Indophil Textile Mill Workers UnionPTGWO v.

CalicaINDOPHIL
TEXTILE MILL WORKERS UNION-PTGWO (petitioner) vs.
VOLUNTARY ARBITRATOR TEODORICO P. CALICA and
INDOPHIL TEXTILE MILLS, INC. (respondents)FEBRUARY 3,
1992J.

MEDIALDEAthe corporation as an entity exception: doctrine of

piercing the veil of corporate fiction when not applicable

SUMMARY: Union sought to pierce corporate veil of Acrylic, alleging

that the creation of Acrylic was Indophils devise to evade the
application of its CBA with them. Court held that there was no need to
pierce Acrylics corporate veil. 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. Union did not seek to
impose such claim against Acrylic. The mere fact that businesses
were related, that some of the employees of Indophil were the same
persons manning and providing for auxiliary services to the other
company, and that physical plants, officers and facilities are situated
in the same compound were not sufficient to apply the doctrine. The
doctrine of piercing the veil of corporate entity applies when 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 another
corporation.

NATURE: Petition for certiorari

FACTS:

Indophil Textile Mill Workers Union-PTGWO is a legitimate labor

organization and the exclusive bargaining agent of all the rank-and-
file employees of Indophil Textile Mills, Incorporated. Teodorico P.
Calica is the Voluntary Arbitrator of the National Conciliation and
Mediation Board of the Department of Labor and Employment, while
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. Indophil Textile Mill Workers
Union-PTGWO and Indophil Textile Mills, Inc. executed a collective
bargaining agreement.7 months later, Indophil Acrylic Manufacturing
Corporation was formed and registered with the Securities and
Exchange Commission (different from above Indophil Textile). 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. Acrylic became
operational and hired workers according to its own criteria and
standards. The workers of Acrylic unionized and a duly certified
collective bargaining agreement was executed. A year after, the
union claimed that the plant facilities built and set up by Acrylic
should be considered as an extension or expansion of the facilities of
Indophil Textile Mills pursuant to Section 1(c), Article I of the CBA. In
other words, it is the Union's contention that Acrylic is part of the
Indophil bargaining unit. The union alleged that:1. Both corporations
are engaged in the same line of business. 2. Both have their physical
plants, offices and facilities in the same compound.3. Many of
Indophil Textiles machines were transferred and installed and were
being used in Acrylic.4. Services of a number of units, departments
and sections were being provided to Acrylic. 5. Employees of Indophil
Textile were the same persons manning and servicing
Acrylic.Indophil Textile opposed, saying it was a juridical entity
separate and distinct from Acrylic. It argued through the SolGen that
Acrylic was not an alter ego or an adjunct or business conduit of
Indophil Textile Mills because it had a separate business purpose.
Indophil Textile engaged in the business of manufacturing yarns of
various counts and kinds and textiles., while Acrylic manufactured,
bough, sold, at wholesale basis, bartered, imported, exported and
otherwise dealt in yarns of various counts and kinds. Acrylic cannot
manufacture textiles while Indophil cannot buy or import yarns. The
existing impasse led the parties to enter into a submission
agreement. The parties jointly requested Calica to act as voluntary
arbitrator in the resolution of the pending labor dispute pertaining to
the proper interpretation of the CBA provision. Calica ruled that the
proper interpretation and application of Sec. 1, (c), Art. I of the 1987
CBA does not extend to the employees of Acrylic as an extension or
expansion of Indophil Textile Mills, Inc.
ISSUE: Were the operations in Indophil Acrylic Corporation an
extension or expansion of Indophil Textile Mills?

NO, they were separate corporations. The CBA did not apply to
Acrylic. 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 or 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 another corporation. In the case at bar,
the union 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 the Union and Indophil Textile. While
the Court does not discount the possibility of the similarities of the
businesses of Indophil Textile Mills and Acrylic, neither is it inclined to
apply the doctrine invoked by the union in granting the relief sought.
The fact that the businesses of Indophil Textile and Acrylic are
related, that some of the employees of Indophil Textile 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 the Courts opinion that these facts are
not sufficient to justify the piercing of the corporate veil of Acrylic.
Although it was shown that the two corporations businesses are
related, that some of the employees of the two corporations are
interchanged, and that the physical plants, offices, and facilities, are
situated in the same compound, were not considered sufficient bases
to pierce the veil in order to treat the two corporations as one
bargaining unit. 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. DISPOSITION: Petition denied. Award of
arbitrator affirmed.