FIRST DIVISION

[G.R. No. 112661. May 30, 2001.]

SIMEON DE LEON, EFREN ABAD, JAIME ABAD, JESSIE ABAY-

ABAY, ROLANDO ABIOLA, ALICIO ABISO, CELEDONIO ABSALON,
JEREMIAS ADO, VICENTE ADO, VICENTE AGGABAO, EFRAIN
AGUIRRE, ALEXANDER ALATA, ERNESTO ALCALDE, LORENZO
ALCOY, ALMARIO ALICIO, CESAR AMADOR, JOSE AMANTE,
ESTELITO AMBROSIO, VICENTE ANAPI, ARNEL ANCHETA,
ROGELIO ANCHETA, WILFREDO AÑONUEVO, DOMINGO
ANTIGRO, MARGARITO ANTIGRO, ROGELIO ANZANO, ANTONIO
APOSTOL, ORLANDO AQUINO, JUAN ARCALAS, BONIFACIO
ARIOLA, EDGAR ARIOLA, BONIFACIO ARMASA, FERNANDO
BACCAY, MARIO BACUD, RUPERTO BACUDAN, NILO BALAG,
ARGEL BALTAZAR, DEMETRIO BARAYOGA, FELIX BARNEDO,
FLORENTINO BARTE, SARRI BASIRUL, MARCELO BATANES,
RECTO BAYONA, VICTORIO BERMUNDO, ISMAEL BERNAL,
LERIO BERSABE, FIDEL BOSE, MARIANO BOTACION, DANILO
BRAZIL, REYNALDO BRUNIO, MARIO BUENAVENTURA, ARSENIO
BULATAO, FRANCISCO BULATAO, CARLOS CAJARA, ROSENDO
CAMACHO, RUBEN CAMACHO, NESTOR CAPILOS, DOMINGO
CASTRO, MAXIMIANO DE CASTO, EDINO CASTUERA, ZALDY
CERDON, ANTONIO DERUJANO, VICTOR CIPRIANO, JUANITO
CORPUZ, ALFREDO CRUZ, FERNANDO DELA CRUZ, MARIO
CUSTOPAY, ROSAURO CUSTODIO, FRANKLIN CUSTODIO,
ALFREDO DAPROZA, RENATO DAVAG, NOEL DEMINGOY, GENE
DIESTRO, ESTEBAN DIONSON, RAMON DIZA, JEREMIAS
DOROMAL, MANUEL EDATO, FERNANDO EDORA, CONRADO
ENRIQUEZ, NICOMEDEZ ENRIQUEZ, ROLITO ESPIEL, LAURO
ESPAÑOL, NONITO ESPLANA, ELPIDIO ESPAÑOL, DIOLITO
ESTOPEREZ, ODILON EUSTE, HENRY FACTOR, VIRGILIO
FAVORITO, ARISTOTLE FERNANDEZ, RODOLFO FORMALEJO,
JUNE FULAY, RUIS FUTOL, JESUS GABA, RODRIGO GABAT,
ROSALIA GABAT, CLEMENTE GASPAR, RODRIGO GAVIOLA,
ELLEN GODELOSON, SALVADOR GUELA, EDUARDO GUZMAN,
BALTAZAR DE GUZMAN, ZOSIMO DE GUZMAN, REYNALDO
HAGUIRING, CARLOS GINDAP, BERNARDINO GIPIT, WILFREDO
HERNANDEZ, IMMANUEL IBRING, PEPITO IMPERIO,
MAGTANGGOL INSORIO, RODELYN JACUNTO, MARIO JARAPAN,
MAXIMO JIMENEZ, ALEJANDRO JUDLOMAN, JUAN LAOAGAN,
DANTE LARIOSA, ELINO LASAGA, JOSEPH LEGASPINA, ZOSIMO
LEPALAM, BENJAMIN LIBAN, EFREN LIGUE, CLETO LINGA,
ROMEO LLAGAS, LUCIO LLARENA, ALFREDO LOPEZ, FELIX
LOPEZ, SANTOS LOPEZ, RUBEN LORENZO, NILO LUGANA,
CANCIO MAATUBANG, ANTONIO MACASIO, ROBERTO
MACATUNGGAL, VIRGILIO MACALINAO, RAMON MACOY, JOSE
MAGALONA, ALEJO MANAGUELOD, DOMINGO MANALO,
EMILIANO MANALO, SULPICIO MANTALABA, EDITO MANUEL,
ROMULO MANUEL, FELINO MARANA, CARLITO MARGAJA,
ROMARES MARIANO, CERMELO MARTINEZ, MODESTO
MASULIT, ALMA MATUSALEM, FLAVIANO MEDEL, DOLCIANO
MEDINA, DOLOROSA MEDINA, NORLINDO MEJARITO, PEDRITO
MENDOZA, GUARDITO MERANO, ALBERTO DE MESA, CHARLIE
MINANO, JOSE MONTEROSO, ROSENDO MORALES, CESAR
NARDA, DOMINADOR NAGAL, EDEMIO NARISMA, DINISIO
NAVASCA, REGINO NEPICON, JR., JESSIE CRIS NILO, JERWYN
ORARIO, EUGENIO ORBEGOZO, IRENEO ORGANISTA, CATALINO
OJENDRAS, WILLIAM OLIVARES, JUANITO ORIO, WILLIAM
ORTIZO, ROQUE PAL-PALLATOC, ROGELIO PAEL, LORENZO
PAMINTUAN, VIRGILIO PANTALEON, ANTONIO PAPA,
EMMANUEL PASCUAL, FRANCISCO PECUNDO, RUFINO PELICER,
LEONARDO PEPITO, PABLITO PERALTA, EDILBERTO PEREZ,
LOLITO PEREZ, PELAGIO PEREZ, JR., FERNANDO PINEDA,
CARMEN PIO, ALEJANDRO QUIAMCO, VIRGILIO QUILALANG,
JEREMEAS QUINES, ZENAIDA RAQUINE, DOMINGO RANOLA,
SABINO RANULO, EDDIE RAZONABE, ALBERTO REBAULA,
BENIGNO REGIS, PERFECTO REBOYO, VITALIANO REYES,
ZOSIMO REYES, EDWIN ROBERTS, ROBERT ROJO, GODOFREDO
ROLIO, ANATALIA ROSANTO, DOMINADOR ROSANTO, RAMON
ROSANTO, SR., RODRIGO ROSANTO, JULIO RUBIO, DANTE
RUZOL, VENUS RUZOL, ROMULO SABINO, CIPRIANO
SACUILLES, SR., PRIMO SALAZAR, GASPAR SAMUYA, ANTONIO
SANCHEZ, CLAUDIO SANCHEZ, YOLANDA SAN LUIS, ROBERTO
SANTOS, BENITO SEGUDIENTE, EDGAR SIBAL, GREGORIO
SIBAL, VALENTINO SIBAL, SONNY SINGH, ROMEO SOMERA,
EDGAR TABAQUE, BENITO TACATA, MATILDE TACATA,
ANDRESITO TALAM, ANTOLIN TALISIC, PABLO TAMAYO, JULIE
TAMIEZA, ROGELIO TAYO, CELSO TE, ENRIQUE TRIPULCA,
ARMANDO TUIBEO, NICANOR TUMAMAO, EDUARDO TUMBALE,
RAMON TURIRIT, LONGENIO UMACAM, TOLENTINO
UNDAUNDO, DIOLITO VALENCIA, ERNESTO VARGAS, BILLY
VASQUEZ, TOMAS VELINA, MARCOS DE VERA, IRENEO VILELA,
NICANDRO VILLAFRANCA, DANNY VILLANUEVA, LOLITA
VITALICO, ALIPIO YGOT, AGOSTO YROMA, FELIX ZAMBALES,
and GUILLERMO ZIPANGAN , petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (NLRC), and FORTUNE TOBACCO
CORPORATION and/or MAGNUM INTEGRATED SERVICES, INC.
(formerly FORTUNE INTEGRATED SERVICES, INC.), respondents.

DECISION
PUNO, J : p

This case stemmed from a complaint for illegal dismissal, unfair labor practice and
refund of cash bond filed by petitioners against respondents before the Arbitration
Branch of the National Labor Relations Commission (NLRC). The petition at bar
seeks the annulment of the resolution of the NLRC dated July 5, 1993 reversing the
decision of the Labor Arbiter finding respondents liable for the charges, and its
resolution dated August 10, 1993 denying petitioners' motion for reconsideration.
cDEHIC

The undisputed facts are as follows:

On August 23, 1980, Fortune Tobacco Corporation (FTC) and Fortune Integrated
Services, Inc. (FISI) entered into a contract for security services where the latter
undertook to provide security guards for the protection and security of the former.
The petitioners were among those engaged as security guards pursuant to the
contract.

On February 1, 1991, the incorporators and stockholders of FISI sold out lock, stock
and barrel to a group of new stockholders by executing for the purpose a "Deed of
Sale of Shares of Stock". On the same date, the Articles of Incorporation of FISI was
amended changing its corporate name to Magnum Integrated Services, Inc. (MISI).
A new by-laws was likewise adopted and approved by the Securities and Exchange
Commission on June 4, 1993.

On October 15, 1991, FTC terminated the contract for security services which
resulted in the displacement of some five hundred eighty two (582) security guards
assigned by FISI/MISI to FTC, including the petitioners in this case. FTC engaged the
services of two (2) other security agencies, Asian Security Agency and Ligalig
Security Services, whose security guards were posted on October 15, 1991 to
replace FISI's security guards.

Sometime in October 1991, the Fortune Tobacco Labor Union, an affiliate of the
National Federation of Labor Unions (NAFLU), and claiming to be the bargaining
agent of the security guards, sent a Notice of Strike to FISI/MISI. On November 14,
1991, the members of the union which include petitioners picketed the premises of
FTC. The Regional Trial Court of Pasig, however, issued a writ of injunction to enjoin
the picket.

On November 29, 1991, Simeon de Leon, together with sixteen (16) other
complainants instituted the instant case before the Arbitration Branch of the NLRC.
The complaint was later amended to allow the inclusion of other complainants. aESIHT

The parties submitted the following issues for resolution:

(1) Whether petitioners were illegally dismissed;

(2) Whether respondents are guilty of unfair labor practice; and

(3) Whether petitioners are entitled to the refund of their cash bond
 deposited with respondent FISI.

Petitioners alleged that they were regular employees of FTC which was also using
the corporate names Fortune Integrated Services, Inc. and Magnum Integrated
Services, Inc. They were assigned to work as security guards at the company's main
factory plant, its tobacco redrying plant and warehouse. They averred that they
performed their duties under the control and supervision of FTC's security
supervisors. Their services, however, were severed in October 1991 without valid
cause and without due process. Petitioners claimed that their dismissal was part of
respondents' design to bust their newly-organized union which sought to enforce
their rights under the Labor Standards law. 1

Respondent FTC, on the other hand, maintained that there was no employer-
employee relationship between FTC and petitioners. It said that at the time of the
termination of their services, petitioners were the employees of MISI which was a
separate and distinct corporation from FTC. Hence, petitioners had no cause of
action against FTC. 2

Respondent FISI, meanwhile, denied the charge of illegal dismissal and unfair labor
practice. It argued that petitioners were not dismissed from service but were merely
placed on floating status pending re-assignment to other posts. It alleged that the
temporary displacement of petitioners was not due to its fault but was the result of
the pretermination by FTC of the contract for security services. 3AaS HE D

The Labor Arbiter found respondents liable for the charges. Rejecting FTC's
argument that there was no employer-employee relationship between FTC and
petitioners, he ruled that FISI and FTC should be considered as a single employer.
He observed that the two corporations have common stockholders and they share
the same business address. In addition, FISI had no client other than FTC and other
corporations belonging to the group of companies owned by Lucio Tan. The Labor
Arbiter thus found respondents guilty of union busting and illegal dismissal. He
observed that not long after the stockholders of FISI sold all their stocks to a new
set of stockholders, FTC, terminated the contract of security services and engaged
the services of two other security agencies. FTC did not give any reason for the
termination of the contract. The Labor Arbiter gave credence to petitioners' theory
that respondents' precipitate termination of their employment was intended to bust
their union. Consequently, the Labor Arbiter ordered respondents to pay petitioners
their backwages and separation pay, to refund their cash bond deposit, and to pay
attorney's fees. 4

On appeal, the NLRC reversed and set aside the decision of the Labor Arbiter. First, it
held that the Labor Arbiter erred in applying the "single employer" principle and
concluding that there was an employer-employee relationship between FTC and
FISI on one hand, and petitioners on the other hand. It found that at the time of the
termination of the contract of security services on October 15, 1991, FISI which, at
that time, had been renamed Magnum Integrated Services, Inc. had a different set
of stockholders and officers from that of FTC. They also had separate offices. The
NLRC held that the principle of "single employer" and the doctrine of piercing the
corporate veil could not apply under the circumstances. It further ruled that the
proximate cause for the displacement of petitioners was the termination of the
contract for security services by FTC on October 15, 1991. FISI could not be faulted
for the severance of petitioners' assignment at the premises of FTC. Consequently,
the NLRC held that the charge of illegal dismissal had no basis. As regards the
charge of unfair labor practice, the NLRC found that petitioners who had the burden
of proof failed to adduce any evidence to support their charge of unfair labor practice
against respondents. Hence, it ordered the dismissal of petitioners' complaint. 5

The petitioners filed a motion for reconsideration of the resolution of the NLRC but
the same was denied. 6 Hence, this petition.

We gave due course to the petition on May 15, 1995. Thus, the ruling in St. Martin
Funeral Home vs. NLRC 7 remanding all petitions for certiorari from the decision of
the NLRC to the Court of Appeals does not apply to the case at bar.

The petition is impressed with merit.

An examination of the facts of this case reveals that there is sufficient ground to
conclude that respondents were guilty of interfering with the right of petitioners to
self-organization which constitutes unfair labor practice under Article 248 of the
Labor Code. 8 Petitioners have been employed with FISI since the 1980s and have
since been posted at the premises of FTC — its main factory plant, its tobacco
redrying plant and warehouse. It appears from the records that FISI, while having
its own corporate identity, was a mere instrumentality of FTC, tasked to provide
protection and security in the company premises. The records show that the two
corporations had identical stockholders and the same business address. FISI also had
no other clients except FTC and other companies belonging to the Lucio Tan group
of companies. Moreover, the early payslips of petitioners show that their salaries
were initially paid by FTC. 9 To enforce their rightful benefits under the laws on
Labor Standards, petitioners formed a union which was later certified as bargaining
agent of all the security guards. On February 1, 1991, the stockholders of FISI sold
all their participation in the corporation to a new set of stockholders which renamed
the corporation Magnum Integrated Services, Inc. On October 15, 1991, FTC,
without any reason, preterminated its contract of security services with MISI and
contracted two other agencies to provide security services for its premises. This
resulted in the displacement of petitioners. As MISI had no other clients, it failed to
give new assignments to petitioners. Petitioners have remained unemployed since
then. All these facts indicate a concerted effort on the part of respondents to remove
petitioners from the company and thus abate the growth of the union and block its
actions to enforce their demands in accordance with the Labor Standards laws. The
Court held in Insular Life Assurance Co., Ltd., Employees Association-NATU vs.
Insular Life Assurance Co., Ltd.: 10
"The test of whether an employer has interfered with and coerced
employees within the meaning of section (a) (1) is whether the employer has
engaged in conduct which it may reasonably be said tends to interfere with
 the free exercise of employees' rights under section 3 of the Act, and it is
not necessary that there be direct evidence that any employee was in fact
intimidated or coerced by statements of threats of the employer if there is a
reasonable inference that anti-union conduct of the employer does have an
adverse effect on self-organization and collective bargaining." 11

We are not persuaded by the argument of respondent FTC denying the presence of
an employer-employee relationship. We find that the Labor Arbiter correctly applied
the doctrine of piercing the corporate veil to hold all respondents liable for unfair
labor practice and illegal termination of petitioners' employment. It is a
fundamental principle in corporation law that a corporation is an entity separate
and distinct from its stockholders and from other corporations to which it is
connected. However, when the concept of separate legal entity is used to defeat
public convenience, justify wrong, protect fraud or defend crime, the law will regard
the corporation as an association of persons, or in case of two corporations, merge
them into one. The separate juridical personality of a corporation may also be
disregarded when such corporation is a mere alter ego or business conduit of
another person. 12 In the case at bar, it was shown that FISI was a mere adjunct of
FTC. FISI, by virtue of a contract for security services, provided FTC with security
guards to safeguard its premises. However, records show that FISI and FTC have the
same owners and business address, and FISI provided security services only to FTC
and other companies belonging to the Lucio Tan group of companies. The purported
sale of the shares of the former stockholders to a new set of stockholders who
changed the name of the corporation to Magnum Integrated Services, Inc. appears
to be part of a scheme to terminate the services of FISI's security guards posted at
the premises of FTC and bust their newly-organized union which was then
beginning to become active in demanding the company's compliance with Labor
Standards laws. Under these circumstances, the Court cannot allow FTC to use its
separate corporate personality to shield itself from liability for illegal acts committed
against its employees.

Thus, we find that the termination of petitioners' services was without basis and
therefore illegal. Under Article 279 of the Labor Code, an employee who is unjustly
dismissed from work is entitled to reinstatement without loss of seniority rights and
other privileges, and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement. However, if
reinstatement is no longer possible, the employer has the alternative of paying the
employee his separation pay in lieu of reinstatement. 13

IN VIEW WHEREOF, the petition is GRANTED. The assailed resolutions of the NLRC
are SET ASIDE. Respondents are hereby ordered to pay petitioners their full
backwages, and to reinstate them to their former position without loss of seniority
rights and privileges, or to award them separation pay in case reinstatement is no
longer feasible.

SO ORDERED.

Davide, Jr., C.J ., Pardo and Ynares-Santiago, JJ ., concur.

Kapunan, J ., is on leave.
Footnotes

1. Position Paper of Complainants, Original Record, pp. 66-73.

2. Position Paper of Respondent Fortune Tobacco Corporation, Original Record, pp.

140-150.

3. Position Paper of Respondent Fortune Integrated Services, Inc., Original Record,

pp. 121-125.

4. Rollo, pp. 47-64.

5. Rollo, pp. 26-45.

6. Rollo, p. 46.

7. 295 SCRA 494 (1998).

8. Art. 248. Unfair labor practices of employers . — It shall be unlawful for an

employer to commit any of the following unfair labor practice:

(a) To interfere with, restrain or coerce employees in the exercise of their

right to self-organization;

xxx xxx xxx

9. Annex "B"-"B-19", Position Paper of Complainants, Original Record, pp. 81-100.

10. 37 SCRA 244 (1971).

11. citing Francisco, Labor Laws, 1956, Vol. II, p. 323.

12. Yutivo Sons and Hardware Co. vs. Court of Tax Appeals , 1 SCRA 160 (1961); See
als o La Campana Coffee Factory, Inc. vs. Kaisahan ng mga Manggagawa sa La
Campana (KKM), 93 Phil. 160 (1953); Tan Boon Bee & Co., Inc. vs. Jarencio , 163
SCRA 205 (1988); Tomas Lao Construction vs. NLRC, 278 SCRA 716 (1997).

13. Dela Cruz vs. NLRC, 268 SCRA 458 (1997).