G.R. No. 196134 . October 12, 2016
VALENTIN S. LOZADA, PETITIONER, VS. MAGTANGGOL MENDOZA, RESPONDENT.

FACTS

Magtanggol Mendoza was employed by the VSL Service Center, a single proprietorship owned by Valentin Lozada. In 2003, the business was incorporated as LB&C Services Corporation. Mendoza refused to sign a new employment contract with the corporation, after which his work schedule was drastically reduced. He was eventually told not to report for work and to await a call for his schedule, which never came. Mendoza filed a complaint for illegal dismissal against LB&C Services Corporation and Valentin Lozada. The Labor Arbiter ruled in Mendoza’s favor, declaring his dismissal illegal and ordering his reinstatement with full backwages. LB&C’s appeal was dismissed for failure to post the required bond, making the Labor Arbiter’s decision final and executory.
A writ of execution was issued to satisfy the monetary award. The sheriff levied upon a real property registered under Valentin Lozada’s name. Lozada and the corporation moved to quash the writ, arguing the property could not be levied as it was a family home and, more critically, that the final decision did not hold Lozada personally liable. The Labor Arbiter denied the motion. The NLRC, however, reversed the Labor Arbiter and lifted the levy, ruling that the judgment was solely against the corporation. The Court of Appeals reinstated the Labor Arbiter’s order, holding Lozada solidarily liable, which prompted this appeal.

ISSUE

Whether petitioner Valentin Lozada, the former sole proprietor, can be held personally and solidarily liable for the monetary award arising from the illegal dismissal of the respondent by the successor corporation, LB&C Services Corporation.

RULING

The Supreme Court ruled in favor of petitioner Lozada and reversed the Court of Appeals. The Court emphasized the doctrine of finality of judgments and the separate juridical personality of a corporation. The Labor Arbiter’s final and executory decision named only LB&C Services Corporation as the liable party. A writ of execution must conform strictly to this judgment; it cannot vary or expand the liability decreed therein. To hold Lozada personally liable would be to modify the final judgment, which is prohibited.
The legal logic is clear: a corporation has a personality separate and distinct from its stockholders and officers. Personal liability of a corporate officer attaches only when they have acted with bad faith or in a manner amounting to malice or gross negligence. The complaint and the subsequent final decision did not contain any finding of such bad faith on Lozada’s part to justify piercing the corporate veil. Since the judgment had long become final, the sheriff’s act of levying Lozada’s personal property to satisfy a corporate obligation was a nullity for going beyond the terms of the judgment. The execution must be enforced solely against the assets of LB&C Services Corporation.