GODOY, JERICO U.

COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION (CEEA) represented by its

union president CECILIA TALAVERA, GEORGE ARSOLA, MARIO DIAGO AND
SOCORRO BONCAYAO v. THE NATIONAL LABOR RELATIONS COMMISSION,
COMPLEX ELECTRONICS CORPORATION, IONICS CIRCUIT, INC., LAWRENCE
QUA, REMEDIOS DE JESUS, MANUEL GONZAGA, ROMY DELA ROSA, TERESITA
ANDINO, ARMAN CABACUNGAN, GERRY GABANA, EUSEBIA MARANAN and
BERNADETH GACAD

THE CASE:

In this case, the story began with President Lawrence Qua, who based on the records, President
of both subcontractors Complex Electronics Corporation (manufacturer of electrical products)
and Ionics Circuit Inc (semiconductor business).

Let’s proceed with the story first of Complex:

Complex engaged services in consigning their materials, equipment, machineries in which their
clients also engaged in the same line of industry. The case arose when one of their clients, Lite-
On Philippines Electronics Co, aggrieved to lower their price of assembly cost by 10% in their
Taiwan client because of uncompetitive price to the prices in China. In response, the Complex
refused as they also argued their losses with their operations which later on left no choice but to
close down their operations in Lite-On Philippines promising retrenchment pays with their
possible retrenched workers and to some, prolonging their jobs in accordance with their skills.

On the side note, the petitioner UNION in this case commenced a strike to push for a
retrenchment pay equivalent to one (1) month salary for every year of service which the
Complex refused.

Upon total closure of the operations in Lite-On, Complex’ machines, equipment, and materials
for operations were all transferred to IONICS Circuit.

Here COMPLEX UNION filed a complaint for unfair labor practice, illegal closure/illegal
lockout, money claims for vacation leave, sick leave, unpaid wages, 13th month pay, damages
and attorney’s fees against Complex and to Ionics because both companies were held by the
same President.

Complex averred that they suffered losses, delivery schedules were not complied Fearful that the
machinery, equipment and materials would be rendered inoperative and unproductive due to the
impending strike of the workers, the customers ordered their pull-out and transfer to Ionics.

On the other hand, Ionics argued that while it might be true that President Qua was the president
but didn’t recognize him as the OWNER of the said company. They further argued that the
hiring of some displaced workers of Complex was an exercise of management prerogatives.
Likewise, the transfer of the machinery, equipment and materials from Complex was the
decision of the owners who were common customers of Complex and Ionics.
GODOY, JERICO U.

The Labor Arbiter actually favored the plaintiffs. But later on, both parties raised an appeal to the
NLRC until their petitions to the Supreme Court.
The plaintiffs argued that both companies have the same set of not only the President but also
Board of Directors. The manifestation of transferring machines, materials, as well as the
equipment shows the fact that Ionics Circuit was the runaway shop.

The matters reached the Supreme Court raising the issue that the Ionics Circuit is a runaway shop
hence capable to pierce the veil of corporate fiction. It also raises the issue of personal liability of
President Lawrence for corporate liabilities.

A) The Court ruled in the negative. The Court defined a runaway shop as an:
1) industrial plant that is moved from one location to another by its owner to evade union
labor regulations or state law
2) describe a factory that is relocated to a new location to combat worker discrimination. to
the old factory for their union activities.
3) where the employer moves the business to another location or temporarily closes the
business for anti-union purposes.

In this sense, a "runaway shop" is a relocation motivated by anti-union hostility rather

than commercial reasons.

In this case, however, Ionics was not established for the sole purpose of transferring Complex's
business. When a labor dispute broke out at Complex, Ionics existed as an independent company.
As mentioned earlier, it has been existing since 8 years before the dispute.

Therefore, it cannot be said that the temporary closure of Complex and its subsequent transfer of
operations to Ionics were for the sake of breaking the alliance. The union has not proven that the
main reason for the closure of the establishment is the union activities of the workers. 

B) On the issue of capability for piercing the veil of the corporate fiction, the argument was
untenable.

The Court ruled that mere fact that one or more corporations are owned or controlled by the
same or single stockholder is not a sufficient ground for disregarding separate corporate
personalities.

In this case, Ionics may be engaged in the same business as that of Complex, but this fact alone
is not enough reason to pierce the veil of corporate fiction of the corporation. Well-settled is the
rule that a corporation has a personality separate and distinct from that of its officers and
stockholders. This fiction of corporate entity can only be disregarded in certain cases such as
when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime. To
disregard said separate juridical personality of a corporation, the wrongdoing must be clearly and
convincingly established.
GODOY, JERICO U.

C) On issue of personal liability of Lawrence Qua, the Court ruled that it is settled that in the
absence of malice or bad faith, a stockholder or an officer of a corporation cannot be
made personally liable for corporate liabilities.

In the case at bar, while it may be true that the equipment, materials and machinery were
pulled-out of Complex and transferred to Ionics during the night, their action was
sufficiently explained by Lawrence Qua to the petition filed by the Union that such acts
of the President were, in fact, made pursuant to his official functions as the President
because of the demands of Complex’s customers who were already alarmed by the
pending labor dispute and imminent strike to be stage by the laborers, to have their
equipment, machinery and materials pull out of Complex. Hence, nowhere to be found
any evidence of bad faith.

FINALLY, the Court ruled in favor of the petitioners as against only the COMPLEX for
separation benefits.
GODOY, JERICO U.

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD. v. NATIONAL
LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND
MARCELO G. SANTOS

THE CASE:

The case started when the private respondent and an OFW Santos hired as a printer in China.
Prior to that case, Santos was a former printer in Mazoon Printing Press, Sultanate of Oman.
Later on, the Operations Manager of Palace Hotel in China called Santos offering him a higher
salary as printer in the said Hotel. 

Meanwhile, the Court noted in the records that the first petitioner MHC is a GOCC in the
Philippines while the 2nd petitioner MHICL is the “incorporator” of MHC duly organized under
the laws of Hong Kong. There’s this “Management Agreement” entered by the MHICL with the
Palace Hotel whereby the MHICL is bound to train personnel and staffs in the said hotel.

Going back to our private respondent, the latter went back to the Philippines voluntarily
resigning with his former job to fly to China for his job as a printer also in the Palace Hotel with
a promising 2-year contract, payable for 14 times in $900.00.

The time came when our private respondent kababayan was on leave in the Philippines. When
our kababayan tried to come back to China, here’s when the problem arose.

Due to political problems in Beijing, China, the Palace Hotel temporarily shut down their
operations forcibly that led to retrenchment of many workers including our kababayan. The
private respondent left China with some leave pay given the fact of the 1 month notice came
from the Palace Hotel.

When the OFW came back to our country, in seeking for full compensation from the said
contract, he commenced, through counsel, the recovery sum of money plus damages in the
National Labor Relations Commission, through Labor Arbiter against the petitioners as well as to
the General Manager and the company Hotel itself while the petitioner move for dismissal for
lack of jurisdiction because the jurisdiction for such cases shall be brought to the Philippine
Overseas Employment Administration. However, the petitioners were the ones who served the
summons.

In due course, the respondent Labor Arbiter granted the petitioner’s claim for the unearned
salaries, moral and exemplary damages, and attorney’s fees.

On appeal the NLRC at first granted the appeal for jurisdictional matters but later on reversed
itself that Santos argued that he was not an “overseas contract worker”.

The matters reached the Supreme Court raising the question as to whether the petitioner
corporation shall be held liable for the said claims by the OFW considering the contractual
relations of the petitioners and the Palace Hotel.
GODOY, JERICO U.

The Supreme Court ruled in the negative. The Supreme Court ruled that piercing the veil of a
corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud or defend a crime. It is done only when a
corporation is a mere alter ego or business conduit of a person or another corporation. The Court
also cited some tests whether the corporate veil may be pierced are: (1) the defendant must have
control or complete domination of the other corporation’s finances, policy and business practices
with regard to the transaction attacked. There must be proof that the other corporation had no
separate mind, will or existence with respect the act complained of. (2) control must be used by
the defendant to commit fraud or wrong. (3) the aforesaid control or breach of duty must be the
proximate cause of the injury or loss complained of

In the case at bar, it might be true that the MHC is an incorporator of MHICL and owns fifty
percent (50%) of its capital stock. However, this is not enough to pierce the veil of corporate
fiction between MHICL and MHC. Nowhere to be found in the evidence presented to show that
MHICL and MHC are one and the same entity even though the Palace Hotel is a member of the
"Manila Hotel Group '' is not enough to pierce the corporate veil between MHICL and the Palace
Hotel.

In all foregoing, the Supreme Court granted the petition and nullified the decisions of the NLRC.

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over
the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may
conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as
to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its
decision.

This is not to say that Philippine courts and agencies have no power to solve controversies involving
foreign employers. Neither are we saying that we do not have power over an employment contract
executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum,
specifically the POEA, not the NLRC, would protect him. He is not an "overseas contract worker" a
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fact which he admits with conviction.