Times Transportation Company Vs Santos Sotelo

Times Transportation Company, Inc. v Santos Sotelo, et al.
G.R. No. 163786 February 16, 2005
FACTS: Petitioner Times Transportation Company, Inc. (Times) is a corporation engaged in the
business of land transportation. Prior to its closure in 1997, the Times Employees Union (TEU)
was formed and issued a certificate of union registration. Times challenged the legitimacy of TEU by
filing a petition for the cancellation of its union registration. TEU held a strike in response to Times’
alleged attempt to form a rival union and its dismissal of the employees identified to be active union
members. Upon petition by Times, then Labor Secretary, and now Associate Justice of this Court,
Leonardo A. Quisumbing, assumed jurisdiction over the case and referred the matter to the NLRC for
compulsory arbitration. In a certification election, TEU was certified as the sole and exclusive collective
bargaining agent in Times. Consequently, TEU’s president wrote the management of Times and
requested for collective bargaining. Times refused on the ground that the decision of the Med-Arbiter
upholding the validity of the certification election was not yet final and executory. TEU filed a Notice of
Strike. Another conciliation/mediation proceeding was conducted for the purpose of settling the
brewing dispute. In the meantime, Times’ management implemented a retrenchment program and
notices of retrenchment were sent to some of its employees, including the respondents herein,
informing them of their retrenchment effective 30 days thereafter. TEU held a strike vote on grounds of
unfair labor practice on the part of Times. For alleged participation in what it deemed was an illegal
strike, Times terminated all the 123 striking employees by virtue of two notices. Later, then DOLE
Secretary Quisumbing issued the second return-to-work order certifying the dispute to the NLRC. While
the strike was ended, the employees were no longer admitted back to work. In the meantime, Mencorp
Transport Systems, Inc. (Mencorp) had acquired ownership over Times’ Certificates of Public
Convenience and a number of its bus units by virtue of several deeds of sale. Mencorp is controlled and
operated by Mrs. Virginia Mendoza, daughter of Santiago Rondaris, the majority stockholder of Times.
Labor Arbiter Renaldo O. Hernandez rendered a decision stating that the sale of said respondent
company to respondents Mencorp Transport Systems Company (sic), Inc. and/or Virginia Mendoza and
Reynaldo Mendoza was simulated and/or effected in bad faith. Reconsideration thereof was denied.
Thus, the respondents appealed to the Court of Appeals by way of a petition for certiorari, attributing
grave abuse of discretion on the NLRC for not ruling that Times and Mencorp are one and the same
entity. The Court of Appeals rendered the decision granting the instant petition. Setting aside the
Resolution of the NLRC. Reinstating the Decision of the Labor Arbiter.
Times, Mencorp and the Spouses Mendoza filed Motions for Reconsideration, which were
denied. Hence, this petition for review.
ISSUE:
1.) W/N piercing the corporate veil in this case was proper. [YES, it was proper.]
RULING: Times’ petition lacks merit.
1.) We have held that piercing the corporate veil is warranted only in cases when the
separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, such that in the case of two corporations, the law will regard the
corporations as merged into one. It may be allowed only if the following elements concur:
(1) control—not mere stock control, but complete domination—not only of finances, but
of policy and business practice in respect to the transaction attacked; (2) such control
must have been used to commit a fraud or a wrong to perpetuate the violation of a
statutory or other positive legal duty, or a dishonest and an unjust act in contravention of
a legal right; and (3) the said control and breach of duty must have proximately caused
the injury or unjust loss complained of.
The following are findings of the Labor Arbiter, to wit:
1. The sale was transferred to a corporation controlled by V. Mendoza, the
daughter of respondent S. Rondaris of [Times] where she is/was also a director,
as proven by the articles of incorporation of [Mencorp];
2. All of the stockholders/incorporators of [Mencorp]: Reynaldo M. Mendoza,
Virginia R. Mendoza, Vernon Gerard R. Mendoza, Vivian Charity R. Mendoza,
Vevey Rosario R. Mendoza are all relatives of respondent S. Rondaris;
3. The timing of the sale evidently was to negate the
employees/complainants/members’ right to organization as it was effected
when their union (TEU) was just organized/requesting [Times] to bargain;
4. ...
5. [Mencorp] never obtained a franchise since its supposed incorporation in 10
May 1994 but at present, all the buses of [Times] are already being run/operated
by respondent [Mencorp], the franchise of [Times] having been transferred to it.
We uphold the findings of the labor arbiter and the Court of Appeals. The sale of Times’
franchise as well as most of its bus units to a company owned by Rondaris’ daughter
and family members, right in the middle of a labor dispute, is highly suspicious. It is
evident that the transaction was made in order to remove Times’ remaining assets from
the reach of any judgment that may be rendered in the unfair labor practice cases filed
against it.
The petition is DENIED. The decision of the Court of Appeals is hereby AFFIRMED in toto.

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Times Transportation Company, Inc. v Santos Sotelo, et al.

G.R. No. 163786 February 16, 2005

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