G.R. No. 67825. September 04, 1987
ELIAS C. GARCIA, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, JUANITA FERNANDEZ, JULIAN AGUILA AND TITO PAGLINAWAN, RESPONDENTS.
FERNAN, J.:
Petitioner Elias C. Garcia,
an executive vice-president of Filriters Guaranty
Assurance Corporation, challenges in this certiorari proceedings the resolution[1] of the National Labor
Relations Commission dated March 15, 1984 which affirmed the decision[2] of the Labor Arbiter dated
November 24, 1982, finding him liable in his
personal capacity, as one of the respondents in NLRC-NCR Case No. 9-6045-82, on
private respondents’ claim for separation pay and/or retirement benefits,
share in the profits for the the year 1980, bonus for the year 1981, and accumulated
vacation leave in addition to the retrenchment benefits they received by virtue of their having been retrenched when Filriters Guaranty Assurance Corporation was placed under conservatorship pursuant to Section 248 of the Insurance Code.
The antecedent facts of the
case are undisputed.
Filriters Guaranty Assurance Corporation [FILRITERS, for short], an insurance company with home office at the 6th
floor, Sterling Life Condominium, De la Rosa St., corner Esteban St., Legaspi Village, Makati, Metro Manila, was placed under conservatorship
as a financially distressed company by the Insurance Commissioner sometime in
September 1981 pursuant to Section 248 of the Insurance Code.
On September
17, 1981, Insurance
Commissioner Gregoria Cruz-Arnaldo
appointed Mr. Julian J. Locsin as her representative vested with the powers of a
conservator under Section 248 of the Insurance Code.[3] In his letter of appointment, Mr. Julian J. Locsin was likewise
informed that he was elected as member of the Board of Directors and Chairman of the
Executive Committee of Filriters.
At the time Filriters was placed under conservatorship, Mr. Joaquin Rodriguez was the president of the company while Elias C. Garcia, petitioner herein, was the executive
vice-president. Private respondents
Julian Aguila and Tito Paglinawan
were the vice-presidents and Juanita Fernandez was the assistant vice-president.
In
carrying out his functions as conservator, Mr. Julian J. Locsin [CONSERVATOR, for short] wrote the president of Filriters on January 11, 1982 advising him that all
officers of the company, particularly the President and Executive
Vice-President, shall in proper cases see to it that the policies, orders and
instructions promulgated by the Insurance Commissioner and/or the legal
conservator are strictly implemented, which policies and orders, shall be considered
to have amended and superseded any standing policy or power granted by the
board or by-laws of the corporation in favor of any officer of the company in
accordance with Section 248 of the Insurance Code.[4]
A
retrenchment policy was thereafter
instituted by the CONSERVATOR who, in a
letter dated January 27, 1982,[5] confirmed the guidelines that the Board of
Directors and the operating officer should consider and follow. Thus:
“1. The company may only allow the
retrenched employee or officer
one-half salary for every year of service; and,
”2. The company may also allow the 13th
month pay for those receiving P1,500.00 below.”
On July 31,
1982, private
respondents were formally notified of their retrenchment and termination from
the service effective as of the close of office hours on August 6, 1982 in separate letters signed by Elias C. Garcia, executive
vice-president of FILRITERS acting as operating officer of the CONSERVATOR.
Upon their separation from
the service and after executing identical release and waiver documents,
private respondents were given their retrenchment benefits equivalent to
fifteen [15]days salary for every year of service in accordance with the
guidelines set by the CONSERVATOR on January 27, 1982. Thus, Julian Aguila
received P46,000.00; Tito Paglinawan
P40,000.00; and Juanita Fernandez P13,600.00.
Notwithstanding acceptance
of their retrenchment benefit checks, private respondents wrote FILRITERS on August 20, 1982 demanding payment of their unenjoyed vacation leave, share in the profits for the year
1980 and bonus for the year 1981, stating therein, among others, that the
waivers of claim that they signed were made under duress and do
not reflect their voluntary act
and deed.[6]
Unable to elicit a
favorable response from FILRITERS, private respondents filed on September 21, 1982
with the then Ministry of Labor and Employment a complaint for payment of
separation pay and/or retirement benefits, share in the profits for the year
1980, bonus for the year 1981, and accumulated vacation leave, naming as
respondents therein, Filriters Guaranty Assurance
Corporation and Elias C. Garcia.[7] The case was docketed as
NLRC-NCR Case No. 9-6045-82.
Records show that FILRITERS and petitioner Elias C. Garcia did not appear
during the three [3] scheduled hearings and, as a consequence thereof, both
were deemed by the Labor Arbiter to have waived their right to present evidence
in support of their stand. On motion of
private respondents upon submission of their position paper, the case was
submitted for resolution by the Labor Arbiter on November 22, 1982 on the basis of the documents on record.[8]
On November
24, 1982, the Labor
Arbiter rendered his decision directing FILRITERS and petitioner Elias C.
Garcia to pay the claims of private respondents, the dispositive
portion of which reads:
“WHEREFORE, respondents [Filriters
and E.C. Garcia] are hereby
ordered to pay herein complainants, as
follows:
“1. Julian B. Aguila ………… P30,422.15
2. Tito
O. Paglinawan …….
25,768.50
3.
Juanita T. Fernandez….. 9,307.44
TOTAL………. P 64,498.09
representing the
latter’s share in profits for 1980, money equivalent of accumulated vacation
leave for the last three [3] years and 13th month pay or bonus for 1981.
“SO ORDERED.” [Words in parenthesis supplied]
FILRITERS and petitioner Elias C.
Garcia filed on December 16, 1982 a motion to re-open the case and to admit the
attached position paper and to reset the case for hearing with proper
notice. Treated as a motion for reconsideration, the
motion to re-open the case was denied by the Labor Arbiter on December
23, 1982.
On separate appeals, FILRITERS and petitioner Elias C. Garcia elevated the case to the National
Labor Relations Commission.
In the meantime, while the
case was pending appeal before the NLRC, the Insurance Commissioner suspended
on January 30, 1983 FILRITERS’ certificate of authority effective
February 1, 1983 in view of its consistent inability to maintain an unimpaired
paid-up capital and required margin of solvency. A cease and desist order was issued on the
same day enjoining the company from taking any risk of any kind or character
until such time its certificate of authority is restored by the Insurance
Commission.[9]
Following
the suspension of FILRITERS’ certificate of authority,
the services of all senior officers, including that of petitioner Elias C. Garcia
as executive vice-president and vice-president
for finance were likewise terminated by the end of February 1983. However, for reasons of necessity, the CONSERVATOR retained Elias C. Garcia and Mrs. Pilar R. Jacobe on special
arrangements or terms to be determined by the CONSERVATOR.[10]
In a memorandum addressed
to petitioner Elias C. Garcia dated February 22, 1983,[11] the CONSERVATOR laid down the rules and
guidelines to be observed following the suspension of the company’s
certificate of authority. The CONSERVATOR likewise, formally informed petitioner that the
CONSERVATOR would enter into a new working arrangement with
him and Mrs. Pilar R. Jacobe to handle the duties and responsibilities
assigned to them by the CONSERVATOR.
On March 15,
1984, the National
Labor Relations Commission issued its resolution denying the appeal and thus affirming the
decision of the Labor Arbiter dated November 24, 1982 and the order dated December
23, 1982.
Petitioner Elias C. Garcia
filed a motion for reconsideration[12] pointing out, among others, that the NLRC only
passed upon the issue of whether or not private respondents are entitled to
additional retrenchment benefits but did not rule on the issue of whether or
not he, who is neither the employer of private respondents nor a stockholder of Filriters Guaranty Assurance Corporation, could be held
liable for the latter’s corporate liabilities as an employer of private
respondents.
On June 13,
1984, petitioner’s
motion for reconsideration was denied for lack of merit by the NLRC.[13]
Dissatisfied, Elias C.
Garcia instituted the instant petition for certiorari seeking the
reversal of the resolution of the NLRC dated March 15, 1984 insofar as it holds him personally liable and praying that
he be absolved from liability on the claim of private respondents for
additional retrenchment benefits from Filriters
Guaranty Assurance Corporation.
After due consideration, a
temporary restraining order was issued, as prayed for, on July 9, 1984
restraining respondent National Labor Relations Commission and its officers, agents, representatives and/or any
person or persons acting upon its orders or in its place or stead from
enforcing and executing the decision dated March 15, 1984 rendered in NLRC-NCR
Case No. 9-6045-82 entitled “Juanita Fernandez, et. al., Complainants-Appellees, versus Filriters
Guaranty Assurance Corporation, et. al.,
Respondents-Appellants.”[14]
Records show that Filriters Guaranty Assurance Corporation did not appeal the
NLRC decision of March 15, 1984 to this Court.
A party who did not appeal the decision of the NLRC is bound by its
findings of facts and cannot impugn the correctness of its judgment.[15] Insofar therefore as the liability of FILRITERS is concerned, the same has
now become final although the nature and extent of FILRITERS’ liability depend on the
resolution of the issue raised in the instant petition, i.e.: whether or not petitioner Elias C. Garcia is
jointly and severally liable with Filriters Guaranty
Assurance Corporation for the payment of private respondents’ claims for
profit sharing in 1980, bonus for 1981, and accrued vacation leave when
petitioner, as executive vice-president of FILRITERS at the time it was placed under conservatorship pursuant to Section 248 of the Insurance
Code, formally informed private respondents of their termination pursuant to
the retrenchment policy undertaken by the CONSERVATOR.
In asserting his theory of
non-liability for the corporate obligations of FILRITERS to its retrenched employees
as a result
of its having been placed under conservatorship
proceedings by the Insurance Commissioner, petitioner Elias C. Garcia relies on
Section 248 of the Insurance Code[16] which provides:
“SEC.
248. If at any
time before, or after, the suspension or revocation of the certificate
of authority of an insurance company as
provided in the preceding title, the Commissioner finds that such
company is in a state of continuing inability or unwillingness to maintain a
condition of solvency or liquidity deemed adequate to protect the interest of
policyholders and creditors, he may appoint a conservator to take charge of the
assets, liabilities, and the management of such company, collect all moneys and
debts due said company and exercise all powers necessary to preserve the assets
of said company, reorganize the management thereof, and restore
viability. The said conservator shall
have the power to overrule or revoke the actions of the previous management and
board of directors of the said company, any provision of law, or of the
articles of incorporation or by-laws of the company, to the contrary
notwithstanding, and such other powers as the Commissioner shall deem necessary.
“The
conservator may be another insurance company doing business in the
Philippines, any officer or
officers
of such company, or any other
competent and qualified person, firm or corporation. The remuneration of the conservator and other expenses attendant to
the conservation shall be borne by the insurance company concerned.
“The conservator shall
not be subject to any action, claim or demand by, or liability to, any person
in respect of anything done or omitted to be done in good faith in the exercise or in connection with the exercise, of the powers conferred on the
conservator.
“The conservator appointed shall report and be responsible to the Commissioner until
such time as the Commissioner is satisfied
that the insurance company can continue to operate on its own and the conservatorship
shall likewise be terminated should the Commissioner, on the basis of the report of the conservator or
of his own findings, determine that the continuance in business of the insurance company would be hazardous to policyholders and
creditors, in which case the provisions of Title 15 shall apply.”
Referring to the aforequoted Section 248 of the Insurance Code, petitioner
maintains that when FILRITERS was placed
under conservatorship proceedings, the CONSERVATOR appointed by the Insurance Commissioner virtually
took over the management of FILRITERS, took charge of its assets and liabilities and was authorized to collect all moneys and debts due
said company, exercise all powers necessary to preserve the assets of said company, reorganize the management
thereof, restore its viability, and overrule or revoke the actions of the
previous management and board of directors of the said company.
Since retrenchment of
personnel was
undertaken by the CONSERVATOR as early as January 1982, petitioner argues that he cannot be
held liable in his personal capacity for the payment of additional retrenchment benefits to the retrenched
employees benefits because he merely implemented the CONSERVATOR’S retrenchment
program and has no discretion or
choice on the matter; that the resolution of the NLRC results in an unjust and inequitous
situation that while the CONSERVATOR cannot be liable under Section 248 of the
Insurance Code, petitioner was made liable in his personal capacity to the retrenched personnel
by the mere accident that he was the one who formally notified them of the CONSERVATOR’S order of retrenchment; that
there is no factual nor legal
basis to hold petitioner personally liable as he is
neither an employer
of private respondents nor a stockholder of Filriters Guaranty Assurance Corporation is
himself an employee who was also retrenched but subsequently appointed as manager-in-charge by the CONSERVATOR from March 1, 1983 to
handle duties and responsibilities assigned to him; that private respondents
actually received retrenchment benefits in accordance with the guidelines fixed
by the CONSERVATOR and had executed release and waiver deeds fully
and completely releasing Filriters Guaranty Assurance
Corporation from all claims of whatever nature resulting from their
retrenchment.
We sustain petitioner.
At the outset, mention must
be made of the fact that in the resolution of October 1, 1984[17] We granted the motion of the
Solicitor General that he be excused from filing the required comment because he is unable to agree
with the decision of public respondent NLRC.
Business reverses or losses
are recognized by law as a just cause for terminating employment.[18] Under Article 284 of the Labor Code, as amended, retrenchment
of personnel to prevent losses can only be availed of by management if the
company is losing or meeting financial reverses.[19] But it is essentially required that the
alleged losses in business operations must be proved.[20] Otherwise, said ground for termination would
be susceptible to abuse by scheming employers who might be merely feigning business
losses or reverses in their business ventures in order to ease out employees.
Conservatorship proceedings against a financially distressed
insurance company are statutory in nature and are resorted to only if and when
the Insurance Commissioner finds that such company is in a state of continuing
inability or unwillingness to maintain a condition of solvency or liquidity
deemed adequate to protect the interest of policyholders and creditors. In other
words, the insurance company placed under conservatorship is facing
financial difficulties which require the appointment of a conservator to take
charge of its assets, liabilities, and management aimed at preserving its
assets and restoring its viability as a going business enterprise.
The retrenchment of
personnel as a consequence
of conservatorship proceedings against an insurance
company in financial difficulties is, understandably, a cost-saving measure
resorted to by the CONSERVATOR to preserve the assets of
the company for the protection not only of the policy-holders and creditors
but also of the investors and the public in general. Rightly so, for conservatorship
proceedings contemplate, not the liquidation of the insurance company
involved, but a conservation of company assets and business during the period
of stress by the Commissioner of Insurance, who thereafter yields control to the regular officers of the company.[21] The power of the Insurance Commissioner with
respect to the statutory proceedings against insolvent or delinquent insurer is
of general public concern, to which contract and property rights must yield.[22]
Essentially, conservatorship under Section 248 of the Insurance Code is in the nature of rehabilitation
proceedings. As such, the CONSERVATOR may only act with the
approval of the Insurance Commissioner with respect to the major aspects of rehabilitation. With respect to the ordinary details of
administration, the CONSERVATOR has implied authority by virtue of his appointment to proceed without the approval of the Insurance Commissioner. He is clothed with such discretion in
conducting and managing the affairs of
the insurance company placed under his control.[23]
It is within that sphere of
authority that a program of retrenchment was undertaken by the CONSERVATOR as early as January 1982. The authority conferred by law upon the CONSERVATOR to reorganize the management of the insurance
company under his control embraces, among others, the authority to carry out a retrenchment program to
prevent the further dissipation of company funds. The general rules of agency as to the binding
effect of the acts of the company’s executive vice-president, petitioner
herein, as the operating officer of the CONSERVATOR, would apply to the
implementation of the retrenchment program delegated to him by the CONSERVATOR. It was well within the scope of his delegated
authority for petitioner to formally inform private respondents of their
termination from FILRITERS.
Thus, merely being impleaded in the
complaint is no justifiable reason at all to hold petitioner personally and
severally liable with FILRITERS for the latter’s corporate
obligations to private respondents.
Verily, it is a reversible error for the NLRC to affirm the resolution of the Labor
Arbiter holding petitioner Elias C. Garcia personally and severally liable with
FILRITERS for the payment of additional retrenchment benefits to private
respondents. The Labor Arbiter
inexplicably failed to disclose the reasons why petitioner Elias C. Garcia, as
one of the named respondents in NLRC-NCR-Case No. 9-6045-82, was made
personally and severally liable with FILRITERS. Except
for the allegations of private respondents in their complaint that
petitioner’s act of terminating them was ULTRA VIRES in nature as
it was done without the authority and approval of the FILRITERS’ Board of
Directors, there is nothing in the decision which reasonably justify
the liability of petitioner in his
personal capacity. Instead of correcting
said error, the NLRC, on the other hand, did not at all touch on the
issue.
Realizing that the
appointment of a CONSERVATOR by
the Insurance Commissioner as early as September 17, 1981 pursuant to Section
248 of the Insurance Code militates against their argument before the Labor
Arbiter, private respondents would now change their
posture and alleged that petitioner was not vested with direct or delegated
authority from the CONSERVATOR relative
to the termination of their employment.[24] This belated argument
is belied by the letter[25] dated July 24, 1982
of the CONSERVATOR, Mr.
Julian
J. Locsin, addressed to the President of the Filriters, Mr. Joaquin C. Rodriguez,
confirming the retrenchment of Julian B. Aguila,
Virginia B. Aluquin, Tito O. Paglinawan
and Juanita T. Fernandez, as well as
the
report[26] of
the CONSERVATOR dated July 14, 1983 to the Ministry of Labor and Employment [MOLE]
listing private respondents in No. 32 [AGUILA], No. 34, [PAGLINAWAN] and No. 35
[FERNANDEZ] among the retrenched
employees of FILRITERS.
Even
the repeated reference by the Labor Arbiter and the NLRC to the fact that FILRITERS and petitioner
waived their right to present evidence in support of their stand by virtue of
their having failed to appear during the three [3] scheduled hearings[27] will
not legally sustain the conclusion that petitioner is personally and severally
liable with
FILRITERS for the payment of the latter’s corporate
obligations to its retrenched employees.
Administrative agencies exercising quasi-judicial functions are not
bound by the rigidities of technical rules of procedure[28] precisely to allow them every opportunity to
arrive at the truth of the matter in controversy. More often than not, such policy has given rise to abuses
on the part of the labor arbiter resulting in the deprivation of the parties’
right to due process. The case at bar,
on the other hand, presents a study in contrast. In denying FILRITERS’ and petitioner’s motion to
re-open the case and to admit their position paper despite the proferred reason for their failure to appear at the
scheduled hearings, the labor arbiter relied too much on technicalities,
thereby resulting in herein petitioner being deprived of his right to property
without due process of law as well as of his right to the equal protection of
the law afforded to similarly situated corporate officers found acting within
the scope of their authority. It would
have been more in keeping with the mandate of Article 221 of the Labor Code had
the Labor Arbiter granted petitioner’s motion to re-open the case and admit his
position paper as no full-blown hearing was conducted by the Labor Arbiter.
Liability of corporate
officers in their personal capacities to corporate employees who were
terminated from their employment depends on whether or not the act of
termination was tainted with evident malice and bad faith.[29] In the instant case, there is no evidence on
record which sufficiently shows that petitioner Elias C. Garcia acted in bad
faith or with malice in carrying out the retrenchment program of the CONSERVATOR. In
fact, the retrenchment of private respondents was confirmed in the letter dated
July 24, 1982
of the CONSERVATOR addressed to the President of Filriters and in the report submitted by the CONSERVATOR to the Ministry of Labor and Employment on July 14,
1983.[30]
We do not, however, quite
agree with the general proposition of petitioner that the CONSERVATOR cannot be held liable as he is not subject to
any action, claim or demand by, or liability to any person under Section 248 of
the Insurance Code. In interpreting a
similar provision[31] of the Insurance Code relating to the receiver
or liquidator of the insurance company, We held in PIONEER INSURANCE AND
SURETY CORPORATION vs. HON. FORTUN, et. al., G.R. L-44959 [April 15, 1987],
that said provision cannot be construed to prohibit suits being brought against
a receiver in his or its representative capacity, as custodian and manager of the funds and property of the person
or firm under receivership. The Court
stated, thus:
“To do so would work
inequity and injustice upon parties with just claims against the latter and
leave them without remedy to pursue and recover on the claims. Correctly read, the exemption applies only with reference to acts done or
left undone in good faith by the receiver
in the discharge of the receivership. It
does not apply to actions brought upon claims against the person or property under receivership and not,
in any event, upon claim which matured before the receivership was established.” [Underscoring supplied]
It was likewise an error
for petitioner to claim that the execution of release and waiver deeds after
private respondents actually received their retrenchment benefits in the total
amount of P99,600.00 completely released FILRITERS from all claims of whatever nature resulting
from their retrenchment. The rule as
held in MERCURY
DRUG CO., INC. vs. COURT OF INDUSTRIAL RELATIONS, 56 SCRA 694 and DE LEON vs. NLRC, 100 SCRA 691 [1980] is that employees
who received their separation pay are not barred from contesting the legality
of their dismissal and that the acceptance of those benefits would not amount to estoppel. In AFPMBA, INC. vs.
AFPMBI EMPLOYEES UNION, 97 SCRA
715, this Court ruled that quitclaims and/or complete releases executed by the
employees do not estop them from pursuing their claim
arising from the unfair labor practice of the employer.
There
is then no reason to absolve FILRITERS of its corporate
obligations to private respondents which may be satisfied from any available
funds or assets of the company under the custody and control of the CONSERVATOR if it is still under conservatorship,
or of the Receiver/Liquidator if it
is under receivership or liquidation.
While FILRITERS is liable for its corporate obligations to
private respondents, We rule, as earlier discussed,
that petitioner Elias C. Garcia is not liable in his personal capacity for the
payment to private respondents of their additional retrenchment benefits.
WHEREFORE, modified as above indicated, the decision of the National
Labor Relations Commission dated March 15, 1984 is affirmed with respect to the
sole liability of Filriters Guaranty Assurance
Corporation to private respondents.
Petitioner is absolved from
liability to private respondents.
No costs.
SO
ORDERED.
Gutierrez, Jr.,
Feliciano, Bidin, and
Cortes, JJ., concur.
[1]
Annex “J”, Petition, pp. 37-41, Rollo.
[2]
Annex “H”, Petition, pp. 25-30,
Rollo.
[3]
Annex “A”, Petition, p. 18, Rollo.
[4]
Annex “B”, Petition, p. 19, Rollo.
[5]
Annex “C”, Petition, p. 19-A, Rollo.
[6]
Annex “5”, Comment, p. 75, Rollo.
[7]
Annex “D”, Petition, p. 19-B, Rollo.
[8]
See Decision of Labor Arbiter, p. 28, Rollo.
[9]
Annex “E”, Petition, p. 20-21, Rollo.
[10]
Annex “F”, Petition, pp. 22-23,
Rollo.
[11]
Annex “G”, Petition, p. 24, Rollo.
[12]
Annex “K”, Petition, p. 42-46, Rollo.
[13]
Annex “L”, Petition, p. 47, Rollo.
[14]
pp. 50-51, Rollo.
[15]
Itogon-Suyoc Mines vs. NLRC, 117
SCRA 523 (1982).
[16]
Presidential Decree No. 612 (December 18, 1974).
[17]
p. 121, Rollo.
[18]
Columbia Development Corporation vs. Minister of Labor and Employment, 146 SCRA 421 (1986);
LVN Pictures and Workers Association vs. LVN Pictures, INC., 35 SCRA
147.
[19]
People’s Bank & Trust
Company vs. People’s Bank & Trust Company Union, 69 SCRA 10 (1976).
[20]
National Federation of
Labor Unions (NAFLU) vs. Ople, 143 SCRA 124
(1986).
[21]
Caminetti vs. Superior Court in
and for City and County of San Francisco, 108 P 2d 911, 914, 16 Cal
2d 838, cited in 8-A Words and Phrases 229.
[22]
Caminetti vs. Pacific Mutual Life Insurance Co.,
22 Cal 2d 334, 139 P 2d 908, cert den 320 US 802, 88 L ed 484, 64
S CT 428.
[23]
Lucas vs. Mfg.
Lumbermen’s Underwriters, 349 Mo 835, 163 SW 2d 750.
[24]
p. 10,
Memorandum for Private Respondents pp. 152-162, Rollo.
[25]
p. 106, Rollo.
[26]
pp.
107-110,
Rollo.
[27]
pp.
37, 39, Rollo.
[28]
Tajonera vs. Lamoroza,
110 SCRA 438 (1981); Magdalena Estate, Inc. vs. Kapisanan
ng Manggagawa sa Magdalena
Estate, 8 SCRA 237 (1966).
[29]
Sunio vs. NLRC, 127 SCRA
390 (1984); General Bank and Trust Co. vs. Court of Appeals, 135 SCRA
569 (1985).
[30]
See Footnote 26 and 27.
[31]
Section 251, Insurance Code.