Facts:

The case involves A.C. Ransom Labor Union-CCLU as the petitioner and A.C. Ransom (Phils.) Corporation, along with its officers Ruben Hernandez, Maximo C. Hernandez, Jr., Porfirio R. Valencia, Laura H. Cornejo, Francisco Hernandez, Celestino C. Hernandez, and Ma. Rosario Hernandez as respondents. The events leading to this case began with a decision by the Court of Industrial Relations (CIR) on August 19, 1972, which found A.C. Ransom (Phils.) Corporation guilty of unfair labor practices, specifically interference and discrimination against its employees. The CIR ordered the corporation to cease such practices, declared a strike by the employees as legal and justified, and mandated the immediate reinstatement of 22 employees with backwages from July 25, 1969, until actual reinstatement, without loss of seniority rights. The decision was affirmed by the Supreme Court on February 26, 1973, when it denied a petition for review filed by Ransom.

Subsequent motions for execution o...

Facts:

Background and CIR Decision

• In two earlier cases rendered on August 19, 1972, by the Court of Industrial Relations (CIR), it was held that A.C. Ransom Philippine Corporation committed unfair labor practices by interfering with and discriminating against union members.
• The CIR ordered the corporation, its officers, and its agents to cease and desist from such practices, reinstate the affected employees immediately with backwages from July 25, 1969, and preserve their seniority rights and other privileges.

Computation and Execution of Backwages

• The examiner computed the backwages due to 22 employees at ₱199,276.00.
• Despite several motions for execution filed by the union beginning January 27, 1973, RANSOM opposed these motions citing its precarious financial condition.
• Following a motion by the union on April 22, 1973, and subsequent hearings, the computed award was reduced to ₱164,984.00.

Corporate Closure and Reorganization

• RANSOM applied for clearance to cease operations and terminate employment, which was granted on June 7, 1973, effective May 1, 1973, though without prejudice to the employees’ rights to redress grievances.
• The justification for the clearance was primarily due to financial difficulties stemming from obligations incurred before 1966.
• On January 21, 1974, the union renewed motions for execution, alleging that despite RANSOM’s financial claims, its officers and principal stockholders had organized a new entity, Rosario Industrial Corporation (ROSARIO), which operated with the same equipment, personnel, business stocks, and location.

Allegations of Evasion and Subsequent Orders

• The union contended that ROSARIO was effectively a “run-away corporation” formed to evade the financial obligations imposed by the CIR decision.
• A writ of execution was issued by Labor Arbiter Tito F. Genilo on March 11, 1980, which included personal liability for several officers/agents of RANSOM.
• Subsequent to the Labor Arbiter’s Order, the NLRC on appeal relieved the individual officers and agents of personal liability, arguing that there was no evidence they had exceeded their authority and that they had not been given a chance to be heard.
• Reconsiderations by the union and RANSOM followed, leading to a special civil action for certiorari.

Final Litigation Developments

• On June 10, 1986, the Supreme Court set aside the NLRC decision and reinstated the Labor Arbiter’s Order with modifications.
• The modification limited personal liability for the backwages initially to the corporation’s President in 1974 and subsequent Presidents up to the termination of the corporation’s life, while also holding ROSARIO and its officers jointly and severally liable.
• The decision addressed the issues of corporate continuity and the evasion of labor obligations through the creation of a new corporate entity.

Issue:

Legal Status and Liability of Corporate Officers

• Whether the separate corporate personality of A.C. Ransom Philippine Corporation and the subsequent Rosario Industrial Corporation could shield their officers and agents from personal liability for the payment of backwages and the enforcement of the CIR decision.
• Whether the modifications made by the NLRC in relieving officers of personal liability were legally tenable.

Piercing the Corporate Veil

• Whether the court should pierce the corporate veil to hold the individual officers and agents liable, given that both corporations were managed by members of the same family and operated in the same manner.
• Whether the creation of ROSARIO was a deliberate and malicious stratagem to evade financial obligations to the union members.

Enforcement of Workers’ Preference in the Event of Bankruptcy

• Whether the precedent of workers enjoying first preference, as stipulated under Article 110 of the Labor Code, applies even where the employer’s properties are encumbered or when there is an alleged bankruptcy.

Ruling:

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Ratio:

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Doctrine:

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