1. CONCEPT BUILDERS INC VS.

NLRC entity as to this transaction had at the time no separate mind, will or existence of its
own; 2. Such control must have been used by the defendant to commit fraud or
CONCEPT BUILDERS, INC., petitioner, vs. THE NATIONAL LABOR wrong, to perpetuate the violation of a statutory or other positive legal duty, or
RELATIONS COMMISSION, (First Division) and Norberto Marabe, dishonest and unjust act in contravention of plaintiff’s legal rights; and 3. The
Rodolfo Raquel, Cristobal Riego, Manuel Gillego, Palcronio Giducos, aforesaid control and breach of duty must proximately cause the injury or unjust loss
Pedro Aboigar, Norberto Comendador, Rogelio Salut, Emilio Garcia, Jr., complained of. The absence of any one of these elements prevents ‘piercing the
Mariano Rio, Paulina Basea, Alfredo Albera, Paquito Salut, Domingo corporate veil.’ In applying the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are
Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino concerned with reality and not form, with how the corporation operated and the
Sualibio, Moreno Escares, Ferdinand Torres, Felipe Basilan, and Ruben individual defendant’s relationship to that operation.”
Robalos, respondents. Same;  Same; The question of whether a corporation is a mere alter ego, a
mere sheet or paper corporation, a sham or a subterfuge is purely one of fact.—
Corporation Law; Doctrine of Piercing the Veil of Corporate Fiction; The Thus, the question of whether a corporation is a mere alter ego, a mere sheet or paper
separate and distinct personality of a corporation is merely a fiction created by law corporation, a sham or a subterfuge is purely one of fact.
for convenience and to promote justice; When the notion of separate juridical Labor Law; Writs of Execution; Sheriffs; Pleadings and Practice;  Should the
personality is used to defeat public convenience, justify wrong, protect fraud or losing party, his agent or representative, refuse or prohibit the Sheriff or his
defend crime, or is used as a device to defeat the labor laws, this separate representative entry to the place where the property subject of execution is located
personality of the corporation may be disregarded or the veil of corporate fiction or kept, the judgment creditor may apply to the NLRC or the Labor Arbiter
pierced.—It is a fundamental principle of corporation law that a corporation is an concerned for a break-open order.—In view of the failure of the sheriff, in the case at
entity separate and distinct from its stockholders and from other corporations to bar, to effect a levy upon the property subject of the execution, private respondents
which it may be connected. But, this separate and distinct personality of a corporation had no other recourse but to apply for a break-open order after the third-party claim
is merely a fiction created by law for convenience and to promote justice. So, when the of HPPI was dismissed for lack of merit by the NLRC. This is in consonance with
notion of separate juridical personality is used to defeat public convenience, justify Section 3, Rule VII of the NLRC Manual of Execution of Judgment which provides
wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws, that: “Should the losing party, his agent or representative, refuse or prohibit the
this separate personality of the corporation may be disregarded or the veil of Sheriff or his representative entry to the place where the property subject of execution
corporate fiction pierced. This is true likewise when the corporation is merely an is located or kept, the judgment creditor may apply to the Commission or Labor
adjunct, a business conduit or an alter ego of another corporation. Arbiter concerned for a break-open order.”
Same;  Same; Some probative factors of identity that will justify the
application of the doctrine of piercing the corporate veil.—The conditions under SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
which the juridical entity may be disregarded vary according to the peculiar facts and
circumstances of each case. No hard and fast rule can be accurately laid down, but The facts are stated in the opinion of the Court.
certainly, there are some probative factors of identity that will justify the application      The Law Firm of Araullo & Raymundo for petitioner.
of the doctrine of piercing the corporate veil, to wit: “1. Stock ownership by one or      Ciriaco S. Cruz for private respondents.
common ownership of both corporations. 2. Identity of directors and officers. 3. The
manner of keeping corporate books and records. 4. Methods of conducting the
HERMOSISIMA, JR., J.:
business.”
Same;  Same; “Instrumentality Rule,” Explained.—The SEC en banc explained
the “instrumentality rule” which the courts have applied in disregarding the separate The corporate mask may be lifted and the corporate veil may be pierced when a
juridical personality of corporations as follows: “Where one corporation is so corporation is just but the alter ego of a person or of another corporation. Where
organized and controlled and its affairs are conducted so that it is, in fact, a mere badges of fraud exist; where public convenience is defeated; where a wrong is sought
instrumentality or adjunct of the other, the fiction of the corporate entity of the to be justified thereby, the corporate fiction or the notion of legal entity should come
‘instrumentality’ may be disregarded. The control necessary to invoke the rule is not to naught. The law in these instances will regard the corporation as a mere association
majority or even complete stock control but such domination of finances, policies and of persons and, in case of two corporations, merge them into one.
practices that the controlled corporation has, so to speak, no separate mind, will or Thus, where a sister corporation is used as a shield to evade a corporation’s
existence of its own, and is but a conduit for its principal. It must be kept in mind that subsidiary liability for damages, the corporation may not be heard to say that it has a
the control must be shown to have been exercised at the time the acts complained of personality separate and distinct from the other corporation. The piercing of the
took place. Moreover, the control and breach of duty must proximately cause the corporate veil comes into play.
injury or unjust loss for which the complaint is made.” This special civil action ostensibly raises the question of whether the National
Same;  Same; Test in determining the applicability of the doctrine of piercing Labor Relations Commission committed grave abuse of discretion when it issued a
the veil of corporate fiction.—The test in determining the applicability of the doctrine “break-open order” to the sheriff to be enforced against personal property found in
of piercing the veil of corporate fiction is as follows: “1. Control, not mere majority or the premises of petitioner’s sister company.
complete stock control, but complete domination, not only of finances but of policy Petitioner Concept Builders, Inc., a domestic corporation, with principal office at
and business practice in respect to the transaction attacked so that the corporate 355 Maysan Road, Valenzuela, Metro Manila, is engaged in the construction business.

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Private respondents were employed by said company as laborers, carpenters and On November 23, 1989, private respondents filed a “Motion for Issuance of a
riggers. Break-Open Order,” alleging that HPPI and petitioner corporation were owned by the
On November, 1981, private respondents were served individual written notices of same incorporator/stockholders. They also alleged that petitioner temporarily
termination of employment by petitioner, effective on November 30, 1981. It was suspended its business operations in order to evade its legal obligations to them and
stated in the individual notices that their contracts of employment had expired and that private respondents were willing to post an indemnity bond to answer for any
the project in which they were hired had been completed. damages which petitioner and HPPI may suffer because of the issuance of the break-
Public respondent found it to be, the fact, however, that at the time of the termination open order.
of private respondent’s employment, the project in which they were hired had not yet In support of their claim against HPPI, private respondents presented duly
been finished and completed. Petitioner had to engage the services of sub-contractors certified copies of the General Informations Sheet, dated May 15, 1987, submitted by
whose workers performed the functions of private respondents. petitioner to the Securities and Exchange Commission (SEC) and the General
Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor Information Sheet, dated May 15, 1987, submitted by HPPI to the Securities and
practice and non-payment of their legal holiday pay, overtime pay and thirteenth- Exchange Commission.
month pay against petitioner. The General Information Sheet submitted by the petitioner revealed the
On December 19, 1984, the Labor Arbiter rendered judgment 1 ordering petitioner following:
to reinstate private respondents and to pay them back wages equivalent to one year or “1. Breakdown of Subscribed Capital
three hundred working days.   Name of Stockholder   Amount Subscribed
On November 27, 1985, the National Labor Relations Commission (NLRC)   HPPI   P6,999,500.00
dismissed the motion for reconsideration filed by petitioner on the ground that the   Antonio W. Lim   2,900,000.00
said decision had already become final and executory.2   Dennis S. Cuyegkeng   300.00
On October 16, 1986, the NLRC Research and Information Department made the   Elisa C. Lim   100,000.00
finding that private respondents’ back wages amounted to P199,800.00. 3   Teodulo R. Dino   100.00
On October 29, 1986, the Labor Arbiter issued a writ of execution directing the   Virgilio O. Casino   100.00
sheriff to execute the Decision, dated December 19, 1984. The writ was partially 2. Board of Directors    
satisfied through garnishment of sums from petitioner’s debtor, the Metropolitan   Antonio W. Lim Chairman  
Waterworks and Sewerage Authority, in the amount of P81,385.34. Said amount was   Dennis S. Cuyegkeng Member  
turned over to the cashier of the NLRC.   Elisa C. Lim Member  
On February 1, 1989, an Alias Writ of Execution was issued by the Labor Arbiter   Teodulo R. Dino Member  
directing the sheriff to collect from herein petitioner the sum of P117,414.76,   Virgilio O. Casino Member  
representing the balance of the judgment award, and to reinstate private respondents 3. Corporate Officers    
to their former positions.   Antonio W. Lim President  
On July 13, 1989, the sheriff issued a report stating that he tried to serve the alias writ   Dennis C. Cuyegkeng Assistant to the President
of execution on petitioner through the security guard on duty but the service was   Elisa O. Lim Treasurer  
refused on the ground that petitioner no longer occupied the premises.   Virgilio O. Casino Corporate Secretary  
On September 26, 1986, upon motion of private respondents, the Labor Arbiter 4. Principal Office    
issued a second alias writ of execu-tion.   355 Maysan Road    
The said writ had not been enforced by the special sheriff because, as stated in his   Valenzuela, Metro Manila.”  
progress report, dated November 2, 1989: On the other hand, the General Information Sheet of HPPI revealed the following:
“1. Breakdown of Subscribed Capital
1. 1.All the employees inside petitioner’s premises at 355 Maysan Road,   Name of Stockholder   Amount Subscribed
Valenzuela, Metro Manila, claimed that they were employees of Hydro   Antonio W. Lim   P400,000.00
Pipes Philippines, Inc. (HPPI) and not by respondent;   Elisa C. Lim   57,700.00
2. 2.Levy was made upon personal properties he found in the premises;   AWL Trading   455,000.00
3. 3.Security guards with high-powered guns prevented him from removing the   Dennis S. Cuyegkeng   40,100.00
properties he had levied upon.4   Teodulo R. Dino   100.00
  Virgilio O. Casino   100.00
2. Board of Directors    
The said special sheriff recommended that a “break-open order” be issued to enable   Antonio W. Lim Chairman  
him to enter petitioner’s premises so that he could proceed with the public auction   Elisa C. Lim Member  
sale of the aforesaid personal properties on November 7, 1989.   Dennis S. Cuyegkeng Member  
On November 6, 1989, a certain Dennis Cuyegkeng filed a third-party claim with   Virgilio O. Casino Member  
the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff   Teodulo R. Dino Member  
were owned by Hydro (Phils.), Inc. (HPPI) of which he is the Vice-President. 3. Corporate Officers    

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   Antonio W. Lim President   The SEC en banc explained the “instrumentality rule” which the courts have applied
  Dennis S. Cuyegkeng Assistant to the President   in disregarding the separate juridical personality of corporations as follows:
  Elisa C. Lim Treasurer   “Where one corporation is so organized and controlled and its affairs are conducted so
  Virgilio O. Casino      Corporate Secretary   that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the
4. Principal Office     corporate entity of the ‘instrumentality’ may be disregarded. The control necessary to
  355 Maysan Road, Valenzuela, Metro Manila.” invoke the rule is not majority or even complete stock control but such domination of
On February 1, 1990, HPPI filed an Opposition to private respondents’ motion for finances, policies and practices that the controlled corporation has, so to speak, no
issuance of a break-open order, contending that HPPI is a corporation which is separate mind, will or existence of its own, and is but a conduit for its principal. It
separate and distinct from petitioner. HPPI also alleged that the two corporations are must be kept in mind that
engaged in two different kinds of businesses, i.e., HPPI is a manufacturing firm while the control must be shown to have been exercised at the time the acts complained of
petitioner was then engaged in construction. took place. Moreover, the control and breach of duty must proximately cause the
On March 2, 1990, the Labor Arbiter issued an Order which denied private injury or unjust loss for which the complaint is made.”
respondents’ motion for break-open order. The test in determining the applicability of the doctrine of piercing the veil of
Private respondents then appealed to the NLRC. On April 23, 1992, the NLRC set corporate fiction is as follows:
aside the order of the Labor Arbiter, issued a break-open order and directed private
respondents to file a bond. Thereafter, it directed the sheriff to proceed with the 1. “1.Control, not mere majority or complete stock control, but complete
auction sale of the properties already levied upon. It dismissed the third-party claim domination, not only of finances but of policy and business practice in
for lack of merit. respect to the transaction attacked so that the corporate entity as to this
Petitioner moved for reconsideration but the motion was denied by the NLRC in a transaction had at the time no separate mind, will or existence of its own;
Resolution, dated December 3, 1992. 2. 2.Such control must have been used by the defendant to commit fraud or
Hence, the resort to the present petition. wrong, to perpetuate the violation of a statutory or other positive legal
Petitioner alleges that the NLRC committed grave abuse of discretion when it duty, or dishonest and unjust act in contravention of plaintiff’s legal rights;
ordered the execution of its decision despite a third-party claim on the levied and
property. Petitioner further contends, that the doctrine of piercing the corporate veil 3. 3.The aforesaid control and breach of duty must proximately cause the injury
should not have been applied in this case, in the absence of any showing that it or unjust loss complained of.
created HPPI in order to evade its liability to private respondents. It also contends
that HPPI is engaged in the manufacture and sale of steel, concrete and iron pipes, a
business which is distinct and separate from petitioner’s construction business. The absence of any one of these elements prevents ‘piercing the corporate veil.’ In
Hence, it is of no consequence that petitioner and HPPI shared the same premises, applying the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are concerned with
the same President and the same set of officers and subscribers. 7 reality and not form, with how the corporation operated and the individual
We find petitioner’s contention to be unmeritorious. defendant’s relationship to that operation.” 14
It is a fundamental principle of corporation law that a corporation is an entity Thus, the question of whether a corporation is a mere alter ego, a mere sheet or paper
separate and distinct from its stockholders and from other corporations to which it corporation, a sham or a subterfuge is purely one of fact. 15
may be connected.8 But, this separate and distinct personality of a corporation is In this case, the NLRC noted that, while petitioner claimed that it ceased its
merely a fiction created by law for convenience and to promote justice. 9 So, when the business operations on April 29, 1986, it filed an Information Sheet with the
notion of separate juri- Securities and Exchange Commission on May 15, 1987, stating that its office address
dical personality is used to defeat public convenience, justify wrong, protect fraud or is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI, the
defend crime, or is used as a device to defeat the labor laws, 10 this separate personality third-party claimant, submitted on the same day, a similar information sheet stating
of the corporation may be disregarded or the veil of corporate fiction pierced. 11 This is that its office address is at 355 Maysan Road, Valenzuela, Metro Manila.
true likewise when the corporation is merely an adjunct, a business conduit or an alter Furthermore, the NLRC stated that:
ego of another corporation.12 “Both information sheets were filed by the same Virgilio O. Casiño as the corporate
The conditions under which the juridical entity may be disregarded vary secretary of both corporations. It would also not be amiss to note that both
according to the peculiar facts and circumstances of each case. No hard and fast rule corporations had the same president, the same board of directors, the same corporate
can be accurately laid down, but certainly, there are some probative factors of identity officers, and substantially the same subscribers.
that will justify the application of the doctrine of piercing the corporate veil, to wit: From the foregoing, it appears that, among other things, the respondent (herein
petitioner) and the third-party claimant shared the same address and/or premises.
Under this circumstances, (sic) it cannot be said that the property levied upon by the
1. “1.Stock ownership by one or common ownership of both corporations. sheriff were not of respondents.16
2. 2.Identity of directors and officers. Clearly, petitioner ceased its business operations in order to evade the payment to
3. 3.The manner of keeping corporate books and records. private respondents of back wages and to bar their reinstatement to their former
4. 4.Methods of conducting the business.”13 positions. HPPI is obviously a business conduit of petitioner corporation and its

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emergence was skillfully orchestrated to avoid the financial liability that already single stockholder or by another corporation of all or nearly all of the capital stock of a
attached to petitioner corporation. corporation is not of itself sufficient ground for disregarding the separate corporate
The facts in this case are analogous to Claparols v. Court of Industrial personality. (Santos vs. National Labor Relations Commission, 254 SCRA
Relations,17 where we had the occasion to rule: 673 [1996])
“Respondent court’s findings that indeed the Claparols Steel and Nail Plant, which Personal liability where the employer corporation is no longer existing and is
ceased operation of June 30, 1957, was SUCCEEDED by the Claparols Steel unable to satisfy the judgment in favor of the employee, the officer should be held
Corporation effective the next day, July 1, 1957 up to December 7, 1962, when the liable for acting on behalf of the corporation. (Valderrama vs. National Labor
latter finally ceased to operate, were not disputed by petitioners. It is very clear that Relations Commission, 256 SCRA 466[1996])
the latter corporation was a continuation and successor of the first entity x x x. Both
predecessors and successor were owned and controlled by petitioner Eduardo
Claparols and there was no break in the succession and continuity of the same
business. This ‘avoiding-the-liability’ scheme is very patent considering that 90% of
the subscribed shares of stocks of the Claparols Steel Corporation (the second
corporation) was owned by respondent x x x Claparols himself, and all the assets of
the dissolved Claparols Steel and Nail Plant were turned over to the emerging
Claparols Steel Corporation.
It is very obvious that the second corporation seeks the protective shield of a
corporate fiction whose veil in the present case could, and should, be pierced as it was
deliberately and maliciously designed to evade its financial obligation to its
employees.”
In view of the failure of the sheriff, in the case at bar, to effect a levy upon the property
subject of the execution, private respondents had no other recourse but to apply for a
break-open order after the third-party claim of HPPI was dismissed for lack of merit
by the NLRC. This is in consonance with Section 3, Rule VII of the NLRC Manual of
Execution of Judgment which provides that:
“Should the losing party, his agent or representative, refuse or prohibit the Sheriff or
his representative entry to the place where the property subject of execution is located
or kept, the judgment creditor may apply to the Commission or Labor Arbiter
concerned for a break-open order.”
Furthermore, our perusal of the records shows that the twin requirements of due
notice and hearing were complied with. Petitioner and the third-party claimant were
given the opportunity to submit evidence in support of their claim. Hence, the NLRC
did not commit any grave abuse of discretion when it affirmed the break-open order
issued by the Labor Arbiter.
Finally, we do not find any reason to disturb the rule that factual findings of
quasi-judicial agencies supported by substantial evidence are binding on this Court
and are entitled to great respect, in the absence of showing of grave abuse of a
discretion.
WHEREFORE, the petition is DISMISSED and the assailed resolutions of the NLRC,
dated April 23, 1992 and December 3, 1992, are AFFIRMED.
SO ORDERED.
     Padilla  (Chairman), Bellosillo, Vitug and Kapunan, JJ., concur.
Petition dismissed, resolutions affirmed.
Notes.—A corporation is an entity separate and distinct from its stockholders
and from other corporations to which it may be connected. (Philippine Veterans
Investment Development Corporation vs. Court of Appeals, 181 SCRA 669 [1990])
When valid ground exists, the legal fiction that a corporation is an entity with a
juridical personality separate and distinct from its members or stockholders may be
disregarded. (Guatson International Travel and Tours, Inc. vs. National Labor
Relations Commission, 230 SCRA 815 [1994])
The basic rule is still that which can be deduced from the Court’s pronouncement
in Sunio v. National Labor Relations Commission, i.e., that mere ownership by a

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