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    Xiv. Duties of Directors and Controlling Stockholders

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    The GM of Benguet Electric Cooperative implemented remedial measures recommended by COA to address cash advances, per diems, and fund utilization irregularities. In response, the Board of Benguet Electric abolished the GM's allowances, reduced his salary, and removed him from his position. The GM contended his removal required NEA approval. The Board also refused to release compensation owed to the GM. The NLRC ruled both the company and Board were liable for damages to the GM. On appeal, the Court affirmed the Board members were personally liable because their removal of the GM showed bad faith and was beyond their lawful authority, as the GM was rectifying financial irregularities.

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    Xiv. Duties of Directors and Controlling Stockholders

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    daregumacal
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    The GM of Benguet Electric Cooperative implemented remedial measures recommended by COA to address cash advances, per diems, and fund utilization irregularities. In response, the Board of Benguet Electric abolished the GM's allowances, reduced his salary, and removed him from his position. The GM contended his removal required NEA approval. The Board also refused to release compensation owed to the GM. The NLRC ruled both the company and Board were liable for damages to the GM. On appeal, the Court affirmed the Board members were personally liable because their removal of the GM showed bad faith and was beyond their lawful authority, as the GM was rectifying financial irregularities.

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    The GM of Benguet Electric Cooperative implemented remedial measures recommended by COA to address cash advances, per diems, and fund utilization irregularities. In response, the Board of Benguet Electric abolished the GM's allowances, reduced his salary, and removed him from his position. The GM contended his removal required NEA approval. The Board also refused to release compensation owed to the GM. The NLRC ruled both the company and Board were liable for damages to the GM. On appeal, the Court affirmed the Board members were personally liable because their removal of the GM showed bad faith and was beyond their lawful authority, as the GM was rectifying financial irregularities.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    49 views1 page

    Xiv. Duties of Directors and Controlling Stockholders

    Uploaded by

    daregumacal
    The GM of Benguet Electric Cooperative implemented remedial measures recommended by COA to address cash advances, per diems, and fund utilization irregularities. In response, the Board of Benguet Electric abolished the GM's allowances, reduced his salary, and removed him from his position. The GM contended his removal required NEA approval. The Board also refused to release compensation owed to the GM. The NLRC ruled both the company and Board were liable for damages to the GM. On appeal, the Court affirmed the Board members were personally liable because their removal of the GM showed bad faith and was beyond their lawful authority, as the GM was rectifying financial irregularities.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    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.

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