G.R. No. 89879 ; April 20, 1990
Jaime Pabalan and Eduardo Lagdameo, petitioners, vs. National Labor Relations Commission, Labor Arbiter Ambrosio B. Sison, Elizabeth Roderos, et al., and the Sheriff of the National Labor Relations Commission, respondents.

FACTS

Eighty-four workers of Philippine Inter-Fashion, Inc. (PIF) filed a complaint for illegal dismissal. The Labor Arbiter rendered a decision ordering PIF and its officers, petitioners Jaime Pabalan and Eduardo Lagdameo, to reinstate the employees and pay back wages, holding them jointly and severally liable. The National Labor Relations Commission (NLRC) affirmed the decision. Petitioners filed this certiorari petition, not contesting the corporate liability of PIF but specifically challenging their personal liability as corporate officers.
Petitioners argued that the Labor Arbiter and NLRC never acquired jurisdiction over them due to alleged lack of proper summons, constituting a deprivation of due process. They further contended that holding them personally liable for corporate obligations was a grave abuse of discretion, as they acted within their official capacities and there was no finding that they used the corporate veil to perpetrate fraud or evade obligations.

ISSUE

Whether the corporate officers, petitioners Jaime Pabalan and Eduardo Lagdameo, can be held jointly and severally liable with the corporation, Philippine Inter-Fashion, Inc., for the payment of the awarded back wages and other benefits to the illegally dismissed employees.

RULING

The Supreme Court granted the petition and modified the NLRC resolution, relieving the petitioners of personal liability. On the procedural issue, the Court found that petitioners were not deprived of due process. The record showed that while initially only PIF was impleaded, petitioners appeared through counsel, filed oppositions and position papers when they were later included via a supplemental pleading, thereby submitting to the tribunal’s jurisdiction.
On the substantive issue of personal liability, the Court applied the fundamental principle of corporate separateness. A corporation has a personality distinct from its officers and stockholders. As a rule, corporate officers acting in their official capacity are not personally liable for corporate obligations. The exception, known as piercing the corporate veil, applies only when the corporate entity is used to commit fraud, evade legal duties, or perpetrate a wrong. The Court examined the records and found no allegation or evidence presented by the complainants that petitioners acted maliciously to evade corporate obligations, designed the employee transfer to perpetrate an illegal act, or confused legitimate issues. The NLRC’s reliance on A.C. Ransom Labor Union-CCLU vs. NLRC was misplaced, as that case involved a family corporation that transferred assets to a new entity specifically to avoid paying employee claims, a circumstance absent here. Consequently, in the absence of fraud or bad faith, petitioners could not be held jointly and severally liable. The liability for the illegal dismissal claims rests solely with the corporate entity, Philippine Inter-Fashion, Inc.