The Supreme Court ruled that a civil action against an employer for subsidiary liability based on an employee’s alleged defamatory acts is premature if filed before the employee is convicted in the related criminal case. This decision clarifies the timing and conditions under which an employer can be held liable for an employee’s actions, protecting employers from premature lawsuits while ensuring recourse for victims once liability is established. The ruling emphasizes the importance of adhering to procedural rules and ensuring that all elements of liability are properly established before pursuing legal action.

Can Employers Be Sued for Libel Before Their Employees Are Convicted?

International Flavors and Fragrances (Phils.), Inc. (IFFI) faced a lawsuit from former employees Merlin J. Argos and Jaja C. Pineda, who alleged defamation by IFFI’s managing director, Hernan H. Costa. Following Costa’s announcement describing them as “persona non grata,” Argos and Pineda filed both criminal libel charges against Costa and a civil case for damages against Costa and IFFI, the latter in a subsidiary capacity as the employer. IFFI argued that the civil case was premature since Costa had not yet been convicted in the criminal case, a prerequisite for establishing subsidiary liability. The Regional Trial Court initially dismissed the civil case but later reversed its decision, a move upheld by the Court of Appeals, prompting IFFI to elevate the matter to the Supreme Court.

The central issue before the Supreme Court was whether Argos and Pineda could sue IFFI for damages based on subsidiary liability in an independent civil action under Article 33 of the Civil Code, while criminal libel cases against Costa were still pending. This required the Court to examine the nature of subsidiary liability and the proper timing for enforcing such claims.

The Supreme Court began its analysis by scrutinizing the nature of Civil Case No. 65026, the complaint for damages filed by Argos and Pineda against IFFI. IFFI contended that the Court of Appeals erred in treating the complaint as one seeking to enforce IFFI’s primary liability under Article 33 of the Civil Code. They argued that the complaint explicitly stated IFFI was being sued in its subsidiary capacity, not its primary one. The Supreme Court agreed with IFFI, emphasizing that the nature of an action is determined by the allegations and the relief sought in the complaint.

Examining the complaint, the Court found clear indications that IFFI was being sued in a subsidiary capacity. The complaint’s title explicitly stated that IFFI was being sued “in its subsidiary capacity, as employer of Hernan H. Costa.” Paragraph 2 of the complaint reinforced this, stating that “defendant IFFI is being sued in its subsidiary capacity as employer of Hernan H. Costa, in accordance with the pertinent provisions under the Rules of Court, the Revised Penal Code and/or the Civil Code of the Philippines.” Further, paragraph 22 described the nature of the liability as subsidiary, stating that “in case of his (Costa’s) default, defendant (IFFI) should be held subsidiarily liable as an employer of Hernan Costa.” Finally, the prayer in the complaint requested judgment against “defendant, Hernan H. Costa and/or against defendant International Flavors and Fragrances (Phil.), Inc., in its subsidiary capacity.”

The Supreme Court emphasized the importance of pleadings accurately reflecting the nature of the claim. Essential averments lacking in a pleading cannot be construed into it, nor can facts not alleged by a plaintiff be taken as having no existence. This principle ensures that a defendant is properly apprised of the nature of the action against them, allowing them to prepare an adequate defense. The Court noted that a pleading must be construed most strictly against the pleader, who is presumed to have stated all the facts involved as favorably to themselves as possible. If material allegations are omitted, it is presumed that those matters do not exist.

Given that Argos and Pineda were suing IFFI in its subsidiary capacity, the Court addressed whether such an action could be maintained under Article 33 of the Civil Code, while the criminal cases against Costa were still pending. Obligations arising from crimes are governed by Article 1161 of the Civil Code, which provides that said obligations are governed by penal laws, subject to the provision of Article 2177 and the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of Book IV of the Civil Code.

Article 100 of the Revised Penal Code further clarifies that every person criminally liable for a felony is also civilly liable. In default of the persons criminally liable, employers engaged in any kind of industry shall be civilly liable for felonies committed by their employees in the discharge of their duties. These provisions establish the foundation for subsidiary liability in criminal offenses.

The Court then turned to Article 33 of the Civil Code, which specifically addresses defamation cases, stating:

“In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence.”

However, the Court clarified that Article 33 contemplates an action against the employee in his primary civil liability. It does not apply to an action against the employer to enforce its subsidiary civil liability. The Court cited Joaquin vs. Aniceto, 12 SCRA 308 (1964), holding that subsidiary liability arises only after conviction of the employee in the criminal case or when the employee is adjudged guilty of the wrongful act in a criminal action and found to have committed the offense in the discharge of his duties. Therefore, any action brought against the employer based on its subsidiary liability before the conviction of its employee is premature. This principle safeguards employers from being held liable before their employee’s guilt is established.

While Argos and Pineda attempted to invoke the principle of respondeat superior to hold IFFI primarily liable for Costa’s statements, the Court found that they did not raise this claim as a cause of action in their complaint. Instead, they sought to enforce the alleged subsidiary liability of IFFI prematurely. Consequently, the Supreme Court ruled that both the trial and appellate courts erred in failing to dismiss the complaint against IFFI. The Court emphasized that its decision did not prejudice any reliefs that Argos and Pineda might seek at the appropriate time, once the conditions for subsidiary liability were met.

FAQs

What was the key issue in this case?	The key issue was whether a civil action against an employer for subsidiary liability, based on an employee’s defamatory act, could proceed before the employee was convicted in the criminal case. The Supreme Court ruled that it could not, as the action was premature.
What is subsidiary liability?	Subsidiary liability refers to the responsibility of an employer for the acts of their employee, which arises only after the employee has been convicted of a crime and is found to be insolvent. In this context, it means IFFI could only be held liable if Costa was convicted of libel and unable to pay the damages.
What is the significance of Article 33 of the Civil Code?	Article 33 of the Civil Code allows for a civil action for damages in cases of defamation, fraud, or physical injuries to proceed independently of a criminal action. However, the Supreme Court clarified that this article pertains to the primary liability of the individual who committed the act, not the subsidiary liability of the employer.
Why was the civil case against IFFI dismissed?	The civil case against IFFI was dismissed because it was filed prematurely. The Supreme Court held that a civil action to enforce an employer’s subsidiary liability could not proceed until the employee, Costa, was convicted in the criminal case for libel.
What did the Court say about the nature of the complaint?	The Court emphasized that the nature of the complaint is determined by its allegations and the relief sought. In this case, the complaint explicitly stated that IFFI was being sued in its subsidiary capacity, not its primary capacity.
What is the doctrine of respondeat superior?	The doctrine of respondeat superior holds an employer liable for the torts (wrongful acts) of an employee committed within the scope of their employment. The respondents attempted to invoke this principle, but the Court found that they did not properly plead a cause of action based on IFFI’s primary liability.
What happens to the case now?	The Supreme Court’s decision does not prevent Argos and Pineda from seeking reliefs at the appropriate time. If Costa is convicted in the criminal case and found to be insolvent, Argos and Pineda can then pursue a civil action against IFFI to enforce its subsidiary liability.
What is the key takeaway for employers?	The key takeaway for employers is that they cannot be held subsidiarily liable for their employees’ actions until the employee has been convicted of a crime. This ruling provides employers with protection from premature lawsuits and clarifies the timing for enforcing subsidiary liability claims.

In conclusion, the Supreme Court’s decision in International Flavors and Fragrances (Phil.), Inc. vs. Merlin J. Argos and Jaja C. Pineda reinforces the principle that an employer’s subsidiary liability for an employee’s actions cannot be enforced until the employee is convicted in the corresponding criminal case. This ruling ensures that employers are not prematurely subjected to civil suits and that the proper procedural steps are followed in establishing liability.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: International Flavors and Fragrances (Phil.), Inc. vs. Merlin J. Argos and Jaja C. Pineda, G.R. No. 130362, September 10, 2001