Doctrine of Piercing the Corporate Veil - Case Digest

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  G.R. No. 185280 Promulgated: January 18, 2012 TIMOTEO H. SARONA, Petitioner, versus NATIONAL LABOR RELATIONS COMMISSION, ROYALE SECURITY AGENCY (FORMERLY SCEPTRE SECURITY AGENCY) and CESAR S. TAN,  Respondents. FACTS: Petitioner, a security guard in Sceptre since April 1976, was asked by Sceptre’s operations manager on June 2003, to submit a resignation letter as a requirement for an application in Royale and to fill up an employment application form for the said company. He was then assigned at Highlight Metal Craft Inc. from July 29 to August 8, 2003 and was later transferred to Wide Wide World Express Inc. On September 2003, he was informed that his assignment at WWWE Inc. was withdrawn because Royale has been allegedly replaced by another security agency which he later discovered to be untrue. Nevertheless, he was once again assigned at Highlight Metal sometime in September 2003and when he reported at Royale’s office on October 1, 2003 he was informed that he would no longer be given any assignment as instructed by Sceptre’s general manager.   He thus filed a complaint for illegal dismissal. The LA ruled in petitioner’s favor as he found him illegally dismissed and was not convinced by the respondent’s claim on petitioner’s abandonment. Respondents were ordered to pay back wages computed from the day he was dismissed up to the promulgation of his decision on May 11, 2005.The LA also ordered for the payment of separation pay but refused to pierce Royale’s corporate veil. Respondents appealed to the NLRC claiming that the LA acted with grave abuse of discretion upon ruling on the illegal dismissal of petitioner. NLRC partially affirmed the LA’s decision with regard to petitioner’s illegal dismissal and separation pay but modified the amount of back wages and limited it to only 3 months of his last month salary reducing P95, 600 to P15, 600 since he worked for Royale for only 1 month and 3 days. Petitioner did not appeal to LA but raised the validity of LA’s findings on piercing Royale’s corporate personality and computation of his separation pay and such petition was dismissed by the NLRC. Petitioner elevated NLRC’s decision to the CA on a petition for certiorari, and the CA disagreed with the NLRC’s decision of not proceedin g to review the evidence for determining if Royale is Sceptre’s alter ego that would warrant the piercing of its corporate veil.    ISSUES: 1. Whether or not Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the pe titioner’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. 2. Whether or not petitioner’s back wages should be limited to his salary for 3 months   RULING: The doctrine of piercing the corporate veil is applicable on 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 creation 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. 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. The way on how petitioner was made to resign from Sceptre then later on made an employee of Royale, reflects the use of the legal fiction of the separate corporate personality and is an implication of continued employment. Royale is a continuation or successor or Sceptre since the employees of Sceptre and of Royale are the same and said companies have the same principal place of business. Because petitioner’s rights were violated and his employer has not changed, he is entitled to separation pay which must be computed from the time he was hired until the finality of this decision. Royale is also ordered to pay him back wages from his dismissal on October 1, 2003 until the finality of this decision. However, the amount already received by petitioner from the respondents shall be deducted. He is also awarded moral and exemplary damages amounting to P 25, 000.00 each for his dismissal which was tainted with bad faith and fraud. Petition is granted. CA’s decision is reversed and set aside.  
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