Zaragoza v. Tan

DOCTRINE: To hold a director or officer personally liable for corporate obligations, two (2) requisites must concur: (1) complaint must allege in the complaint that the director or officer was guilty of gross negligence or bad faith; (2) complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith. 

FACTS: Petitioner was the Area Sales Manager of Consolidated Distillers of the Far East Incorporated (Condis) in the Bicol Region. He was dismissed. He filed an illegal dismissal case against Condis. The LA declared that he was illegally dismissed. Condis filed a Manifestation that petitioner can no longer be reinstated as his former position no longer existed. Condis and Hidalgo appealed to the NLRC, which affirmed the LA’s decision but with modifications on the awards. The Motion for Reconsideration was denied. They filed with the CA a petition for certiorari which partly affirmed the NLRC decision but absolved Hidalgo of Liability. CA denied the MR. Condis filed a petition for review in the Court but it was denied, as well as the MR.  Petitioner filed a motion execution with notice of appearance, arguing that he is likewise entitled to accrued salaries by reason of the order of reinstatement. He prayed that respondent Tan, as President of Condis, should be held personally liable for the awards; and that respondent EDI should also be held jointly and solidarily liable with Condis for the judgment award as the transfer of manufacturing business of the latter to the former was done in bad faith in order to evade payment/satisfaction of their liabilities in the labor case, applying the doctrine of piercing the veil of corporate fiction. The LA held that Katherine Tan and EDI to be jointly and severally liable with Condis. Respondents filed with the NLRC a Petition for Annulment of the Resolution which was granted. Petitioner’s MR was denied. Petitioner filed a petition for certiorari with the CA but the court dismissed the petition.

ISSUE: Whether or not the monetary award can be enforced against respondent Tan in her capacity as President of Condis and against EDI

HELD: No. To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1) complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and (2) complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith. To stress, respondent Tan was not at all impleaded in the illegal dismissal case; thus, her participation in petitioner’s dismissal was never established in any of the proceedings therein. Consequently, it was not shown at all that she assented to patently unlawful acts of the corporation, or that she was guilty of gross negligence or bad faith. In fact, the LA’s Resolution granting the alias writ of execution against the respondents did not make any  finding as to why respondent Tan was ordered to pay the judgment award in the alternative, with Condis and respondent EDI, other than his reliance on our ruling in A.C. Ransom Labor Union-CCLU v. NLRC, 142 SCRA 269 (1986), which as we found is misplaced.