XIV. DUTIES OF DIRECTORS AND CONTROLLING STOCKHOLDERS

Benguet Electric Cooperative vs. NLRCG.R. No. 89070; May 18, 1992

FACTS:Cosalan, GM of the Benguet Electric Cooperative, was informed by COA that cash advances

received by officers and employees of Benguet Electric had been virtually written off the books, that per diems and allowances showed substantial inconsistencies with the directives of the National Electrification Administration, and that several irregularities in the utilization of funds released by NEA to Benguet. Cosalan then implemented the remedial measures recommended by COA. Board members of Benguet responded by abolishing the housing allowance of Cosalan, reduced his salary, representation and other allowances, and directed him to hold in abeyance all disciplinary actions, and struck his name out as principal signatory of Benguet Electric. The Board adopted another series of resolutions which resulted in the ouster of Cosalan as GM. Cosalan nonetheless continued to work as GM, contending that only the NEA can suspend and remove him. The Board then refused to act on Cosalan request to release compensation due him. Cosalan files a complaint with the NLRC against the Board of Benguet Electric, and impleaded Benguet Electric itself as well as the individual members of the board in their official and private capacities. Labor Arbiter rules in favor of Cosalan, holding both the company and the board solidarily liable to Cosalan. NLRC modifies award to Cosalan by declaring Benguet alone, and not the Board members, was liable to Cosalan. Benguet appeals.

ISSUE:WON both the corporation and board members are liable to Cosalan.

HELD:YES. 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, civilly or otherwise, for the consequences of their acts. Those acts are properly attributed to the corporation alone and no personal liability is incurred. In this case, the board members obviously wanted to get rid of Cosalan and acted with indecent haste in removing him from his GM position. This shows strong indications that the members of the board had illegally suspended and dismissed him precisely because he was trying to rectify the financial irregularities. 

The Board members are also liable for damages under Sec. 31 of the Corporation Code, which by virtue of Sec. 4 thereof, makes it applicable in a supplementary manner to all corporations, including those with special or individual charters so long as these are not inconsistent therewith. 

The Board members are also guilty of gross negligence and bad faith in directing the affairs of the corporation in enacting the said resolutions, and in doing so, acted beyond the scope of their authority.