By: Grant Buena Joy C.

Mesa

Indophil Textile Workers Union v. Voluntary Arbitrator Calica

FACTS:

Petitioner Indophil Textile Mill Workers Union-PTGWO is a legitimate labor organization duly
registered with the Department of Labor and Employment and the exclusive bargaining agent of all
the rank-and-file employees of Indophil Textile Mills, Incorporated. Respondent Teodorico P. Calica is
impleaded in his official capacity as the Voluntary Arbitrator of the National Conciliation and Mediation
Board of the Department of Labor and Employment, while private respondent Indophil Textile Mills,
Inc. is a corporation engaged in the manufacture, sale and export of yarns of various counts and kinds
and of materials of kindred character and has its plants at Barrio Lambakin. Marilao, Bulacan.

Petitioner Indophil Textile Mill Workers Union-PTGWO and private respondent Indophil Textile
Mills, Inc. executed a collective bargaining agreement effective from April 1, 1987 to March 31, 1990.

On November 3, 1967 Indophil Acrylic Manufacturing Corporation was formed and registered
with the Securities and Exchange Commission. Subsequently, Acrylic applied for registration with the
Board of Investments for incentives under the 1987 Omnibus Investments Code. The application was
approved on a preferred non-pioneer status.

In 1988, Acrylic became operational and hired workers. Sometime in July, 1989, the workers
of Acrylic unionized and a duly certified collective bargaining agreement was executed. A year after
the workers of Acrylic have been unionized and a CBA executed, the petitioner union claimed that the
plant facilities built by Acrylic should be considered as an extension of the facilities of private
respondent Company pursuant to Section 1(c), Article I of the CBA, to wit,.

c) This Agreement shall apply to the Company's plant facilities and installations and
to any extension and expansion thereat. (Rollo, p.4)

In other words, it is the petitioner's contention that Acrylic is part of the Indophil bargaining unit.
The petitioner's contention was opposed by private respondent which submits that it is a juridical entity
separate and distinct from Acrylic.

ISSUE:

Is Indophil Acrylic a separate and distinct entity from respondent company for purposes of
union representation?

LAW:

Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist,
the legal fiction that a corporation is an entity with a juridical personality separate and distinct from its
members or stockholders may be disregarded. In such cases, the corporation will be considered as a
mere association of persons. The members or stockholders of the corporation will be considered as
the corporation that is liability will attach directly to the officers and stockholders. The doctrine applies
when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend
crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the
mere alter ego or business conduit of a person, or where the corporation is so organized and controlled
and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of
By: Grant Buena Joy C. Mesa

another corporation. (Umali et al. v. Court of Appeals, G.R. No. 89561, September 13, 1990, 189
SCRA 529, 542)

CASE HISTORY:

The existing impasse led the petitioner and private respondent to enter into a submission
agreement on September 6, 1990. The parties jointly requested the public respondent to act as
voluntary arbitrator in the resolution of the pending labor dispute pertaining to the proper interpretation
of the CBA provision. Public respondent Voluntary Arbitrator rendered its award made to the effect
that the proper interpretation and application of Sec. l, (c), Art. I, of the 1987 CBA do (sic) not extend
to the employees of Acrylic as an extension or expansion of Indophil Textile Mills, Inc. Hence, the
petition for certiorari.

RULING: Yes.

In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that
the creation of the corporation is a devise to evade the application of the CBA between petitioner
Union and private respondent Company. The fact that the businesses of private respondent and
Acrylic are related, that some of the employees of the private respondent are the same persons
manning and providing for auxiliary services to the units of Acrylic, and that the physical plants, offices
and facilities are situated in the same compound, it is our considered opinion that these facts are not
sufficient to justify the piercing of the corporate veil of Acrylic.

It’s already emphasized that "the legal corporate entity is disregarded only if it is sought to hold
the officers and stockholders directly liable for a corporate debt or obligation." In the instant case,
petitioner does not seek to impose a claim against the members of the Acrylic.

Furthermore, it’s already ruled in the case of Diatagon Labor Federation Local 110 of the
ULGWP v. Ople (supra) that it is grave abuse of discretion to treat two companies as a single
bargaining unit when these companies are indubitably distinct entities with separate juridical
personalities.

Hence, the Acrylic not being an extension or expansion of private respondent, the rank-and-
file employees working at Acrylic should not be recognized as part of, and/or within the scope of the
petitioner, as the bargaining representative of private respondent.

All premises considered, the Court is convinced that the public respondent Voluntary Arbitrator
did not commit grave abuse of discretion in its interpretation of Section l(c), Article I of the CBA that
the Acrylic is not an extension or expansion of private respondent.

ACCORDINGLY, the petition is DENIED and the award of the respondent Voluntary Arbitrator
are hereby AFFIRMED.

OPINION:

I agree with the decision of the Supreme Court. It grave injustice to deprive other companies in
creating their respective bargaining unit using the doctrine of piercing the veil of corporate entity, when
in fact, they are totally distinct and separate juridical personalities.
By: Grant Buena Joy C. Mesa

Piercing the veil of corporate fiction must be undertaken with extreme caution, otherwise the
overall welfare and related interests of the company will be served injustice. In fact the Supreme Court in
most of its decisions made an emphasis that whether the separate personality of the corporation should
be pierced hinges on obtaining facts appropriately pleaded or proved. Under the doctrine of piercing the
veil of corporate fiction, the court looks at the corporation as a mere collection of individuals or an
aggregation of persons undertaking business as a group, disregarding the separate juridical personality of
the corporation unifying the group. Another formulation of this doctrine is that when two business
enterprises are owned, conducted and controlled by the same parties, both law and equity will, when
necessary to protect the rights of third parties, disregard the legal fiction that two corporations are distinct
entities and treat them as identical or as one and the same.

This doctrine is primarily created for the purpose of protecting parties against individual members
of a corporation who are intending to evade liability in the guise of the separate and distinct personality
of the corporation in doing unlawful activity. In relation to this, it is therefore understandable that for the
application of this doctrine, the one who alleges should first establish his claims against the individual
officers or shareholders of the corporation involved in the alleged taking advantage of the corporation’s
juridical personality, otherwise, any claim to pierce the veil of the company’s corporate fiction deserves
no merit. It must be made evident that the auxiliary corporation is one and the same with the principal
corporation and was being operated to protect its officers and shareholders in illegal activities.

In the given case, mere similarities and connection in operation does not equate to a disregarded
distinct personalities of the two companies. As reiterated, the doctrine only applies when the corporate
fiction is used to defeat public convenience, justify a wrong, protect fraud or defend crime, or when it is
made as a shield to confuse legitimate issues, or where a corporation is the mere alter ego or business
conduit of a person or where the corporation is organized and controlled and its affairs are so conducted
as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. The evil sought
to be prevented in applying the doctrine is absent in this case, thus, upholding the decision of the Supreme
Court is just.