Criminal actions for violations of Social Security Law
Petitioner also challenges the finding of the Court of Appeals that under Section 28(f) of the Social Security Law, a mere director or officer of an employer corporation, and not necessarily a managing director or officer, can be held liable for the unpaid SSS premium contributions.
Section 28(f) of the Social Security Law provides the following: (f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its managing head, directors or partners shall be liable to the penalties provided in this Act for the offense.
Section 28(f) of the Social Security Law provides the following: (f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its managing head, directors or partners shall be liable to the penalties provided in this Act for the offense.
The Supreme Court agrees in petitioners observation that the SSS did not even deny nor rebut the claim that petitioner was not the managing head of Impact Corporation. However, the Court of Appeals rightly held that petitioner, as a director of Impact Corporation, is among those officers covered by Section 28(f) of the Social Security Law.
Petitioner invokes the rule in statutory construction called ejusdem generic; that is, where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned. According to petitioner, to be held liable under Section 28(f) of the Social Security Law, one must be the managing head, managing director, or managing partner. The Supreme Court though finds no need to resort to statutory construction.
Section 28(f) of the Social Security Law imposes penalty on: (1) the managing head; (2) directors; or (3) partners, for offenses committed by a juridical person
The said provision does not qualify that the director or partner should likewise be a managing director or managing partner. The law is clear and unambiguous.
Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, only directors, trustees or officers who participate in unlawful acts or are guilty of gross negligence and bad faith shall be personally liable, and that being a mere stockholder, she is liable only to the extent of her subscription.
Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers, provides: SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
Basic is the rule that a corporation is invested by law with a personality separate and distinct from that of the persons composing it as well as from that of any other legal entity to which it may be related. A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. Following this, the general rule applied is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities. A director, officer, and employee of a corporation are generally not held personally liable for obligations incurred by the corporation.
Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist to warrant the disregard of its independent being and the lifting of the corporate veil. This situation might arise when a corporation is used to evade a just and due obligation or to justify a wrong, to shield or perpetrate fraud, to carry out other similar unjustifiable aims or intentions, or as a subterfuge to commit injustice and so circumvent the law. Thus, Section 31 of the Corporation Law provides:
Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held solidarily liable with the corporation in the following instances:
1. When directors and trustees or, in appropriate cases, the officers of a corporation--
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the Corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.
The aforesaid provision states: SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
The situation of petitioner, as a director of Impact Corporation when said corporation failed to remit the SSS premium contributions falls exactly under the fourth situation. Section 28(f) of the Social Security Law imposes a civil liability for any act or omission pertaining to the violation of the Social Security Law, to wit:
(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its managing head, directors or partners shall be liable to the penalties provided in this Act for the offense.
In fact, criminal actions for violations of the Social Security Law are also provided under the Revised Penal Code.
The Social Security Law provides, in Section 28 thereof, to wit: (h) Any employer who, after deducting the monthly contributions or loan amortizations from his employees compensation, fails to remit the said deductions to the SSS within thirty (30) days from the date they became due shall be presumed to have misappropriated such contributions or loan amortizations and shall suffer the penalties provided in Article Three hundred fifteen of the Revised Penal Code.
(i) Criminal action arising from a violation of the provisions of this Act may be commenced by the SSS or the employee concerned either under this Act or in appropriate cases under the Revised Penal Code: x x x. (G.R. No. 170735; December 17, 2007)
The said provision does not qualify that the director or partner should likewise be a managing director or managing partner. The law is clear and unambiguous.
Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, only directors, trustees or officers who participate in unlawful acts or are guilty of gross negligence and bad faith shall be personally liable, and that being a mere stockholder, she is liable only to the extent of her subscription.
Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers, provides: SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
Basic is the rule that a corporation is invested by law with a personality separate and distinct from that of the persons composing it as well as from that of any other legal entity to which it may be related. A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. Following this, the general rule applied is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities. A director, officer, and employee of a corporation are generally not held personally liable for obligations incurred by the corporation.
Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist to warrant the disregard of its independent being and the lifting of the corporate veil. This situation might arise when a corporation is used to evade a just and due obligation or to justify a wrong, to shield or perpetrate fraud, to carry out other similar unjustifiable aims or intentions, or as a subterfuge to commit injustice and so circumvent the law. Thus, Section 31 of the Corporation Law provides:
Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held solidarily liable with the corporation in the following instances:
1. When directors and trustees or, in appropriate cases, the officers of a corporation--
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the Corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.
The aforesaid provision states: SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
The situation of petitioner, as a director of Impact Corporation when said corporation failed to remit the SSS premium contributions falls exactly under the fourth situation. Section 28(f) of the Social Security Law imposes a civil liability for any act or omission pertaining to the violation of the Social Security Law, to wit:
(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its managing head, directors or partners shall be liable to the penalties provided in this Act for the offense.
In fact, criminal actions for violations of the Social Security Law are also provided under the Revised Penal Code.
The Social Security Law provides, in Section 28 thereof, to wit: (h) Any employer who, after deducting the monthly contributions or loan amortizations from his employees compensation, fails to remit the said deductions to the SSS within thirty (30) days from the date they became due shall be presumed to have misappropriated such contributions or loan amortizations and shall suffer the penalties provided in Article Three hundred fifteen of the Revised Penal Code.
(i) Criminal action arising from a violation of the provisions of this Act may be commenced by the SSS or the employee concerned either under this Act or in appropriate cases under the Revised Penal Code: x x x. (G.R. No. 170735; December 17, 2007)
