BENGUET ELECTRIC COOPERATIVE, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, PETER COSALAN AND BOARD OF DIRECTORS OF BENGUET ELECTRIC COOPE­RATIVE, INC.,[] RESPONDENTS.

Private respondent Peter Cosalan was the General Manager of
petitioner Benguet Electric Cooperative, Inc. (“Beneco”), having been
elected as such by the Board of Directors of Beneco, with the approval of the
National Electrification Administrator, Mr. Pedro Dumol, effective 16 October
1982.

On 3 November 1982, respondent Cosalan received Audit Memorandum
No. 1 issued by the Commission on Audit (“COA”). This Memorandum noted that cash advances
received by officers and employees of petitioner Beneco in the amount of P129,618.48
had been virtually written off in the books of Beneco. In the Audit Memorandum, the COA directed
petitioner Beneco to secure the approval of the National Electrification
Administration (“NEA”) before writing off or condoning those cash
advances, and recommended the adoption of remedial measures.

On 12 November 1982, COA issued another Memorandum — Audit
Memorandum No. 2 — addressed to respondent Peter Cosalan, inviting attention
to the fact that the audit of per diems and allowances received
by officials and members of the
Board of Directors of Beneco showed substantial inconsistencies with the
directives of the NEA. The Audit
Memorandum once again directed the taking of immediate action in conformity
with existing NEA regulations.

On 19 May 1983, petitioner Beneco received the COA Audit Report
on the financial status and operations of Beneco for the eight (8) month period
ended 30 September 1982. This Audit
Report noted and enumerated irregularities in the utilization of funds amounting
to P37 Million released by NEA to Beneco, and recommended that
appropriate remedial action be taken.

Having been made aware of the serious financial condition of
Beneco and what appeared to be mismanagement, respondent Cosalan initiated
implementation of the remedial measures recommended by the COA. The respondent members of the Board of
Beneco reacted by adopting a series of resolutions during the period from 23
June to 24 July 1984. These Board
Resolutions abolished the housing allowance of respondent Cosalan; reduced his
salary and his representation and commutable allowances; directed him to hold
in abeyance all pending personnel disciplinary actions; and struck his name out
as a principal signatory to transactions of petitioner Beneco.

During the period from 28 July to 25 September 1984, the
respondent Beneco Board members adopted another series of resolutions which
resulted in the ouster of respondent Cosalan as General Manager of Beneco and
his exclusion from performance of his regular duties as such, as well as the
withholding of his salary and allowances. These resolutions were as follows:

“1. Resolution No.
91-4 dated 28 July 1984:

‘x x x that the services
of Peter M. Cosalan as General Manager of BENECO is terminated upon approval of the National Electrification Administration;’

2. Resolution No. 151-84 dated September 15,
1984;

‘x x x that Peter M.
Cosalan is hereby suspended from his position as General Manager of the Benguet
Electric Cooperative, Inc. (BENECO) effective as of the start of the office
hours on September 24, 1984, until a final decision has been reached by the NEA
on his dismissal;’

‘x x x that GM Cosalan’s
suspension from office shall remain in full force and effect until such
suspension is sooner lifted, revoked or rescinded by the Board of Directors;
that all monies due him are withheld until cleared;’

3. Resolution No. 176-84 dated September 25, 1984;

‘x x x that Resolution No. 151-84, dated September 15, 1984 stands
as preventive suspension for GM Peter M. Cosalan.’ ”^[1]

Respondent Cosalan nevertheless continued to work as General
Manager of Beneco, in the belief that he could be suspended or removed only by
duly authorized officials of NEA, in accordance with provisions of P.D. No.
269, as amended by P.D. No. 1645 (the statute creating the NEA, providing for its capitalization, powers and
functions and organization), the loan agreement between NEA and petitioner
Beneco^[2]
and the NEA Memorandum of 2 July 1980.^[3] Accordingly, on 5 October and 10
November 1984, respondent Cosalan requested petitioner Beneco to release the
compensation due him. Beneco, acting through respondent
Board members, denied the written request of respondent Cosalan.

Respondent Cosalan then filed a complaint with the National Labor
Relations Commission (“NLRC”) on 5 December 1984 against respondent
members of the Beneco Board, challenging the legality of the Board resolutions which ordered his
suspension and termination from the service
and demanding payment of his
salaries and allowances. On 18 February
1985, Cosalan amended his complaint to implead petitioner Beneco and respondent
Board members, the latter in their respective dual capacities as Directors and
as private individuals.

In the course of the proceedings before the Labor Arbiter, Cosalan
filed a motion for reinstatement
which, although opposed by petitioner Beneco, was granted on 23 October 1987 by
Labor Arbiter Amado T. Adquilen. Petitioner Beneco complied with the Labor Arbiter’s order on 28 October
1987 through Resolution No. 10-90.

On 5 April 1988, the Labor Arbiter rendered a decision (a)
confirming Cosalan’s reinstatement; (b) ordering payment to Cosalan of his
backwages and allowances by petitioner Beneco and respondent Board members,
jointly and severally, for a period of three (3) years without deduction or
qualification, amounting to P344,000.00; and (3) ordering the individual
Board members to pay, jointly and severally, to Cosalan moral damages of P50,000.00
plus attorney’s fees of ten percent (10%) of the wages and allowances awarded
him.

Respondent Board members appealed to the NLRC, and there filed a
Memorandum on Appeal. Petitioner Beneco
did not appeal, but moved to dismiss the appeal filed by respondent Board
members and for execution of judgment. By this time, petitioner Beneco had a new set of directors.

In a decision dated 21 November 1988, public respondent NLRC
modified the award rendered by the Labor Arbiter by declaring that petitioner
Beneco alone, and not respondent Board members, was liable for
respondent Cosalan’s backwages and allowances, and by ruling that there was no
legal basis for the award of moral damages and attorney’s fees made by the
Labor Arbiter.

Beneco, through its new set of directors, moved for
reconsideration of the NLRC decision, but without success.

In the present Petition for Certiorari, Beneco’s principal
contentions are two-fold: first, that
the NLRC had acted with grave abuse of discretion in accepting and giving due
course to respondent Board members’ appeal although such appeal had been filed
out of time; and second, that the NLRC had acted with grave abuse of discretion
amounting to lack of jurisdiction in holding petitioner alone liable for
payment of the backwages and allowances due to Cosalan and releasing respondent
Board members from liability therefor.

We consider that petitioner’s first contention is
meritorious. There is no dispute about
the fact that the respondent Beneco Board members received the decision of the
Labor Arbiter on 21 April 1988. Accordingly, and because 1 May 1988 was a legal holiday, they had only
up to 2 May 1988 within which to perfect their appeal by filing their
memorandum on appeal. It is also not
disputed that the respondent Board members’ memorandum on appeal was posted by
registered mail on 3 May 1988 and received by the NLRC the following day.^[4] Clearly, the memorandum on appeal was
filed out of time.

Respondent Board members, however, insist that their Memorandum
on Appeal was filed on time because it was delivered for mailing on 1 May 1988 to
the Garcia Communications Company, a licensed private letter carrier. The Board members in effect contend that the
date of delivery to Garcia Communications was the date of filing of their
appeal memorandum.

Respondent Board members’ contention runs counter to the
established rule that transmission through a private carrier or letter-forwarder — instead of the
Philippine Post Office — is not a recognized mode of filing pleadings.^[5]
The established rule is that the date of delivery of pleadings to a private
letter-forwarding agency is not to be considered as the date of filing thereof
in court, and that in such cases, the date of actual receipt by the court, and
not the date of delivery to the private carrier, is deemed the date of filing
of that pleading.^[6]

There was, therefore, no reason grounded upon substantial justice
and the prevention of serious miscarriage of justice that might have justified
the NLRC in disregarding the ten-day reglementary period for perfection of an
appeal by the respondent Board members. Accordingly, the applicable rule was that the ten-day reglementary
period to perfect an appeal is mandatory and jurisdictional in nature, that
failure to file an appeal within the reglementary period renders the assailed
decision final and executory and no longer subject to review.^[7]
The respondent Board members had thus lost their right to appeal from the
decision of the Labor Arbiter and the NLRC should have forthwith dismissed
their appeal memorandum.

There is another and more compelling reason why the respondent
Board members’ appeal should have been dismissed forthwith: that appeal was quite bereft of merit. Both the Labor Arbiter and the NLRC had found that the indefinite
suspension and termination of services imposed by the respondent Board members
upon petitioner Cosalan was illegal. That illegality flowed, firstly, from the fact that the suspension of
Cosalan was continued long after expiration of the period of thirty (30) days,
which is the maximum period of preventive suspension that could be lawfully
imposed under Section 4, Rule XIV of the Omnibus Rules Implementing the Labor
Code. Secondly, Cosalan had been
deprived of procedural due process by the respondent Board members. He was never informed of the charges raised
against him and was given no opportunity to meet those charges and present his
side of whatever dispute existed; he was kept totally in the dark as to the
reason or reasons why he had
been suspended and effectively dismissed from the service of Beneco. Thirdly, respondent Board members failed to
adduce any cause which could reasonably be regarded as lawful cause for the
suspension and dismissal of respondent Cosalan from his position as General
Manager of Beneco. Cosalan was, in
other words, denied due process both procedural and substantive. Fourthly, respondent Board members failed to
obtain the prior approval of the NEA of their suspension and dismissal of
Cosalan, which prior approval was required, inter alia, under the
subsisting loan agreement between the NEA and Beneco. The requisite NEA approval was subsequently sought by the
respondent Board members; no NEA approval was granted.

In reversing the decision of the Labor Arbiter declaring
petitioner Beneco and respondent Board members solidarily liable for the salary,
allowances, damages and attorney’s fees awarded to respondent Cosalan, the NLRC
said:

“x x x. A perusal of
the records show that the members of the Board never acted in their individual
capacities. They were acting as a Board
passing resolutions affecting their general manager. If these resolutions and resultant acts transgressed the law,
then BENECO for which the Board was acting in behalf should bear
responsibility. The records do not
disclose that the individual Board members were motivated by malice or bad
faith, rather, it reveals an intramural power play gone awry and
misapprehension of its own rules and regulations. For this reason, the decision holding the individual board
members jointly and severally liable with BENECO for Cosalan’s backwages is
untenable. The same goes for the award
of damages which does not have the proverbial leg to stand on.

The Labor Arbiter below should have heeded his own observation in
his decision –

‘Respondent BENECO as an artificial person could not have, by itself,
done anything to prevent it. But
because the former have acted while in office and in the course of their official functions as directors of
BENECO, x x x.’

Thus, the decision of the Labor Arbiter should be modified
conformably with all the foregoing holding BENECO solely liable for backwages
and releasing the appellant board members from any individual
liabilities.”^[8]
(Underscoring supplied)

The applicable general rule is clear enough. The Board members and officers of a
corporation who purport to act for and in behalf of the corporation, keep
within the lawful scope of their authority in so acting, and act in good faith,
do not become liable, whether civilly or otherwise, for the consequences
of their acts. Those acts, when they
are such a nature and are done under such circumstances, are properly
attributed to the corporation alone and no personal liability is incurred by
such officers and Board members.^[9]

The major difficulty with the conclusion reached by the NLRC is
that the NLRC clearly overlooked or disregarded the circumstances under which
respondent Board members had in fact acted in the instant case. As
noted earlier, the respondent Board members responded to the efforts of Cosalan
to take seriously and implement the Audit Memoranda issued by the COA
explicitly addressed to the petitioner Beneco, first by stripping Cosalan of
the privileges and perquisites attached to his position as General Manager,
then by suspending indefinitely and finally dismissing Cosalan from such
position. As also noted earlier,
respondent Board members offered no suggestion at all of any just or lawful
cause that could sustain the suspension and dismissal of Cosalan. They obviously wanted to get rid of Cosalan
and so acted, in the words of the NLRC itself, “with indecent haste”
in removing him from his position and denying him substantive and procedural
due process. Thus, the record showed
strong indications that respondent Board members had illegally suspended and
dismissed Cosalan precisely because he was trying to remedy the financial
irregularities and violations of NEA regulations which the COA had brought to
the attention of Beneco. The conclusion
reached by the NLRC that “the records do not disclose that the individual
Board members were motivated by malice or bad faith,” flew in the face of
the evidence of record. At the very
least, a strong presumption had arisen, which it was incumbent upon respondent
Board members to disprove, that they had acted in reprisal against respondent
Cosalan and in an effort to
suppress knowledge about and remedial measures against the financial
irregularities the COA Audits had unearthed. That burden respondent Board members did not discharge.

The Solicitor General has urged that respondent Board members may
be held liable for damages under the foregoing circumstance under Section 31 of
the Corporation Code which reads as follows:

“Sec. 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 confict with their duty as such directors or trustees shall
be jointly liable and severally for all damages resulting therefrom suffered by
the corporation, its stockholders or members and other persons x x x.”
(Underscoring supplied)

We agree with the Solicitor General, firstly, that Section 31 of the Corporation Code
is applicable in respect of Beneco and other electric cooperatives similarly
situated. Section 4 of the Corporation
Code renders the provisions of that Code applicable in a supplementary manner
to all corporations, including those with special or individual charters so long as those provisions are not
inconsistent with such charters. We
find no provision in P.D. No. 269, as amended, that would exclude expressly or
by necessary implication the applicability of Section 31 of the Corporation
Code in respect of members of the boards of directors of electric
cooperatives. Indeed, P.D. No. 269
expressly describes these cooperatives as “corporations:”

“Sec. 15. Organization
and Purpose. — ­Cooperative non-stock, non-profit
membership corporations may be organized, and electric cooperative
corporations heretofore formed or registered under the Philippine
non-Agricultural Co-operative Act may as hereinafter provided be converted,
under this Decree for the purpose of supplying, and of promoting and
encouraging the fullest use of, service on an area coverage basis at the lowest
cost consistent with sound economy and the prudent management of the business
of such corporations.”^[10]
(Underscoring supplied)

We agree with the Solicitor General, secondly, that respondent
Board members were guilty of “gross negligence or bad faith in directing
the affairs of the corporation” in enacting the series of resolutions
noted earlier indefinitely suspending and dismissing respondent Cosalan from
the position of General Manager of Beneco. Respondent Board members, in doing so, acted beyond the scope of their
Authority as such Board members. The
dismissal of an officer or employee in bad faith, without lawful cause and
without procedural due process, is an act
that is contra legem. It cannot
be supposed that members of boards of directors derive any authority to violate the express mandates of law or the
clear legal rights of their officers and employees by simply purporting to act
for the corporation they control.

We believe and so hold, further, that not only are Beneco and
respondent Board members properly held solidarily liable for the awards made by
the Labor Arbiter, but also that petitioner Beneco which was controlled by and
which could act only through respondent Board members, has a right to be
reimbursed for any amounts that Beneco may be compelled to pay to respondent
Cosalan. Such right of reimbursement is
essential if the innocent members of Beneco are not to be penalized for the
acts of respondent Board members which were both done in bad faith and ultra vires. The liability-generating acts here are the
personal and individual acts of respondent Board members, and are not properly
attributed to Beneco itself.

WHEREFORE, the Petition for Certiorari is GIVEN DUE
COURSE, the comment filed by respondent Board members is TREATED as their
answer, and the decision of the National Labor Relations Commission dated 21
November 1988 in NLRC Case No. RAB-1-0313-84 is hereby SET ASIDE and the
decision dated 5 April 1988 of Labor Arbiter Amado T. Adquilen hereby
REINSTATED in toto. In
addition, respondent Board members are hereby ORDERED to reimburse petitioner
Beneco any amounts that it may be compelled to pay to respondent Cosalan by
virtue of the decision of Labor Arbiter Amado T. Adquilen. No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr.,
(Chairman), Bidin, Davide, Jr., and Romero,
JJ., concur.

* The Board was composed of the
following individuals: (1) Victor
Laoyan; (2) Nicasio Aliping; (3) Abundio Awal; (4) Antonio Sudang Pan; and (5)
Lorenzo Pilando.

^[1]
Decision of the National Labor Relations Commission, pp. 1-2; Rollo, pp. 19–20.

^[2]
Records, p. 53.

^[3]
Id., p. 150.

^[4]
Records, p. 322.

^[5]
Section 1, Rule 13, Rules of Court.

^[6]
See, e.g., Eslabon v. Spouses Ramon Magbanua, G.R. No. 76571, Resolution
dated 1 April 1987; Pelonio v. Lebrillo, 83556, Resolution dated 8 November 1988.

^[7]
E.g., Armigos v. Court of Appeals, 179 SCRA 1 (1989); Jocson v.
Baguio, 179 SCRA 550 (1989); Chong Guan Trading v. National Labor Relations
Commission, 172 SCRA 831 (1989).

^[8]
Rollo, p. 36.

^[9]
See Pabalan, et al. v. National Labor Relations Commission, et al., 184
SCRA 495 (1990). See also Garcia v.
National Labor Relations Commission, 153 SCRA 639 (1987); Sunio v.
National Labor Relations Commission, 127 SCRA 390 (1984); Mindanao Motors Line,
Inc. v. Court of Industrial Relations, 6 SCRA 710 (1962):

^[10]
See also Section 17 of P.D. No. 269, as amended, which requires the members of
electric cooperatives to include the abbreviation “Inc.” (in the name
of the cooperative). Section 18 refers
to the organizers of a cooperative as “Incorporators.” Sections 19-27
of the same statute refer to “Articles of Incorporation of a
Cooperative.” Section 37 expressly incorporates the provision of limited
liability of members (but not of directors or other officers) which is
the hallmark of corporations:

“No member
shall be liable or responsible for any debts of the cooperative and the
property of the members shall not be subject to execution therefor.”

The legislative intent to make
applicable to directors and officers of cooperatives generally (i.e., electric
cooperatives, agricultural cooperatives etc.) the provisions of Section 31 of
the Corporation Code, was confirmed by Article 46 of the Philippine Cooperative
Code (R.A. No. 6938, approved, 10 March 1990). Article 46 of the Cooperative Code reads as follows:

“Article
46. Liability of Directors, Officers
and Committee Members. Directors,
officers and committee members, who willfully and knowingly vote for or assent
to patently unlawful acts or who are guilty of gross negligence or bad faith in
directing the affairs of the cooperative or acquire any personal or pecuniary
interest in conflict with their duty as such directors, officers or committee members
shall be liable jointly and severally for all damages or profits resulting
therefrom to the cooperative, members and other persons.

When a director,
officer or committe member attempts to acquire or acquires, in violation of his
duty, any interest or equity adverse to the cooperative in respect to any
matter which has been reposed in him in confidence, he shall, as a trustee for
the cooperative, be liable for damages
and for double the profits which otherwise would have accrued to the
cooperative.”

Article 122 of the Cooperative Code
states that “[e]lectric cooperatives shall be covered by this Code. x x x.” Upon the other hand, Article
127 of the same Code provides that electric cooperatives which qualify under
this Code “shall fall under the coverage of [P.D. No. 269 as amended].”
The Cooperative Code is substantially a reproduction of the general provisions
of the Corporation Code.