XIV.

DUTIES OF DIRECTORS AND CONTROLLING STOCKHOLDERS

Benguet Electric Cooperative vs. NLRC
G.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.