Case Summary (G.R. No. 108734)
Key Dates
• November 1981 – Private respondents received notices terminating employment effective November 30, 1981.
• December 19, 1984 – Labor Arbiter ordered reinstatement and payment of back wages for one year.
• November 27, 1985 – NLRC denied petitioner’s motion for reconsideration; decision became final.
• October 29, 1986 – Writ of execution issued; partial garnishment of P81,385.34 from petitioner’s debtor.
• February 1, 1989 – Alias writ of execution issued for P117,414.76 balance and reinstatement order.
• September 26, 1989 – Second alias writ issued; enforcement obstructed by security guards.
• November 23, 1989 – Private respondents moved for break-open order after HPPI’s third-party claim.
• March 2, 1990 – Labor Arbiter denied break-open order.
• April 23, 1992 – NLRC granted break-open order and dismissed HPPI’s claim.
• December 3, 1992 – NLRC denied petitioner’s motion for reconsideration.
• May 29, 1996 – Supreme Court decision rendered.
Applicable Law
• 1987 Philippine Constitution (Article XIII, Section 3: security of tenure and protection of labor).
• Doctrine of Piercing the Corporate Veil (alter ego/instrumentality rule).
• Section 3, Rule VII of NLRC Manual on Execution of Judgment.
Facts
Petitioner terminated private respondents on the alleged completion of a project that was, in fact, unfinished. Sub-contractors replaced respondents. Respondents filed for illegal dismissal, unfair labor practice, and unpaid benefits. The Labor Arbiter ordered reinstatement and back wages. Execution of the award was only partially satisfied. When sheriffs attempted to levy personal property at petitioner’s premises, they were denied entry and confronted with a third-party claim by HPPI. Private respondents then sought a break-open order to access the premises and sell levied property.
Issue
Whether the NLRC committed grave abuse of discretion by issuing a break-open order against petitioner’s premises despite HPPI’s third-party claim, and whether piercing petitioner’s corporate veil was justified.
Ruling
The Supreme Court affirmed the NLRC’s resolutions, holding that no grave abuse of discretion occurred and that piercing the corporate veil was warranted.
Reasoning and Analysis
- Separate Corporate Personality vs. Fraudulent Device
– A corporation is distinct from its stockholders, but the fiction may be disregarded to prevent fraud or defeat of legal obligations. - Instrumentality/Alter Ego Doctrine
– Complete domination of finances, policies, and practices by petitioner over HPPI rendered HPPI a mere conduit.
– Probative factors: common stockholders (e.g., Antonio W. Lim, Dennis S. Cuyegkeng), identical directors and officers, identical principal office, a
Case Syllabus (G.R. No. 108734)
Facts
- Concept Builders, Inc. is a domestic construction corporation with principal office at 355 Maysan Road, Valenzuela, Metro Manila.
- Private respondents were employed as laborers, carpenters, and riggers and received termination notices effective November 30, 1981, citing project completion.
- At termination, the project remained unfinished; petitioner engaged subcontractors to perform respondents’ duties.
- Aggrieved respondents filed complaints for illegal dismissal, unfair labor practice, and non-payment of holiday pay, overtime pay, and thirteenth-month pay.
- On December 19, 1984, the Labor Arbiter ordered reinstatement and payment of back wages equal to 300 working days.
- The NLRC dismissed petitioner’s motion for reconsideration on November 27, 1985, making the decision final and executory.
- On October 16, 1986, the NLRC Research and Information Department quantified back wages at ₱199,800.00.
- A writ of execution issued October 29, 1986 was partially satisfied by garnishing ₱81,385.34 from the Metropolitan Waterworks and Sewerage Authority.
Execution Proceedings and Levy Difficulties
- On February 1, 1989, an alias writ of execution directed collection of the ₱117,414.76 balance and reinstatement; service was refused July 13, 1989 as petitioner had vacated its premises.
- A second alias writ issued September 26, 1989 was obstructed: HPPI employees claimed ownership of levied goods and armed guards prevented removal.
- The special sheriff recommended a “break-open order” to enter premises and auction the levied personal properties.
Third-Party Claim and Break-Open Motion
- On November 6, 1989, Dennis Cuyegkeng filed a third-party claim asserting HPPI’s ownership of the levied assets.
- On November 23, 1989, private respondents moved for a break-open order, alleging common incorporators/stockholders of petitioner and HPPI and suspension of operations to evade liabilities; they offered an indemnity bond.
- Certified General Information Sheets dat