INDOPHIL TEXTILE MILL WORKERS UNION-PTGWO, petitioner, vs.

VOLUNTARY
ARBITRATOR TEODORICO P. CALICA and INDOPHIL TEXTILE MILLS, INC., respondents
G.R. No. 96490 February 3, 1992
MEDIALDEA, J.:

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.

FACTS:
Indophil Union is a legitimate labor organization duly registered with the DOLE and the
exclusive bargaining unit of all rank-and-file employees of Indophil Textile Mills. On April 1987, the
Union and Indophil executed a CBA effective April 1, 1987 to March 31, 1990. On November 1987,
Indophil Acrylic was formed and registered with the SEC. In 1998, Indophil Acrylic became operational
and hired workers according to its criteria and standards. Sometime in July 1989, the workers of Acrylic
unionize and a duly certified CBA was executed. In 1990, the Union claimed that the plant facilities built
and set up by Indophil Acrylic should be considered as an extension or expansion of Indophil pursuant to
Sec. 1(c) of Art.1 of the CBA to wit:
“This agreement shall apply to all companies, facilities, and installations and to any extension
and expansion thereat.”

In other words, the union sough that Acrylic be considered part of the bargaining unit. Their
contention is that the articles of incorporation of the two corporation establish that the two entities are
engaged in the same kind of business, which is the manufacture and sale of yarns of various counts and
kinds and of other materials of kindred character or nature. Furthermore, they emphasize that the two
corporations have practically the same incorporators, directors and officers. Also, the two corporation
have their facilities in the same compound. That many of Indophil’s own machineries such as dyeing
machines, reeler, broiler, were transferred to and are now being used by the Acrylic plant. That services
of a number of units, departments or sections of private respondents are provided by Acrylic and that the
employees of Indophil are the same persons manning and servicing the units of Acrylic. Both parties
submitted the issue to Labor Arbiter Calica. Calica ruled for Indophil and stated that Acrylic is not
extension of Indophil, hence their CBA does not extend to the employees of Acrylic.

ISSUE:
WON Acrylic is a separate and distinct entity from Indophil for purposes of union representation.

HELD:
Acrylic is not an alter ego or an adjunct or a business conduit of Indophil because it has a separate
legitimate business purpose. Indophil engages in the manufacture of yarns while Acrylic is to
manufacture, buy, sell at wholesale basis, barter, import, export and otherwise deal in various kinds of
yarns. Two corporations cannot be treated as single bargaining unit just because they have related
businesses. The Union seeks to pierce the veil of Acrylic alleging that the corporation is a device to evade
the application of the CBA. However, the CA held that said doctrine is only used on the existence of valid
grounds. In the case at bar, the fact that the business of Indophil and Acrylic are related that sometimes
the employees of Indophil 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
SC’s opinion that these facts are not sufficient to justify the piercing of the corporation veil of Acrylic.
Furthermore, the legal entity is disregarded only if sought to hold the officers and stockholders liable. In
the instant case, the Union does not seek relief from Indophil. 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.