Lopez Realty, Inc. v. Fontecha
REITERATIONFacts
1. The Antecedents: This case concerns a dispute over the payment of gratuity pay and other benefits to employees of Lopez Realty, Inc. The private respondents, former employees of the company, filed a complaint against their employer, Lopez Realty, Inc., and its majority stockholder, Asuncion Lopez Gonzales, alleging non-payment of these benefits. The company's board of directors had previously passed resolutions in 1978 and 1980 concerning employee gratuity pay, particularly for retiring employees. However, in August 1981, a resolution was passed by a majority of the board, altering the payment terms for retained employees, offering them partial payment of their gratuity pay. This was followed by a subsequent resolution on September 1, 1981, which further detailed the payment schedule for these retained employees. The company subsequently paid some installments of the gratuity pay to certain employees, but further payments were allegedly cancelled by petitioner Asuncion Lopez Gonzales. 2. Procedural History: The private respondents filed a complaint for non-payment of gratuity pay, which was docketed as NLRC-NCR Case No. 2-2176-82. The Labor Arbiter rendered a judgment in favor of the private respondents. The petitioners appealed this decision to the National Labor Relations Commission (NLRC), arguing that the board resolutions of August 17, 1981, and September 1, 1981, were not ratified by the stockholders and that gratuity pay was only for retiring employees. The NLRC dismissed the appeal, affirming the Labor Arbiter's decision. The petitioners filed a motion for reconsideration, raising for the first time the issue of lack of notice to petitioner Asuncion Lopez Gonzales regarding the special board meetings. This motion was denied. A second motion for reconsideration was also denied by the NLRC. 3. The Petition: The petitioners filed a petition for certiorari with the Supreme Court, seeking to annul the NLRC's resolution. They contend that the board resolutions of August 17, 1981, and September 1, 1981, were ultra vires due to the alleged lack of notice to petitioner Asuncion Lopez Gonzales and the absence of stockholder ratification. They also maintain that gratuity pay was exclusively for retiring employees. The Supreme Court noted that the issue of lack of notice was raised for the first time in a motion for reconsideration before the NLRC, and thus, generally cannot be raised on appeal. The Court further held that even if there was a lack of notice, the subsequent conduct of the petitioners, including partial payment of gratuity and acquiescence by petitioner Asuncion Lopez Gonzales, estopped them from assailing the validity of the resolutions. The Court also clarified that the resolutions did not fall under the category of acts requiring stockholder approval as per the Corporation Law, and that the gratuity pay was indeed due to the retained employees under the terms of the resolutions.
Issue(s)
Whether public respondent NLRC acted with grave abuse of discretion in holding that private respondents are entitled to receive their gratuity pay under the assailed board resolutions dated August 17, 1981 and September 1, 1981. Whether the board resolutions passed on August 17, 1981 and September 1, 1981, granting gratuity pay to retained employees, were ultra vires due to lack of notice to petitioner Asuncion Lopez Gonzales. Whether the said board resolutions were ratified by the stockholders of the corporation. Whether gratuity pay must be given only to retiring employees, to the exclusion of retained employees or those who voluntarily resigned.
Ruling
The petition is dismissed for lack of merit. The assailed resolution of the National Labor Relations Commission is affirmed. The temporary restraining order issued is lifted. The decision is immediately executory.
Ratio Decidendi
On the entitlement to gratuity pay under the assailed board resolutions: The Supreme Court affirmed the NLRC's ruling that private respondents are entitled to gratuity pay. The Court found that the board resolutions of August 17, 1981, and September 1, 1981, which provided for gratuity pay to retained employees, were validly passed and acted upon. The Court noted that the issue of lack of notice to petitioner Asuncion Lopez Gonzales was raised for the first time in a motion for reconsideration before the NLRC, which is generally not allowed as it was not raised in the appeal before the NLRC or the Labor Arbiter. This procedural defect barred petitioners from raising the issue of lack of notice. Furthermore, the Court found that even if there was an irregularity in notice, the subsequent conduct of the corporation, including the payment of initial installments and the acquiescence of petitioner Gonzales herself by signing vouchers, constituted ratification and estopped the petitioners from assailing the validity of the resolutions. The Court also clarified that providing gratuity pay is within the express powers of a corporation and thus not an ultra vires act. On the ultra vires nature of the resolutions due to lack of notice: The Court rejected the argument that the resolutions were ultra vires due to lack of notice to petitioner Gonzales. The Court reiterated that the issue of lack of notice was raised belatedly and thus barred. Moreover, the Court explained that an ultra vires act pertains to actions outside the corporate powers granted by law or the articles of incorporation. Providing gratuity pay for employees is an express power of the corporation under the Corporation Code, making the resolutions valid in subject matter. The Court also highlighted that even if notice was indeed lacking, such acts can be ratified expressly or impliedly through subsequent conduct, which occurred in this case. On the ratification by stockholders: The Court found that the requirement of stockholder ratification, as cited by petitioners under Section 28 1/2 of the Corporation Law (now Section 40 of the Corporation Code), was not applicable. This provision pertains to the disposition of all or substantially all of the corporation's assets, which was not the subject of the assailed resolutions. The Court also noted the unique shareholding structure where most shareholders were also directors, making it illogical and superfluous to require separate stockholder approval for resolutions concerning employee benefits. The absence of a resolution revoking or nullifying the board resolutions further supported their validity. On the entitlement of retained and resigned employees: The Court dismissed the petitioners' contention that retained employees, including those who resigned after filing the complaint, were precluded from receiving gratuity pay. The board resolutions clearly stipulated payment schedules for retained employees. At the time of their resignation, the private respondents were already entitled to receive their gratuity pay based on the installment plan established by the resolutions. The Court also pointed out that the resignation of some employees might have been pressured due to the "power struggle" within the corporation, further negating the argument that they voluntarily forfeited their right to gratuity pay.
Main Doctrine
Acts of a board of directors, even if irregular for lack of notice, may be ratified expressly by subsequent legal meetings or impliedly by the corporation's subsequent course of conduct, estopping the corporation from assailing the validity of such resolutions. Furthermore, providing gratuity pay for employees falls within the express powers of a corporation and cannot be considered an ultra vires act.