David v. National Federation of Labor Union
REITERATIONFacts
The Antecedents: Mariveles Apparel Corporation (MAC) hired Armando David (David) as IMPEX and Treasury Manager in 1988 and later as President in May 1990, serving as a nominee without owning shares. MAC allegedly ceased operations on July 8, 1993, without prior notice to its employees, and failed to pay salaries for work rendered in the preceding one to two weeks. The National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union (MACLU) filed a complaint for illegal dismissal and moved to implead MAC Chairman of the Board Antonio Carag (Carag) and David to guarantee satisfaction of any judgment award. Procedural History: Labor Arbiter Isabel Panganiban-Ortiguerra (Arbiter Ortiguerra) declared the case submitted for resolution due to MAC's failure to appear for settlement. MAC's counsel argued against holding Carag and David liable, stating MAC was owned by a consortium of banks. Arbiter Ortiguerra granted the motion to implead Carag and David and declared them solidarily liable with MAC for money claims, citing the closure of MAC to ensure valid claims would not be defeated. David claimed he was not notified of the decision and did not know MAC appealed. The case was eventually referred to the Court of Appeals. The Court of Appeals affirmed the Labor Arbiter's decision, holding David solidarily liable, stating his resignation after the closure meant he assented to the unlawful closure. The Petition: David petitioned the Supreme Court, raising issues of denial of due process, lack of jurisdiction over his person, and grave abuse of discretion in holding him solidarily liable.
Issue(s)
Whether petitioner Armando David was afforded due process of law and whether the Labor Court acquired jurisdiction over his person. Whether, assuming jurisdiction, it was proper to hold petitioner David solidarily liable with his co-respondents. Whether the Labor Arbiter acted with grave abuse of discretion in adjudging petitioner David to be jointly and severally liable with his co-respondents.
Ruling
The Supreme Court granted the petition, setting aside the Joint Decision and Resolution of the Court of Appeals. The Court found that David was denied due process and that the Labor Arbiter and NLRC lacked jurisdiction over him. The Court also ruled that even assuming jurisdiction, it was improper to hold David personally liable for MAC's obligations.
Ratio Decidendi
On the denial of due process and lack of jurisdiction: The Court held that the proceedings before the Labor Arbiter deprived David of due process. David was not issued any summons, was not accorded a conciliatory conference, was not ordered to submit a position paper, was not afforded a hearing, was not given an opportunity to present his evidence, and was not notified that the case was submitted for resolution. The motion to implead David was filed only in the position paper, and David had already resigned from MAC at that time. The Court emphasized that David's knowledge of a labor case against MAC did not substitute for a summons. Consequently, the Labor Arbiter and the NLRC did not acquire jurisdiction over David, rendering any liability or judgment against him void. The Court cited Sections 2, 3, 4, 5(b), and 11(c) of Rule V of the New Rules of Procedure of the NLRC to support the procedural requirements for impleading parties. On the propriety of corporate president's solidary liability: Assuming arguendo that jurisdiction was acquired, the Court found it improper to hold David liable for MAC's obligations. While Article 212(e) of the Labor Code includes persons acting in the interest of an employer, Section 31 of the Corporation Code governs the personal liability of officers. This section requires a showing that the officer willfully and knowingly voted for or assented to patently unlawful acts, or was guilty of gross negligence or bad faith. The Court found no such showing against David. Therefore, David could not be held solidarily liable with MAC for the unpaid wages of its employees. On the Labor Arbiter's grave abuse of discretion: The Labor Arbiter acted with grave abuse of discretion in adjudging petitioner David to be jointly and severally liable with his co-respondents because the requirements for establishing solidary liability were not met, as explained in the ratio regarding the propriety of the corporate president's solidary liability. The absence of due process and lack of jurisdiction further support the finding of grave abuse of discretion.
Main Doctrine
A labor arbiter and the NLRC lack jurisdiction over a corporate officer who was not issued summons, not accorded a conciliatory conference, not ordered to submit a position paper, not accorded a hearing, not given an opportunity to present evidence, and not notified that the case was submitted for resolution, thereby violating the officer's right to due process.