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Corporate Liability in Dismissals

The document discusses a labor case between Loreta Yung and Wensha Spa Center Inc. and its president Xu Zhi Jie regarding Loreta's termination. The issue is whether Xu can be held personally liable along with the corporation. The court held that Xu is not personally liable as a corporation has a separate legal identity from its owners. Directors and officers can only be jointly liable for terminations if proven to be done with malice or bad faith, which was not found in this case.

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105 views1 page

Corporate Liability in Dismissals

The document discusses a labor case between Loreta Yung and Wensha Spa Center Inc. and its president Xu Zhi Jie regarding Loreta's termination. The issue is whether Xu can be held personally liable along with the corporation. The court held that Xu is not personally liable as a corporation has a separate legal identity from its owners. Directors and officers can only be jointly liable for terminations if proven to be done with malice or bad faith, which was not found in this case.

Uploaded by

romanruizpugeda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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G.R. No.

185122 August 16, 2010

WENSHA SPA CENTER, INC. and/or XU ZHI JIE, Petitioners,


vs.
LORETA T. YUNG, Respondent.

FACTS:

Wensha Spa specializes in sauna baths and massage services. Xu serves as the president, and Loreta
held the position of administrative manager until her termination. Loreta was initially employed at
Manmen, where Xu was a client. Impressed by Loreta's work, Xu persuaded her to join Wensha. Starting
as Xu's personal assistant and interpreter on April 21, 2004, Loreta later advanced to the role of
Administrative Manager. However, she was asked to resign based on advice from a Feng Shui master
who claimed her aura didn't align with Xu's. Loreta contested her dismissal with a case of illegal
termination against Xu and Wensha. The Labor Arbiter dismissed Loreta's complaint, citing a lack of
merit and attributing her dismissal to a loss of trust and confidence. The Court of Appeals overturned
the NLRC's decision.

ISSUE/S

Whether or not Xu is solidarily liable with Wensha, assuming that Loreta was illegally dismissed.

HELD:

Xu is not personally liable with Wensha as per legal doctrine which upholds that a corporation has an
independent legal personality separate from its owners and other related entities. Merely owning all or
most of a corporation's stock does not automatically dissolve this separate corporate identity.

Regarding labor disputes, corporate directors and officers may only be held jointly liable with the
corporation for employment terminations if proven to be done with malice or in bad faith. Bad faith does
not refer to errors in judgment or negligence; it implies a dishonest motive or moral wrongdoing,
signifying a breach of duty driven by self-interest, ill will, or fraud. In the case discussed, the Court of
Appeals concluded that Xu and Wensha are collectively responsible for Loreta's claim. However, after
reviewing the decision thoroughly, no evidence of malice or bad faith on Xu's part was found, thus
rendering the ruling unjustified. For such a judgment to stand, there must be clear proof that an officer or
director acted maliciously or in bad faith in terminating an employee's services. Additionally, the decision
itself should explicitly state any indication of malice or bad faith in the dismissal.

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