Maricalum Mining Corp. vs. Florentino | G.R. No.
221813, ● They claimed that they were forced to form a
July 23, 2018 | Gesmundo, J. | Doctrine of Piercing the
Corp. Veil | by Jasper
FACTS:
● The dispute traces its roots back to when the
Philippine National Bank (PNB, a former
government-owned-and-controlled corporation)
and the Development Bank of the Philippines
(DBP) transferred its ownership of Maricalum
Mining to the National Government for disposition
or privatization because it had become a non-
performing asset.
● National Government thru the Asset Privatization
Trust (APT) executed a Purchase and Sale
Agreement (PSA) with G Holdings
● G Holding bought 90% of Maricalum Mining's
shares and financial claims in the form of company
notes.
● Concomitantly, G Holdings also assumed
Maricalum Mining's liabilities in the form of
company notes.
● Upon the signing of the PSA and paying the
stipulated down payment, G Holdings immediately
took physical possession of Maricalum's Sipalay
Mining Complex, as well as its facilities, and took
full control of the latter's management and
operations.
● Subsequently, the Sipalay General Hospital, Inc.
(Sipalay Hospital) was duly incorporated to provide
medical services and facilities to the general public.
● Afterwards, some of Maricalum Mining's
employees retired and formed several manpower
cooperatives (there were 5 in total)
● Each of the cooperatives executed identical
Memorandum of Agreements with Maricalum
wherein they will provide the latter with a steady
supply of workers, machinery and equipment for a
monthly fee.
● Maricalum informed the cooperatives that it
decided to stop its mining and milling operations in
order to avert continuing losses brought about by
the low metal prices and high cost of production.
● The properties of Maricalum, which had been
mortgaged to secure the PNs, were extrajudicially
foreclosed and eventually sold to G Holdings as the
highest bidder
● Some of Maricalum's workers, including
complainants, and some of Sipalay General
Hospital's employees jointly filed a Complaint with
the LA against G Holdings for illegal dismissal and
other labor-related claims (Case 1)
● Complainants and CeMPC (one of the
cooperatives) Chairman Sitchon filed his complaint
for illegal dismissal and corresponding monetary
claims with the LA against G Holdings, its officer-in-
charge and CeMP. Thereafter, the complaints were
consolidated by the LA. (Case 2)
● Complainants: Claimed that G holdings had full
control over them and their services were
terminated by Maricalum as part of its
retrenchment program.
cooperative and they were "rehired" only after
their respective manpower cooperative services
were formed.
● The manpower cooperatives were mere alter egos
of G Holdings organized
● G Holdings, being the parent company) argued
(among others) that:
● They had no control because No EE-ER
● Maricalum should have been impleaded because it
is supposed to be the indispensable party in the
present suit;
● Maricalum as well as the manpower cooperatives,
each have distinct legal personalities and that their
individual corporate liabilities cannot be imposed
upon each other;
● LA ruled in favor of complainants: complainants
effectively became the employees of G Holdings
because their work had changed from assisting in
the mining operations to safeguarding the
properties in the Sipalay Mining Complex, which
had already been acquired by G Holding.
● G Holdings connived with Marcalum Mining in
orchestrating the formation of manpower
cooperatives to circumvent complainants' labor
standards rights
● NLRC: Modified LA. Imposed liability of paying the
monetary awards against the corporation
Maricalum, not G Holdings: (Important)
● It was Maricalum-not G Holdings- who entered
into service contracts by way of a MOA with each
of the manpower cooperatives;
● complainants continued rendering their services at
the insistence of Maricalum through their
cooperatives;
● Maricalum never relinquished possession over the
Sipalay Mining Complex;
● Maricalum continuously availed of the services of
complainants through their respective manpower
cooperatives;
● in a previous case, the Court already held that G
Holdings and Maricalum Mining have separate and
distinct corporate personalities.
● CA: Affirmed decision of NLRC
●
ISSUES/RATIO:
● WON CA erred in allowing the piercing of the
corporate veil against PET – YES
○ The doctrine of piercing the corporate veil
applies only in three (3) basic areas:
Defeat of public convenience as when the
corporate fiction is used as a vehicle for
the evasion of an existing obligation,
Fraud cases, Alter ego cases
○ Complainants mainly harp their cause on
the alter ego theory. Under this theory,
piercing the veil of corporate fiction may
be allowed only if the following elements
concur:
■ Control-not mere stock control,
but complete domination-not
only of finances, but of policy
and business practice in respect
 to the transaction attacked, must
have been such that the
corporate entity as to this
transaction had at the time no
separate mind, will or existence
of its own;
■ Such control must have been
used by the defendant to commit
a fraud or a wrong, to perpetuate
the violation of a statutory or
other positive legal duty, or a
dishonest and an unjust act in
contravention of plaintiffs legal
right; and
■ the said control and breach of
duty must have proximately
caused the injury or unjust loss
complained of.
○ In relation to the elements above, SC laid
down the jurisprudential tests for
piercing, to wit - (check notes for further
discussion)
■ Control Test
● There is no doubt that G
Holdings - being the
majority and controlling
stockholder - had been
exercising signifcant
control over Maricalum
Mining. This is because
this Court had already
upheld the validity and
enforceability of the PSA
between the APT and G
Holdings
■ Fraud Test
● No clear and convincing
evidence was presented
by the complainants to
conclusively prove the
presence of fraud on
the part of G Holdings.
■ Harm Test
● In the case at bench,
complainants have not
yet even suffered any
monetary injury. They
have yet to enforce their
claims against
Maricalum.
○ Hence, in order for a parent corporation
to be held liable for the obligations or
liabilities of its subsidiary, all three (3)
tests must be satisfied. "Piercing of the
corporate veil" cannot be done when only
one or two of the said tests have been
satisfied.
○ Only one of the three (3) tests was met
(particularly, control). The complainants
therein (who claimed to be employees of
the subsidiary) failed to prove that the
parent purposely used the separate
corporate fiction of its subsidiary to
defraud them; neither were complainants
able to show any harm inflicted upon
them, which was proximately caused by
the control of the parent over the
subsidiary.
○ In other words, while control was
undoubtedly present in this case, there
was neither fraud done nor harm
inflicted.
■ Hence, the complainants were
held unable to proceed against
the parent corporation for
supposed liabilities of its
subsidiary, in keeping with the
principle of separate and distinct
juridical personalities of
corporations
RULING: Wherefore, CA Affirmed.
Leonen Dissent:
DISSENT as to the ruling that the corporate veil should not
be pierced. I maintain that the doctrine of piercing the
corporate veil properly applies and that G Holdings, Inc.
should be held liable with Maricalum Mining Corporation
G Holdings did not merely own Maricalum Mining sa
holding company. It had a say in its processes and
procedures. Thus, it cannot claim to be innocent. It cannot
participate in the illegal disn;issal of employees and
thereafter hide behind its separate corporate personality to
avoid the liability arising from it. The elements of control,
bad faith, and injury are present in the case at bar.
Moreover, assuming that the case does not fall within the
purview of fraud or alter-ego cases, the doctrine of piercing
the corporate veil still applies when the separate
personality of the corporation is being used to "defeat
public convenience as when the corporate fiction is used as
a vehicle for the evasion of an existing obligation. It is
established that the relations between capital and labor are
impressed with public interest, with the working class
usually at a disadvantage. Thus, in case of doubt, courts rule
in favor of labor.