INDOPHIL TEXTILE MILL WORKERS UNION-PTGWO (PETITIONER) VS. VOLUNTARY ARBITRATOR TEODORICO P.

CALICA AND INDOPHIL TEXTILE MILLS, INC. (RESPONDENTS) FEBRUARY 3, 1992 J. MEDIALDEA

085. Indophil Textile Mill Workers Union PTGWO v. Calica

the 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. o In such cases, the corporation will be considered as a mere association of persons. o The members or stockholders or the corporation will be considered as the corporation, that is, liability will attach directly to the officers and stockholders. o 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. -BETTINA