Case Summary (G.R. No. 69494)
Finality and Initial Enforcement Efforts
After this Court denied Ransom’s petition for review in February 1973, the CIR Examiner computed backwages at ₱199,276. Ransom filed motions opposing execution on grounds of financial distress. Subsequent hearings led to a recomputed award of ₱164,984.
Corporate Closure and Parallel Entity Formation
In June 1973, Ransom obtained a clearance to cease operations effective May 1, 1973, citing pre-1966 obligations. In January 1974, the Union alleged that Ransom’s principal stockholders had simultaneously organized Rosario Industrial Corporation in 1969, using the same equipment, personnel, premises, and business lines, ostensibly to evade liabilities.
Execution Proceedings and Officers’ Liability
Between 1976 and 1978, multiple writs of execution and garnishment were issued against Ransom without success. In December 1978, the Union moved ex parte to hold Ransom’s officers personally liable. On March 11, 1980, Labor Arbiter Tito F. Genilo ordered execution of ₱164,984 jointly against the corporation and its seven named officers/agents in their official capacities.
NLRC’s Relief of Individual Officers
On appeal, the NLRC set aside personal liability, reasoning that corporate officers are not personally liable for official acts absent evidence of ultra vires conduct or opportunity to be heard. It affirmed the writ against the corporation only.
Supreme Court’s 1986 Reinstatement and Modification
This Court, in June 1986, granted the Union’s certiorari petition, reinstated the Arbiter’s March 11, 1980 order, but limited personal liability to the President of Ransom in 1974 and any successor presidents until corporate termination, as “employer” under applicable labor statutes.
Reconsideration Contentions
Surviving private respondents argued lack of due process and absence of liability at the time of ULP; the Union urged full reinstatement of the CIR’s original directive, piercing corporate veils to reach all individual officers and the successor corporation.
Basis for Corporate Veil Piercing
Under the 1987 Constitution’s guarantees of social justice and statutory provisions, corporate fiction may be disregarded when directors design separate entities to evade labor obligations. Precedents (Claparols, Villa Rey, A.D. Santos) hold that family-controlled corporations may be merged for purposes of justice where fraud or injustice would otherwise result.
Worker Preference in Insolvency
Labor Code Article 110 and Rule VIII Sec. 10 grant wage claims first preference in bankruptcy or liquidation, above all other creditors and encumbrances, reflecting the Constitution’s mandate to protect labor. Mortgage foreclosure or post-sale debt settlements cannot impair this preference.
Rosario’s Role and Employee Remedies
Rosario Industrial Corporation functioned as a
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Facts of the Case
- On August 19, 1972, the Court of Industrial Relations (CIR) found A.C. Ransom (Phils.) Corporation guilty of unfair labor practices—interference and discrimination—and declared the strike legal and justified.
- The CIR ordered the corporation, its officers and agents to cease and desist from further illegal acts and to reinstate 22 union members with backwages from July 25, 1969 until actual reinstatement, without loss of seniority or other privileges.
- The backwages were initially computed at ₱199,276.00 by the CIR Examiner.
- A.C. RansomPhil. Corporation applied for and received a clearance from the Secretary of Labor to cease operations effective May 1, 1973, citing financial difficulties, but clearance preserved employees’ right to redress under existing laws.
Procedural History
- February 26, 1973: Supreme Court denied Ransom’s petition for review (G.R. Nos. L-36226-68), affirming the CIR decision.
- January 27 and March 1, 1973: Union filed successive Motions for Execution; Ransom opposed, citing precarious finances.
- April 22, 1973: Union moved that Ransom deposit the awarded backwages; recomputation hearings reduced the award from ₱199,276.00 to ₱164,984.00.
- January 21, 1974: Union alleged that Ransom’s officers and stockholders had organized Rosario Industrial Corporation (ROSARIO) in 1969 using the same assets, personnel, and premises.
- June 23, 1976 & February 17, 1977: Writs of execution issued against Ransom, without success.
- December 18, 1978: Union filed ex-parte Motion for Writ of Execution and Garnishment against Ransom’s officers/agents personally for hiding company assets.
- March 11, 1980: Labor Arbiter Tito F. Genilo issued an Order deeming seven named officers of Ransom liable and directed issuance of a writ of execution for ₱164,984.00 against the corporation and its officers/agents.
Issue Presented
- Whether the corporate officers and agents of A.C. Ransom (Phils.) Corporation may be held personally liable for the backwages awarded to union members.
- Whether the veil of corporate fiction may be pierced to hold Rosario Industrial Corporation and its officers jointly and severally liable.
- The proper scope and enforceability of the CIR’s backwages award after Ransom’s cessation of operations.
CIR and Labor Arbiter Rulings
- CIR (August 19, 1972): Held Ransom guilty of unfair labor practice, ordered reinstatement with backwages, cease-and-desist relief, backwages pegged at ₱199,276.00.
- Labor Arbiter Genilo (March 11, 1980): Implemented CIR decisi