Concept Builders V NLRC

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Case Name Concept Builders, Inc. v NLRC
Topic Doctrine of Piercing the Corporate Veil
Case No. | Date G.R. No. 108734 | 29 May 1996
Ponente J. Hermosisima, Jr.
Petitioner Concept Builders, Inc
NLRC and Norberto Marabe, Rodolfo Raquel, Cristobal Riego, Manuel Gillego, Palcronio
Giducos, Pedro Aboigar, Norberto Comendador, Rogelio Salut, Emilio Garcia, Jr., Mariano Rio,
Respondent Paulina Basea, Alfredo Albera, Paquito Salut, Domingo Guarino, Romeo Galve, Dominador
Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe Basilan, and
Ruben Robalos
Definition
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 dishonest and unjust act in contravention of
Doctrine
plaintiff’s legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.
The absence of any one of these elements prevents ‘piercing the corporate veil.’ In applying the
‘instrumentality’ or ‘alter ego’ doctrine, the courts are concerned with reality and not form, with
how the corporation operated and the individual defendant’s relationship to that operation.
Enumeration
RELEVANT FACTS
● Concept Builders, Inc., a domestic corporation, is engaged in the construction business. Private
respondents were employed by Concept Builders as laborers, carpenters and riggers.
● On November 1981, private respondents were served individual written notices of termination of
employment by Concept Builders. It was stated in the individual notices that their contracts of
employment had expired and the project in which they were hired had been completed. It was found,
however, that at the time of the termination of the private respondents’ employment, the project in which
they were hired had not yet been finished and completed. Concept Builders had to engage the services of
sub-contractors whose workers performed the functions of private respondents.
● Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor practice and non-
payment of their legal holiday pay, overtime pay and 13 th month pay against Concept Builders.
● The Labor Arbiter rendered judgment ordering Concept Builder to reinstate private respondents and to
pay them back wages.
● The motion for reconsideration was denied by the NLRC on the ground that the said decision has
become final and executory.
● When the writ of garnishment was issued, it was partially satisfied through garnishment of sums from
Concept Builders’ debtor, Metropolitan Waterworks and Sewerage Authority.
● On 1 February 1989, an Alias Writ of Execution was issued by the Labor Arbiter directing the sheriff to
collect from Concept Builders the balance due of the judgment award and to reinstate private
respondents to their former positions. However, when the same was served, it was found out that
Concept Builders no longer occupied the premises of its then place of business.
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● A Second Alias Writ of Execution was issued upon motion of the private respondents.
● On 6 November 1989, a Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter, alleging that
the properties sought to be levied upon by the sheriff were owned by Hydro Philippines, Inc. (HPPI) of
which he is the Vice President.
● On 23 November, private respondents filed a Motion for Issuance of a Break-Open Order, alleging that
HPPIl and Concept Builders were owned by the same incorporators or stockholders. They also alleged
that Concept Builders temporarily suspended its business operations to evade its legal obligations to
them, and that private respondents were willing to post an indemnity bond to answer for any damages
which Concept Builders and HPPI may suffer because of the issuance of the break-open order.
● HPPI filed an Opposition to private respondents’ motion, contending that it is a corporation which is
separate and distinct from Concept Builders. It also alleged that the two companies are engaged in two
different kinds of businesses. (HPPI is a manufacturing firm while Concept Builders is engaged in
construction)
● The Labor Arbiter issued an Order which denied private respondents’ motion.
● On appeal to the NLRC, it applied the doctrine of piercing the corporate veil when it set aside the Order
of the Labor Arbiter and issued a break-open order.
● Concept Builders’ MR was denied.
ISSUE: W/N the veil of corporate fiction must be pierced to hold Concept Builders liable.
RULING:
YES. Concept Builders ceased its business operations to evade the payment of back wages to private respondents and
to bar them from being reinstated to their former positions.
The NLRC noted that while Concept Builders claimed that it ceased its business operations on 29 April 1986, it filed
an Information Sheet with the SEC on 15 May 1987, stating that its office address is at 355 Maysan Road,
Valenzuela, Metro Manila.
On the other hand, the third-party claimant HPPI submitted on the same day a similar Information Sheet stating that
its office address is likewise at 355 Maysan Road, Valenzuela, Metro Manila.
Furthermore, the NLRC stated that both Information Sheets were filed by the same person in the name of Virgilio
Casiño, the corporate secretary of both corporations. Both corporations also had the same president, board of
directors, corporate officers, and subscribers.
It thus appears that Concept Builders and HPPI shared the same address and/or premises. Hence, it cannot be said that
the property levied upon by the sheriff were not of Concept Builders’.
HPPI is a business conduit of Concept Builders and its emergence was skillfully orchestrated to avoid the financial
liability that has already attached to Concept Builders.
DISPOSITIVE PORTION
WHEREFORE, the petition is DISMISSED and the assailed resolutions of the NLRC are AFFIRMED. SO
ORDERED.
100-word Digest:
Concept Builders engaged private respondents as laborers, carpenters and riggers. They were served notices of
termination. They filed a case for illegal dismissal, ULP and non-payment of wages. The LA ordered for the
reinstatement of private respondents and payment of their back wages.
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When the writ of execution was served to Concept Builders, it was found out that they no longer occupied the
premises of its then place of business. A Dennis Cuyegkeng filed a third-party claim with the LA, alleging that the
properties sought to be levied upon by the sheriff were owned by HPPI.
Private respondents filed a Motion for Issuance of a Break-Open Order, alleging that HPPIl and Concept Builders
were owned by the same incorporators/stockholders.
Issue: W/N the veil of corporate fiction must be pierced to hold Concept Builders liable.
Ruling: YES. Concept Builders ceased its operations to evade the payment of back wages to private respondents and
to bar their reinstatement. It and HPPI shared the same address and/or premises. Hence, it cannot be said that the
property levied upon by the sheriff were not of Concept Builders’.

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