[G.R. No. 108734.

May 29, 1996]

Concept Builders Inc. vs. NLRC
Facts:
Petitioner Concept Builders, Inc., with principal office at 355 Maysan Road, Valenzuela, Metro Manila, a
domestic corporation engaged in the construction business. Private respondents were employed by said
company as laborers, carpenters and riggers.
The private respondents were given termination letter stating that their contracts of employment had
expired and the project in which they were hired had been completed. However, the private respondents
found out that the project in which they were hired had not yet been finished and completed.
Aggrieved, private respondents filed a complaint for illegal dismissal. Labor Arbiter rendered judgment
ordering petitioner to reinstate private respondents. The said decision had become final and executory.
An Alias Writ of Execution was issued by the Labor Arbiter.
The sheriff tried to serve the alias but the service was refused on the ground that petitioner no longer
occupied the premises and all the employees inside petitioner’s premises claimed that they were
employees of Hydro Pipes Philippines, Inc. (HPPI)
A certain 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 (Phils.), Inc. (HPPI) of which he is the Vice-
President.
Private respondents filed a Motion for Issuance of a Break-Open Order, alleging that HPPI and petitioner
corporation were owned by the same incorporator and stockholders.
HPPI filed an Opposition contending that HPPI is a corporation which is separate and distinct from
petitioner.
NLRC issued a break- open order against Concept Builders and HPPI.
Petitioner alleges that the NLRC committed grave abuse of discretion when it ordered the execution of its
decision despite a third-party claim on the levied property. Petitioner further contends, that the doctrine
of piercing the corporate veil should not have been applied, in this case, in the absence of any showing
that it created HPPI in order to evade its liability to private respondents
Issue: whether or not the doctrine of piercing the corporate veil should apply in this case?
Held: YES
It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from
its stockholders and from other corporations to which it may be connected. But, this separate and distinct
personality of a corporation is merely a fiction created by law for convenience and to promote justice. So,
when the notion of separate juridical personality is used to defeat public convenience, justify wrong,
protect fraud or defend crime, or is used as a device to defeat the labor laws, this separate personality of
the corporation may be disregarded or the veil of corporate fiction pierced.
No hard and fast rule can be accurately laid down, but certainly, there are some probative factors of
identity that will justify the application of the doctrine of piercing the corporate veil, to wit:
1. Stock ownership by one or common ownership of both corporations.
2. Identity of directors and officers.
3. The manner of keeping corporate books and records.
4. Methods of conducting the business.
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
plaintiffs 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.
In this case, the NLRC noted that, while petitioner claimed that it ceased its business operations on April
29, 1986, it filed an Information Sheet with the Securities and Exchange Commission on May 15, 1987,
stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI,
the third-party claimant, submitted on the same day, a similar information sheet stating that its office
address is at 355 Maysan Road, Valenzuela, Metro Manila.
Furthermore, the NLRC stated that:
Both information sheets were filed by the same Virgilio O. Casino as the corporate secretary of both
corporations. It would also not be amiss to note that both corporations had the same president, the same
board of directors, the same corporate officers, and substantially the same subscribers.
From the foregoing, it appears that, among other things, the respondent (herein petitioner) and the third-
party claimant shared the same address and/or premises. Under this circumstances, it cannot be said that
the property levied upon by the sheriff were not of respondents.
Clearly, petitioner ceased its business operations in order to evade the payment to private respondents
of back wages and to bar their reinstatement to their former positions. HPPI is obviously a business
conduit of petitioner corporation and its emergence was skillfully orchestrated to avoid the financial
liability that already attached to petitioner corporation.