TIMOTEO H. SARONA v. NATIONAL LABOR RELATIONS COMMISSION G.R. No. 185280, January 18, 2012

TIMOTEO H. SARONA v.

NATIONAL LABOR RELATIONS COMMISSION

G.R. No. 185280, January 18, 2012
Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Doctrine of Piercing the Veil of Corporate Fiction)

FACTS:

On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime in April 1976, was asked by Karen Therese Tan (Karen), Sceptre’s Operation Manager, to submit a resignation letter as the same was supposedly required for applying for a position at Royale. The petitioner was also asked to fill up Royale’s employment application form, which was handed to him by Royale’s General Manager, respondent Cesar Antonio Tan II (Cesar).

After several weeks of being in floating status, Royale’s Security Officer, Martin Gono (Martin), assigned the petitioner at Highlight Metal Craft, Inc. (Highlight Metal) from July 29, 2003 to August 8, 2003. Thereafter, the petitioner was transferred and assigned to Wide Wide World Express, Inc. (WWWE, Inc.).

On September 17, 2003, the petitioner was informed that his assignment at WWWE, Inc. had been withdrawn because Royale had allegedly been replaced by another security agency. The petitioner, however, shortly discovered thereafter that Royale was never replaced as WWWE, Inc.’s security agency. When he placed a call at WWWE, Inc., he learned that his fellow security guard was not relieved from his post.

On September 21, 2003, the petitioner was once again assigned at Highlight Metal, albeit for a short period from September 22, 2003 to September 30, 2003. Subsequently, when the petitioner reported at Royale’s office on October 1, 2003, Martin informed him that he would no longer be given any assignment per the instructions of Aida Sabalones-Tan (Aida), general manager of Sceptre. This prompted him to file a complaint for illegal dismissal on October 4, 2003.

ISSUE:

Whether or not Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the petitioner’s length of service with Sceptre and for holding it liable for the benefits that have accrued to him arising from his employment with Sceptre?

RULING:

Yes.

The doctrine of piercing the corporate veil applies in alter ego cases, where a corporation is merely a farce since it is a 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.

The respondents’ scheme reeks of bad faith and fraud and compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling Royale to credit and recognize the petitioner’s length of service with Sceptre. The respondents cannot use the legal fiction of a separate corporate personality for ends subversive of the policy and purpose behind its creation53 or which could not have been intended by law to which it owed its being.

Also, Sceptre and Royale have the same principal place of business. As early as October 14, 1994, Aida and Wilfredo became the owners of the property used by Sceptre as its principal place of business by virtue of a Deed of Absolute Sale they executed with Roso.57 Royale, shortly after its incorporation, started to hold office in the same property. These, the respondents failed to dispute.

Royale also claimed a right to the cash bond which the petitioner posted when he was still with Sceptre. If Sceptre and Royale are indeed separate entities, Sceptre should have released the petitioner’s cash bond when he resigned and Royale would have required the petitioner to post a new cash bond in its favor.

However, the manner by which the petitioner was made to resign from Sceptre and how he became an employee of Royale suggest the perverted use of the legal fiction of the separate corporate personality.

Royale is a continuation or successor of Sceptre.