JOSE ANTONIO U. GONZALEZ, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, SINFRONIO PACAMARA, JR., EDGAR ACACIA, LOURDES APUAN, MARCIAL AQUINO, HONORATO BARRONGO, RICARDO B…

Gonzalez versus National Labor Relations Commission

The Case

This is a petition for certiorari filed with the Supreme Court by Jose Antonio Gonzalez, the president of the Metropolitan Theatre Foundation, Incorporated, against the National Labor Relations Commission and a group of employees of the Foundation. Gonzalez asks the Court to annul two resolutions of the Commission: one that dismissed his appeal for failure to submit a joint declaration under oath regarding the surety bond, and another that denied his motion for reconsideration for lack of merit. The case matters because it settles two things every labor practitioner must know: first, that procedural rules may be relaxed for persuasive and weighty reasons to avoid sacrificing substantial justice; and second, that a corporate officer may not be held solidarily liable with the corporation for unpaid wages absent any showing of negligence, bad faith, or that the corporate fiction was used to cover fraud or illegality.

Procedural History

The employees first filed a complaint for illegal dismissal against the Metropolitan Theatre Foundation alone. On the second amendment of their complaint, they impleaded Gonzalez as a respondent in his capacity as president, and changed their cause of action to non-payment of salaries and wages. The Labor Arbiter rendered judgment ordering the Foundation and Gonzalez to pay, jointly and severally, the unpaid wages, thirteenth month pay for 1995, proportionate thirteenth month pay for 1996, and attorney's fees equivalent to ten percent of the total awards.

Gonzalez and the Foundation appealed to the National Labor Relations Commission. The Commission issued an order requiring the employer and counsel to submit within ten days a joint declaration under oath attesting that the surety bond posted was genuine and would remain in effect until final disposition of the case. Finding no compliance, the Commission issued its first assailed resolution dismissing the appeal. Gonzalez then filed a manifestation and motion explaining that he had in fact mailed a compliance to the order, covered by a registry receipt issued by the Ermita Post Office. The Commission issued its second assailed resolution denying the appeal for lack of merit, holding that the manifestation and motion was not under oath as required by its rules. Gonzalez then filed this petition for certiorari with the Supreme Court.

Facts

The private respondents were employees of the Metropolitan Theatre Foundation, holding positions ranging from utility worker to director. They uniformly alleged that, except for partial payments, their salaries and thirteenth month pay remained unpaid. Before the Labor Arbiter, the Foundation admitted that it was suffering financial difficulties and could no longer sustain its operations. Because of losses and the lack of government funds, it had been cut off from electrical, water, and telephone services, and since the operation and administration of the theatre had been taken over by the Government Service Insurance System, it had been deprived of income. The Foundation declared that whatever income it could still squeeze would be divided among the employees.

Gonzalez filed a separate position paper. He argued that the Foundation is a non-stock, non-profit corporation with a personality separate and distinct from its officers and members, so that claims against it should be paid out of its assets, and that he should not be personally liable for its financial obligations. He said the inability of the Foundation to pay was beyond his control, and that he was included in the complaint merely because he was its president, a position he held without pay out of a sense of duty to promote culture and the arts.

The Labor Arbiter nonetheless held Gonzalez solidarily liable with the Foundation. On appeal, the Commission dismissed the appeal for failure to submit the required joint declaration under oath, and later denied reconsideration because the manifestation and motion was not under oath. Gonzalez brought the matter to the Supreme Court.

Issues

• Whether or not the National Labor Relations Commission committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing its resolutions dismissing the appeal and denying reconsideration on the ground that the manifestation and motion was not under oath.
• Whether or not Gonzalez should be held solidarily liable with the Metropolitan Theatre Foundation, Incorporated for the complainants' unpaid wages, thirteenth month pay for 1995, proportionate thirteenth month pay for 1996, and attorney's fees.

Applicable Provisions

Section 14 of Rule VII of the National Labor Relations Commission Rules of Procedure, as quoted in the assailed resolution, provides:

Section 14. MOTION FOR RECONSIDERATION. Motion for reconsideration of any order, resolution, or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is UNDER OATH and filed within then (10) calendar days from receipt of order, resolution or decision with proof of service that a copy of the same has been furnished, within the reglementary period, the adverse party, and provided further, that only one such motion from the same party shall be entertained.

This is the procedural rule the Commission applied in denying Gonzalez's motion for reconsideration, and which the Court held should have been relaxed under the circumstances.

Ruling

On the first issue, the Court found merit in the petition. It acknowledged that rules of procedure must be faithfully followed, but held that they may be relaxed for persuasive and weighty reasons to relieve a litigant of an injustice commensurate with his failure to comply with the prescribed procedure. The Court noted that although the manifestation and motion was not under oath, Gonzalez had in fact complied with the order requiring the joint declaration. The certifications from the Quezon City Central Post Office showed clear proof that he had mailed it, and the fact that it went astray among the heap of records of the Commission should not be attributed to him. The Court warned that rigid application of the rules and dismissal on an onerous technicality would sacrifice substantial justice and result in inequity.

On the second issue, the Court ruled that Gonzalez should not be held solidarily liable with the Foundation. The Court stressed that the liability of the Foundation to the respondents was never put in issue, since it had admitted that it was unable to pay their wages due to financial difficulties and lack of government subsidy. To declare Gonzalez, its president, solidarily liable with the Foundation was without legal basis and an injustice. There was never any allegation that Gonzalez was negligent or in bad faith in the exercise and performance of his duties as president, nor any allegation that the corporation was used to cover fraud or illegality. The Court reiterated the general rule that a corporation is clothed with a personality separate and distinct from the persons composing it, and that this separate personality is a fiction created by law for convenience and to prevent injustice. Accordingly, there was no reason to pierce the veil of the corporate entity, and Gonzalez should not be held liable for the claims of the respondents.

Doctrine

Two rules must be retained. First, rules of procedure may be relaxed for persuasive and weighty reasons to relieve a litigant of an injustice commensurate with his failure to comply with the prescribed procedure; substantial justice must not be sacrificed on an onerous technicality. Second, a corporation has a personality separate and distinct from its officers and stockholders, and a corporate officer may not be held solidarily liable with the corporation for its obligations to employees absent any showing of negligence or bad faith on his part, or that the corporate fiction was used to cover fraud or illegality. The veil of corporate entity will not be pierced without such a showing.

Disposition

The petition was granted, the assailed orders were annulled and set aside, and the complaint against Gonzalez was dismissed.

Remember This

The single line worth memorizing is that a corporate president is not solidarily liable with the corporation for unpaid wages absent negligence, bad faith, or use of the corporate fiction to cover fraud or illegality. Examiners like to use this case on the relaxation of procedural rules in labor cases and on the doctrine of separate corporate personality as a bar to personal liability of corporate officers.