4 Guidelines in Establishing a Separate Bargaining Unit
The central issue submitted for arbitration is whether or not the operations in Indophil Acrylic Corporation are an extension or expansion of private respondent Company. Corollary to the aforementioned issue is the question of whether or not the rank-and-file employees working at Indophil Acrylic should be recognized as part of, and/or within the scope of the bargaining unit.
Petitioner maintains that public respondent Arbitrator gravely erred in interpreting Section l(c), Article I of the CBA in its literal meaning without taking cognizance of the facts adduced that the creation of the aforesaid Indophil Acrylic is but a devise of respondent Company to evade the application of the CBA between petitioner Union and respondent Company.
Petitioner stresses that the articles of incorporation of the two corporations establish that the two entities are engaged in the same kind of business, which is the manufacture and sale of yarns of various counts and kinds and of other materials of kindred character or nature.
Contrary to petitioner's assertion, the public respondent through the Solicitor General argues that the Indophil Acrylic Manufacturing Corporation is [GUIDELINE #1] not an alter ego or an adjunct or business conduit of private respondent because it has a separate legitimate business purpose. In addition, the Solicitor General alleges that the primary purpose of private respondent is to engage in the business of manufacturing yarns of various counts and kinds and textiles. On the other hand, the primary purpose of Indophil Acrylic is to manufacture, buy, sell at wholesale basis, barter, import, export and otherwise deal in yarns of various counts and kinds. Hence, unlike private respondent, Indophil Acrylic cannot manufacture textiles while private respondent cannot buy or import yarns.
Furthermore, petitioner emphasizes that the two corporations have practically the same incorporators, directors and officers. In fact, of the total stock subscription of Indophil Acrylic, P1,749,970.00 which represents seventy percent (70%) of the total subscription of P2,500,000.00 was subscribed to by respondent Company.
On this point, private respondent cited the case of Diatagon Labor Federation v. Ople, G.R. No. L-44493-94, December 3, 1980, 10l SCRA 534, which ruled that two corporations cannot be treated as a single bargaining unit even if their businesses are related. It submits that the fact that there are as many bargaining units as there are companies in a conglomeration of companies is [GUIDELINE #2] a positive proof that a corporation is endowed with a legal personality distinctly its own, independent and separate from other corporations (see Rollo, pp. 160-161).
Petitioner notes that the foregoing evidence sufficiently establish that Acrylic is but an extension or expansion of private respondent, to wit:
(a) the two corporations have their physical plants, offices and facilities situated in the same compound, at Barrio Lambakin, Marilao, Bulacan;
(b) many of private respondent's own machineries, such as dyeing machines, reeling, boiler, Kamitsus among others, were transferred to and are now installed and being used in the Acrylic plant;
(c) the services of a number of units, departments or sections of private respondent are provided to Acrylic; and
(d) the employees of private respondent are the same persons manning and servicing the units of Acrylic. (see Rollo, pp. 12-13)
Private respondent insists that the existence of a bonafide business relationship between Acrylic and private respondent is not a [GUIDELINE #3] proof of being a single corporate entity because the services which are supposedly provided by it to Acrylic are auxiliary services or activities which are not really essential in the actual production of Acrylic. It also pointed out that the essential services are discharged exclusively by Acrylic personnel under the control and supervision of Acrylic managers and supervisors.
In sum, petitioner insists that the public respondent committed grave abuse of discretion amounting to lack or in excess of jurisdiction in erroneously interpreting the CBA provision and in failing to disregard the corporate entity of Acrylic.
We find the petition devoid of merit.
Time and again, We stress that the decisions of voluntary arbitrators are to be given the highest respect and a certain measure of finality, but this is not a hard and fast rule, it does not preclude judicial review thereof where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law were brought to our attention. (see Ocampo, et al. v. National Labor Relations Commission, G.R. No. 81677, 25 July 1990, First Division Minute Resolution citing Oceanic Bic Division (FFW) v. Romero, G.R. No. L-43890, July 16, 1984, 130 SCRA 392)
It should be emphasized that in rendering the subject arbitral award, the voluntary arbitrator Teodorico Calica, a professor of the U.P. Asian Labor Education Center, now the Institute for Industrial Relations, found that the existing law and jurisprudence on the matter, supported the private respondent's contentions. Contrary to petitioner's assertion, public respondent cited facts and the law upon which he based the award. Hence, public respondent did not abuse his discretion.
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. In such cases, the corporation will be considered as a mere association of persons. The members or stockholders of the corporation will be considered as the corporation, that is liability will attach directly to the officers and stockholders. 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. (Umali et al. v. Court of Appeals, G.R. No. 89561, September 13, 1990, 189 SCRA 529, 542)
In the case at bar, petitioner 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 petitioner Union and private respondent Company. While we do not discount the possibility of the similarities of the businesses of private respondent and Acrylic, neither are we inclined to apply the doctrine invoked by petitioner in granting the relief sought. The fact that the businesses of private respondent and Acrylic are related, that some of the employees of the private respondent are the same persons manning and providing for auxilliary services to the units of Acrylic, [GUIDELINE #4] and that the physical plants, offices and facilities are situated in the same compound, it is our considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of Acrylic.
Petitioner maintains that public respondent Arbitrator gravely erred in interpreting Section l(c), Article I of the CBA in its literal meaning without taking cognizance of the facts adduced that the creation of the aforesaid Indophil Acrylic is but a devise of respondent Company to evade the application of the CBA between petitioner Union and respondent Company.
Petitioner stresses that the articles of incorporation of the two corporations establish that the two entities are engaged in the same kind of business, which is the manufacture and sale of yarns of various counts and kinds and of other materials of kindred character or nature.
Contrary to petitioner's assertion, the public respondent through the Solicitor General argues that the Indophil Acrylic Manufacturing Corporation is [GUIDELINE #1] not an alter ego or an adjunct or business conduit of private respondent because it has a separate legitimate business purpose. In addition, the Solicitor General alleges that the primary purpose of private respondent is to engage in the business of manufacturing yarns of various counts and kinds and textiles. On the other hand, the primary purpose of Indophil Acrylic is to manufacture, buy, sell at wholesale basis, barter, import, export and otherwise deal in yarns of various counts and kinds. Hence, unlike private respondent, Indophil Acrylic cannot manufacture textiles while private respondent cannot buy or import yarns.
Furthermore, petitioner emphasizes that the two corporations have practically the same incorporators, directors and officers. In fact, of the total stock subscription of Indophil Acrylic, P1,749,970.00 which represents seventy percent (70%) of the total subscription of P2,500,000.00 was subscribed to by respondent Company.
On this point, private respondent cited the case of Diatagon Labor Federation v. Ople, G.R. No. L-44493-94, December 3, 1980, 10l SCRA 534, which ruled that two corporations cannot be treated as a single bargaining unit even if their businesses are related. It submits that the fact that there are as many bargaining units as there are companies in a conglomeration of companies is [GUIDELINE #2] a positive proof that a corporation is endowed with a legal personality distinctly its own, independent and separate from other corporations (see Rollo, pp. 160-161).
Petitioner notes that the foregoing evidence sufficiently establish that Acrylic is but an extension or expansion of private respondent, to wit:
(a) the two corporations have their physical plants, offices and facilities situated in the same compound, at Barrio Lambakin, Marilao, Bulacan;
(b) many of private respondent's own machineries, such as dyeing machines, reeling, boiler, Kamitsus among others, were transferred to and are now installed and being used in the Acrylic plant;
(c) the services of a number of units, departments or sections of private respondent are provided to Acrylic; and
(d) the employees of private respondent are the same persons manning and servicing the units of Acrylic. (see Rollo, pp. 12-13)
Private respondent insists that the existence of a bonafide business relationship between Acrylic and private respondent is not a [GUIDELINE #3] proof of being a single corporate entity because the services which are supposedly provided by it to Acrylic are auxiliary services or activities which are not really essential in the actual production of Acrylic. It also pointed out that the essential services are discharged exclusively by Acrylic personnel under the control and supervision of Acrylic managers and supervisors.
In sum, petitioner insists that the public respondent committed grave abuse of discretion amounting to lack or in excess of jurisdiction in erroneously interpreting the CBA provision and in failing to disregard the corporate entity of Acrylic.
We find the petition devoid of merit.
Time and again, We stress that the decisions of voluntary arbitrators are to be given the highest respect and a certain measure of finality, but this is not a hard and fast rule, it does not preclude judicial review thereof where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law were brought to our attention. (see Ocampo, et al. v. National Labor Relations Commission, G.R. No. 81677, 25 July 1990, First Division Minute Resolution citing Oceanic Bic Division (FFW) v. Romero, G.R. No. L-43890, July 16, 1984, 130 SCRA 392)
It should be emphasized that in rendering the subject arbitral award, the voluntary arbitrator Teodorico Calica, a professor of the U.P. Asian Labor Education Center, now the Institute for Industrial Relations, found that the existing law and jurisprudence on the matter, supported the private respondent's contentions. Contrary to petitioner's assertion, public respondent cited facts and the law upon which he based the award. Hence, public respondent did not abuse his discretion.
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. In such cases, the corporation will be considered as a mere association of persons. The members or stockholders of the corporation will be considered as the corporation, that is liability will attach directly to the officers and stockholders. 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. (Umali et al. v. Court of Appeals, G.R. No. 89561, September 13, 1990, 189 SCRA 529, 542)
In the case at bar, petitioner 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 petitioner Union and private respondent Company. While we do not discount the possibility of the similarities of the businesses of private respondent and Acrylic, neither are we inclined to apply the doctrine invoked by petitioner in granting the relief sought. The fact that the businesses of private respondent and Acrylic are related, that some of the employees of the private respondent are the same persons manning and providing for auxilliary services to the units of Acrylic, [GUIDELINE #4] and that the physical plants, offices and facilities are situated in the same compound, it is our considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of Acrylic.
In the same case of Umali, et al. v. Court of Appeals (supra), We already emphasized that "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." In the instant case, petitioner does not seek to impose a claim against the members of the Acrylic.
Furthermore, We already ruled in the case of Diatagon Labor Federation Local 110 of the ULGWP v. Ople (supra) that it is grave abuse of discretion to treat two companies as a single bargaining unit when these companies are indubitably distinct entities with separate juridical personalities.
Hence, the Acrylic not being an extension or expansion of private respondent, the rank-and-file employees working at Acrylic should not be recognized as part of, and/or within the scope of the petitioner, as the bargaining representative of private respondent.
All premises considered, the Court is convinced that the public respondent Voluntary Arbitrator did not commit grave abuse of discretion in its interpretation of Section l(c), Article I of the CBA that the Acrylic is not an extension or expansion of private respondent.
Furthermore, We already ruled in the case of Diatagon Labor Federation Local 110 of the ULGWP v. Ople (supra) that it is grave abuse of discretion to treat two companies as a single bargaining unit when these companies are indubitably distinct entities with separate juridical personalities.
Hence, the Acrylic not being an extension or expansion of private respondent, the rank-and-file employees working at Acrylic should not be recognized as part of, and/or within the scope of the petitioner, as the bargaining representative of private respondent.
All premises considered, the Court is convinced that the public respondent Voluntary Arbitrator did not commit grave abuse of discretion in its interpretation of Section l(c), Article I of the CBA that the Acrylic is not an extension or expansion of private respondent.
[1] The existence of a bona fide business relationship between the 2 companies is not proof of being a single corporate entity, especially when the services provided by the other company are merely auxiliary;
[2] The fact that there are as many bargaining units as there are companies in a conglomeration of companies is a positive proof that a corporation is endowed with a legal personality distinct, independent and separate from other corporations;
[3] Separate legitimate purposes militate against treating one corporation as an adjunct or alter ego of the other; and
[4] The fact that the businesses are related, that some of the employees are the same persons working in the other company and the physical plants, offices and facilities are in the same compound are not sufficient to justify piercing the corporate veil. (Indophil Textile Mills Workers Union v. Calica, 1992)
[3] Separate legitimate purposes militate against treating one corporation as an adjunct or alter ego of the other; and
[4] The fact that the businesses are related, that some of the employees are the same persons working in the other company and the physical plants, offices and facilities are in the same compound are not sufficient to justify piercing the corporate veil. (Indophil Textile Mills Workers Union v. Calica, 1992)
