rule on presidential liability for corporate labor obligations; cited as subsequent authority for the same holding.
• Philippine Apparel Workers Union vs. NLRC, L-50320, October 27, 1983, 125 SCRA 391 — Source of the four requisites for valid substitution of counsel; applied to find no valid substitution authorizing RAPSA's counsel to appeal for Crisologo.
• Lim vs. NLRC, G.R. 79907 and Sweet Lines Inc. vs. NLRC, G.R. 79975, March 16, 1989 — Authority for holding the officer liable where the employer corporation no longer exists and cannot satisfy the employee's judgment; relied upon given RAPSA's closure and insolvency.

• Article 212(c), Labor Code — Provides that employer includes any person acting in the interest of an employer, directly or indirectly, excluding labor organizations and their officers or agents except when acting as employer; applied to treat the corporate president as the employer liable for separation pay and deposits.
• Rule 65, Rules of Court — Governs the petition for certiorari seeking annulment of the NLRC resolution; the vehicle by which petitioners challenged the modification of the Labor Arbiter's award.

Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.