Concept Builders Inc. vs National Labor Relations Commission
257 SCRA 149 [G.R. No. 108734. May 29, 1996]
Facts: Petitioner Concept Builders Inc., a domestic corporation with principal office at 355 Maysan Road, Valenzuela, Metro Manila is engaged in the construction business. Private respondents were employed by said company as laborers, carpenters, and niggers. On November 1981, private respondents were served with individual written notices of termination of employment by petitioner, effective on November 30, 1981. 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, at the time of the termination of private respondents’ employment, the project in which they were hired had not yet been finished and completed. Petitioner had to engage the services of the subcontractors whose workers performed the functions of private respondents. Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor practices and non-payment of their holiday pay, overtime pay, and 13th month pay against petitioners. The labor arbiter rendered decision in favor of the private respondents. When the same became final and executory, a writ of execution was issued, however, the same was refused by the security guard on duty on the ground that the petitioners no longer occupied the premises. A break-open order was then recommended.
Issue: Whether or not the alias writ of execution can be issued against the sister company of the petitioners, HPPI.
Held: Yes. It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders and from other corporations to which it may be connected. But, this separate and distinct personality of a corporation is merely a fiction created by law for convenience and to promote justice. So, when the notion of separate juridical personality is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or is used as a device to defeat labor laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation.
The conditions under which the juridical entity may be disregarded vary according to the peculiar facts and in circumstances 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:
- Stock ownership by one or common ownership of both corporations.
- Identity of directors and officers.
- The names of keeping corporate books and records
- Methods of conducting the business.
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 instances, 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 as follows:
- 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 on exercise of its own;
- 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.
- The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any of these elements prevents “piercing the corporate veil” of the corporation. 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.