Guillermo vs. Uson

A corporate officer may be impleaded and held personally and solidarily liable for a corporation's judgment obligation to an illegally dismissed employee even after the labor arbiter's decision has become final and executory, provided there is satisfactory evidence of fraud, bad faith, or malice in the officer's conduct of the dismissal and in the subsequent evasion of the judgment.

Royal Class Venture Phils., Inc. was a family corporation owned by the Guillermos, with Jose Emmanuel Guillermo serving as its President and General Manager. Crisanto Uson was employed as an accounting clerk and later promoted to accounting supervisor, but was also a stockholder and director of the corporation. The dispute arose from Uson's illegal dismissal and the subsequent frustration of execution of the labor arbiter's decision, which was thwarted by the dissolution of Royal Class Venture and the incorporation of a new family corporation, Joel and Sons Corporation, at the same business address.

Crisanto Uson began his employment with Royal Class Venture Phils., Inc. on March 11, 1996 as an accounting clerk, eventually promoted to accounting supervisor with a monthly salary of ₱13,000. He was also a stockholder and director of the corporation. On December 20, 2000, Uson was dismissed from employment. According to his verified Position Paper, the dismissal was carried out by Jose Emmanuel Guillermo, the President and General Manager of the corporation, after Uson exposed Guillermo's practice of dictating and undervaluing the shares of stock of the corporation.

On March 2, 2001, Uson filed a Complaint for Illegal Dismissal with the NLRC Sub-Regional Arbitration Branch No. 1 in Dagupan City, seeking backwages, reinstatement, salaries, 13th month pay, moral and exemplary damages, and attorney's fees. Royal Class Venture did not make any appearance despite receipt of summons. On October 22, 2001, Labor Arbiter Jose G. De Vera rendered a Decision in favor of Uson, ordering reinstatement and payment of backwages, 13th month pay, moral and exemplary damages, and attorney's fees. Royal Class Venture did not appeal, and the decision became final and executory.

Execution of the judgment proved futile. A Writ of Execution issued on February 15, 2002, an Alias Writ on May 17, 2002, and a Second Alias Writ on September 11, 2002—all remained unsatisfied. The Sheriff's Return revealed that at Royal Class Venture's business address in Minien East, Sta. Barbara, Pangasinan, a new establishment named "Joel and Sons Corporation" was found—a family corporation owned by the Guillermos, with Jose Emmanuel Guillermo as one of the stockholders. Guillermo received the writ of execution using the nickname "Joey," denied being Jose Emmanuel, and pretended to be Jose's brother, contrary to the guard-on-duty's confirmation that Jose and Joey were one and the same person. The guard also informed the sheriff that Royal Class Venture had been dissolved. A notice of garnishment served on the Bank of Philippine Islands Magsaysay Branch yielded a reply that the respondent corporation did not have an account with the branch.

On November 14, 2002, Uson filed a Motion for Alias Writ of Execution and to Hold Directors and Officers of Respondent Liable for Satisfaction of the Decision. On December 26, 2002, Labor Arbiter Irenarco R. Rimando granted the motion, piercing the veil of corporate fiction and holding Guillermo personally and solidarily liable with the corporation. Guillermo filed a Motion for Reconsideration by way of special appearance, which was denied by Labor Arbiter Niña Fe S. Lazaga-Rafols on November 24, 2003, who sustained the prior findings and noted Guillermo's unexplained absence in the proceedings despite notice. A subsequent motion for reconsideration was denied on January 7, 2004. On May 18, 2004, the Labor Arbiter granted Uson's Motion for Issuance of an Alias Writ of Execution and rejected Guillermo's opposition. Guillermo elevated the matter to the NLRC, which dismissed his appeal on May 11, 2010. He then filed a petition for certiorari before the Court of Appeals, which denied the petition on June 8, 2011, and his motion for reconsideration on October 7, 2011. The lower tribunals found as fact that Guillermo received the summons as President and General Manager, refused to receive subsequent notices and orders, and dissolved the corporation to evade the judgment—findings that Guillermo never disputed in any of his pleadings.

• Finality of Judgment: Guillermo contended that the decision had become final, immutable, and unalterable, and that any amendment thereto is null and void. He asserted that he was impleaded only more than a year after the decision had become final and executory, an act unsupported in law and jurisprudence.
• Piercing the Veil of Corporate Fiction: Guillermo assailed the piercing of the veil of corporate fiction as discriminatory, arguing that he alone was belatedly impleaded despite the existence of other directors and officers in Royal Class Venture.
• Jurisdiction: Guillermo claimed that the Labor Arbiter had no jurisdiction because the case was an intra-corporate controversy, Uson also claiming to be a stockholder and director of Royal Class Venture.

• Adoption of Appellate Court's Reasoning: Uson did not introduce any new arguments but merely cited verbatim the disquisitions of the Court of Appeals to counter Guillermo's assertions in his petition.

• Personal Liability After Final Judgment: Whether an officer of a corporation may be included as judgment obligor in a labor case for the first time only after the decision of the Labor Arbiter had become final and executory.
• Piercing the Veil and Officer Liability: Whether the twin doctrines of piercing the veil of corporate fiction and personal liability of company officers in labor cases apply.
• Jurisdiction — Intra-Corporate Controversy: Whether the case is an intra-corporate controversy beyond the jurisdiction of the Labor Arbiter and the NLRC.

• Personal Liability After Final Judgment: Yes. A corporate officer may be impleaded and held solidarily liable even after final judgment and during execution, provided fraud, bad faith, or malice is satisfactorily established by the records.
• Piercing the Veil and Officer Liability: Yes. The veil of corporate fiction was properly pierced, Guillermo having acted in bad faith in dismissing Uson and in dissolving the corporation to evade the judgment obligation.
• Jurisdiction — Intra-Corporate Controversy: No. The case is a labor dispute cognizable by the NLRC, jurisdiction being determined by the allegations in the complaint, which centered solely on Uson's dismissal as an employee.

• Personal Liability After Final Judgment: The Court traced the evolution of jurisprudence from Claparols vs. Court of Industrial Relations and A.C. Ransom Labor Union-CCLU vs. NLRC, where persons not originally impleaded were held solidarity liable even during execution, through Naguiat vs. NLRC and Reynoso vs. Court of Appeals, where the veil was pierced at the execution stage. These rulings were tempered by McLeod vs. NLRC, Spouses Santos vs. NLRC, and Carag vs. NLRC, which established the primacy of Section 31 of the Corporation Code: personal liability attaches only upon willful and knowing assent to patently unlawful acts, gross negligence or bad faith in directing corporate affairs, or conflict of interest resulting in damages. The common thread is that the veil may be pierced even after final judgment so long as the persons deliberately used the corporate vehicle to unjustly evade the judgment obligation through fraud, bad faith, or malice. In this case, the records bore sufficient evidence of Guillermo's bad faith: he was the responsible officer who maliciously dismissed Uson, refused to participate in the proceedings despite receipt of summons, and dissolved the corporation to form a new family company at the same address—all undisputed facts that bound the Court as findings of fact.

• Piercing the Veil and Officer Liability: The Court applied the three basic areas where piercing the corporate veil is warranted, as enumerated in Pantranco Employees Association vs. NLRC: (1) defeat of public convenience, (2) fraud cases, and (3) alter ego cases. The Court found that Guillermo's conduct fell within the fraud and alter ego categories. Uson's uncontroverted sworn allegation in his Position Paper that Guillermo dismissed him for exposing the practice of undervaluing corporate shares constituted clear evidence of bad faith. Guillermo's receipt of summons and subsequent refusal to receive all notices and orders demonstrated malicious intent to evade the proceedings. The Sheriff's Return, likewise undisputed, established that Guillermo dissolved Royal Class Venture and helped incorporate Joel and Sons Corporation at the same address, where he was again a stockholder—evidencing a scheme to avoid liability. The Court emphasized that bad faith imports a dishonest purpose or some moral obliquity and conscious doing of wrong, partaking of the nature of fraud. Only the "responsible officer"—the person directly responsible for and who acted in bad faith in committing the illegal dismissal—is held solidarily liable; in the absence of a clearly identifiable officer, the president is considered such. Guillermo was both the president and the person directly responsible for the dismissal.

• Jurisdiction — Intra-Corporate Controversy: The Court sustained the appellate court's finding that the nature of an action and the jurisdiction of a tribunal are determined by the allegations of the complaint at the time of its filing, irrespective of whether the plaintiff is entitled to recover upon all or some of the claims asserted. Although Uson was also a stockholder and director, not all conflicts between a stockholder and the corporation are intra-corporate. An examination of the complaint must determine whether the complainant is involved in his capacity as a stockholder or director, or as an employee. Uson's complaint alleged that he was maliciously and illegally dismissed as an accounting supervisor by Guillermo—an allegation that was not disputed and raised no intra-corporate relationship issues or issues regarding the regulation of the corporation. The relief sought centered solely on his dismissal as an employee, making the matter a labor dispute cognizable by the labor tribunals.

• Piercing the Veil of Corporate Fiction — The doctrine applies in three basic areas: (1) defeat of public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; (2) fraud cases, or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; and (3) alter ego cases, where a corporation is a mere farce, conduit, or instrumentality of a person or another corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such officer cannot be made personally liable for corporate liabilities. The Court applied this doctrine to hold Guillermo liable, finding that he used the corporate vehicle to evade the judgment obligation by dissolving Royal Class Venture and forming Joel and Sons Corporation at the same address.

• Personal Liability of Corporate Officers Under Section 31 of the Corporation Code — Directors, trustees, or officers who willfully and knowingly vote for or assent to patently unlawful acts of the corporation, or who are guilty of gross negligence or bad faith in directing the affairs of the corporation, or who acquire any personal or pecuniary interest in conflict with their duty, shall be liable jointly and severally for all damages resulting therefrom. The Court held that personal liability attaches only upon a satisfactory showing of fraud, bad faith, or malice, and that bad faith is a question of fact requiring evidentiary support in the records. Only the "responsible officer"—the person directly responsible for and who acted in bad faith in committing the illegal dismissal—is held solidarily liable; in the absence of a clearly identifiable officer, the president of the corporation is considered such officer.

• Determination of Jurisdiction by Allegations in the Complaint — The nature of an action and the jurisdiction of a tribunal are determined by the allegations of the complaint at the time of its filing, irrespective of whether the plaintiff is entitled to recover upon all or some of the claims asserted therein. Not all conflicts between a stockholder and the corporation are intra-corporate; the complaint must be examined to determine whether the complainant is involved in his capacity as a stockholder or director, or as an employee. If the dispute does not meet the test of an intra-corporate controversy, the case is a labor case cognizable by the NLRC.

• "The common thread running among the aforementioned cases, however, is that the veil of corporate fiction can be pierced, and responsible corporate directors and officers or even a separate but related corporation, may be impleaded and held answerable solidarily in a labor case, even after final judgment and on execution, so long as it is established that such persons have deliberately used the corporate vehicle to unjustly evade the judgment obligation, or have resorted to fraud, bad faith or malice in doing so." — This passage articulates the controlling rule that piercing the veil and holding officers personally liable may occur even after final judgment, provided fraud, bad faith, or malice is established.

• "Bad faith, in this instance, does not connote bad judgment or negligence but imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud." — This defines the standard of bad faith required for piercing the corporate veil in labor cases, distinguishing it from mere negligence or poor judgment.

• "If the latter is found and the dispute does not meet the test of what qualities as an intra-corporate controversy, then the case is a labor case cognizable by the NLRC and is not within the jurisdiction of any other tribunal." — This establishes that jurisdiction is determined by the capacity in which the complainant brings the action, not by the complainant's other relationships with the corporation.

• Claparols vs. Court of Industrial Relations, 160 Phil. 624 (1975) — Early authority holding that persons not originally impleaded, including officers or stockholders of the corporation, could be held solidarity liable even during execution for the employer corporation's unpaid obligations to employees. Followed in this case as foundational precedent for impleading officers after final judgment.

• A.C. Ransom Labor Union-CCLU vs. NLRC, 226 Phil. 199 (1986) — Held that a newly-formed corporation considered a mere conduit or alter ego of the originally impleaded corporation, and/or its officers, could be held solidarity liable even after final judgment. Followed; the Court noted the similarity to the present case involving a family corporation.

• Naguiat vs. NLRC, 336 Phil. 545 (1997) — The president of the corporation was found, for the first time on appeal, to be solidarily liable to dismissed employees. Followed; the Court found parallel facts in Guillermo's role as president and responsible officer.

• Reynoso vs. Court of Appeals, 399 Phil. 38 (2000) — The veil of corporate fiction was pierced at the execution stage against a corporation not previously impleaded, where dominant control was used to defraud creditors. Followed as authority for piercing the veil during execution.

• McLeod vs. NLRC, 541 Phil. 214 (2007) — Established the primacy of Section 31 of the Corporation Code in assigning personal liability to directors, trustees, and officers in labor cases, holding that personal liability attaches only upon willful and knowing assent to patently unlawful acts, gross negligence or bad faith, or conflict of interest. Followed as the governing standard; the Court relied on its formulation that bad faith is a question of fact requiring evidentiary support.

• Spouses Santos vs. NLRC, 354 Phil. 918 (1998) — Reinforced the separate personality of the corporation and the requirement of bad faith for personal liability. Followed.

• Carag vs. NLRC, 548 Phil. 581 (2007) — Clarified that only the "responsible officer" who acted in bad faith is held solidarily liable when the corporate veil is pierced. Followed; the Court applied this principle to identify Guillermo as the responsible officer.

• Pantranco Employees Association (PEA-PTGWO) vs. NLRC, 600 Phil. 645 (2009) — Enumerated the three basic areas where piercing the corporate veil applies: defeat of public convenience, fraud cases, and alter ego cases. Followed as the controlling framework for evaluating whether the veil should be pierced.

• Reahs Corporation vs. NLRC, 337 Phil. 698 (1997) — Held that conferment of liability on officers for a corporation's obligations to labor is an exception to the general doctrine of separate corporate personality. Cited in support.

• Concept Builders Inc. vs. NLRC, 326 Phil. 955 (1996) — Held that there is no hard and fast rule on when corporate fiction may be disregarded; each case must be evaluated according to its peculiar circumstances. Cited in support.

• Real vs. Sangu Philippines, Inc. and/or Abe, 655 Phil. 68 (2011) — Held that not all conflicts between a stockholder and the corporation are intra-corporate; the complaint must be examined to determine the capacity in which the complainant is involved. Followed on the jurisdiction issue.

• Section 31, Corporation Code (Liability of directors, trustees or officers) — Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation, or who are guilty of gross negligence or bad faith in directing the affairs of the corporation, or who acquire any personal or pecuniary interest in conflict with their duty, shall be liable jointly and severally for all damages resulting therefrom. The Court applied this provision as the controlling standard for personal liability of corporate officers in labor cases, requiring a satisfactory showing of bad faith, malice, or fraud before an officer may be held solidarily liable.

Velasco, Jr. (Chairperson), Perez, Reyes, and Jardeleza, JJ., concurred.