Emilio Cano Enterprises, Inc. vs. Court of Industrial Relations, et al.

A corporation's separate legal personality may be disregarded, and its property held liable for a judgment against its officers, where the corporation is a closed family corporation and the officers were sued in their official capacity, such that the judgment against them is in effect against the corporation. The corporate fiction cannot be invoked when its purpose is to shield an end subversive of justice.

Emilio Cano Enterprises, Inc. is a closed family corporation whose incorporators and directors belong to one single family: Emilio Cano, his wife Juliana, his sons Rodolfo and Carlos, and his daughter-in-law Ana D. Cano. The case involves an unfair labor practice charge filed before the Court of Industrial Relations against Emilio, Ariston, and Rodolfo Cano in their capacities as president and proprietor, field supervisor, and manager, respectively, of the corporation.

Emilio Cano Enterprises, Inc. is a closed family corporation, with its incorporators being Emilio Cano, his wife Juliana, his sons Rodolfo and Carlos, and his daughter-in-law Ana D. Cano. A complaint for unfair labor practice was filed before the Court of Industrial Relations on June 6, 1956, naming Emilio, Ariston, and Rodolfo Cano as respondents in their capacities as president and proprietor, field supervisor, and manager, respectively, of the corporation.

After trial, Presiding Judge Jose S. Bautista found Emilio Cano and Rodolfo Cano guilty of the unfair labor practice charge but absolved Ariston for insufficiency of evidence. The two were ordered, jointly and severally, to reinstate Honorata Cruz to her former position with payment of backwages from the time of her dismissal up to her reinstatement, together with all other rights and privileges appertaining thereto. Emilio Cano died on November 14, 1958, and the attempt to have the case dismissed against him failed. The case was appealed to the court en banc, which affirmed the decision of Judge Bautista.

An order of execution was issued on August 23, 1961, directing (1) the reinstatement of Honorata Cruz to her former position, and (2) the deposit with the court of the amount of P7,222.58 within ten days from receipt of the order, failing which the court would order either a levy on respondents' properties or the filing of an action for contempt of court. The order of execution was directed against the properties of Emilio Cano Enterprises, Inc. instead of those of the respondents named in the decision. The corporation filed an ex parte motion to quash the writ on the ground that the judgment sought to be enforced was not rendered against it, as it is a juridical entity separate and distinct from its officials. The motion was denied, and the motion for reconsideration failed, prompting the corporation to interpose the present petition for certiorari.

• Separate Juridical Personality: Petitioner argued that the judgment sought to be enforced was not rendered against it, as it is a juridical entity separate and distinct from its officials, and therefore the writ of execution directed against its properties should be quashed.

• Enforceability of Judgment: Respondent Court of Industrial Relations and respondent Honorata Cruz maintained that the judgment against Emilio and Rodolfo Cano, rendered in their official capacity as officers of the corporation, could be enforced against the corporation's property.

• Piercing the Corporate Veil: Whether the judgment rendered against Emilio and Rodolfo Cano in their capacity as officials of the corporation Emilio Cano Enterprises, Inc. can be made effective against the property of the latter, which was not a party to the case.

• Piercing the Corporate Veil: Yes. The judgment can be enforced against the corporation's property. While a corporation has a personality separate and distinct from its members, the Emilio Cano Enterprises, Inc. is a closed family corporation where the incorporators and directors belong to one single family, and the corporate fiction cannot be invoked to shield an end subversive of justice.

• Piercing the Corporate Veil: The Court acknowledged the undisputed rule that a corporation has a personality separate and distinct from its members or stockholders because of a fiction of the law. However, the Court noted that Emilio Cano Enterprises, Inc. is a closed family corporation where the incorporators and directors belong to one single family: Emilio Cano, his wife Juliana, his sons Rodolfo and Carlos, and his daughter-in-law Ana D. Cano. The Court found this to be an instance where the corporation and its members can be considered as one, and to hold such entity liable for the acts of its members is not to ignore the legal fiction but merely to give meaning to the principle that such fiction cannot be invoked if its purpose is to use it as a shield to further an end subversive of justice. The Court cited the principle that while a corporation is a legal entity existing separate and apart from the persons composing it, that concept cannot be extended to a point beyond its reason and policy, and when invoked in support of an end subversive of this policy it should be disregarded by the courts.

The Court also emphasized that Emilio and Rodolfo Cano were indicted not in their private capacity but as president and manager, respectively, of Emilio Cano Enterprises, Inc. Having been sued officially, their connection with the case must be deemed to be impressed with the representation of the corporation. The court's order was for them to reinstate Honorata Cruz to her former position in the corporation and incidentally pay her the wages she had been deprived of during her separation. Thus, the order against them was in effect against the corporation. The Court further noted that no benefit could be attained if the case were remanded to the court a quo merely in response to a technical substitution of parties, as this would only cause unwarranted delay that would work to Honorata's prejudice, contrary to the spirit of the law which enjoins a speedy adjudication of labor cases disregarding as much as possible the technicalities of procedure.

• Piercing the Corporate Veil — A corporation has a legal personality separate and distinct from its members or stockholders, but this concept cannot be extended to a point beyond its reason and policy. When invoked in support of an end subversive of this policy, the corporate fiction should be disregarded by the courts. The Court applied this doctrine to hold the corporation liable for the acts of its officers, as the corporation was a closed family corporation and the officers were sued in their official capacity.

• Officers Sued in Official Capacity — When corporate officers are sued in their official capacity, their connection with the case is deemed impressed with the representation of the corporation. An order against them is in effect an order against the corporation itself, making the corporation's property liable for the judgment.

• "Here is an instance where the corporation and its members can be considered as one. And to hold such entity liable for the acts of its members is not to ignore the legal fiction but merely to give meaning to the principle that such fiction cannot be invoked if its purpose is to use it as a shield to further an end subversive of justice." — This passage articulates the Court's application of the piercing the corporate veil doctrine to the facts of the case, establishing that the corporate fiction cannot shield an unjust end.

• "Having been sued officially their connection with the case must be deemed to be impressed with the representation of the corporation. In fact, the court's order is for them to reinstate Honorata Cruz to her former position in the corporation and incidentally pay her the wages she had been deprived of during her separation. Verily, the order against them is in effect against the corporation." — This passage establishes the principle that a judgment against officers in their official capacity is effectively a judgment against the corporation itself.

• La Campana Coffee Factory, et al. vs. Kaisahan ng mga Manggagawa, etc., et al., L-5677, March 25, 1953 — Cited in support of the principle that the corporate fiction cannot be invoked to subvert justice.
• McConnel, et al. vs. The Court of Appeals, et al., L-10510, March 17, 1961 — Cited in support of the principle that the corporate fiction cannot be invoked to subvert justice.

• Corporate Fiction Doctrine (12 Am. Jur. 160-161) — Cited for the principle that while a corporation is a legal entity separate and apart from the persons composing it, that concept cannot be extended beyond its reason and policy, and when invoked in support of an end subversive of this policy, it should be disregarded by the courts.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concurred.