CORPORATION LAW

G.R. No. 108734. May 29, 1996

CONCEPT BUILDERS, INC vs. NLRC
Petitioner: Concept Builders, Inc.
Respondent: NLRC and 22 private respondent-laborers

Facts:
Concept Builders, Inc., a domestic corporation, is engaged in the construction business. Private
respondents were employed by said company as laborers, carpenters and riggers. In 1981, the private respondents
were served individual written notices of termination of employment by petitioner, effective at the end of the
month. It was stated that their contracts of employment had expired and the project in which they were hired had
been completed. But actually, the project had not yet been finished and completed.
The laborers 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 a judgment in
their favor, ordering petitioner to reinstate private respondents and to pay them back wages equivalent to one year or
three hundred working days. The Labor Arbiter also issued a writ of execution directing the sheriff to execute the
Decision. The said writ was served, twice, but the sheriff was not able to enforce it because the principal place of
business of Concept Builders is now being occupied by Hydro Pipes Philippines, Inc. (HPPI). The special sheriff
recommended that a break-open order and such order was granted by the Labor Arbiter, and affirmed by NLRC,
when the issue was raised on appeal.

Issue:
WON the NLRC committed grave abuse of discretion when it issued a break-open order to the sheriff to be
enforced against personal property found in the premises of petitioners sister company, HPPI.

Held:
The break-open order is valid. It is valid because HPPI is a mere alter ego of the petitioner. The doctrine of piercing
the veil of corporate fiction is justified.

Rationale:

Petitioners Contention
Petitioner contends that the doctrine of piercing the corporate veil should not have been applied, in the absence of
any showing that it created HPPI in order to evade its liability to private respondents. It also contends that HPPI is
engaged in the manufacture and sale of steel, concrete and iron pipes, a business which is distinct and separate from
petitioners construction business. Hence, it is of no consequence that petitioner and HPPI shared the same
premises, the same President and the same set of officers and subscribers.
Probative Factors --. (Doctrine provided on pages 94-95 of CLVs book)
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:
1. Stock ownership by one or common ownership of both corporations.
2. Identity of directors and officers.
3. The manner of keeping corporate books and records.
4. Methods of conducting the business.

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
plaintiffs 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 defendants relationship to that operation.

The question of whether a corporation is a mere alter ego is purely one of fact.
In this case, the NLRC noted that, while petitioner claimed that it ceased its business operations on April 29, 1986, it
filed an Information Sheet with the Securities and Exchange Commission on May 15, 1987, stating that its office
address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI, the third-party claimant,
submitted on the same day, a similar information sheet stating that its office address is at 355 Maysan Road,
Valenzuela, Metro Manila.
The NLRC also observed that both information sheets were filed by the same Virgilio O. Casino 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 backwages
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.
KIM DEBRA C. CLEDERA (2-A) PROBATIVE FACTORS
11/19/2009 DEAN CLV