Case 8:

Armando David vs. National Federation of Labor Union, et al.

G.R. No. 148263 and 148271-72, April 21, 2009.
********Case Digest**********
Facts: MAC hired David as IMPEX and Treasury Manager on 16 September 1988. David
began serving as MACs President in May 1990. David served as President in the n
ature of a nominee as he did not own any of MACs shares. David tendered his irre
vocable resignation from MAC on 30 September 1993. Davids resignation was made e
ffective on 15 October 1993.
August 1993, National Federation of Labor Unions (NAFLU) and Mariveles Apparel C
orporation Labor Union (MACLU) alleged that MAC ceased operations on 8 July 1993
without prior notice to its employees. MAC allegedly gave notice of its closure
on the same day that it ceased operations. MACLU and NAFLU further alleged that
, at the time of MACs closure, employees who had rendered one to two weeks work
were not paid their corresponding salaries.
Atty. Joshua Pastores, as MACs counsel, submitted a position paper dated 21 Febr
uary 1994 and argued that Carag and David should not be held liable because MAC
is owned by a consortium of banks. Carags and Davids ownership of MAC shares onl
y served to qualify them to serve as officers in MAC.
ARBITER....The LA impleaded Carag and David. The decision of the LA explains why
said persons are impleaded. "The complainants claim that Atty. Antonio Carag an
d Mr. Armando David should be held jointly and severally liable with respondent
corporation [MAC]. In instances where corporate officers dismissed employees in
bad faith or wantonly violate labor standard laws or whejn the company had alrea
dy ceased operations and there is no way by which a judgment in favor of employe
es could be satisfied, corporate officers can be held jointly and severally liab
le with the company. This Office after a careful consideration of the factual ba
ckdrop of the case is inclined to grant complainants prayer for the impleader of
Atty. Antonio Carag and Mr. Armando David, to assure that valid claims of emplo
yees would not be defeated by the closure of [MAC].
David then filed a petition for certiorari under Rule 65, docketed as G.R. No. 1
18880, before this Court. We also consolidated Davids petition with that of MACL
U and NAFLU (G.R. No. 118880) and of MAC and Carag (G.R. No. 118820).
CA.... affirmed the decision of the LA.
Therefore this petition is brought to this court. This is a petition for review
on certiorari dated 27 March 2001 of the Court of Appeals (appellate court) in C
A-G.R. SP Nos. 54404-06. The appellate court affirmed the Decision 4[4] dated 17
June 1994 of Labor Arbiter Isabel Panganiban-Ortiguerra (Arbiter Ortiguerra) in
RAB-III-08-5198-93 where petitioner Armando David (David) was held solidarily l
iable, along with Mariveles Apparel Corporation (MAC) and MAC Chairman of the Bo
ard Antonio Carag (Carag), for money claims of the employees of MAC.
Issue/s: Whether or not the Labor Court has acquired jurisdiction over the perso
n of petitioner by ordering him to be impleaded as a party respondent in the cou
rse of the proceedings not through a separate order prior to the promulgation of
its decision, but through the decision itself, under which, petitioner was adju
dged to be jointly and severally liable to pay the monetary award with the origi
nal respondent?
Held: NEGATIVE Assuming that the NLRC and the Labor Arbiter had jurisdiction ove
r David, we rule that it was still improper to hold David liable for MACs obliga
tions to its employees. Arbiter Ortiguerra held David liable for MACs debts purs

uant to Article 212(e) of the Labor Code, which reads: Employer includes any per
son acting in the interest of an employer, directly or indirectly. The term shal
l not include any labor organization or any of its officers or agents except whe
n acting as employer.
However, Article 212(e) of the Labor Code, by itself, does not make a corporate
officer personally liable for the debts of the corporation because Section 31 of
the Corporation Code is still the governing law on personal liability of office
rs for the debts of the corporation.

*******Answers to Discuss Questions*******

(1) Is there an instance where corporate officers liable are held jointly and se
verally liable with the
corporation? Explain and cite legal basis.
Directors or trustees who willfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or bad f
aith in directing the affairs of the corporation. This is based on Section 31 of
the Corporation Code.
(2) In what instances corporate officers are held liable? Cite legal basis.
In instances where corporate officers dismissed employees in bad faith or wanton
ly violate labor standard laws or when the company had already ceased operations
and there is no way by which a judgment in favor of employees could be satisfie
d, corporate officers can be held jointly and severally liable with the company.
This is based on the decision of the Labor Arbiter which he based on the Labor C
ode Article 212(e)
(3) How is the rule related to separate personality doctrine?
According to Separate personality Doctrine, the corporation have personality dis
tinct and separate from stockholders. This is also known as Corporate Fiction.
This is related with the preceeding answer, which is a rule known as piercing th
e corporate veil. Even though that the corporation has its distinct personality,
this can be pierced if said doctrine can be established.

Case 9:
********Case Digest**********
Facts:
The Gonzales family owned two corporations, namely, the PNEI and Macris Realty C
orporation (Macris). PNEI provided transportation services to the public, and ha

d its bus terminal at the corner of Quezon and Roosevelt Avenues in Quezon City.
The terminal stood on four valuable pieces of real estate (known as Pantranco p
roperties) registered under the name of Macris. 9[9] The Gonzales family later i
ncurred huge financial losses despite attempts of rehabilitation and loan infusi
on. In March 1975, their creditors took over the management of PNEI and Macris.
By 1978, full ownership was transferred to one of their creditors, the National
Investment Development Corporation (NIDC), a subsidiary of the PNB.
LA.... It being a corporation with a distinct and separate personality, its asse
ts could not answer for the liabilities of PNEI. Considering, however, that PNBMadecor executed a promissory note in favor of PNEI for P7,884,000.00, the writ
of execution to the extent of the said amount was concerned was considered valid
. The LA granted the Third Party Claim of PNB Madecor, owners of the PNEI proper
ties subject of the Labor dispute.
NLRC affirmed the decision of the LA.
CA affirmed the NLRC resolutions.
Issue/s: (1) Whether they can attach the properties (specifically the Pantranco
properties) of PNB, PNB-Madecor and Mega Prime to satisfy their unpaid labor cl
aims against PNEI.
Held: (1) Negative. The subject property is not owned by the judgment debtor, th
at is, PNEI. Nowhere in the records was it shown that PNEI owned the Pantranco p
roperties. Petitioners, in fact, never alleged in any of their pleadings the fac
t of such ownership.
The power of the court in executing judgments extends only to properties unquest
ionably belonging to the judgment debtor alone. To be sure, one mans goods shall
not be sold for another mans debts. A sheriff is not authorized to attach or le
vy on property not belonging to the judgment debtor, and even incurs liability i
f he wrongfully levies upon the property of a third person.

*******Answers to Discuss Questions*******

(1) Discuss the doctrine of piercing the corporate veil. Give its rationale.
Corporation has a personality separate and distinct from those of its stockholde
rs and other corporations to which it may be connected. The rationale behind thi
s doctrine, a fiction created by law for convenience and to prevent injustice
(2) Relate the doctrine to the limited liability and the separate personality do
ctrines.
In numerous jurisprudence, stockholders and/or directors of a Corporation may be
held jointly liable through instances under the doctrine of "piercing the corpo
rate veil".
Limited Liability refers to when stockholders and/or directors form a corporatio
n to defraud their creditors which said stockholders and/or directors would not
be personally liable for debts should the business be unable to pay its creditor
s.
Separate Personality refers to how stockholders and/directors of the corporation
and the Corporation itself are two distict personalities, therefore the stockho
lders and/or its directors are not jointly liable of obligations incurred by the

Corporation.

(3) When do you apply the said doctrine?

This can be applied in 3 basic areas: (a) defeat the public convenience as when
the corporate fiction is used as a vehicle for the evasion of an existing obliga
tion; (b) fraud cases or when the corporate entity is used to justify a wrong, p
rotect fraud, or defend a crime; or (c) alter ego cases, when a corporation is a
merely a farce since it is a mere alter ego or business conduit of a person, or
where the corporation is so organized and controlled and its affairs are so con
ducted as to make it merely an intrumentality, agency, conduit or adjunct of ano
ther corporation.
(4) When can you say that a subsidiary is just a mere instrumentality of the par
ent corporation?
1. The parent corporation owns all or most of the capital stock of the subsidiar
y;
2. The parent and subsidiary corporations have common directors or officers;
3. The parent corporation finances the subsidiary;
4. The parent corporation subscribes to all the capital stock of the subsidiary
or otherwise causes its
incorporation;
5. The subsidiary has grossly inadequate capital;
6. The parent corporation pays the salaries and other expenses or losses of the
subsidiary;
7. The subsidiary has substantially no business except with the parent corporati
on or no assets except those
conveyed to or by the parent corporation;
8. In the papers of the parent corporation or in the statements of its officers,
the subsidiary is described as a
department or division of the parent corporation, or its business or financial r
esponsibility is referred to as
the parent corporations own;
9. The parent corporation uses the property of the subsidiary as its own;
10. The directors or executives of the subsidiary do not act independently in th
e interest of the subsidiary, but
take their orders from the parent corporation;
11. The formal legal requirements of the subsidiary are not observed.

Case 10:

********Case Digest**********
Facts: Petitioner Gloria V. Gomez used to work as Manager of the Legal Departmen
t of Petron Corporation, then a government-owned corporation. With Petrons priva
tization, she availed of the companys early retirement program and left that org
anization on April 30, 1994. On the following day, May 1, 1994, however, Filoil
Refinery Corporation (Filoil), also a government-owned corporation, appointed he
r its corporate secretary and legal counsel, with the same managerial rank, comp
ensation, and benefits that she used to enjoy at Petron.
Issue/s: Whether Petitioner GOMEZ is an ordinary employee or a corporate officer
. WON the NLRC has jurisdiction over the case.
Held:Gomez is an ORDINARY EMPLOYEE, therefore NLRC has jurisdiction over the com

plaint filed by Gomez before NLRC.

Ordinary company employees are generally employed by that of the managing office
r of the corporation who also determines the compensation to be paid such employ
ees. While Corporate officers are elected or appointed by the directors or stoc
kholders, and are those who are given that character either by the Corporation C
ode or by the corporations by-laws.
Here respondent PDMC enrolled petitioner Gomez with the Social Security System,
the Medicare, and the Pag-Ibig Fund. It even issued certifications dated Octobe
r 10, 2008, stating that Gomez was a permanent employee and that the company had
remitted combined contributions during her tenure. The company also made her a
member of the PDMCs savings and provident plan and its retirement plan. hospital
ization insurance. It grouped her with the managers covered by the companys grou
p. Likewise she underwent employee performance appraisals, through the employee
stock option plan, and was entitled to vacation and emergency leaves. PDMC even
withheld taxes on her salary and declared her as an employee in the official BIR
Forms.
The Court GRANTS petition.

*******Answers to Discuss Questions*******

(1) Give the distinction between ordinary employees and corporate officers.
Ordinary company employees are generally employed not by action of the directors
and stockholders but by that of the managing officer of the corporation who als
o determines the compensation to be paid such employees.
Corporate officers are elected or appointed by the directors or stockholders, a
nd are those who are given that character either by the Corporation Code or by t
he corporations by-laws.
(2) When is an employee considered corporate officer?
A person to a corporation, whether as officer or agent or employee, is not deter
mined by the nature of the services he performs but by the incidents of his rela
tionship with the corporation as they actually exist.
A corporation is not prohibited
from hiring a corporate officer to perform services under circumstances which wi
ll make him an employee.
(3) Give five (5) examples of corporate officers and their corresponding duties.
Code

Case 11:

********Case Digest**********

*******Answers to Discuss Questions*******

(1) Distinguish term from tenure.

(2) Discuss the principle of holdover. Give its rationale.
(3) Can the BOD fill the vacancy of directorship brought about by the expiration
of the term?
Explain.
(4) What are the instances where the remaining BOD can fill any vacancy in the b
oard? Relate this to
the theory of delegated power of BOD.
(5) Is resignation as director while in a holdover capacity the same with expira
tion of term? Explain.