Harpoon Marine Services, Inc. and Jose Lido T. Rosit vs. Fernan H. Francisco

An employer bears the burden of proving a valid or just cause of dismissal by substantial evidence, and a claim of abandonment requires proof of both the employee's failure to report for work without valid reason and a clear intention to sever the employment relationship manifested by overt acts. Absent clear and convincing proof of bad faith, a corporate officer may not be held solidarily liable with the corporation for backwages and separation pay arising from an illegal dismissal.

Petitioner Harpoon Marine Services, Inc. is a company engaged in ship building and ship repair, with petitioner Jose Lido T. Rosit serving as its President and Chief Executive Officer. Respondent Fernan H. Francisco was employed by the company as Yard Supervisor, a position that tasked him with overseeing and supervising all of its projects, having first been hired in 1992 and rehired in 1999 after a year of employment elsewhere. The dispute is governed by the Labor Code's guarantee of security of tenure, under which satisfactory evidence of a valid or just cause of dismissal is indispensably required to protect the worker's right to continued employment.

Petitioner Harpoon Marine Services, Inc. is a company engaged in ship building and ship repair, with petitioner Jose Lido T. Rosit as its President and Chief Executive Officer. Respondent Fernan H. Francisco was originally hired by the company in 1992 as Yard Supervisor, tasked to oversee and supervise all of its projects. In 1998 he left for employment elsewhere but was rehired by Harpoon and assumed his previous position a year later, in 1999.

According to respondent, he was unceremoniously dismissed by Rosit on June 15, 2001, when he was informed that the company could no longer afford his salary and that he would be paid his separation pay and accrued commissions. He nonetheless continued to report for work, but a few days later he was barred from entering the company premises. Relying on Rosit's promise, he went to the office on June 30, 2001 to receive his separation pay and commissions, but Rosit offered only his separation pay. Respondent refused to accept it and also declined to sign a quitclaim. After several unheeded requests, he sent a demand letter dated September 24, 2001 through counsel asking for ₱70,000.00, representing his commissions for the seven boats constructed and repaired by the company under his supervision. In a letter-reply dated September 28, 2001, petitioners denied owing any commission, asserting that they had never entered into any contract or agreement for the payment of commissions. Respondent filed an illegal dismissal complaint on October 24, 2001.

Petitioners presented a different version. They explained that Rosit spoke to respondent on June 15, 2001 not to dismiss him but only to remind and warn him of his excessive absences and tardiness, as shown by his Time Card covering June 1 to 15, 2001. Instead of improving his work behavior, respondent continued to absent himself and sought employment with another company engaged in the same line of business, thereby creating serious damage in the form of unfinished projects. Petitioners denied having terminated respondent, claiming that he voluntarily abandoned his work after going on Absence Without Official Leave beginning June 22, 2001. When his absences persisted, several memoranda informing him of his absences were sent to him by ordinary mail and were duly filed with the Department of Labor and Employment on August 13, 2001; upon his continuous and deliberate failure to respond, a Notice of Termination dated July 30, 2001 was issued to him.

Respondent denied his alleged tardiness and excessive absences. He claimed that the three-day absence appearing on his time card could not be considered habitual absenteeism, and that he incurred those absences because Rosit, who was then hospitalized, had ordered the employees not to report for work until he was discharged. A co-worker, Nestor Solares, attested that respondent always went to work and continued to report until June 20, 2001. Respondent further denied having received the memoranda allegedly mailed to him, asserting that those documents were merely fabricated to cover up and justify his illegal termination on June 15, 2001. He absolved himself of fault for defective works, justifying that he had been illegally terminated even before the company projects were completed, and denied petitioners' asseveration that he abandoned his job without any formal notice in 1998, as he had written a resignation letter which petitioners received.

As regards the commissions, respondent insisted that in addition to his fixed monthly salary of ₱18,200.00, he was paid a commission of ₱10,000.00 for every ship repaired or constructed by the company, and he presented two check vouchers issued by the company showing payment thereof. Petitioners contended that respondent was hired as a regular employee with a fixed salary and not on a commission basis; that the giving of additional monetary benefit once in a while to employees was a form of recognizing employees' efforts and could not be interpreted as commissions; and that the word "commission" appearing in the check vouchers referred to "additional money" received by employees, as distinguished from the usual "vale," and was written for accounting and auditing purposes only.

The Labor Arbiter found that respondent had been validly dismissed for unjustified absences and tardiness with due process observed, but held him entitled to commissions on the strength of the check vouchers, plus attorney's fees. The NLRC initially affirmed the commission award but deleted the attorney's fees; on reconsideration, it modified its ruling and found the dismissal illegal, holding that the only evidence of habitual absenteeism and tardiness was the time card for June 1 to 15, 2001, which disclosed only three absences and no tardiness. The Court of Appeals affirmed both the finding of illegal dismissal and the commission award.

• Grave Abuse of Discretion and Lack of Substantial Evidence: Petitioners argued that the Court of Appeals erred in failing to rectify and correct the findings and conclusions of the NLRC and of the Labor Arbiter, which were allegedly arrived at with grave abuse of discretion amounting to lack or excess of jurisdiction, because those findings were not supported by substantial evidence, were conflicting and contradictory, were grounded upon speculation, conjectures, and assumptions, and were mere conclusions founded upon a misapprehension of facts.
• Illegal Dismissal — Habitual Absenteeism and Abandonment: Petitioners maintained that there was no basis for the Court of Appeals to rule that respondent was illegally dismissed, since more than sufficient proof was adduced to show his habitual absenteeism and abandonment of work — he incurred additional absences after June 15, 2001 and subsequently went on AWOL; he completely ignored all the notices and memoranda sent to him; he never demanded reinstatement in his September 24, 2001 demand letter, complaint, and position paper before the Labor Arbiter; he took four months before filing an illegal dismissal complaint; and he was later found to have been working for another company.
• Commissions: Petitioners questioned the veracity of the documents presented by respondent to prove his entitlement to commissions, namely the two check vouchers and the purported list of vessels allegedly constructed and repaired by the company. They insisted that the check vouchers neither proved that commissions were paid on account of a repair or construction of a vessel nor were admissible to prove that a regular commission was given for every vessel constructed or repaired under respondent's supervision, and that the list of vessels could not serve as a basis for the amount of commissions due because it was self-serving, unsigned, unverified, and a mere enumeration of names of vessels that proved nothing.
• Solidary Liability of Petitioner Rosit: Petitioners insisted that Rosit, being an officer of the company, has a personality distinct from that of Harpoon, and that no proof was adduced to show that he acted with malice or bad faith; hence no liability, solidary or otherwise, should be imposed on him.

• Illegality of Dismissal: Respondent maintained that his dismissal was illegal because there was no sufficient evidence on record of his alleged gross absenteeism and tardiness, and that the three-day absence appearing on his time card could not be considered habitual absenteeism since he incurred those absences on the order of Rosit, who was then hospitalized, that the employees should not report for work until he was discharged.
• Fabricated Memoranda and Bad Faith: Respondent imputed bad faith on the part of petitioners for concocting the memoranda for the purpose of providing a semblance of compliance with due process requirements, and denied having received the memoranda allegedly mailed to him, asserting that these were fabricated to cover up and justify his illegal termination on June 15, 2001.
• Denial of Abandonment: Respondent denied petitioners' claim that he abandoned his job without any formal notice in 1998, asserting that he wrote a resignation letter which petitioners received, and denied having abandoned his work after June 22, 2001, a co-worker having attested that he continued to report for work until June 20, 2001.
• Commissions: Respondent insisted that in addition to his fixed monthly salary of ₱18,200.00, he was paid a commission of ₱10,000.00 for every ship repaired or constructed by the company, and he presented two check vouchers issued by the company showing payment thereof as proof of his entitlement.

• Substantial Evidence and the Lower Tribunals' Findings: Whether the Court of Appeals erred in failing to reverse the findings and conclusions of the NLRC and of the Labor Arbiter on the ground that these were not supported by substantial evidence, were conflicting and contradictory, were grounded upon speculation, conjectures, and assumptions, and were mere conclusions founded upon a misapprehension of facts.
• Illegal Dismissal — Habitual Absenteeism and Abandonment: Whether the Court of Appeals erred in ruling that there was an illegal dismissal notwithstanding the claim that respondent was habitually absent, subsequently went on AWOL, and had abandoned his work, and correspondingly, whether he is entitled to backwages and separation pay.
• Commissions: Whether the Court of Appeals erred in ruling that respondent is entitled to commissions in the amount of ₱70,000.00 even though no substantial evidence was shown to support the claim.
• Bad Faith and Solidary Liability of Petitioner Rosit: Whether the Court of Appeals erred in ruling that there was bad faith on the part of petitioner Rosit even though no substantial evidence was presented to prove this, and correspondingly, whether petitioner Rosit can be held solidarily liable with petitioner Harpoon.

• Substantial Evidence and the Lower Tribunals' Findings: Partly. The findings on illegal dismissal, backwages, and separation pay are supported by substantial evidence and stand, but the findings on the commission award and on Rosit's solidary liability are not supported by the record and were corrected.
• Illegal Dismissal — Habitual Absenteeism and Abandonment: No. The dismissal was illegal, the employer having failed to prove gross and habitual absenteeism or the concurrence of the two essential elements of abandonment of work.
• Commissions: Yes. The award of ₱70,000.00 in commissions was deleted, the check vouchers and the purported list of vessels being too vague to constitute substantial evidence of entitlement.
• Bad Faith and Solidary Liability of Petitioner Rosit: Yes. Rosit was absolved of solidary liability, bad faith or malice not having been established clearly and convincingly to justify piercing the veil of corporate fiction.

• Substantial Evidence and the Lower Tribunals' Findings: The Court examined the record and found that the NLRC and the Court of Appeals did not commit manifest error in finding that there was illegal dismissal, so that the award of backwages and separation pay in favor of respondent was proper. It nonetheless parted ways with the lower tribunals on two points where the evidence did not support their conclusions: the award of commissions, which rested on mere inferences, speculations, and presumptions, and the imposition of solidary liability on Rosit, which rested on a finding of bad faith that the records did not substantiate.
• Illegal Dismissal — Habitual Absenteeism and Abandonment: The employer bears the burden of proving clearly a valid or just cause of dismissal, and here no such evidence was presented. A scrutiny of the time card and payroll disclosed that respondent incurred only three days of absence and no record of tardiness; these documents did not show gross and habitual absenteeism and tardiness, especially since respondent's explanation that Rosit had ordered the employees not to report for work during his hospitalization was not denied by petitioners at the first instance before the Labor Arbiter. No other evidence was presented to show the alleged absences and tardiness, while Solares, respondent's co-worker, stated under oath that respondent was diligent in reporting for work until June 20, 2001. On the claim of abandonment, jurisprudence requires the concurrence of two essential elements: the failure to report for work or absence without valid or justifiable reason, and a clear intention to sever the employer-employee relationship manifested by some overt acts. The employer must establish the employee's deliberate and unjustified refusal to resume employment without any intention of returning. Petitioners failed to prove that it was respondent who voluntarily refused to report back for work; the Court of Appeals correctly ruled that no evidence was presented that the notices were sent to respondent's last known address for the purpose of warning him that continued failure to report would be construed as abandonment. The affidavit of Harpoon's liaison officer that the memoranda were duly sent was insufficient and self-serving, and despite being stamped as received, the memoranda bore no signature of respondent indicating actual receipt, with no proof of how they were given. Respondent's failure to pray for reinstatement and his employment with a competitor could not be construed as overt acts of abandoning employment, nor could the four-month delay be taken as an indication that the complaint was a mere afterthought, since the records showed that he first attempted to obtain his separation pay and commissions and resorted to judicial recourse only after his requests went unheeded. Petitioners' inconsistent stance — offering respondent his separation pay despite asserting a just cause for dismissal, as intimated in their September 28, 2001 letter-reply offering the amount of ₱27,584.37 representing separation and 13th month pays — bolstered the fact that they wanted to terminate respondent and gave more credence to his protestation that he was barred and prevented from reporting for work.
• Commissions: Although the Labor Arbiter, the NLRC, and the Court of Appeals unanimously held that respondent was entitled to accrued commissions of ₱10,000.00 for every vessel repaired or constructed, or ₱70,000.00 for seven vessels, the Court ruled otherwise. Examination of the check vouchers revealed that ₱30,000.00 and ₱10,000.00, alleged as commissions, were paid to respondent on June 9, 2000 and September 28, 2000, respectively. Although their veracity and genuineness were not effectively disputed, nothing in them provided that commissions were paid on account of a repair or construction of a vessel, nor could it be deduced for what or for how many vessels the amounts stated were paid. The vouchers contained very scant details and could hardly be considered sufficient and substantial evidence to conclude that respondent was entitled to a commission of ₱10,000.00 for every vessel; at most they showed that he was paid on two occasions but were silent as to the specific purpose of payment. The list of vessels supposedly repaired or constructed neither validated the monetary claim, as it merely contained an enumeration of seventeen names of vessels and nothing more; no particulars, notation, or clear indication showed that the repair or complete construction of seven of the seventeen boats listed was supervised or managed by respondent. Worse, the list was written only on a piece of paper, not on petitioners' official stationery, and was unverified and unsigned, its patent vagueness making it unworthy of any credence. No other competent evidence was presented to determine the value of what was properly due respondent, much less his entitlement to a commission; the claim could not be based on allegations and unsubstantiated assertions, and the award should not be allowed as it was founded on mere inferences, speculations, and presumptions.
• Bad Faith and Solidary Liability of Petitioner Rosit: While no error was found in the declaration that the dismissal was illegal, the Court disagreed with the ruling holding Rosit solidarily liable with Harpoon for backwages and separation pay. As held in MAM Realty Development Corporation vs. National Labor Relations Commission, obligations incurred by corporate officers acting as such corporate agents are not theirs but the direct accountabilities of the corporation they represent, and they should not generally be held jointly and solidarily liable with the corporation. 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. The Court of Appeals' basis for holding Rosit liable was that he acted in bad faith when he approached respondent and told him that the company could no longer afford his salary and that he would instead be paid his separation pay and accrued commissions. This finding could not substantially justify the holding of any personal liability against him; the records were bereft of any other satisfactory evidence that he acted in bad faith with gross or inexcusable negligence, or that he acted outside the scope of his authority as company president. Rosit merely informed respondent that the company wished to terminate his services since it could no longer afford his salary, and the promise of separation pay was, according to petitioners, out of goodwill and magnanimity. At most, his actuations showed the illegality of the manner of effecting respondent's termination due to the absence of a just or valid cause and the non-observance of procedural due process, but did not point to any malice or bad faith on his part; good faith is still presumed, and liability attaches only if the officer has assented to patently unlawful acts of the corporation. It was thus error for the Court of Appeals to hold Rosit solidarily liable with Harpoon.

• Security of tenure and the employer's burden of proof — Satisfactory evidence of a valid or just cause of dismissal is indispensably required in order to protect a laborer's right to security of tenure. The employer carries the burden of proving clearly its cause, and a failure to present such evidence renders the dismissal illegal and entitles the employee to backwages and separation pay. In this case, the employer presented no competent evidence of habitual absenteeism or abandonment, so the dismissal was declared illegal and the awards of backwages and separation pay were affirmed.
• Abandonment of work — two essential elements — For abandonment of work to exist, two elements must concur: (a) the failure to report for work or absence without valid or justifiable reason, and (b) a clear intention to sever the employer-employee relationship manifested by some overt acts. The employer must establish the employee's deliberate and unjustified refusal to resume employment without any intention of returning. The Court found neither element proved, since the time card showed only three days of absence and no tardiness, and the notices allegedly sent to respondent were unsupported by proof of actual receipt.
• Inconsistency of the employer's stance as evidence of illegal dismissal — An employer's act of offering separation pay despite asserting a just cause for dismissal is inconsistent and bolsters the conclusion that it intended to terminate the employee, thereby lending credence to the employee's claim that he was barred from reporting for work. The Court relied on petitioners' September 28, 2001 letter-reply offering ₱27,584.37 as separation and 13th month pays in sustaining the finding of illegal dismissal.
• Solidary liability of corporate officers — general rule and exceptions — Obligations incurred by corporate officers acting as such corporate agents are not theirs but the direct accountabilities of the corporation they represent, and they should not generally be held jointly and solidarily liable with the corporation. This general rule rests on the theory that a corporation has a legal personality separate and distinct from the persons comprising it. Solidary liability may be imposed only in the following exceptional circumstances: (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, or (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, 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; and (4) when a director, trustee, or officer is made, by specific provision of law, personally liable for his corporate action. The Court applied the general rule and absolved Rosit, no bad faith or malice having been shown.
• Piercing the corporate veil requires clear and convincing proof of bad faith — 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. Liability attaches only if the officer has assented to patently unlawful acts of the corporation. The Court held that Rosit's act of informing respondent of the company's inability to afford his salary, and the offer of separation pay made out of goodwill, showed at most the illegality of the manner of termination but not malice or bad faith.
• Substantial evidence in labor cases — A claim for monetary awards in a labor case cannot rest on allegations and unsubstantiated assertions without any competent document to support it; an award founded on mere inferences, speculations, and presumptions must be struck down. The Court applied this standard in deleting the ₱70,000.00 commission award, the check vouchers being silent as to the purpose of payment and the list of vessels being unsigned, unverified, and patently vague.

• "Satisfactory evidence of a valid or just cause of dismissal is indispensably required in order to protect a laborer's right to security of tenure. In the case before us, the employer presented none despite the burden to prove clearly its cause." — This passage opens the decision and states the ratio decidendi on the illegality of the dismissal; it is the canonical formulation of the employer's evidentiary burden in dismissal cases.
• "Jurisprudence provides for two essential requirements for abandonment of work to exist. The 'failure to report for work or absence without valid or justifiable reason' and 'clear intention to sever the employer-employee relationship x x x manifested by some overt acts' should both concur." — This passage states the controlling two-element test for abandonment of work, which the Court applied in rejecting petitioners' defense that respondent had abandoned his post.
• "The general rule is grounded on the theory that a corporation has a legal personality separate and distinct from the persons comprising it." — This passage anchors the Court's refusal to hold petitioner Rosit solidarily liable with the corporation, explaining the doctrinal basis for the separate juridical personality of corporate officers acting as corporate agents.
• "To warrant the piercing of the veil of corporate fiction, the officer's bad faith or wrongdoing 'must be established clearly and convincingly' as '[b]ad faith is never presumed.'" — This passage supplies the evidentiary standard governing the exceptions to the general rule on non-liability of corporate officers, and explains why the Court of Appeals' finding of bad faith against Rosit could not stand.

• MAM Realty Development Corporation vs. National Labor Relations Commission, 314 Phil. 838 (1995) — Controlling precedent relied upon for the rule that obligations incurred by corporate officers acting as such corporate agents are the direct accountabilities of the corporation they represent, and for the enumeration of the exceptional circumstances in which solidary liability may be imposed on directors, trustees, or officers.
• Henlin Panay Company vs. National Labor Relations Commission, G.R. No. 180718, October 23, 2009, 604 SCRA 362, 369 — Cited for the two essential requirements for abandonment of work to exist, namely the failure to report for work or absence without valid or justifiable reason and the clear intention to sever the employer-employee relationship manifested by some overt acts.
• Samarca vs. Arc-Men Industries, Inc., 459 Phil. 506, 515 (2003) — Cited for the rule that the employee's deliberate and unjustified refusal to resume his employment without any intention of returning should be established and proven by the employer.
• Petron Corporation vs. National Labor Relations Commission, G.R. No. 154532, October 27, 2006, 505 SCRA 596, 613 — Cited for the theory that a corporation has a legal personality separate and distinct from the persons comprising it, which grounds the general rule against solidary liability of corporate officers.
• Carag vs. National Labor Relations Commission, G.R. No. 147590, April 2, 2007, 520 SCRA 28, 49 — Cited for the rule that bad faith is never presumed and must be established clearly and convincingly before the corporate veil may be pierced.

• Article 111, Labor Code — Cited by the Labor Arbiter as the basis for awarding attorney's fees of ten percent (10%) of the ₱70,000.00 commission for withholding payment thereof. The NLRC subsequently deleted the award for lack of evidence showing petitioners' bad faith in terminating respondent, and the deletion was sustained on review.
• Section 13, Article VIII, 1987 Constitution — Invoked in the certification accompanying the Decision, by which the Chief Justice certified that the conclusions in the case had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

• Renato C. Corona, Chief Justice, Chairperson
• Presbitero J. Velasco, Jr., Associate Justice
• Teresita J. Leonardo-De Castro, Associate Justice
• Jose Portugal Perez, Associate Justice