Concept Builders, Inc. v. National Labor Relations Commission
REITERATIONFacts
1. The Antecedents: Private respondents, employed by petitioner Concept Builders, Inc. as laborers, carpenters, and riggers, were terminated in November 1981. Petitioner claimed their contracts expired and the project was completed, but the public respondent found the project unfinished and that petitioner had engaged subcontractors whose workers performed the private respondents' functions. Aggrieved, the private respondents filed a complaint for illegal dismissal, unfair labor practice, and non-payment of various monetary claims. 2. Procedural History: The Labor Arbiter initially ordered petitioner's reinstatement of private respondents and payment of back wages. Petitioner's motion for reconsideration was denied as the decision had become final. Subsequent efforts to execute the judgment, including garnishment and alias writs of execution, were met with difficulties. A sheriff's attempt to levy personal property was obstructed, with employees claiming to be from a different company, Hydro Pipes Philippines, Inc. (HPPI), and security guards preventing the removal of levied properties. A third-party claim was filed by HPPI, asserting ownership of the levied properties. The Labor Arbiter denied the private respondents' motion for a break-open order, but the National Labor Relations Commission (NLRC) reversed this, issuing the break-open order and dismissing HPPI's third-party claim. The NLRC denied petitioner's motion for reconsideration. 3. The Petition: Petitioner Concept Builders, Inc. filed this special civil action, alleging grave abuse of discretion by the NLRC in ordering the execution of its decision despite a third-party claim and in applying the doctrine of piercing the corporate veil. Petitioner argued that HPPI was a distinct entity engaged in a separate business and that there was no showing it created HPPI to evade liability. The petition raises the question of whether the NLRC committed grave abuse of discretion in issuing a break-open order against personal property found in the premises of petitioner's alleged sister company.
Issue(s)
Whether the National Labor Relations Commission committed grave abuse of discretion in issuing a break-open order. Whether the corporate veil may be pierced to reach Hydro Pipes Philippines, Inc. given the factual matrix. Whether the third-party claim by HPPI precluded execution against the levied property. Whether the factual findings of the NLRC are supported by substantial evidence and thus binding on this Court.
Ruling
The petition is dismissed. The assailed NLRC resolutions dated April 23, 1992 and December 3, 1992 are affirmed.
Ratio Decidendi
On Whether the NLRC committed grave abuse of discretion in issuing a break-open order: The Court held that the NLRC did not commit grave abuse of discretion. It applied the NLRC Manual of Execution of Judgment, Section 3, Rule VII, which authorizes a break-open order when the losing party or his agent refuses or prohibits entry to the place where the property subject of execution is located. The Court found that the sheriff's inability to remove levied property due to obstruction and claims of third-party ownership justified the issuance of a break-open order. The Court also noted that due notice and hearing were complied with, as petitioner and the third-party claimant were given opportunities to present evidence. Given these circumstances, issuance of the break-open order was a proper exercise of the NLRC's execution powers and did not amount to grave abuse of discretion. On Whether the corporate veil may be pierced to reach HPPI: The Court affirmed application of the instrumentality/alter ego doctrine and pierced the corporate veil on the facts presented. It reiterated that separate juridical personality is a fiction that may be disregarded when used to defeat public convenience, justify wrong, protect fraud or evade legal obligations; the Court applied the three-part test requiring (1) complete domination of finances, policy and business practice so the corporation has no separate mind or existence, (2) such control used to commit a wrong or perpetuate violation of a statutory duty, and (3) proximate causation of injury or unjust loss. The Court found substantial indicia of identity between petitioner and HPPI: same principal office, same president and officers, substantially the same subscribers, and filings showing overlapping corporate information. The Court held that these facts, together with the timing and circumstances of petitioner's cessation and HPPI's emergence, demonstrated that HPPI was used as a conduit to evade liability. Applying Claparols v. Court of Industrial Relations, the Court concluded that HPPI was a business conduit and the veil could be pierced to satisfy the judgment. On Whether the third-party claim precluded execution against the levied property: The Court found that the third-party claim had been dismissed by the NLRC for lack of merit and that petitioner's attempts to assert separate ownership were insufficient. Because the NLRC dismissed HPPI's third-party claim and the sheriff was obstructed from completing levy, private respondents were entitled to seek a break-open order to effect execution. The Court emphasized that where property is levied and the levying officer is prevented from removing it, the execution process cannot be stalled by mere assertions of third-party claims without proof. Having provided opportunity for hearing and evidence, the NLRC's dismissal of the third-party claim and subsequent ordering of execution were upheld. On Whether the factual findings of the NLRC are supported by substantial evidence: The Court adhered to the doctrine that factual findings of quasi-judicial agencies supported by substantial evidence are binding and are entitled to great respect, absent grave abuse of discretion. It concluded that the NLRC's findings regarding the identity of officers, subscribers, address and the conduct suggesting evasion of liabilities were supported by substantial evidence in the record, including the General Information Sheets filed with the Securities and Exchange Commission. Consequently, there was no basis to disturb the NLRC's factual determinations.
Main Doctrine
The corporate veil may be pierced under the instrumentality/alter ego doctrine where control is used to evade liabilities; a break-open order is proper when levy is obstructed and procedural due notice is observed.