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[G.R. No. 112661.May 27, 2002]
DE LEON, et al. vs. NLRC, et al.
FIRST DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated 27 MAY 2002.
G.R. No. 112661 (Simeon De Leon, et al. vs. NLRC, et al .)
Before the Court for resolution are the motions for reconsideration of our Decision [1] cralaw filed by respondents Fortune Tobacco Corporation and Magnum Integrated Services, Inc. Both respondents assail our ruling that Fortune Tobacco Corporation [FTC] and Magnum Integrated Services, Inc. [MISI] (formerly Fortune Integrated Services, Inc. [FISI]) should be considered as a single employer and should be held liable for unfair labor practice and for the unlawful dismissal of petitioners. Respondent FTC also faults the Decision for modifying the Decision of the Labor Arbiter by increasing the amount of backwages and separation pay awarded to petitioners.
We find no merit on the first ground raised by the respondents. Contrary to respondents' assertion, there is adequate evidence on record to show that respondents are guilty Of unfair labor practice. The sudden sale of FISI to a new set of stockholders, the unexplained pretermination of the security contract between FTC and FISI/MISI, and the removal of petitioners from their posts within the premises of FTC were all done at a time when petitioners were in the process of organizing their union and were seeking the satisfaction of their various benefits and privileges under the Labor Code. It is not correct to say, as respondents want to impress upon the Court, that the union came into being only in October 1991, several months after the sale of FISI. At that time, the union was already in existence and has been certified as bargaining agent. Thus, it had the authority to file a notice of strike against FISI and FTC in behalf of the employees. Also, we are not convinced by the explanation offered by respondents for the pretermination of the security contract between FTC and FISI/MISI. To our mind, such explanation is a mere afterthought as no mention was made regarding the reason for the pretermination of the contract either in the letter sent by FTC to MISI [2] cralaw or in the position papers filed by the respondents before the Labor Arbiter. [3] cralaw FTC's silence as regards the cause, for the premature cessation of the contract reveals the lack of a valid reason therefor. Unfair labor practice need not be proved by direct evidence as long as it is shown that the employer has engaged in conduct from which a reasonable inference may be made that the latter is attempting or has attempted to interfere with the employees' free exercise of their right to self organization. We reiterate our ruling in Insular Life Assurance Co., Ltd., Employees Association-NATU vs. Insular Life Assurance Co., Ltd. [4] cralaw which we also quoted in our Decision, thus:
"The test of whether an employer has interfered with and coerced employees within the meaning of section (a) (1) is whether The employer has engaged in conduct which it may reasonably be said tends to interfere with the free exercise of employees' rights under section 3 of the Act, and it is not necessary that there be direct evidence that any employee was in fact intimidated or coerced by statements of threats of the employer if there is a reasonable inference that anti-union conduct of the employer does have an adverse effect on self-organization and collective bargaining."
Using this test to the facts of the case at bar, we find that there is sufficient basis to conclude that the sale of FISI was only a means to evade any liability for unfair labor practice on the part of FISI and FTC. It is clear from the facts that FISI was a mere instrumentality of FTC. They have identical stockholders and they operated within the same premises. FISI's security guards were posted mostly in FTC and other companies owned by respondent Tan. The earlier salaries of the security guards were paid by FTC. The payslips attached to the record of this case provide reasonable basis to prove that FTC paid the salaries of FISI's security guards. [5] cralaw We further note that the new stockholders of MISI were also previously connected with FISI. MISI's stockholders, General Mariano Ordonez and Mr. Arsenio Tan were the President and the Treasurer of FISI, respectively. [6] cralaw Against this backdrop, we cannot apply the general rule that a corporation possesses a personality separate and distinct from that of the persons composing it or any other legal entity to which it may be related. This separate and distinct personality is merely a fiction created by law for convenience and to promote justice. Accordingly, the separate personality of the corporation may be disregarded, or the veil or corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work an injustices or where necessary to achieve equity or when necessary for the protection of creditors. [7] cralaw Any piercing of the corporate veil, however, has to be done with caution. 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 dishonesty and unjust acts 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 presence of these elements will justify the piercing of the corporate veil. [8] cralaw Thus, the corporation's separate personality will be disregarded where the business affairs of a subsidiary corporation are so controlled by the mother corporation to the extent that it becomes an instrument or agent of its parent. But even when there is dominance over the affairs of the subsidiary, the doctrine of piercing the veil of corporate fiction applies only when such fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime. [9] cralaw In this case, the element of control has been adequately proved by the identity of the stockholders of FTC and FISI, as well as their business address, the posting of most of FISI's security guards to FTC and its sister companies, and the payment by FTC of the earlier salaries of the security guards assigned by FISI to secure its premises. The change in the stockholders of FISI is of no moment as it appears that such change was only a device used by respondents to avoid liability for non-compliance with labor standards laws and unfair labor practice committed against the petitioners. No court will allow the use of a corporation's separate personality as a shield against its wrongdoing.
We now come to the contention of the respondent FTC that our Decision unduly modified the Decision of the Labor Arbiter and awarded the petitioners more than what they prayed for in their petition. On this score, we sustain the respondent. The records will show that the Labor Arbiter decided in favor of the petitioners on December 15, 1992.The dispositive portion of the Decision states:
"WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the,, respondent Fortune Tobacco Corporation and/or Fortune Integrated Services, Inc. (now Magnum Integrated Services, Inc.) to pay complaints, as follows:
1. P13,345,847.20 as backwages;
2. P7,051,926.10 as separation pay;
3. Refund of accumulated cash bond deposits due each complainant; and
4. Attorney's fees equivalent to ten percent (10%) of whatever are herein adjudicated in favor of the complainants.
All other claims of the complainants are hereby dismissed for reasons hereinabove stated.
SO ORDERED."
Respondents alone appealed the Decision to the NLRC. Petitioners accepted the Decision, hence, did not challenge it. On July 5, 1993, the NLRC reversed the Decision of the Labor Arbiter and dismissed the complaints of the petitioners for unfair labor practice, illegal dismissal, refund of cash bond deposits, moral damages and attorney's fees.
Petitioners thus elevated the Decision of the NLRC via certiorari to this Court. They prayed as follows:
"WHEREFORE, it is most respectfully prayed:
1. That this petition be kindly given due course;
2. That the Decision of the Commission dated 05 July 1993 and its subsequent Resolution dated 10 August, 1993 be annulled and judgment be rendered affirming the Decision of Labor Arbiter Jose de Vera ordering private respondents to pay petitioners P13,345,847.20 as backwages, P7,05 1,926.10 as separation pay, to refund the accumulated cash bond deposit of each petitioner, and to pay attorney's fees equivalent to ten (10%) percent;
3. That petitioners be granted such other and further reliefs (sic) and remedies which this most Honorable Supreme Tribunal may deem just and equitable in the premises."
In our Decision, we reversed the NLRC. It appears, however, that we awarded to petitioners more than the awards given by the Labor Arbiter. We ordered the respondents to pay petitioners "x x x their full backwages and to reinstate them to their former position without loss of seniority rights and privileges, or to award them separation pay in case reinstatement is no longer feasible."
We agree with the respondent FTC that the petitioners can be given only the awards ordered by the Labor Arbiter. The decision of said Labor Arbiter has not been assailed by the petitioners and in their petition before us, petitioners merely prayed for its affirmance. Respondents will be denied due process if they will be made liable on the basis of an issue not raised by the petitioners themselves.
IN VIEW WHEREOF, the Motions for Reconsideration of the respondents are denied with the qualification that we reverse and set aside the Decision of the NLRC dated July 5, 1993 and its Resolution dated August 10, 1993, but reinstate in toto the Decision of Labor Arbiter Jose de Vera dated December 15, 1992.J. Martinez, no part as she did not participate in the main decision.
Very truly yours,
(Sgd.) VIRGINIA ANCHETA-SORIANO
Clerk of Court
Endnotes:
[1] cralaw Promulgated May 30, 2001.
[2] cralaw Annex "A", Appeal Memorandum filed by Fortune Integrated Services, Inc., Original Record, p. 445.
[3] cralaw Original Record, pp. 121-125, pp. 140-150.
[4] cralaw 37 SCRA 244 (1971).
[5] cralaw Annexes "B" - "B-19", Complainants' Position Paper, Original Record, pp. 81-100.
[6] cralaw Annexes "C" and "D", Id., pp. 101-111.
[7] cralaw Tan Boon Bee & Co., Inc. vs. Jarencio, 163 SCRA 205 (1988).
[8] cralaw Heirs of Ramon Durano, Sr. vs. Uy, 344 SCRA 238 (2000).
[9] cralaw Reynoso IV vs. CA, 345 SCRA 335 (2000).
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