Case Summary (G.R. No. 147590)
Key Dates
- July 8, 1993: Alleged cessation of MAC’s operations
- August 12, 1993: Filing of illegal-dismissal complaint by NAFLU and MACLU
- January 10, 1994: Complainants’ position paper seeking impleader of Carag and David
- June 17, 1994: Labor Arbiter’s decision declaring illegal closure and holding Carag and David solidarily liable
- January 5, 1995: NLRC resolution denying reduction of appeal bond
- February 29, 2000: Court of Appeals decision affirming Arbiter and NLRC rulings
- April 2, 2007: Supreme Court decision under review
Applicable Law
- 1987 Philippine Constitution
- Labor Code of the Philippines (Articles 283, 286, 288)
- Rule V of the NLRC Rules of Procedure
- Section 31, Batas Pambansa Blg. 68 (Corporation Code)
- Rule 45, Rules of Court
- Relevant jurisprudence (e.g., Habana v. NLRC; Businessday Information Systems; McLeod v. NLRC)
The Case
Petitioner seeks to annul the Court of Appeals’ affirmation of (a) a Labor Arbiter’s declaration that MAC’s July 1993 shutdown amounted to illegal closure, and (b) the imposition of joint and several liability on Carag (as MAC’s Chairman) for separation pay totaling over P49 million. He also challenges the NLRC’s refusal to reduce his appeal bond.
Facts
The unions NAFLU and MACLU, representing MAC’s rank-and-file employees under a valid collective bargaining agreement (CBA), filed for illegal dismissal after MAC ceased operations on July 8, 1993, without the one-month notice required by Article 283 of the Labor Code. Employees allegedly lost wages, separation pay and other benefits. Complainants moved to implead Carag and David to guarantee satisfaction of any award, invoking Article 212(e) of the Labor Code (“Employer includes any person acting in the interest of an employer”) and Supreme Court precedents on officer liability.
Ruling of the Labor Arbiter
On June 17, 1994, Labor Arbiter Ortiguerra, citing corporate‐officer liability in cases of bad faith or corporate disappearance, allowed the impleader mid-proceedings—despite Carag’s lack of notice—and held him and David jointly and severally liable with MAC for separation pay (one month per year of service, totaling P49,101,621) plus 10% attorney’s fees. Claims for moral and exemplary damages were dismissed for lack of evidence.
Ruling of the NLRC
The NLRC Third Division, by resolution of January 5, 1995, denied MAC’s and Carag’s motions to reduce the P48,101,621 appeal bond, reasoning that merits review of the appeal bond would pre‐judge the case.
Ruling of the Court of Appeals
On February 29, 2000, the appellate court dismissed petitions for certiorari, finding no grave abuse in the Arbiter’s procedure and agreeing that Carag, as highest‐ranking officer, acted in bad faith by failing to observe closure‐notice requirements. It affirmed the Labor Arbiter’s liability findings and bond directive.
Issues on Certiorari
- Whether Carag’s due‐process rights were violated when he was impleaded and held liable without summons, position‐paper submission, hearing or notice of submission for decision (Rule V, NLRC Rules).
- Whether evidence supports personal liability in the absence of proven bad faith or patently unlawful acts.
- Whether the NLRC abused discretion in denying bond reduction.
Supreme Court Ruling: Violation of Due Process
The Court held that Arbiter Ortiguerra never summoned Carag to any conference, never ordered a position paper, set no hearing, did not notify him of case submission, and thus utterly denied him the opportunity to be heard in violation of Sections 2, 3, 4, 5(b) and 11(c) of Rule V of the NLRC Rules. Citing Habana v. NLRC, the Supreme Court declared the decision void as to Carag for lack of due process.
Supreme Court Ruling: Personal Liability of Corporate Directors
- Governing Law: Section 31 of the Corporation Code imposes personal liability only if officers “will
Case Syllabus (G.R. No. 147590)
Parties
- Petitioner: Antonio C. Carag, Chairman of the Board of Mariveles Apparel Corporation (MAC)
- Respondents:
• National Labor Relations Commission (NLRC)
• Isabel G. Panganiban-Ortiguerra, Executive Labor Arbiter
• National Federation of Labor Unions (NAFLU)
• Mariveles Apparel Corporation Labor Union (MACLU)
Case Background
- Petition for review on certiorari under Rule 45, assailing:
• Labor Arbiter Ortiguerra’s Decision (17 June 1994) in RAB-III-08-5198-93
• NLRC Resolution (5 January 1995) in NLRC CA No. L-007731-94
• Court of Appeals Decision (29 February 2000) and Resolution (27 March 2001) in CA-G.R. SP Nos. 54404-06 - Core dispute: alleged illegal closure of MAC and illegal dismissal of rank-and-file employees
Facts
- MAC ceased operations on 8 July 1993 without prior one-month notice to employees or DOLE
- At closure, employees with one to two weeks’ work remained unpaid
- Existing Collective Bargaining Agreement (CBA) guaranteed separation pay and other benefits
- Complainants: NAFLU and MACLU, acting for all rank-and-file workers, filed complaint for illegal dismissal and claims for separation pay, unpaid wages, actual, moral, exemplary damages
Motion to Implead and Early Proceedings
- Complainants moved (3 January 1994) to implead Carag and MAC President Armando David as “persons acting in interest of employer” under Article 212(e), Labor Code
- Arbiter summoned only MAC and union for settlement conference; respondents failed to appear
- Case submitted for resolution on extant pleadings
Labor Arbiter’s Decision (17 June 1994)
- Declared MAC’s closure illegal, exceeding six-month “temporary shutdown” under Article 286, Labor Code
- Ordered MAC to pay P49,101,621.00 separation pay (one month per year of service, six-month fraction as one year)
- Granted Association’s motion to implead Carag and David; held them solidarily liable under corporate fiction exceptions
- Awarded attorney’s fees at 10% of judgment; denied moral and exemplary damages for lack of evidence
NLRC Ruling (5 January 1995)
- Third Division denied MAC’s and Carag’s motions to reduce bond; bond set at P48,101,621.00
- Held that reduction on ground of merits would preemptively rule on appeal’s substance
- Directed posting of cash or surety bond within 15 days; no further motions for reconsideration