THIRD DIVISION

G.R. No. 198967, March 07, 2016

JOSE EMMANUEL P. GUILLERMO, Petitioner, v. CRISANTO P. USON, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Court of Appeals Decision 1 dated June 8, 2011
and Resolution2 dated October 7, 2011 in CA G.R. SP No. 115485, which affirmed in
toto the decision of the National Labor Relations Commission ( NLRC).

The facts of the case follow.

On March 11, 1996, respondent Crisanto P. Uson ( Uson) began his employment with
Royal Class Venture Phils., Inc. ( Royal Class Venture) as an accounting
clerk.3 Eventually, he was promoted to the position of accounting supervisor, with a
salary of Php13,000.00 a month, until he was allegedly dismissed from employment on
December 20, 2000.4

On March 2, 2001, Uson filed with the Sub-Regional Arbitration . Branch No. 1,
Dagupan City, of the NLRC a Complaint for Illegal Dismissal, with prayers for
backwages, reinstatement, salaries and 13 thmonth pay, moral and exemplary damages
and attorney's fees against Royal Class Venture. 5

Royal Class Venture did not make an appearance in the case despite its receipt of
summons.6

On May 15, 2001, Uson filed his Position Paper 7 as complainant.

On October 22, 2001, Labor Arbiter Jose G. De Vera rendered a Decision 8 in favor of the
complainant Uson and ordering therein respondent Royal Class Venture to reinstate him
to his former position and pay his backwages, 13 th month pay as well as moral and
exemplary damages and attorney's fees.

Royal Class Venture, as the losing party, did not file an appeal of the
decision.9 Consequently, upon Uson's motion, a Writ of Execution 10 dated February 15,
2002 was issued to implement the Labor Arbiter's decision.

On May 17, 2002, an Alias Writ of Execution 11 was issued. But with the judgment still
unsatisfied, a Second Alias Writ of Execution 12 was issued on September 11, 2002.
Again, it was reported in the Sheriff's Return that the Second Alias Writ of Execution
dated September 11, 2002 remained "unsatisfied." Thus, on November 14, 2002, Uson
filed a Motion for Alias Writ of Execution and to Hold Directors and Officers of
Respondent Liable for Satisfaction of the Decision. 13 The motion quoted from a portion
of the Sheriffs Return, which states:
chanRoblesvirtualLawlibrary

On September 12, 2002, the undersigned proceeded at the stated present business
office address of the respondent which is at Minien East, Sta. Barbara, Pangasinan to
serve the writ of execution. Upon arrival, I found out that the establishment erected
thereat is not [in] the respondent's name but JOEL and SONS CORPORATION, a family
corporation owned by the Guillermos of which, Jose Emmanuel F. Guillermo the General
Manager of the respondent, is one of the stockholders who received the writ using his
nickname "Joey," [and who] concealed his real identity and pretended that he [was] the
brother of Jose, which [was] contrary to the statement of the guard-on-duty that Jose
and Joey [were] one and the same person. The former also informed the undersigned
that the respondent's (sic) corporation has been dissolved.

On the succeeding day, as per [advice] by the [complainant's] counsel that the
respondent has an account at the Bank of Philippine Islands Magsaysay Branch, A.B.
Fernandez Ave., Dagupan City, the undersigned immediately served a notice of
garnishment, thus, the bank replied on the same day stating that the respondent [does]
not have an account with the branch.14ChanRoblesVirtualawlibrary
On December 26, 2002, Labor Arbiter Irenarco R. Rimando issued an Order 15 granting
the motion filed by Uson. The order held that officers of a corporation are jointly and
severally liable for the obligations of the corporation to the employees and there is no
denial of due process in holding them so even if the said officers were not parties to the
case when the judgment in favor of the employees was rendered. 16 Thus, the Labor
Arbiter pierced the veil of corporate fiction of Royal Class Venture and held herein
petitioner Jose Emmanuel Guillermo (Guillermo), in his personal capacity, jointly and
severally liable with the corporation for the enforcement of the claims of Uson. 17

Guillermo filed, by way of special appearance, a Motion for Reconsideration/To Set

Aside the Order of December 26, 2002. 18 The same, however, was not granted as, this
time, in an Order dated November 24, 2003, Labor Arbiter Nia Fe S. Lazaga-Rafols
sustained the findings of the labor arbiters before her and even castigated Guillenno for
his unexplained absence in the prior proceedings despite notice, effectively putting
responsibility on Guillermo for the case's outcome against him. 19

On January 5, 2004, Guillermo filed a Motion for Reconsideration of the above

Order,20 but the same was promptly denied by the Labor Arbiter in an Order dated
January 7, 2004.21
On January 26, 2004, Uson filed a Motion for Alias Writ of Execution, 22 to which
Guillermo filed a Comment and Opposition on April 2, 2004. 23

On May 18, 2004, the Labor Arbiter issued an Order 24 granting Uson's Motion for the
Issuance of an Alias Writ of Execution and rejecting Guillermo's arguments posed in his
Comment and Opposition.

Guillermo elevated the matter to the NLRC by filing a Memorandum of Appeal with
Prayer for a (Writ of) Preliminary Injunction dated June 10, 2004. 25cralawred

In a Decision26 dated May 11, 2010, the NLRC dismissed Guillermo's appeal and denied
his prayers for injunction.

On August 20, 2010, Guillermo filed a Petition for Certiorari27 before the Court of
Appeals, assailing the NLRC decision.

On June 8, 2011, the Court of Appeals rendered its assailed Decision 28 which denied
Guillermo's petition and upheld all the findings of the NLRC.

The appellate court found that summons was in fact served on Guillermo as President
and General Manager of Royal Class Venture, which was how the Labor Arbiter acquired
jurisdiction over the company.29 But Guillermo subsequently refused to receive all
notices of hearings and conferences as well as the order to file Royal Class Venture's
position paper.30 Then, it was learned during execution that Royal Class Venture had
been dissolved.31 However, the Court of Appeals held that although the judgment had
become final and executory, it may be modified or altered "as when its execution
becomes impossible or unjust."32 It also noted that the motion to hold officers and
directors like Guillermo personally liable, as well as the notices to hear the same, was
sent to them by registered mail, but no pleadings were submitted and no appearances
were made by anyone of them during the said motion's pendency. 33 Thus, the court
held Guillermo liable, citing jurisprudence that hold the president of the corporation
liable for the latter's obligation to illegally dismissed employees. 34Finally, the court
dismissed Guillermo's allegation that the case is an intra-corporate controversy, stating
that jurisdiction is determined by the allegations in the complaint and the character of
the relief sought.35

From the above decision of the appellate court, Guillermo filed a Motion for
Reconsideration36 but the same was again denied by the said court in the assailed
Resolution37 dated October 7, 2011.

Hence, the instant petition.

Guillermo asserts that he was impleaded in the case only more than a year after its
Decision had become final and executory, an act which he claims to be unsupported in
law and jurisprudence.38 He contends that the decision had become final, immutable
and unalterable and that any amendment thereto is null and void. 39 Guillermo assails
the so-called "piercing the veil" of corporate fiction which allegedly discriminated
against him when he alone was belatedly impleaded despite the existence of other
directors and officers in Royal Class Venture. 40 He also claims that the Labor Arbiter has
no jurisdiction because the case is one of an intra-corporate controversy, with the
complainant Uson also claiming to be a stockholder and director of Royal Class
Venture.41

In his Comment,42 Uson did not introduce any new arguments but merely
cited verbatim the disquisitions of the Court of Appeals to counter Guillermo's assertions
in his petition.

To resolve the case, the Court must confront the issue of whether an officer of a
corporation may be included as judgment obligor in a labor case for the first time only
after the decision of the Labor Arbiter had become final and executory, and whether the
twin doctrines of "piercing the veil of corporate fiction" and personal liability of company
officers in labor cases apply.

The petition is denied.

In the earlier labor cases of Claparols v. Court of Industrial Relations 43 and A.C. Ransom
Labor Union-CCLU v. NLRC,44 persons who were not originally impleaded in the case
were, even during execution, held to be solidarity liable with the employer corporation
for the latter's unpaid obligations to complainant-employees. These included a newly-
formed corporation which was considered a mere conduit or alter ego of the originally
impleaded corporation, and/or the officers or stockholders of the latter
corporation.45 Liability attached, especially to the responsible officers, even after final
judgment and during execution, when there was a failure to collect from the employer
corporation the judgment debt awarded to its workers.46 In Naguiat v. NLRC,47 the
president of the corporation was found, for the first time on appeal, to be solidarily
liable to the dismissed employees. Then, in Reynoso v. Court of Appeals ,48 the veil of
corporate fiction was pierced at the stage of execution, against a corporation not
previously impleaded, when it was established that such corporation had dominant
control of the original party corporation, which was a smaller company, in such a
manner that the latter's closure was done by the former in order to defraud its
creditors, including a former worker.

The rulings of this Court in A.C. Ransom, Naguiat, and Reynoso, however, have since
been tempered, at least in the aspects of the lifting of the corporate veil and the
assignment of personal liability to directors, trustees and officers in labor cases. The
subsequent cases of McLeod v. NLRC,49Spouses Santos v. NLRC50 and Carag v.
NLRC,51 have all established, save for certain exceptions, the primacy of Section 31 52 of
the Corporation Code in the matter of assigning such liability for a corporation's debts,
including judgment obligations in labor cases. According to these cases, a corporation is
still an artificial being invested by law with a personality separate and distinct from that
of its stockholders and from that of other corporations to which it may be
connected.53 It is not in every instance of inability to collect from a corporation that the
veil of corporate fiction is pierced, and the responsible officials are made liable. Personal
liability attaches only when, as enumerated by the said Section 31 of the Corporation
Code, there is a wilfull and knowing assent to patently unlawful acts of the corporation,
there is gross negligence or bad faith in directing the affairs of the corporation, or there
is a conflict of interest resulting in damages to the corporation. 54 Further, in another
labor case, Pantranco Employees Association (PEA-PTGWO), et al. v. NLRC, et al. ,55 the
doctrine of piercing the corporate veil is held to apply only in three (3) basic areas,
namely: ( 1) defeat of public convenience as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation; (2) fraud cases or when the corporate
entity is used to justify a wrong, protect fraud, or defend a crime; or (3) alter
ego cases, where a corporation is 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 conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation. In the absence of malice, bad faith, or a specific
provision of law making a corporate officer liable, such corporate officer cannot be
made personally liable for corporate liabilities. 56 Indeed, in Reahs Corporation v.
NLRC,57 the conferment of liability on officers for a corporation's obligations to labor is
held to be an exception to the general doctrine of separate personality of a corporation.

It also bears emphasis that in cases where personal liability attaches, not even all
officers are made accountable. Rather, only the "responsible officer," i.e., the person
directly responsible for and who "acted in bad faith" in committing the illegal dismissal
or any act violative of the Labor Code, is held solidarily liable, in cases wherein the
corporate veil is pierced.58 In other instances, such as cases of so-called corporate tort
of a close corporation, it is the person "actively engaged" in the management of the
corporation who is held liable. 59 In the absence of a clearly identifiable officer(s) directly
responsible for the legal infraction, the Court considers the president of the corporation
as such officer.60

The common thread running among the aforementioned cases, however, is that the veil
of corporate fiction can be pierced, and responsible corporate directors and officers or
even a separate but related corporation, may be impleaded and held answerable
solidarily in a labor case, even after final judgment and on execution, so long as it is
established that such persons have deliberately used the corporate vehicle to unjustly
evade the judgment obligation, or have resorted to fraud, bad faith or malice in doing
so. When the shield of a separate corporate identity is used to commit wrongdoing and
opprobriously elude responsibility, the courts and the legal authorities in a labor case
have not hesitated to step in and shatter the said shield and deny the usual protections
to the offending party, even after final judgment. The key element is the presence of
fraud, malice or bad faith. Bad faith, in this instance, does not connote bad judgment or
negligence but imports a dishonest purpose or some moral obliquity and conscious
doing of wrong; it means breach of a known duty through some motive or interest or ill
will; it partakes of the nature of fraud. 61

As the foregoing implies, there is no hard and fast rule on when corporate fiction may
be disregarded; instead, each case must be evaluated according to its peculiar
circumstances.62 For the case at bar, applying the above criteria, a finding of personal
and solidary liability against a corporate officer like Guillermo must be rooted on a
satisfactory showing of fraud, bad

faith or malice, or the presence of any of the justifications for disregarding the
corporate fiction. As stated in McLeod,63 bad faith is a question of fact and is
evidentiary, so that the records must first bear evidence of malice before a finding of
such may be made.

It is our finding that such evidence exists in the record. Like the A. C. Ransom,
and Naguiat cases, the case at bar involves an apparent family corporation. As in those
two cases, the records of the present case bear allegations and evidence that
Guillermo, the officer being held liable, is the person responsible in the actual running
of the company and for the malicious and illegal dismissal of the complainant; he,
likewise, was shown to have a role in dissolving the original obligor company in an
obvious "scheme to avoid liability" which jurisprudence has always looked upon with a
suspicious eye in order to protect the rights of labor. 64

Part of the evidence on record is the second page of the verified Position Paper of
complainant (herein respondent) Crisanto P. Uson, where it was clearly alleged that
Uson was "illegally dismissed by the President/General Manager of respondent
corporation (herein petitioner) Jose Emmanuel P. Guillermo when Uson exposed the
practice of the said President/General Manager of dictating and undervaluing the shares
of stock of the corporation."65 The statement is proof that Guillermo was the responsible
officer in charge of running the company as well as the one who dismissed Uson from
employment. As this sworn allegation is uncontroverted - as neither the company nor
Guillermo appeared before the Labor Arbiter despite the service of summons and
notices - such stands as a fact of the case, and now functions as clear evidence of
Guillermo's bad faith in his dismissal of Uson from employment, with the motive
apparently being anger at the latter's reporting of unlawful activities.

Then, it is also clearly reflected in the records that it was Guillermo himself, as
President and General Manager of the company, who received the summons to the
case, and who also subsequently and without justifiable cause refused to receive all
notices and orders of the Labor Arbiter that followed. 66This makes Guillermo responsible
for his and his company's failure to participate in the entire proceedings before the said
office. The fact is clearly narrated in the Decision and Orders of the Labor Arbiter,
Uson's Motions for the Issuance of Alias Writs of Execution, as well as in the Decision of
the NLRC and the assailed Decision of the Court of Appeals, 67 which Guillermo did not
dispute in any of his belated motions or pleadings, including in his petition
for certiorari before the Court of Appeals and even in the petition currently before this
Court.68 Thus, again, the same now stands as a finding of fact of the said lower
tribunals which binds this Court and which it has no power to alter or
revisit.69 Guillermo's knowledge of the case's filing and existence and his unexplained
refusal to participate in it as the responsible official of his company, again is
an indicia of his bad faith and malicious intent to evade the judgment of the labor
tribunals.

Finally, the records likewise bear that Guillermo dissolved Royal Class Venture and
helped incorporate a new firm, located in the same address as the former, wherein he
is again a stockl1older. This is borne by the Sherif11s Return which reported: that at
Royal Class Venture's business address at Minien East, Sta. Barbara, Pangasinan, there
is a new establishment named "Joel and Sons Corporation," a family corporation owned
by the Guillermos in which Jose Emmanuel F. Guillermo is again one of the
stockholders; that Guillermo received the writ of execution but used the nickname
"Joey" and denied being Jose Emmanuel F. Guillermo and, instead, pretended to be
Jose's brother; that the guard on duty confirmed that Jose and Joey are one and the
same person; and that the respondent corporation Royal Class Venture had been
dissolved.70 Again, the facts contained in the Sheriffs Return were not disputed nor
controverted by Guillermo, either in the hearings of Uson's Motions for Issuance of Alias
Writs of Execution, in subsequent motions or pleadings, or even in the petition before
this Court. Essentially, then, the facts form part of the records and now stand as further
proof of Guillermo's bad faith and malicious intent to evade the judgment obligation.

The foregoing clearly indicate a pattern or scheme to avoid the obligations to Uson and
frustrate the execution of the judgment award, which this Court, in the interest of
justice, will not countenance.

As for Guillermo's assertion that the case is an intra-corporate controversy, the Court
sustains the finding of the appellate court that the nature of an action and the
jurisdiction of a tribunal are determined by the allegations of the complaint at the time
of its filing, irrespective of whether or not the plaintiff is entitled to recover upon all or
some of the claims asserted therein. 71 Although Uson is also a stockholder and director
of Royal Class Venture, it is settled in jurisprudence that not all conflicts between a
stockholder and the corporation are intra-corporate; an examination of the complaint
must be made on whether the complainant is involved in his capacity as a stockholder
or director, or as an employee.72 If the latter is found and the dispute does not meet
the test of what qualities as an intra-corporate controversy, then the case is a labor
case cognizable by the NLRC and is not within the jurisdiction of any other tribunal. 73 In
the case at bar, Uson's allegation was that he was maliciously and illegally dismissed as
an Accounting Supervisor by Guillermo, the Company President and General Manager,
an allegation that was not even disputed by the latter nor by Royal Class Venture. It
raised no intra-corporate relationship issues between him and the corporation or
Guillermo; neither did it raise any issue regarding the regulation of the corporation. As
correctly found by the appellate court, Uson's complaint and redress sought were
centered alone on his dismissal as an employee, and not upon any other relationship he
had with the company or with Guillermo. Thus, the matter is clearly a labor dispute
cognizable by the labor tribunals.chanrobleslaw

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated June 8,
2011 and Resolution dated October 7, 2011 in CA G.R. SP No. 115485 are AFFIRMED.

SO ORDERED.cralawlawlibrary

Velasco, Jr., (Chairperson), Perez, Reyes , and Jardeleza, JJ.,

concur.chanroblesvirtuallawlibrary

Endnotes:

1
Penned by Associate Justice Joselina Guevara-Salonga, with Associate Justices Mariflor
P. Punzalan-Castillo and Franchito N. Diamante, concurring; rollo, pp. 130-142.

The National Labor Relations Commission as well as Labor Arbiter Nia Fe S. Lazaga-
Rafols were excluded as respondents by this Court in its Resolution in this case elated
January 30, 2012, id. at 159-160, citing Section 4(a), Rule 45 of the 1997 Rules of Civil
Procedure.

2
Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices Mariflor
P. Punzalan-Castillo and Franchito Diamante concurring; id. at 155-158.

Id. at
3
165.

Id.
4

Id. at
5
24, 167.

Id. at
6
59-61, 77, 80-81, 89-90, 137.

Id. at
7
49-54.

Id. at
8
57-64.

Id. at
9
25, 65, 168.

10
Id. at 65-66.
 Id. at
11
67-68.

Id. at
12
69-70.

Id. at
13
71-74.

Id. at
14
72.

Id. at
15
75-79.

Id. at
16
78.

Id. at
17
78-79.

Id. at
18
170.

Id. at
19
80-81.

Id. at
20
170-171.

Id. at
21
171 .

Id. at
22
82-83.

Id. at
23
172.

Id. at
24
84.cralawred

Id. at
25
172-173.

Id. at
26
86-91.cralawred

Id. at
27
92-110.

Id. at
28
130-142.

Id. at
29
137.

Id.
30

Id.
31

Id. at
32
138.
 Id.
33

Id. at
34
139-140.

Id. at
35
140.

Id. at
36
143-154.

Id. at
37
155-158.

Id. at
38
31.

Id. at
39
32-33.cralawred

Id. at
40
36-39.

Id. at
41
40-42, 51 (Uson's Position Paper).

Id. at
42
165-178.

43
160 Phil. 624 (1975).

44
226 Phil. 199 (1986).

Claparols v. Court of Industrial Relations, supra; A.C. Ransom Labor Union-CCLU-

45

NLRC, supra.

Id.
46

47
336 Phil. 545 (1997).

48
399 Phil. 38 (2000), citing Claparols v. CIR, supra note 43.

49
541 Phil. 214 (2007).

50
354 Phil. 918 (1998).

51
548 Phil. 581 (2007).

52
Sec. 31. Liability of directors, trustees or officers . - 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 faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered
by the corporation, its stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquire, in violation of his

duty, any interest adverse to the corporation in respect of any matter which has been
reposed in him in confidence, as to which equity imposes a disability upon him to deal
in his own behalf he shall be liable as a trustee for the corporation and must account
for the profits which otherwise would have accrued to the corporation. (n)

McLeod
53
v. NLRC, supra note 49, at 238.

54
Further, as added in McLeod, there is personal liability also when directors, trustees
or officers consent or fail to object to the issuance of watered clown stocks, despite
knowledge thereof; when they agree to hold themselves personally and soliciarily liable
with the corporation; or when they are made by specific provision of IDw personally
answerable for their corporate action. ( Id. at 242)

55
600 Phil. 645 (2009).

Pantranco Employees Association (PEA-PTGWO), et al. v. NLRC, et al., supra , at 663.

56

57
337 Phil. 698 (1997).

Carag v. NLRC, supra note 51, at 606-608, citing McLeod v. NLRC, et al., supra note
58

49.

59
Naguiat v. NLRC, supra note 47, at 562. A "corporate tort" is described as a violation
of a right given or the omission of a duty imposed by law; a breach of a legal duty.
Such legal duty include that spelled out in Art. 238 of the Labor Code which mandates
the employer to grant separation pay to employees in case of closure or cessation of
operations not due to serious business losses or financial reverses.

Santos v. NLRC, 325 Phil. 145 (1996); Naguiat v. NLRC, supra note 47, at 560.
60

Elcee
61
Farms, Inc. v. NLRC (Fourth Div.) , 541 Phil. 576, 593 (2007).

Concept
62
Builders Inc. v. NLRC , 326 Phil. 955, 965 ( 1996).

Supra note
63
49, at 242.

Claparols
64
v. CIR, supra note 43, at 635-636.

Rollo,
65
pp. 50-51.
 Id. at
66
59-61, 77, 80-81, 89-90, 137.

Id.
67

Id. at
68
21-44, 92-109.

Zuellig Freight and Cargo Systems v. NLRC , G.R. No. 157900, July 22, 2013, 701 SCRA
69

561.

Rollo,
70
p. 72.

Barrazona v. Regional Trial Court , Branch 21, Baguio City, 521 Phil. 53 (2006).
71

Real v. Sangu Philippines, Inc. and/or Abe , 655 Phil. 68, 83-84 (2011).
72

73
Id.; Aguirre v. FQB+7, Inc., G.R. No. 170770, January 9, 2013, 688 SCRA 242, 260,
quoting Speed Distribution, Inc. v. Court of Appeals , 469 Phil. 739, 758-759 (2004), as
follows: To determine whether a case involves an intra-corporate controversy, and is to
be heard and decided by the branches of the RTC specifically designated by the Court
to try and decide such cases, two elements must concur: (a) the status or relationship
or the parties; and (b) the nature of the question that is the subject of their
controversy.

The first clement requires that the controversy must arise out of intra-corporate or
partnership relations between any or all of the parties and the corporation, partnership,
or association of which they are stockholders, members or associates; between any or
all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation,
partnership or association and the State insofar as it concerns their individual
franchises. The second element requires that the dispute among the parties be
intrinsically connected with the regulation or the corporation. If the nature of the
controversy involves matters that are purely civil in character, necessarily, the case docs
not involve an intra-corporate controversy. The determination of whether a contract is
simulated or not is an issue that could be resolved by applying pertinent provisions of
the Civil Code.