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G.R. No.

89070 May 18, 1992


BENGUET ELECTRlC COOPERATIVE, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER COSALAN and BOARD OF
DIRECTORS OF BENGUET ELECTRIC COOPERATIVE, INC., * respondents.
Facts:
In 1982, Peter Cosalan, then general manager of the Benguet Electric Cooperative (BENECO),
received an audit report from the National Electrification Administration (NEA). The said audit
advised Cosalan of certain irregularities in the management of the funds of BENECO. Cosalan
then sought to address the issue by introducing reforms recommended by the NEA as well as by
the auditing body, Commission on Audit. However, the Board Members of BENECO reacted to
these reforms by issuing a series of resolutions which first reduced Cosalans salary and
allowances, then he was excluded from his work, and eventually, he was suspended indefinitely.
Cosalan then filed a complaint for illegal dismissal against the BENECO Board Members, he
later impleaded BENECO itself. The Labor Arbiter (LA) ruled in favor of Cosalan. The National
Labor Relations Commission (NLRC) affirmed the decision of the LA but modified it so as to
absolve the Board Members from liability as it held that the Board Members merely acted in
their official capacity. BENECO, being the only party adjudged to be liable, then appealed said
decision.

Issue:
Whether or not cooperatives are considered as corporations
Held:
No. The act of the Board Members is ultra vires. There was no legal basis for them to suspend
Cosalan indefinitely for under the Implementing Rules of the Labor Code the maximum period
form preventive suspension should not go beyond 30 days. Further, it was found that Cosalan
was never informed of the charges against him nor was he afforded the opportunity to present his
case. He was deprived of due process. Nor was Cosalans suspension approved by the NEA,
which is also required for due process purposes.
These acts by the Board Members are tainted with bad faith. A very strong presumption arises
that the Board Members are acting in reprisal against the reforms sought to be introduced by
Cosalan in order to address the irregularities within BENECO. The Board Members are therefore
liable for damages under Section 31 of the Corporation Code. And even though BENECO is a
cooperative, it is still covered by the Corporation Code because under PD 269, cooperatives are
considered as corporations.

The Supreme Court ruled that BENECO and the BENECO Board Members are liable for the
damages caused against Cosalan. However BENECO can seek reimbursement from the Board
Members so as not to unduly penalize the innocent members of BENECO.

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