Pabalan v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Eighty-four workers of Philippine Inter-Fashion, Inc. (PIF) filed a complaint against the company for illegal transfer and dismissal, seeking reinstatement with backwages and other benefits. The company, through its General Manager, was notified and summoned for hearings. Despite multiple postponements and opportunities to present their case, the company and its representatives, including petitioners Jaime Pabalan and Eduardo Lagdameo, repeatedly failed to appear or submit required documents. Procedural History: The Labor Arbiter, after the parties were directed to submit position papers and despite the respondents' continued non-appearance, rendered a decision on July 13, 1988, ordering PIF and its officers, petitioners herein, to reinstate sixty-two complainants and to pay their backwages and other benefits jointly and severally. The petitioners moved for reconsideration, which was denied by the National Labor Relations Commission (NLRC) in a resolution dated June 30, 1989, affirming the Labor Arbiter's decision. The Petition: Petitioners filed a petition for certiorari with the Supreme Court, raising issues of jurisdiction over their persons and deprivation of due process, as well as the grave abuse of discretion in holding them jointly and severally liable with PIF. Initially dismissed for non-compliance with procedural rules, the petition was later reinstated. The Supreme Court ultimately granted the petition, modifying the NLRC resolution by relieving the petitioners of personal liability, holding that the corporation, Philippine Inter-Fashion, Inc., alone is liable, as there was no showing that the corporate veil should be pierced due to fraud or evasion of obligations.
Issue(s)
Whether the Labor Arbiter and NLRC acquired jurisdiction over the persons of the petitioners and whether the decision and resolution deprived petitioners of their property without due process of law. Whether the Arbiter and NLRC committed grave abuse of discretion in adjudging petitioners jointly and severally liable with Philippine Inter-Fashion, Inc. for the corporation's liability.
Ruling
The petition is GRANTED. The questioned resolution of the NLRC dated June 30, 1989 is modified by relieving petitioners of any liability as officers of PIF, holding that the liability shall be solely that of Philippine Inter-Fashion, Inc.
Ratio Decidendi
On the issue of jurisdiction and due process: The Court found the grounds to be devoid of merit. The records showed that petitioners, through counsel, appeared in behalf of PIF. Subsequently, when impleaded in a supplemental position paper, they filed an opposition and their own supplemental position papers. This demonstrated that they were properly served with summons and were not deprived of due process. Their participation in the proceedings, even if initially through the corporation's counsel, indicated their awareness and engagement with the case. On the issue of joint and several liability: The Court reiterated the settled rule that a corporation has a personality separate and distinct from its officers. As a general rule, officers are not personally liable for official acts unless they exceed their authority. The legal fiction of separate corporate personality can only be disregarded when it is used to perpetrate fraud, an illegal act, or as a vehicle for evasion of existing obligations, circumvention of statutes, or to confuse legitimate issues. In this case, the complainants did not allege or show that the petitioners deliberately and maliciously designed to evade the corporation's financial obligations or used the transfer of employees as a means to perpetrate an illegal act. The NLRC's invocation of the ruling in A.C. Ransom Labor Union-CCLU vs. NLRC was found to be misplaced, as the facts in that case involved a family corporation where assets were transferred to another corporation to avoid obligations, a circumstance not present here. Therefore, petitioners could not be held jointly and severally liable with PIF.
Main Doctrine
Corporate officers are not personally liable for the corporation's obligations unless it is shown that they acted in bad faith, exceeded their authority, or the corporate fiction is used to perpetrate fraud or evade obligations.