CONCEPT BUILDERS, INC. VS NLRC CASE DIGEST

G.R. No. 108734 May 29, 1996
CONCEPT BUILDERS, INC., Petitioner,
v. THE NATIONAL LABOR RELATIONS, COMMISSION, Respondent

FACTS:

Petitioner Concept Builders, Inc., a domestic corporation, engaged in the construction business. Private respondents were employed by said company as laborers, carpenters and riggers.

Private respondents were served individual written notices of termination of employment by petitioner. It was stated in the individual notices that their contracts of employment had expired and the project in which they were hired had been completed.

Public respondent found it to be, the fact, however, that at the time of the termination of private respondent’s employment, the project in which they were hired had not yet been finished and completed.

Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor practice and non-payment of their legal holiday pay, overtime pay and thirteenth-month pay against petitioner.

the Labor Arbiter rendered judgment ordering petitioner to reinstate private respondents and to pay them back wages

The said special sheriff recommended that a, "break-open order" be issued to enable him to enter petitioner’s premises

A certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff were owned by Hydro (Phils.), Inc. (HPPI) of which he is the Vice-President.

HPPI filed an Opposition to private respondents’ motion for issuance of a break-open order, contending that HPPI is a corporation which is separate and distinct from petitioner. HPPI also alleged that the two corporations are engaged in two different kinds of businesses, i.e., HPPI is a manufacturing firm while petitioner was then engaged in constitution.

The Labor Arbiter issued an Order which denied private respondents’ motion for break-open order.

Private respondents then appealed to the NLRC. The NLRC set aside the order of the Labor Arbiter, issued a break-open order and directed private respondents to file a bond. Thereafter, it directed the sheriff to proceed with the auction sale of the properties already levied upon.

ISSUE:

Whether or not the doctrine of piercing the corporate veil should not have been applied

HELD:

Yes. The second corporation seeks the protective shield of a corporate fiction whose and should, be pierced

The question of whether a corporation is a mere alter ego, a mere sheet or paper corporation, a sham or a subterfuge is purely one of fact.

The conditions under which the juridical entity may be disregarded vary according to the peculiar facts and circumstances of each case. No hard and fast rule can be accurately laid down, but certainly, there are some probative factors of identity that will justify the application of the doctrine of piercing the corporate veil, to wit:

The SEC en banc explained the "instrumentality rule" which the courts have applied in disregarding the separate juridical personality of corporations as follows:

"Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the ‘instrumentality’ may be disregarded. The control necessary to invoke the rule is not majority or even complete stock control but such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal. It must be kept in mind that the control must be shown to have been exercised at the time the acts complained of took place. Moreover, the control and breach of duty must proximately cause the injury or unjust loss for which the complaint is made."

The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:

1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own;

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiff’s legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of:

The absence of any one of these elements prevents ‘piercing the corporate veil’. In applying the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant’s relationship to that operation."

The NLRC noted that, while petitioner claimed that it ceased its business operations, it filed an Information Sheet with the Securities and Exchange Commission on, stating its office address. On the other hand, HPPI, the third-party claimant, submitted on the same day, a similar information sheet stating the same office address. Both information sheets were filed by the same Virgilio O. Casiño as the corporate secretary of both corporations. It would also not be amiss to note that both corporations had the same president, the same board of directors, the same corporate officers, and substantially the same subscribers.

Clearly, petitioner ceased its business operations in order to evade the payment to private respondents of back wages and to bar their reinstatement to their former positions. HPPI is obviously a business conduit of petitioner corporation and its emergence was skillfully orchestrated to avoid the financial liability that already attached to petitioner corporation.

WROCKLEY