BO2 Case Digests Nos.

11-20 by Mark Bagsic -1

1. BO2 CASE DIGESTS Nos. 11-20

11 (A) ANTONIO C. CARAG, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ISABEL G. PANGANIBANORTIGUERRA, as Executive Labor Arbiter, National Federation of Labor Unions (NAFLU), and MARIVELES APPAREL CORPORATION LABOR UNION (MACLU), Respondents. G.R. No. 147590 | April 2, 2007 FACTS: NAFLU and MACLU, on behalf of all of MAC's rank and file employees, filed a complaint against MAC for illegal dismissal brought about by its illegal closure of business. Complainants contend that the officers must be jointly and personally liable with the corporation to assure the satisfaction of the judgment. They argue that a corporate officer can be held liable for acting on behalf of the corporation when the latter is no longer in existence and there are valid claims of workers that must be satisfied. NLRC and CA found the corporate officers as jointly and personally liable for the debts of MAC for the money claims of the employees. ISSUE: When is a director personally liable for the debts of the corporation? HELD: A corporate officer is not liable for corporate debts except when he willfully and knowingly votes for or assents to patently unlawful acts of the organization or if he is guilty of gross negligence or bad faith in directing the affairs of the corporation. In this case, the respondent officers did not do any of said enumerated acts and are thus not liable with the corporation, which has a separate and distinct personality of its own. -oo0oo11 (B)
JOHN F. McLEOD, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division), FILIPINAS SYNTHETIC FIBER CORPORATION (FILSYN), FAR EASTERN TEXTILE MILLS, INC., STA. ROSA TEXTILES, INC., (PEGGY MILLS, INC.), PATRICIO L. LIM, and ERIC HU, Respondents. G.R. No. 146667 | January 23, 2007 FACTS: Petitioner impleaded the chairman and president of the corporation in his claim for unpaid portion of salary and retirement and other benefits against said corporation. ISSUE: When can a corporate officer be personally liable for corporate liabilities? HELD: Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders or other persons; (2) they consent to the issuance of watered down stocks or when, having knowledge of such issuance, do not forthwith file with the corporate secretary their written objection;

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(3) they agree to hold themselves personally and solidarily liable with the corporation; or (4) they are made by specific provision of law personally answerable for their corporate action. Considering that petitioner failed to prove any of the foregoing exceptions in the present case, he cannot hold the president solidarily liable with the corporation.

-oo0oo12 ARMANDO DAVID, Petitioner, vs. NATIONAL FEDERATION OF LABOR UNION and MARIVELES APPAREL CORPORATION, Respondents. G.R. Nos. 148263 and 148271-72 | April 21, 2009 FACTS: Corporation was ceased operations without prior notice to its employees. It gave notice of its closure on the same day that it ceased operations. Employees who had rendered one to two weeks work were not paid their corresponding salaries. Petitioner, who is president of said corporation, was found guilty of illegal closure and NLRC ruled that he be held jointly and personally liable for the employees money claims as per Art. 212 of the Labor Code. ISSUE: When may a corporate officer be held jointly liable with the corporation? What provision governs said personal liability of a corporate officer? HELD: Article 212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation because Section 31 of the Corporation Code is still the governing law on personal liability of officers for the debts of the corporation. Section 31 of the Corporation Code provides that 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 acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. There was no showing that petitioner willingly and knowingly voted for or assented to patently unlawful acts of the corporation, or that he was guilty of gross negligence or bad faith. -oo0oo13 JANUARIA A. RIVERA, Petitioner, Vs. UNITED LABORATORIES, INC., Respondent. G.R. No. 155639 | April 22, 2009 FACTS: Rivera contends that her consultancy services for ARMCO and FIL-ASIA were actually employment services with UNILAB. To achieve this result, Rivera asks us to pierce the veil of the separate corporate identities of UNILAB and its affiliate corporations. ISSUE: When does the doctrine of piercing the veil of corporate fiction apply?

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HELD: While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality. The doctrine applies only when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. In this case, there is no basis to conclude that UNILAB committed any fraud or illegality in employing a retired employee whose knowledge, experience and expertise the company recognized, as an employee or as a consultant. -oo0oo14 (A) WESTMONT BANK AND THE PROVINCIAL SHERIFF OF RIZAL, Petitioners, vs. INLAND CONSTRUCTION AND DEVELOPMENT CORP., Respondent. G.R. No. 123650 | March 23, 2009 FACTS: Respondent obtained credit accommodations from petitioner and to secure the payment of its obligations, former executed real estate mortgages. Petitioners account officer was the one assigned to transact on petitioners behalf respecting certain loan transactions and arrangements with respondent, during which he signed a deed of assignment. Through a letter from respondents assignee to petitioner, latter was informed of said assignment. Consequently, the manager of the cash department of petitioner issued an internal memorandum stating that said account officer has no authority to sign for the petitioner. Petitioner claims that said officers signing in the deed of assignment did not bound the corporation. ISSUE: Can a corporation be bound by an act of its officers within the scope of an apparent authority? HELD: In the absence of authority from the board, no person, not even its officers, can validly bind a corporation. If a corporation, however, consciously lets one of its officers, or any other agent, to act within the scope of an apparent authority, it will be estopped from denying such officers authority. In this case, petitioner did not present, any Resolution from its Board of Directors or its Charter or By-laws from which it can be reasonably inferred that said officer indeed had no authority to sign in its behalf or bind it in the Deed of Assignment. Petitioner had, either intentionally or negligently, been habitually clothing its account officer with the apparent powers to perform acts in its behalf.

-oo0oo14 (B) CEBU MACTAN MEMBERS CENTER, INC., Petitioner, vs. MASAHIRO TSUKAHARA, Respondent. G.R. No. 159624 | July 17, 2009 FACTS: Petitioner, through its President and Chairman of BoD, obtained a loan amounting from respondent. As payment for the loan, petitioner issued postdated checks payable to respondent. Upon maturity, said checks were dishonored by the drawee bank. After several failed attempts to collect the

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loan amount, respondent filed the instant case for collection of sum of money against the corporation and its president. On the other hand, petitioner denied borrowing the amount from respondent, and claimed that both loans were personal loans of its president. Petitioner also insists that the authority of said officer should have been supported by resolutions issued by corporations Board of Directors. ISSUE: Can a corporation be bound by an act of its officer even without a board resolution providing for the same? HELD: Given presidents express powers under the petitioners by-laws, said officer was more than equipped to enter into loan transactions on the corporations behalf. The loans obtained by said officer from respondent on behalf of the petitioner are valid and binding against the latter, and the corporation may be held liable to pay such loans. A corporate officer may represent and bind the corporation in transactions with third persons to the extent that the authority to do so has been intentionally, incidentally or impliedly conferred upon him, or by apparent powers as corporation has caused persons dealing with its officer or agent to believe that it has conferred.

-oo0oo15 VALLEY GOLF & COUNTRY CLUB, INC., Petitioner, vs. ROSA O. VDA. DE CARAM, Respondent. G.R. No. 158805 | April 16, 2009 FACTS: Petitioner is a duly constituted non-stock, non-profit corporation which operates a golf course. Its shareholders are assessed monthly membership dues. The husband of the respondent subscribed to and paid for in full one share but eventually stopped paying his dues. Subsequently, the golf share was sold at public auction after the BoD had authorized the sale in a meeting. ISSUE: May a non-stock corporation seize and dispose of the membership share of a fully-paid member on account of its unpaid debts to the corporation when it is authorized to do so under the corporate bylaws but not by the Articles of Incorporation? HELD: A share can only be deemed delinquent and sold at public auction only upon the failure of the stockholder to pay the unpaid subscription. Delinquency in monthly club dues was merely an ordinary debt enforceable by judicial action in a civil case. A provision creating a lien upon shares of stock for unpaid debts, liabilities, or assessments of stockholders to the corporation, should be embodied in the Articles of Incorporation, and not merely in the by-laws. Moreover, the by-laws of petitioner should have provided formal notice and hearing procedure before a members share may be seized and sold. The procedure for stock corporations recourse on unpaid subscription is not applicable in members shares in a non-stock corporation.

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CALATAGAN GOLF CLUB, INC. Petitioner, vs. SIXTO CLEMENTE, JR., Respondent. G.R. No. 165443 | April 16, 2009 FACTS: Petitioner charges monthly dues on its members to meet expenses for general operations as provided in its BL and AOI. Respondent who is a member eventually ceased paying the dues. Petitioner then considered his share as inactive and delinquent. Consequently, Petitioners BoD adopted a resolution authorizing the foreclosure of shares of delinquent members and the public auction of these shares. Respondent only learned of the sale of his share four years after and filed a claim with the SEC seeking the restoration of his shareholding. SEC claimed that it had already prescribed citing Sec. 69 of the Corporation Code which provides that the sale of shares at an auction sale can only be questioned within six months from the date of sale. ISSUE: Has the action of respondent prescribed pursuant to Sec. 69 of Corporation Code? HELD: Section 69 of the Corporation Code not applicable in this case because it specifically refers to unpaid subscriptions to capital stock, and not to any other debt of stockholders. Respondent had already fully paid for the share in petitioner and no longer had any outstanding obligation to deprive him of full title to his share. Further, the procedure for stock corporations recourse on unpaid subscription is not applicable in members shares in a non-stock corporation.

-oo0oo17 MARISSA R. UNCHUAN, Petitioner, vs. ANTONIO J.P. LOZADA, ANITA LOZADA and THE REGISTER OF DEEDS OF CEBU CITY, Respondents. G.R. No. 172671 | April 16, 2009 FACTS: Petitioner questions the validity of the sale between the sisters Lozada and their nephew, Antonio. Marissa finds it anomalous that Dr. Lozada, an American citizen, had paid the lots for Antonio. Thus, she accused the latter of being a mere dummy of the former. However, even as Dr. Lozada advanced the money for the payment of Antonios share, at no point were the lots registered in Dr. Lozadas name. Nor was it contemplated that the lots be under his control for they are actually to be included as capital of Damasa Corporation. According to their agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively. ISSUE: Is Damasa considered a Filipino corporation and thus may acquire disposable lands in the Philippines? HELD: Under Republic Act No. 7042, particularly Section 3, a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines, is considered a Philippine National. As such, the corporation may acquire disposable lands in the Philippines. Damasa is Filipino corporation because it is organized under Philippine laws with 60% capital stock owned and held by a Filipino citizen. -oo0oo18 (A)

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ATTY. VIRGILIO R. GARCIA, Petitioner, vs. EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. and ATTY. SALVADOR C. HIZON, Respondents. G.R. No. 173115 | April 16, 2009 FACTS: Petitioner tries to deny he is an officer of ETPI. Not being a corporate officer, he argues that the Labor Arbiter has jurisdiction over the case. However, one of the corporate officers provided for in the by-laws of ETPI is the Vice-President. It can be gathered from Atty. Garcias complaint-affidavit that he was Vice President for Business Support Services and Human Resource Departments of ETPI when his employment was terminated effective 16 April 2000. ISSUE: Is petitioner a corporate officer? What tribunal has jurisdiction over his case? HELD: It is clear from the BLs and from petitioner himself that he is a corporate officer. One who is included in the by-laws of a corporation in its roster of corporate officers is an officer of said corporation and not a mere employee. Being a corporate officer, his removal is deemed to be an intra-corporate dispute cognizable by the SEC (now RTC) and not by the Labor Arbiter.

-oo0oo18 (B) LESLIE OKOL, Petitioner, vs. SLIMMERS WORLD INTERNATIONAL, BEHAVIOR MODIFICATIONS, INC., and RONALD JOSEPH MOY, Respondents. G.R. No. 160146 | December 11, 2009 FACTS: Petitioner was vice-president of respondent at the time of her dismissal. Former filed an illegal dismissal case against the latter before NLRC. Petitioner asserts that even as vice-president, the work that she performed conforms to that of an employee rather than a corporate officer. Respondents, on the other hand, maintain that petitioner was a corporate officer at the time of her dismissal from Slimmers World as supported by the General Information Sheet and Directors Affidavit attesting that petitioner was an officer. Moreover, petitioners position is provided for in the BL as a corporate officer. ISSUE: Is petitioner a corporate officer? What tribunal has jurisdiction over his case? HELD: From the documents submitted by respondents, petitioner was a director and officer of Slimmers World. The charges of illegal suspension, illegal dismissal, unpaid commissions, reinstatement and back wages imputed by petitioner against respondents fall squarely within the ambit of intra-corporate disputes. Being a corporate officer, his removal is deemed to be an intra-corporate dispute cognizable by the SEC (now RTC).

-oo0oo19 MALAYAN INSURANCE COMPANY, INC., Petitioners, vs. VICTORIAS MILLING COMPANY, INC., Respondents. G.R. No. 167768 | April 17, 2009

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FACTS: Petitioner maintains that the Stay Order applies only to claims existing prior to or at the time of the issuance of the said order. It avers that Sec. 6 (c) of P.D. No. 902-A is clear and categorical that the suspension covers actions for claims which are pending before any court at the time of the appointment of the management committee or rehabilitation receiver. And, not being a pre-existing claim, payment of petitioners claim will not result in undue preference which is the mischief sought to be prevented by a stay order. Respondent posits that it is immaterial when the actions were commenced as the cited provision is clear that all actions standing before a court against a corporation under a management committee must be stayed; hence, even actions for claims instituted after the appointment of the management committee are covered by the stay ISSUE: Does the stay order only suspend those claims existing before or at the time of its issuance? HELD: Suspension of actions/claims against a corporation cover all claims against the distressed corporation whether for damages, labor cases, collection cases or claims of pecuniary nature, at any stage, in order to expedite the rehabilitation. However, this does not include criminal cases against corporation officer. -oo0oo20 IMELDA O. COJUANGCO, PRIME HOLDINGS, INC., AND THE ESTATE OF RAMON U. COJUANGCO, Petitioners, vs. SANDIGANBAYAN, REPUBLIC OF THE PHILIPPINES, AND THE SHERIFF OF SANDIGANBAYAN, Respondents. G.R. No. 183278 | April 24, 2009 FACTS: Sandiganbayan, in its Resolution of Nov. 7, 2007, directed PTIC to deliver the cash and stock dividends pertaining to the 111,415 shares, including compounded interests, ratiocinating that the same were covered by SCs Decision in G.R. No. 153459, since the Republic was therein adjudged the owner of the shares and, therefore, entitled to the fruits thereof. The Petitioners moved to reconsider the said Resolution, alleging that the cited decision did not include a disposition of the dividends and interests accruing to the shares adjudicated in favor of the Republic. Petitioners insist on a literal reading of the dispositive portion of the decision as excluding the dividends, interests, and earnings accruing to the shares of stock from being accounted for and remitted. ISSUE: Do the sequestered shares include dividends? HELD: Sequestered shares include dividends. In G.R. No. 153459, although the inclusion of the dividends, interests, and earnings of the 111,415 PTIC shares as belonging to the Republic was not mentioned in the dispositive portion of the Courts Decision, it is clear from its body that what was being adjudicated in favor of the Republic was the whole block of shares and the fruits thereof, said shares were found to be part of the Marcoses ill-gotten wealth, and therefore, public money. It would be absurd to award the shares to the Republic as their owner and not include the dividends and interests accruing thereto. An owner who cannot exercise the attributes of ownership -- the right to possess, to use and enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate, and to the fruits - is a crippled owner.

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