G.R. No. 171951 - Garcia vs. People

Petitioner Immaculada L. Garcia was one of the directors of Impact Corporation, a company engaged in manufacturing aluminum tube containers. Other directors included Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, and Consuelo Villanueva.
Impact Corporation operated two factories—one in Cuyapo, Nueva Ecija, and another in Cainta, Metro Manila.
The company began facing financial difficulties as early as 1978, with labor unrest escalating by 1980. In 1983, it filed a Petition for Suspension of Payments before the Securities and Exchange Commission (SEC), asserting that the business was ongoing and profitable.
A labor strike was declared in 1985, and the Ministry of Labor certified the dispute to the National Labor Relations Commission (NLRC) for compulsory arbitration. The Ministry also acknowledged Impact Corporation’s inability to pay wages, 13th-month pay, and SSS contributions because of cash liquidity problems, directing the company to remit withheld SSS premiums to the Social Security System (SSS).

On 3 July 1985, SSS through its Legal and Collection Division (LCD) filed a case against Impact Corporation for collection of unremitted SSS contributions deducted from employees' salaries, docketed as SSC Case No. 10048.
Impact Corporation admitted non-payment due to financial difficulties but denied the amount claimed was correct. It failed to appear at hearings, and the Petition for Suspension was eventually dismissed by the SEC in December 1985.
The company ceased operations and sold its assets to settle obligations such as rental arrears.

On 1 December 1995, the SSS-LCD amended its petition to directly include directors, specifically naming petitioner Immaculada L. Garcia and the other directors.
The claimed amounts included unremitted employer and employee contributions from August 1980 to December 1984, plus penalties at 3% per month for late remittance, totaling millions of pesos.
Summons failed to be served on some directors due to unknown whereabouts. Ricardo de Leon was declared in default for failure to file an answer, and others were later determined deceased.

Petitioner denied liability, arguing that she was only a director without managerial functions, had ceased being a stockholder and director as early as 1982, and could only be liable up to the extent of unpaid subscription, if any. She also argued the case was barred by prescription and that the corporation had ceased business prior to liability period.
The Social Security Commission (SSC) ruled against petitioner, holding her liable for the unremitted contributions and penalties. The SSC noted her failure to timely raise defenses and stressed the liability imposed by law on directors for such obligations.
Petitioner filed a Motion for Reconsideration to no avail.
The Court of Appeals affirmed the SSC decision, applying Section 28(f) of the Social Security Law, holding petitioner liable as director for SSS contributions and penalties. Petitioner’s motion for reconsideration before the Court of Appeals was likewise denied.

Petitioner argued this Court erred in making her solely liable for the corporate obligations, especially since her liability under Section 28(f) of the Social Security Law was limited to penalties and not the unpaid contributions themselves.
She relied on the Corporation Code’s Section 31 to claim only directors involved in unlawful acts or gross negligence are personally liable, which she denied. She also emphasized that by 1982, she ceased involvement in the company.
Petitioner contended that the SSS failed to properly pursue other directors or the company’s assets.

Whether petitioner, as the sole surviving director of Impact Corporation, is personally liable for the unremitted SSS premium contributions and the penalties thereon.
Whether Section 28(f) of the Social Security Law limits the liability of directors and officers to penalties only, excluding unpaid contributions.
Whether petitioner’s defense based on cessation of stockholding, lack of managerial functions, or prescription exempts her from liability.
Whether personal liability of directors under Section 31 of the Corporation Code is applicable in this case.