ANTONIO CARAG vs. NLRC G.R. No.

147590 April 2, 2007

FACTS: National Federation of Labor Unions and Mariveles Apparel Corporation Labor Union (collectively, complainants), on behalf of all of Mariveles Apparel Corporations rank and file employees, filed a complaint a ainst MAC for ille al dismissal bro! ht abo!t by its ille al clos!re of b!siness" #n their position paper dated $ %an!ary &''(, NAFLU and MACLU moved to implead Atty" Antonio Cara and Armando )avid, bein o*ners of the MAC Corporation, to !arantee the satisfaction of any +!d ment a*ard on the basis of Article ,&,(c) of the -hilippine Labor Code" Atty" %osh!a -astores, as co!nsel for respondents, s!bmitted a position paper dated ,& Febr!ary &''( and stated that complainants sho!ld not have impleaded Cara and )avid beca!se MAC is act!ally o*ned by a consorti!m of banks" Cara and )avid o*n shares in MAC only to .!alify them to serve as MAC/s officers" 0itho!t any f!rther proceedin s, Arbiter 1rti !erra rendered her )ecision dated &2 %!ne &''( rantin the motion to implead Cara and )avid" #n the same )ecision, Arbiter 1rti !erra declared Cara and )avid solidarily liable *ith MAC r!lin that corporate officers *ho dismissed employees in bad faith or *antonly violate labor standard la*s or *hen the company had already ceased operations and there is no *ay by *hich a +!d ment in favor of employees co!ld be satisfied, corporate officers can be held +ointly and severally liable *ith the company" Cara , thro! h a separate co!nsel, filed an appeal dated $3 A! !st &''( before the NL4C" 5e also filed a motion to red!ce bond" #n a 4esol!tion prom!l ated on 6 %an!ary &''6, the NL4C 7hird )ivision denied the motion to red!ce bond" 7he NL4C stated that to rant a red!ction of bond on the ro!nd that the appeal is meritorio!s *o!ld be tantamo!nt to r!lin on the merits of the appeal" 1n Febr!ary &$, &''6, Cara filed his petition for certiorari before CA" 7he CA affirmed the decision of Arbiter 1rti !erra and the resol!tion of NL4C" Motion for reconsideration *as like*ise denied" 5ence this petition for revie* on certiorari" ISSUE: 0hether or not Antonio Cara shall be held personally liable for the payment of ille ally dismissed employees" RULING: 8ection $& makes a director personally liable for corporate debts if he *ilf!lly and kno*in ly votes for or assents to patently !nla*f!l acts of the corporation" 8ection $& also makes a director personally liable if he is !ilty of ross ne li ence or bad faith in directin the affairs of the corporation" Complainants did not alle e in their complaint that Cara *ilf!lly and kno*in ly voted for or assented to any patently !nla*f!l act of MAC" Complainants did not present any evidence sho*in that Cara *ilf!lly and kno*in ly voted for or assented to any patently !nla*f!l act of MAC" Neither did Arbiter 1rti !erra make any findin to this effect in her )ecision" Complainants did not also alle e that Cara is !ilty of ross ne li ence or bad faith in directin the affairs of MAC" Complainants did not present any evidence sho*in

that Cara is !ilty of ross ne li ence or bad faith in directin the affairs of MAC" Neither did Arbiter 1rti !erra make any findin to this effect in her )ecision" After statin *hat she believed is the la* on the matter, Arbiter 1rti !erra stopped there and did not make any findin that Cara is !ilty of bad faith or of *anton violation of labor standard la*s" Arbiter 1rti !erra did not specify *hat act of bad faith Cara committed, or *hat partic!lar labor standard la*s he violated" 7o hold a director personally liable for debts of the corporation, and th!s pierce the veil of corporate fiction, the bad faith or *ron doin of the director m!st be established clearly and convincin ly" 9ad faith is never pres!med" 9ad faith does not connote bad +!d ment or ne li ence" 9ad faith imports a dishonest p!rpose" 9ad faith means breach of a kno*n d!ty thro! h some ill motive or interest" 9ad faith partakes of the nat!re of fra!d" Neither does bad faith arise a!tomatically +!st beca!se a corporation fails to comply *ith the notice re.!irement of labor la*s on company clos!re or dismissal of employees" 7he fail!re to ive notice is not an !nla*f!l act beca!se the la* does not define s!ch fail!re as !nla*f!l" 8!ch fail!re to ive notice is a violation of proced!ral d!e process b!t does not amo!nt to an !nla*f!l or criminal act" 8!ch proced!ral defect is called ille al dismissal beca!se it fails to comply *ith mandatory proced!ral re.!irements, b!t it is not ille al in the sense that it constit!tes an !nla*f!l or criminal act" For a *ron doin to make a director personally liable for debts of the corporation, the *ron doin approved or assented to by the director m!st be a patently !nla*f!l act" Mere fail!re to comply *ith the notice re.!irement of labor la*s on company clos!re or dismissal of employees does not amo!nt to a patently !nla*f!l act" -atently !nla*f!l acts are those declared !nla*f!l by la* *hich imposes penalties for commission of s!ch !nla*f!l acts" 7here m!st be a la* declarin the act !nla*f!l and penali:in the act" #n this case, Article ,;$ of the Labor Code, re.!irin a one<month prior notice to employees and the )epartment of Labor and =mployment before any permanent clos!re of a company, does not state that non<compliance *ith the notice is an !nla*f!l act p!nishable !nder the Code" 7here is no provision in any other Article of the Labor Code declarin fail!re to ive s!ch notice an !nla*f!l act and providin for its penalty" Complainants did not alle e or prove, and Arbiter 1rti !erra did not make any findin , that Cara approved or assented to any patently !nla*f!l act to *hich the la* attaches a penalty for its commission" 1n this score alone, Cara cannot be held personally liable for the separation pay of complainants"