Indophil Textile Mill Workers Union ‐ PTGWO v.

Calica INDOPHIL TEXTILE MILL WORKERS UNION-

PTGWO(PETITIONER) VS VOLUNTARY ARBITRATOR TEODORICO P. CALICA AND INDOPHIL TEXTILE
MILLS, INC.(RESPONDENTS)FEBRUARY 3, 1992J. MEDIALDEA

FACTS:

Indophil Textile Mill Workers Union-PTGWO is a legitimate labor organization and the exclusive bargaining
agent of all the rank-and-file employees of Indophil Textile Mills, Incorporated. Teodorico P. Calica is the
Voluntary Arbitrator of the National Conciliation and Mediation Board of the Department of Labor
and Employment, while Indophil Textile Mills, Inc. is a corporation engaged in the manufacture, sale and
export of yarns of various counts and kinds and of materials of kindred character.

Indophil Textile Mill Workers Union-PTGWO and Indophil Textile Mills, Inc. executed a collective bargaining
agreement.7 months later; Indophil Acrylic Manufacturing Corporation was formed and registered with the
Securities and Exchange Commission (different from above
Indophil Textile). Acrylic applied for registration with the Board of Investments for incentives under the
1987 Omnibus Investments Code. The application was approved on a preferred non-pioneer status. Acrylic
became operational and hired workers according to its own criteria and standards. The workers of Acrylic
unionized and a duly certified collective bargaining agreement were executed. A year after, the union claimed
that the plant facilities built and set up by Acrylic should be considered as an extension or expansion of the
facilities of Indophil Textile Mills pursuant to Section 1(c), Article Iof the CBA. In other words, it is the Union's
contention that Acrylic is part of the Indophil bargaining uni. The union alleged that:

1. Both corporations are engaged in the same line of business.

2. Both have their physical plants, offices and facilities in the same compound.
3. Many of Indophil Textile’s machines were transferred and installed and were being used in

Acrylic
.4. Services of a number of units, departments and sections were being provided to Acrylic
.5. Employees of Indophil Textile were the same persons manning and servicing Acrylic.

Indophil Textile opposed, saying it was a juridical entity separate and distinct from Acrylic. It argued through the
SolGenthat Acrylic was not an alter ego or an adjunct or business conduit of Indophil Textile Mills because it
had a separate business purpose. Indophil Textile engaged in the business of manufacturing yarns of various
counts and kinds and textiles., while Acrylic manufactured, bought, sold, at wholesale basis, bartered, imported,
exported and otherwise dealt in yarns of various counts and kinds. Acrylic cannot manufacture textiles while
Indophil cannot buy or import yarns. The existing impasse led the parties to enter into a submission agreement.
The parties jointly requested Calica to act as voluntary arbitrator in the resolution of the pending labor dispute
pertaining to the proper interpretation of the CBA provision. Calica ruled that the proper interpretation and
application of Sec. 1, (c), Art. I of the 1987 CBA do not extend to the employees of Acrylic as an extension or
expansion of Indophil Textile Mills, Inc.

ISSUE:

Were the operations in Indophil Acrylic Corporation an extension or expansion of Indophil Textile Mills?

HELD:

NO, they were separate corporations. The CBA did not apply to Acrylic.
Under the Doctrine of Piercing the Veil of Corporate Entity, when valid grounds therefore exist, the legal
fiction that a corporation is an entity with a juridical personality separate and distinct from its members or
stockholders may be disregarded. In such cases, the corporation will be considered as a mere association of
persons. The members as stockholders or thee corporation will be considered as the corporation, that is, liability
will attach directly to the officers and stockholders. The doctrine applies when the corporate fiction is used to
defeat public convenience, justify wrong or defend crime, or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the
corporation is organized and controlled and its affairs are conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.

In the case at bar, the union seeks to pierce the veil of corporate entity of Acrylic, alleging that the creation of
the corporation is a devise to evade the application of CBA between the Union and Indophil Textile. While the
court does not discount the possibility of the similarities of the businesses of Indophile Textile Mills and
Acrylic, neither is it inclined to apply the doctrine invoked by the union in granting the relief sought.

Although it was shown that the two corporation’ businesses are related, that some of the employees of the two
corporations are interchanged, and that the physical plants, offices and facilities, are situated in the same
compound, were not considered sufficient bases to pierce the veil in order to treat the two corporations as one
bargaining unit. The legal corporate entity is disregarded only if it is sought to hold the officers and
stockholders directly liable for a corporate debt.

Union sought to pierce corporate veil of Acrylic, alleging that the creation of Acrylic was Indophil’s devise to
evade the application of its CBA with them. Court held that there was no need to pierce Acrylic’s corporate
veil. The legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly
liable for a corporate debt or obligation. Union did not seek to impose such claim against Acrylic. The mere
fact that businesses were related, that some of the employees of Indophil were the same persons manning and
providing for auxiliary services to the other company, and that physical plants, officers and facilities are situated
in the same compound–were not sufficient to apply the doctrine. The doctrine of piercing the veil of corporate
entity applies when corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend
crime, or when it is made as a shield to confuse the legitimate issues or where a corporation is the 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