SECOND DIVISION
G.R. No. 237246, July 29, 2019
HAYDEN KHO, SR., PETITIONER, v. DOLORES G. MAGBANUA, MARILYN S. MERCADO,* ARCHIMEDES** B. CALUB, MARIA E. ONGOTAN, FRANCISCO J. DUQUE, MERLE*** G. RIVERA, DOLORES A. PULIDO, PAULINO R. BALANGATAN, JR., ANAFEL L. ESCROPOLO, PERCIVAL A. DEINLA,**** JERRY C. ZABALA, ROGELIO C. ONGONION, JR., HELEN B. DELA CRUZ, CENON JARDIN, AND ROVILLA L. CATALAN, ***** RESPONDENTS.
D E C I S I O N
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated July 19, 2017 and the Resolution3 dated January 4, 2018 of the Court of Appeals (CA) in CA-G.R. SP No. 141821, which reversed and set aside the Decision4 dated May 7, 2015 and the Resolution5 dated June 16, 2015 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 04-001356-12(4), and accordingly, reinstated the Decision6 dated November 9, 2011 of the Labor Arbiter (LA) holding respondent Hayden Kho, Sr. (Kho) solidarity liable to pay respondents Dolores G. Magbanua, Marilyn S. Mercado, Archimedes B. Calub, Maria E. Ongotan, Francisco J. Duque, Merle G. Rivera, Dolores A. Pulido, Paulino R. Balangatan, Jr., Anafel L. Escropolo, Percival A. Deinla, Jerry C. Zabala, Rogelio C. Ongonion, Jr., Helen B. Dela Cruz, Cenon Jardin, and Rovilla L. Catalan (respondents) separation pay, nominal damages, and attorney's fees, among others.
In the earlier labor cases of Claparols v. Court of Industrial Relations [460 Phil. 624 (1975] and A.C. Ransom Labor Union-CCLU v. NLRC [226 Phil. 199 (1986)], persons who were not originally impleaded in the case were, even during execution, held to be solidarity liable with the employer corporation for the latter's unpaid obligations to complainant-employees. These included a newly-formed corporation which was considered a mere conduit or alter ego of the originally impleaded corporation, and/or the officers or stockholders of the latter corporation. Liability attached, especially to the responsible officers, even after final judgment and during execution, when there was a failure to collect from the employer corporation the judgment debt awarded to its workers. in Naguiat v. NLRC [336 Phil. 545 (1997)], the president of the corporation was found, for the first time on appeal, to be solidarity liable to the dismissed employees. Then, in Reynoso v. [CA] [339 Phil. 38 (2000)], the veil of corporate fiction was pierced at the stage of execution, against a corporation not previously impleaded, when it was established that such corporation had dominant control of the original party corporation, which was a smaller company, in such a manner that the latter's closure was done by the former in order to defraud its creditors, including a former worker.
The rulings of this Court in A.C. Ransom, Naguiat, and Reynoso, however, have since been tempered, at least in the aspects of the lifting of the corporate veil and the assignment of personal liability to directors, trustees[,] and officers in labor cases. The subsequent cases of McLeod v. NLRC, Spouses Santos v. NLRC and Carag v. NLRC, have all established, save for certain exceptions, the primacy of Section 31 of the Corporation Code in the matter of assigning such liability for a corporation's debts, including judgment obligations in labor cases. According to these cases, a corporation is still an artificial being invested by law with a personality separate and distinct from that of its stockholders and from that of other corporations to which it may be connected. It is not in every instance of inability to collect from a corporation that the veil of corporate fiction is pierced, and the responsible officials are made liable. Personal liability attaches only when, as enumerated by the said Section 31 of the Corporation Code, there is a fwillfull and knowing assent to patently unlawful acts of the corporation, there is gross negligence or bad faith in directing the affairs of the corporation, or there, is a conflict of interest resulting in damages to the corporation. x x x.
It also bears emphasis that in cases where personal liability attaches, not even all officers are made accountable. Rather, only the "responsible officer," i.e., the person directly responsible for and who "acted in bad faith" in committing the illegal dismissal or any act violative of the Labor Code, is held solidarily liable, in cases wherein the corporate veil is pierced. In other instances, such as cases of so-called corporate tort of a close corporation, it is the person "actively engaged" in the management of the corporation who is held liable. In the absence of a clearly identifiable officer(s) directly responsible for the legal infraction, the Court considers the president of the corporation as such officer.
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. When the shield of a separate corporate identity is used to commit wrongdoing and opprobriously elude responsibility, the courts and the legal authorities in a labor case have not hesitated to step in and shatter the said shield and deny the usual protections to the offending party, even after final judgment. The key element is the presence of fraud, malice or bad faith. 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.53 (Emphases and underscoring supplied)
Endnotes:
* Mercardo" in some parts of the records.
** Archimides" in some parts of the records.
*** "Melre" in some parts of the records.
**** "Deinia" in some parts of the records.
***** Five (5) respondents herein, namely: (1) Rowena F. Santillan, (2) Jose R. Balgos, Jr., (3) Randy Armero, (4) Marilou D. Adra, and (5) Ruben Galapate, were dropped as parties in this case during the CA proceedings; see rollo, p. 25.
1 Id. at 3-19.
2 Id. at 25-37. Penned by Associate Justice Jhosep Y. Lopez with Associate Justices Normandie B. Pizarro and Samuel H. Gaerlan, concurring.
3 Id. at 39-41.
4 Id. at 105-115. Penned by Presiding Commissioner Gregorio O. Bilog, III with Commissioners Erlinda T. Agus and Alan A. Ventura, concurring.
5 CA rollo, pp. 343-345.
6 In NLRC NCR Case No. NCR-01-01191-11, penned by Labor Arbiter Arthur L. Amansec. Rollo, pp. 72-93.
7 Dated January 20, 2011. Id. at 42-46. See also Complainants' position paper dated May 26, 2011; id. at 48-63.
8 See id. at 27 and 72-74.
9 See id. at 26-27 and 72-75.
10 See id. at 27 and 75.
11 See id. at 27.
12 Id. at 42. See also id. at 27.
13 See id. at 27. They further argued that the case should be dismissed for want of service to the Corporation as the indispensable party and that solidary liability cannot be presumed (see id. at 98-99). See also Spouses Kho's position paper dated April 26, 2011; id. at 64-69.
14 Id. at 72-93.
15 Id. at 86-92.
16 Article 298 [283] of the Labor Code reads:Article 298 [283]. Closure of Establishment and Reduction of Personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
17 See Gudez v. NLRC, 262 Phil. 703 (1990); Maglutac v. NLRC, 267 Phil. 816 (1990); and Carmelcraft Corporation v. NLRC, 264 Phil. 763 (1990).
18 See rollo, pp. 79-80.
19 See id. at 85.
20 See Memorandum of Appeal dated December 7, 2011 (id. at 94-100). Kho filed his Memorandum of Appeal and a Motion to Reduce Appeal Bond dated December 7, 2011 (id. at 101-102), but was only able to pay the appeal bond three (3) days after. Thus, the NLRC Initially dismissed Kho's appeal due to his failure to pay the appeal bond on time. Subsequently, however, the CA, in its December 6, 2014 Decision, annulled the NLRC's ruling and remanded the case to the latter to resolve Kho's motion to reduce bond and/or his appeal on the merits. When the case was remanded, the NLRC eventually resolved the case on the merits in the May 7, 2015 Decision (see id. at 28-29 and 106).
21 Id. at 105-115.
22 Erroneously referred to as "Hayden Kho, Jr." (id. at 114). On motion for reconsideration, the NLRC reversed its November 21, 2014 Decision as regards the sufficiency of the bond posted. It explained that the clear intent of the CA ruling was to accept the bond posted by Kho as substantial compliance and to have the appeal decided on the merits (see id. at 106-108.)
23 See id. at 110-111.
24 See id. at 111-112.
25 See motion for reconsideration dated May 25, 2015; CA rollo, pp. 329-340.
26 See id. at 343-345.
27 Dated August 20, 2015. Id. at 3-25.
28Rollo, pp. 25-37.
29 Id. at 37. On the procedural aspect, the CA deemed acceptable the reduced bond posted by Kho since it amounted to at least 30% of the total assailed award (see id. at 30-31).
30 See id. at 31-35.
31 See id. at 36.
32 678 Phil. 232 (2011).
33 See rollo, pp. 35-36.
34 See motion for reconsideration dated August 10, 2017; CA rollo, pp. 414-425.
35Rollo, pp. 39-41.
36 See Pelagio v. Philippine Transmarine Carriers, Inc., G.R. No. 231773, March 11, 2019, citing University of Santo Tomas (UST) v. Samahang Manggagawa ng UST, G.R. No. 184262, April 24, 2017, 824 SCRA 52, 60.
37 See Pelagio v. Philippine Transmarine Carriers, Inc., id., citing University of Santo Tomas (UST) v. Samahang Manggagawa ng UST, id. at 60-61.
38 See Pelagio v. Philippine Transmarine Carriers, Inc., id., citing University of Santo Tomas (UST) v. Samahang Manggagawa ng UST, id. at 61.
39Mcleod v. NLRC, 541 Phil. 214, 242 (2007). See also Harpoon Marine Services, Inc. v. Francisco, 659 Phil. 453, 470 (2011); and Carag v. NLRC, 548 Phil. 581, 607 (2007).
40Mcleod v. NLRC, id.; and Santos v. NLRC, 325 Phil. 145, 156 (1996).
41 See Mcleod v. NLRC, id. at 242-243. See also Harpoon Marine Services, Inc. v. Francisco, supra note 38, at 469; David v. National Federation of Labor Unions, 604 Phil. 31, 41 (2009); and Carag v. NLRC, supra note 39, at 608-609.
42 See Marc II Marketing, Inc. v. Joson, supra note 32, at 263-264; Santos v. NLRC, supra note 40, at 156- 157; and Reahs Corporation v. NLRC, 337 Phil. 698, 706 (1997).
43 See Guillermo v. Uson, 782 Phil. 215, 224 (2016); and Francisco v. Mallen, Jr., 645 Phil. 369, 376-377 (2010), citing Mcleod v. NLRC, supra note 39, at 239.
44 See Section 31 of the "CORPORATION CODE OF THE PHILIPPINES," Batas Pambansa Blg. 68 (May 1, 1980).
45 See Zaragoza v. Tan, G.R. No. 225544, December 4, 2017, 847 SCRA 437, 454; Polymer Rubber Corporation v. Salamuding, 715 Phil. 141, 150 (2013); and Francisco v. Mallen, Jr., supra note 43, at 374-375.
46 See Pioneer Insurance & Surety Corporation v. Morning Star Travel & Tours, Inc., 763 Phil. 428, 430-431 (2015).
47 CA rollo, pp. 94-99.
48 Id. at 44-49.
49 Id. at 112-117.
50 It is settled that bad faith is never presumed. It is a question of fact and is evidentiary such that the records must first bear evidence of malice before a finding of such may be made. Bad faith does not connote bad judgment or negligence, as it imports a dishonest purpose, a breach of a known duty through some ill motive or interest and partakes of a nature of fraud. (See Pioneer Insurance & Surety Corporation v. Morning Star Travel & Tours, Inc., supra note 46, at 444, citing Carag v. NLRC, supra note 39, at 602 and McLeod v. NLRC, supra note 39, at 242-243.)
51Carag v. NLRC, id. at 602.
52 Supra note 43.
53 Id. at 222-225; other citations omitted.