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.

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.