55 Sarona Vs NLRC

G.R. No. 185280. January 18, 2012.
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TIMOTEO H. SARONA vs. NATIONAL LABOR RELATIONS COMMISSION, ROYALE
SECURITY AGENCY (FORMERLY SCEPTRE SECURITY AGENCY) and CESAR S. TAN
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).
Petitioner was then assigned to different companies. 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.
Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in petitioner’s favor and found him
illegally dismissed. LA ordered Royale to pay the petitioner of back wages and
separation pay. In this regard, LA Gutierrez refused to pierce Royale’s corporate veil for
purposes of factoring the petitioner’s length of service with Sceptre in the computation
of his separation pay. LA Gutierrez ruled that Royale’s corporate personality, which is
separate and distinct from that of Sceptre, a sole proprietorship owned by the late Roso
Sabalones (Roso) and later, Aida, cannot be pierced absent clear and convincing
evidence that Sceptre and Royale share the same stockholders and incorporators and
that Sceptre has complete control and dominion over the finances and business affairs
of Royale.
ISSUE: Whether 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.
A corporation is an artificial being created by operation of law. It possesses the right of
succession and such powers, attributes, and properties expressly authorized by law or
incident to its existence. It has a personality separate and distinct from the persons
composing it, as well as from any other legal entity to which it may be related. This is
basic. Equally well-settled is the principle that the corporate mask may be removed or
the corporate veil pierced when the corporation is just an alter ego of a person or of
another corporation. For reasons of public policy and in the interest of justice, the
corporate veil will justifiably be impaled only when it becomes a shield for fraud,
illegality or inequity committed against third persons.
The doctrine of piercing the corporate veil applies only in three (3) basic areas,
namely: 1) defeat of public convenience as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate
entity is used to justify a wrong, protect fraud, or defend a crime; or 3) 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 Court finds that Royale is a mere continuation or successor of Sceptre and
fraudulent objectives are behind Royale’s incorporation and the petitioner’s subsequent
employment therein. As correctly pointed out by the petitioner, it was Aida who
exercised control and supervision over the affairs of both Sceptre and Royale. Aida’s
control over Sceptre and Royale does not, by itself, call for a disregard of the corporate
fiction. There must be a showing that a fraudulent intent or illegal purpose is behind the
exercise of such control to warrant the piercing of the corporate veil.52 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. 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.
Effectively, the petitioner cannot be deemed to have changed employers as Royale and
Sceptre are one and the same. His separation pay should, thus, be computed from the
date he was hired by Sceptre in April 1976 until the finality of this decision.

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G.R. No. 185280. January 18, 2012.

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