G.R. No. 198967 - Guillermo vs. Uson

Case Summary (G.R. No. 198967)

Factual Background and Procedural History

Uson was employed by Royal Class Venture starting March 11, 1996, and was dismissed on December 20, 2000. He filed a complaint for illegal dismissal before the Sub-Regional Arbitration Branch No. 1 of the NLRC on March 2, 2001, seeking reinstatement, backwages, and other damages. Royal Class Venture failed to appear. The Labor Arbiter ruled in favor of Uson on October 22, 2001, ordering his reinstatement and awarding damages. Royal Class Venture did not appeal the decision, which became final and executory.

Enforcement Efforts and Corporate Veil Piercing

Attempts to enforce the judgment through Writs of Execution were unsuccessful due to the dissolution of Royal Class Venture. A Second Alias Writ of Execution revealed that the original corporate entity was dissolved and replaced by another family corporation, Joel and Sons Corporation, in which Guillermo, using the nickname "Joey," was a stockholder. Guillermo denied his identity during service of process. Uson filed a motion to hold the corporate officers, including Guillermo, personally liable for the satisfaction of the judgment.

Labor Arbiter's Ruling on Personal Liability

The Labor Arbiter granted Uson’s motion, invoking the principle that corporate officers may be held jointly and severally liable for the employer corporation’s obligations to employees. This was despite the fact that the officers were not parties during the initial proceedings. The Labor Arbiter found Guillermo personally liable, emphasizing that due process was not violated in imposing such liability post-judgment. Guillermo’s subsequent motions for reconsideration were denied.

Appellate and NLRC Review

Guillermo filed a Memorandum of Appeal with the NLRC, which was dismissed on May 11, 2010, affirming his liability. The Court of Appeals upheld the NLRC’s decision, confirming that proper jurisdiction over Royal Class Venture was acquired upon service of summons to Guillermo as President and General Manager. It was held that final judgments may be modified or altered at the execution stage when execution is impossible or unjust. The appellate court credited the service of notices to the corporate officers and observed that Guillermo did not respond or appear during the proceedings. Accordingly, the court pierced the corporate veil and held Guillermo liable based on jurisprudence recognizing the liability of corporate presidents for illegal dismissal obligations.

Issues Presented and Petitioner's Assertions

Guillermo contended that he was improperly impleaded only after the judgment had become final and executory, thus rendering the amendment legally invalid. He challenged the piercing of corporate veil doctrine as applied in his case, arguing discrimination since other officers existed and were not similarly held liable. Guillermo also claimed that the case involved an intra-corporate controversy, questioning the Labor Arbiter’s jurisdiction.

Legal Analysis: Piercing the Corporate Veil and Personal Liability

The Supreme Court confirmed that under Philippine law, specifically Section 31 of the Corporation Code, a corporation is a separate legal entity distinct from its officers and stockholders. Personal liability of officers may be imposed only in exceptional circumstances such as willful and knowing participation in unlawful acts, gross negligence, bad faith, or conflict of interest adversely affecting the corporation.

The Court acknowledged prior jurisprudence where personal and solidary liability was imposed on corporate officers and related entities post-final judgment during execution to prevent unjust evasion of labor obligations. However, such imposition requires a showing of fraud, bad faith, or malice. Bad faith connotes a dishonest purpose or conscious doing of wrong, beyond mere negligence or poor judgment.

Application of Doctrine to the Present Case

The Court found that sufficient evidence existed to support piercing the corporate veil in this case. The sworn allegations by Uson that Guillermo dismissed him in bad faith for exposing undervaluation of corporate shares remained uncontroverted, as Guillermo neither appeared nor defended his position. Guillermo’s receipt of summons and subsequent refusal to participate, coupled with his involvement in dissolving the original company and creating a successor at the same business address under a different corporate name, demonstrated a scheme to avoid labor obligations.

The Court emphasized that these facts, supported by the Sheriff's Return and unchallenged by Guillermo, amounted to bad faith and malice, justifying the disregard of corporate fiction and imposition of personal liability.

Jurisdiction and Nature of Controversy

The Court rejected Guillermo’s argument that the case constituted an intra-corporate controversy that would fall outside the jurisdicti

Case Syllabus (G.R. No. 198967)

Background and Procedural History

Respondent Crisanto P. Uson commenced employment with Royal Class Venture Phils., Inc. as an accounting clerk on March 11, 1996.
Uson was promoted to accounting supervisor with a salary of Php13,000.00 monthly until his alleged dismissal on December 20, 2000.
On March 2, 2001, Uson filed a Complaint for Illegal Dismissal before the NLRC’s Sub-Regional Arbitration Branch No. 1 in Dagupan City, seeking backwages, reinstatement, moral and exemplary damages, attorney's fees, and 13th month pay.
Royal Class Venture received summons but failed to appear or file a position paper.
On October 22, 2001, Labor Arbiter Jose G. De Vera ruled in favor of Uson, ordering reinstatement, payment of backwages, damages, and attorney’s fees. No appeal was taken by Royal Class Venture.
Several writs of execution were issued between February and September 2002 to enforce the decision, all reported unsatisfied due to inability to collect from the corporation.
Uson filed a motion to hold directors and officers liable for satisfaction of the decision, quoting the sheriff’s return exposing that Royal Class Venture was dissolved and replaced by Joel and Sons Corporation, a family-owned corporation.
Labor Arbiter Irenarco R. Rimando pierced the corporate veil and held petitioner Jose Emmanuel Guillermo, as president and general manager, jointly and severally liable with the corporation.
Guillermo’s motion for reconsideration was denied; subsequent motions including a petition for certiorari before the Court of Appeals (CA) were also denied.
The CA affirmed the findings of the NLRC, citing evidence of Guillermo’s active role in the corporation, his refusal to participate, and the unlawful dismissal of Uson.
Guillermo filed the instant petition for review under Rule 45, challenging his personal liability and the “piercing of the corporate veil” after finality of judgment.

Issues Presented

Whether a corporate officer may be impleaded as a judgment obligor for the first time after a labor arbiters’ decision has become final and executory.
Whether the doctrines of “piercing the veil of corporate fiction” and personal liability of corporate officers apply to hold Guillermo jointly and severally liable.
Whether the Labor Arbiter had jurisdiction, given that the case allegedly involved an intra-corporate controversy.
Validity of the actions taken to modify or enforce the decision post-finality.

Relevant Facts and Evidence

Guillermo was President and General Manager of Royal Class Venture and the person who received the summons.
Despite official notices and summons, Guillermo and Royal Class Venture did not participate in the proceedings without justifi