DBP v NLRC G.R. No.

86932 June 27, 1990

Facts:
Philippine Smelter Corporation obtained a loan in 1983 from DBP to finance its iron smelting
and steel
manufacturing business. To secure the loan, PSC mortgaged to DBP real properties and chattels
with its President Marcelo as coobligor.Because of this DBP became the majority stockholder of
PSC with stockholdings of P 31M out of P 60 M subscribed and paid up capital stock and took
over PSC’s management. PSC failed to pay and DBP foreclosed on the mortgaged realties and
chattels. 40 alleged unpaid employees filed a petition for involuntary insolvency in the RTC
against PSC and DBP. Said employees were employed by Olecram Mining Corp., Jose Panganiban
Ice Plant and Cold Storage, Inc. all impleaded as corespondent. They filed another complaint
with the DOLE against PSC for nonpayment of salaries, 13th month pay, incentive leave and
separation pay. DBP was impleaded because the employees considered DBP as the parent
company of PSC. Since the DBP was the biggest creditor of PSC, it held majority of stock and
involved in management through Board of Directors, DBP was considered to be by the
employees as their employer. DBP was invoked absence of EE relationship in its Answer. The
labor arbiter held DBP as liable for unpaid wages due to PSC’s foreclosure which it caused as
foreclosing creditor. NLRC sustained this, hence, this petition.

ISSUE:
W/N DBP is liable to the unpaid employees.

Held:
NO. DBP as foreclosing creditor could not be held liable for unpaid wages, etc. of the employees
of PSC. The fact that DBP is a majority stockholder of PSC and PSC are from DBP does not
sufficiently indicate the existence of an EE relationship between the terminated employees of
PSC and DBP. Said workers have no cause of action against DBP and the labor arbiter does not
have jurisdiction to take cognizance of said case. Hence, ownership of a majority of capital stock
and the fact the majority of directors of a corporation are the directors of another corporation
creates no EE relationship with the latter’s employees. Mere ownership by a single stockholder
or by another corporation of all or nearly all of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate corporate personality. Sunio v. NLRC , 127 SCRA
390 (1984); Asionics Philippines, Inc. v. NLRC, 290 SCRA 164 (1998); Francisco v. Mejia, 362 SCRA
738 (2001); Matutina Integrated Wood Products, Inc. v. CA , 263 SCRA 490 (1996); Manila Hotel
Corp. v. NLRC , 343 SCRA 1 (2000). Mere substantial identity of incorporators of two
corporations does not necessarily imply fraud, nor warrant the piercing of the veil of corporate
fiction. In the absence of clear and convincing evidence to show that the corporate personalities
were used to perpetuate fraud, or circumvent the law, the corporations are to be rightly treated
as distinct and separate from each other. Laguio v. NLRC, 262 CRA 715 (1996).
Having interlocking directors, corporate officers and shareholders is not enough justification to
pierce the veil of corporate fiction in the absence of fraud or other public policy considerations.
Velarde v. Lopez , 419 SCRA 422 (2004); Sesbreno v. Court of Appeals , 222 SCRA 466 (1993).