Pea-Ptgwo Vs NLRC

PEA-PTGWO vs NLRC DIGEST
DECEMBER 21, 2016 ~ VBDIAZ
TOPIC: (Classification of piercing cases; elements)
PEA-PTGWO vs NLRC
No. 170689/170705
17 March 2009
FACTS: Gonzales family owned two (2) corporations, namely, the PNEI and
Macris Realty Corporation (Macris). PNEI provided transportation services
to the public. They incurred huge financial losses and creditors took over the
management of PNEI and Maricris. Full ownership was transferred to one of
their creditors, the National Investment Development Corporation (NIDC), a
subsidiary of the PNB
Macris was later renamed as the National Realty Development Corporation
(Naredeco) and eventually merged with the National Warehousing
Corporation (Nawaco) to form the new PNB subsidiary, the PNB-Madecor.
PNEI applied with the Securities and Exchange Commission (SEC) for
suspension of payments. A management committee was thereafter created
which recommended to the SEC the sale of the company through
privatization. As a cost-saving measure, the committee likewise suggested the
retrenchment of several PNEI employees. Eventually, PNEI ceased its
operation. Along with the cessation of business came the various labor claims
commenced by the former employees of PNEI where the latter obtained
favorable decisions.
Labor Arbiter issued the Sixth Alias Writ of Execution commanding the
NLRC Sheriffs to levy on the assets of PNEI due to its former employees.
The sheriffs were likewise instructed to proceed against PNB, PNB-
Madecor and Mega Prime. In implementing the writ, the sheriffs levied
upon the four valuable pieces of real estate owned by PNB-Madecor. PNB,
PNB-Madecor and Mega Prime filed motion to quash the writ and third-
party claims.
Labor Arbiter declared that the subject Pantranco properties were owned by
PNB-Madecor. It being a corporation with a distinct and separate personality,
its assets could not answer for the liabilities of PNEI. Considering, however,
that PNB-Madecor executed a promissory note in favor of PNEI
forP7,884,000.00, the writ of execution to the extent of the said amount was
concerned was considered valid.
PNBs third-party claim to nullify the writ on the ground that it has an
interest in the Pantranco properties being a creditor of PNB-Madecor, on
the other hand, was denied because it only had an inchoate interest in the
properties.
On appeal to the NLRC, the same was denied and the Labor Arbiters
disposition was affirmed. MR denied.
In view of the P7,884,000.00 debt of PNB-Madecor to PNEI, an auction sale
was conducted over the Pantranco properties to satisfy the claim of the PNEI
employees, wherein CPAR Realty was adjudged as the highest bidder
On appeal, CA rule in favor of Respondents upholding the separate and
distinct personalities of Rs from PNEI. As such, there being no cogent reason
to pierce the veil of corporate fiction. MR denied.
ISSUE: Whether former PNEI employees can attach the properties of PNB,
PNB-Madecor and Mega Prime to satisfy their unpaid labor claims against
PNEI.
DECISION: No. First, the subject property is not owned by the judgment
debtor, that is, PNEI. Second, PNB, PNB-Madecor and Mega Prime are
corporations with personalities separate and distinct from that of PNEI.
The general rule is that a corporation has a personality separate and distinct
from those of its stockholders and other corporations to which it may be
connected. This is a fiction created by law for convenience and to prevent
injustice.
Clearly, what can be inferred from the earlier cases is that the doctrine of
piercing the corporate veil applies only in three (3) basic areas, namely:
1) defeat of public convenience as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation;
2) fraud cases or when the corporate entity is used to justify a wrong, protect
fraud, or defend a crime; or
3) alter ego cases, where a corporation is merely a farce since it is a 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
absence of malice, bad faith, or a specific provision of law making a
corporate officer liable, such corporate officer cannot be made personally
liable for corporate liabilities.
Assuming arguendo, that PNB may be held liable for the debts of PNEI,
petitioners still cannot proceed against the Pantranco properties, the same
being owned by PNB-Madecor, notwithstanding the fact that PNB-Madecor
was a subsidiary of PNB. The general rule remains that PNB-Madecor has a
personality separate and distinct from PNB. The mere fact that a corporation
owns all of the stocks of another corporation, taken alone, is not sufficient
to justify their being treated as one entity. If used to perform legitimate
functions, a subsidiarys separate existence shall be respected, and the
liability of the parent corporation as well as the subsidiary will be confined
to those arising in their respective businesses.
In PNB v. Ritratto Group, Inc., we outlined the circumstances which are
useful in the determination of whether a subsidiary is but a mere
instrumentality of the parent-corporation, to wit:
1. The parent corporation owns all or most of the capital stock of the
subsidiary;
2. The parent and subsidiary corporations have common directors or
officers;
3. The parent corporation finances the subsidiary;
4. The parent corporation subscribes to all the capital stock of the subsidiary
or otherwise causes its incorporation;
5. The subsidiary has grossly inadequate capital;
6. The parent corporation pays the salaries and other expenses or losses of
the subsidiary;
7. The subsidiary has substantially no business except with the parent
corporation or no assets except those conveyed to or by the parent
corporation;
8. In the papers of the parent corporation or in the statements of its officers,
the subsidiary is described as a department or division of the parent
corporation, or its business or financial responsibility is referred to as the
parent corporations own;
9. The parent corporation uses the property of the subsidiary as its own;
10. The directors or executives of the subsidiary do not act independently
in the interest of the subsidiary, but take their orders from the parent
corporation;
11. The formal legal requirements of the subsidiary are not observed.
None of the foregoing circumstances is present in the instant case. Thus,
piercing of PNB-Madecors corporate veil is not warranted.

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PEA-PTGWO vs NLRC DIGEST

DECEMBER 21, 2016 ~ VBDIAZ

TOPIC: (Classification of piercing cases; elements)

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