Corporate officers not liable for illegal dismissal


In a dismissal from employment which the courts ruled to be illegal, the employee sought to hold the President of the company solidarily liable for his backwages and separation pay. Reiterating its decision in MAM Realty Development Corporation v. National Labor Relations Commission (314 Phil. 838 [1995]), the Supreme Court ruled that “obligations incurred by [corporate officers], acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent.” As such, they should not be generally held jointly and solidarily liable with the corporation. The Court, however, cited circumstances when solidary liabilities may be imposed, as exceptions:

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 the director or officer has consented to the issuance of watered stock 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 general rule is grounded on the theory that a corporation has a legal personality separate and distinct from the persons comprising it. To warrant the piercing of the veil of corporate fiction, the officer’s bad faith or wrongdoing must be established clearly and convincingly as bad faith is never presumed.

(Harpoon Marine Services, Inc. v. Francisco, G.R. No. 167751, March 2, 2011)

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