Statement of the Legal Problem The issue that needs to be resolved in this case is whether petitioner, Conrado Tan is liable, either jointly or severally with the Nationwide Steel Corporation, for the monetary award in favor of the respondents - Restituto Timbal, Jr.

I. Legal Concepts relevant to the Case Source: Corporation Code of the Philippines (Batas Pambansa Blg. 68) TITLE III - BOARD OF DIRECTORS/TRUSTEES/OFFICERS SECTION 25. Corporate officers, quorum. Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time. The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board. Directors or trustees cannot attend or vote by proxy at board meetings. SECTION 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 there from suffered by the corporation, its stockholders or members and other persons." A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment. Source: Labor Code of the Philippines BOOK SIX – POST EMPLOYMENT TITLE 1: TERMINATION OF EMPLOYMENT ARTICLE 282. Termination by employer. An employer may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and (e) Other causes analogous to the foregoing. ARTICLE 285. Termination by employee. (a) An employee may terminate without just cause the employee-employer relationship by serving a written notice on the employer at least one (1) month in advance. The employer upon whom no such notice was served may hold the employee liable for damages. (b) An employee may put an end to the relationship without serving any notice on the employer for any of the following just causes: 1. Serious insult by the employer or his representative on the honor and person of the employee; 2. Inhuman and unbearable treatment accorded the employee by the employer or his representative; 3. Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family; and 4. Other causes analogous to any of the foregoing. ARTICLE 289. Who are liable when committed by other than natural person. – If the offense is committed by a corporation, trust, firm, partnership, association or any other entity, the penalty shall be imposed upon the guilty officer or officers of such corporation, trust, firm, partnership, association or entity. Definition of Terms Trust Fund Doctrine – It refers to the principle that the capital stock, property and other assets of the corporation are regarded as equity in trust for payment of corporate creditors. “The doctrine is the underlying principle in the procedure for the distribution of capital assets, embodied in Corporation Code, which allows the distribution of corporate capital only in three instances: (1) amendment of Articles of Incorporation to reduce the authorize capital stock, (2) purchase of redeemable shares by the corporation, regardless of the existence of unrestricted retained earnings, and (3) dissolution and eventual liquidation of corporation. Furthermore, the doctrine is articulated in Section 41 on the power of corporation to acquire its own shares and in Section 122 on the prohibition against the distribution of corporate assets and property unless the stringent requirement therefore are complied with”. Garnishment – Method by which a creditor collects on a judgment by requiring an employer or bank to turn over funds belonging to the debtor to the garnishing creditor. The creditor can “garnish” (collect from) any third party which is holding money belonging to debtor. Notice of Garnishment – A court order requiring garnishment of a debt owing by a third party to a judgment creditor or recipient.
II. Highlights of the Case On July 17, 1989, Restituto Timbal, Jr. and Ernesto Valenciano, received a letter from their employer, Nationwide Steel Corporation (NSC), through Conrado Tan, its general manager, informing them that they were found to be among those employees who filed a complaint with the Social Security System (SSS) in which they claimed that NSC was not remitting its employees’ SSS premiums. Tan required both of them (Timbal and Valenciano) to explain their side on the matter within twenty-four (24) hours.

After submitting their explanation, Timbal Jr., and Valenciano were instructed by Tan to report the following day for the resolution of the matter, however, then they arrived the following day, they were not anymore allowed by the security guard to enter. Both of them were handed a memorandum signed by Tan stating that they were being suspended indefinitely. Timbal Jr., and Valenciano refused to receive the memorandum and tried to report for work the next day, and they were again refused entry by the security guard.

On August 3, 1989, both Timbal, Jr. and Valenciano filed a complaint for illegal dismissal with the Labor Arbiter, against NSC, and impleaded Conrado Tan as respondent, in his capacity as general manager of the said corporation.

Respondents alleged in their position papers that the complainants false charged NSC of not paying the SSS premium contributions of its employees, and that both complainants were indefinitely suspended as a result of the criminal case filed by Benny Sy against them for their false charge.

On August 9, 1990, the Labor Arbiter rendered his decision in favor of the complainants and against the NSC only, the decretal portion of which reads as follows:

WHEREFORE, finding the respondent company guilty of illegal dismissal as charged, judgment is hereby rendered ordering it to reinstate complainants to their former or equivalent positions without loss of seniority rights and to pay them full backwages and other benefits.

SO ORDERED.

LA Cornelio Linsangan found that the respondents failed to substantiate the charge that the complainants falsely accused NSC of not paying the SSS premium contributions of its employees and failing to remit the said contributions. He also declared that the evidence on record showed that the legal officer of the SSS cleared the complainants, through his letter, in which he stated that the SSS complaint against the NSC were the result of an investigation conducted by their field representative, and not by any of the employees of the NSC.

The decision became final and executory because no appeal from the decision was filed by any of the parties.

On October 10, 1990, the Labor Arbiter issued a Writ of Execution directing the sheriff to effect the complainants’ reinstatement and to collect from the respondent NSC the accrued backwages, and remit the same to the complainants. The sheriff served a notice of garnishment on the Philippine Banking Corporation. However, the Bank did not respond to the notice, and the decision of the labor arbiter remained unsatisfied.

The complainants filed an omnibus motion, praying that they be paid separation pay instead of being reinstated, as part of the monetary award in their favor. They also prayed for the issuance of an alias writ of execution enforceable against the respondent NSC and its officers/stockholders. Appended to their motion was a copy of the Articles of Incorporation of the NSC showing that Conrado Tan was one of its incorporators and members of the Board of Directors. They averred that all of the incorporators had unpaid subscribed capital stock, and that they had the right to collect their monetary claim from Conrado Tan’s unpaid subscribed capital stock under the trust fund doctrine as provided in the corporation code.

On January 16, 1991, the Labor Arbiter granted the motion, ordering Conrado D. Tan, Joseph O. Tiu, Rudy D. Ang, Pablo C. King, and William T. Ang, to pay to the respondent corporation, through the Office of the Labor Arbiter, their unpaid subscribed capital stock in the total amount of Php135,514.05, in order that the same may be applied to satisfy the complainant’s backwages, failing which, an alias writ of execution would be issued by his Office against their assets. The LA thereafter issued an alias of writ of execution.

On March 7, 1991, the respondent NSC filed an Urgent Motion to Set Aside the Alis Writ of Execution filed by the complainants. However the LA denied the said motion in his Order dated May 2, 1991.

Conrado Tan and William Ang filed with the NLRC a petition for the issuance of a writ of preliminary injunction and a temporary restraining order to enjoin the implementation of the alis writ of execution issued by the Labor Arbiter. They alleged that they were never furnished copies of the omnibus motion filed by Timbal, Jr. and Valenciano; that they were not notified of any hearing on the matter; and, that the Labor Arbiter acted in excess or lack of jurisdiction when he issued an alias writ of execution ordering the sheriff to collect from the respondent the NSC their unpaid subscriptions.

On June 18, 1997, the NLRC rendered a Decision granting the motion of Tan and Ang and setting aside the assailed order and alias writ of execution of the Labor Arbiter. The NLRC ruled as follows:

It may be true that petitioners were/are stockholders of Nationwide Steel Corporation, and that accordingly, they have unpaid subscription to the latter but the records likewise readily show that petitioners were not impleaded as party respondents in NLRC Case No. 08-3596-80. A stockholder who has an unpaid subscription is not automatically held liable in case of judgment against the corporation where he has an unpaid subscription. A separate complaint for the payment of the unpaid subscription should be filed so that unpaid subscriptions of stockholders be made answerable and liable to the obligation sand debts of the corporation.

This Commission has not acquired jurisdiction over the stockholders of the respondent corporation.

The NLRC denied the complainant’s motion for reconsideration of the said decision.

Resituto Timbal, Jr. filed his petition for certiorari under Rule 65, with the Supreme Court for the nullification of the decision of the NLRC, asserting that the latter committed a grave abuse of its discretion in setting aside the order and alias writ of execution issued by the Labor Arbiter.

On January 20, 1999, the Supreme Court issued a Resolution referring the case to the Court of Appeals conformably to its ruling in St. Martin Funeral Homes vs. NLRC.

On September 24, 1999, the CA, after due proceedings, rendered a Decision, affirming the decision of the NLRC as far as William Ang was concerned, but granting the petition and affirming the Order and Alias Writ of Execution of the Labor Arbiter against Conrado Tan. The decretal portion of the decision reads:

IN VIEW OF ALL THE FOREGOING, the assailed NLRC decision dated June 18, 1997, is AFFIRMED insofar as Joseph O. Tiu, Rudy D. Ang, Pablo C. King and William T. Ang are concerned. However, as regard Conrado D. Tan, the Orders of Labor Arbiter Cornelio L. Linsangan dated January 16 and May 2, 1991, are REINSTATED, SUSTAINED and UPHELD. No pronouncement as to costs.

SO ORDERED.

After the CA denied petitioner Tan’s motion for reconsideration, the latter filed the petition at bar contending that the Court of Appeals erred in finding him, jointly and severally, liable with the NSC for the Labor Arbiter’s monetary award in favor of the respondent on its finding that he acted in bad faith and with malice in suspending the respondent.

The petitioner avers that under his decision, the Labor Arbiter found the NSC solely liable for the monetary award issued in favor of the respondent. Hence, the alias writ of execution issued by the Labor Arbiter should be directed only against the NSC and not against him. As such, his property, real and personal, should not be burdened by the said award. For his part, the respondent contends that the Court of Appeals did not err in holding the petitioner, jointly and severally liable with NSC for the monetary award in his favor on its finding that the petitioner acted in bad faith and with malice in suspending him. The petition is meritorious.

III. Case Analysis and the Supreme Court Resolution The SC expressed that from the Labor Arbiter’s desk, only the Nationwide Steel Corporation was found liable for the monetary awards in favor of the complainants. Conrado Tan, who is the general manager of NSC, was not ordered to pay for the monetary award in favor of the complainants, jointly or severally with the NSC. That decision of the LA had become final and executory; hence, immutable. The Supreme Court cited an idea held in Industrial Management International Development Corporation vs. NLRC:

It is an elementary principle of procedure that the resolution of the court in a given issue as embodied in the dispositive part of a decision or order is the controlling factor as to settlement of rights of the parties. Once a decision or order becomes final and executory, it is removed from the power of jurisdiction of the court which rendered it to further alter or amend it. It thereby becomes immutable and unalterable and any amendment or alteration which substantially affects a final and executory judgment is null and void for lack of jurisdiction, including the entire proceedings held for that purpose. An order of execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity.

In this case, none of the parties before the Labor Arbiter appealed the Decision dated August 9, 1990; hence the same became final and executory. It was therefore removed from the jurisdiction of the Labor Arbiter to further alter or amend it. Thus, the proceedings held for the purpose of amending or altering the dispositive portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ of Execution is null and void because it varied the tenor of the judgment in that it sought to enforce the final judgment against Conrado Tan and the incorporators which makes the liability solidary.

It is a given fact the in labor cases, corporate directors and officers are solidarily liable with the corporation for the termination of employment of corporate employees committed with malice or bad faith. The ruling applies in a case where a corporate officer acts with malice or bad faith in suspending an employee. Whether or not the petitioner acted with malice or bad faith in ordering the suspension of the respondent is a question of fact submitted by the parties to the Labor Arbiter for resolution.

Applying it into this case again, the Labor Arbiter did not make any finding in his decision that the petitioner acted with malice or bad faith in ordering the suspension of the respondent. The Court of Appeals had no jurisdiction to delve into and resolve an issue already passed upon by the Labor Arbiter with finality. For the Court of Appeals to do so in a petition for certiorari from the decision of the NLRC, by granting the petitioner’s petition for a writ of injunction, is to do indirectly what it is proscribed from doing directly.

In these regard, the SC granted the petition. The decision of the Court of Appeals is REVERSED and SET ASIDE while the assailed decision of the NLRC is AFFIRMED. No costs.

IV. The Individual’s Critique of the Supreme Court Decision The Supreme Court reverted back to the NLRC’s decision granting the motion of Tan and Ang and setting aside the assailed order and alias writ of execution of the Labor Arbiter. I agree with the Supreme Court on this one because it is true that although Conrado Tan was impleaded in the case together with the Nationwide Steel Corporation, he was a party in the case him being the general manager and not because he was a stockholder. The Labor Arbiter has not acquired jurisdiction over the stockholders of the respondent corporation. Furthermore, the LA already ruled prior to execution of writ that it is only the corporation that was held liable for payment of backwages, it has then became final and executory and afterwhich was removed from its jurisdiction therefore it cannot anymore be altered or amended. He was not even questioned for his “acting in bad faith or maliciousness” therefore he cannot be further impleaded together with the NSC as liable to the monetary damages against Timbal.

I also agree that the execution of notice of garnishment be cancelled and not push thru as regards the property of Conrado Tan, because as reiterated, he is not made liable with the Nationwide Steel Corporation for the payment of damages.

V. Conclusion and Recommendation I therefore conclude that NSC is solely liable for payment of backwages against Restituto Timbal, Jr. and that Conrado Tan not be held liable for the payment because personally, he was not found to have acted with bad faith or evident malice in the suspension of Timbal. The Labor Arbiter did not question his act of suspension and only held NSC solely liable for the payment of monetary damages against the suspended employees. Had Conrado Tan been held initially, then the case against him will have a greater chance of pursuing. I recommend that each one of us should be well aware of our constitutional rights one of which is be entitled to “due process”. If that had not been provided to us, we can have a greater chance of winning a case, but of course, the degree of having it evidently known falls to the complainant.