Indophil Textile Mill Workers Union-PTGWO vs. Voluntary Arbitrator Teodorico P. Calica and Indophil Textile Mills, Inc.

A corporation's separate juridical personality will not be disregarded for purposes of union representation absent sufficient grounds to pierce the corporate veil. The doctrine of piercing the corporate veil applies only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or when the corporation is a mere alter ego, instrumentality, agency, conduit, or adjunct of another corporation. Related businesses, shared facilities, and common personnel are not sufficient grounds to treat two corporations as a single bargaining unit.

Petitioner Indophil Textile Mill Workers Union-PTGWO is a legitimate labor organization and the exclusive bargaining agent of rank-and-file employees of Indophil Textile Mills, Inc., a corporation engaged in the manufacture, sale, and export of yarns. Respondent Teodorico P. Calica was impleaded in his official capacity as Voluntary Arbitrator of the National Conciliation and Mediation Board. In April 1987, the union and the company executed a collective bargaining agreement effective from April 1, 1987 to March 31, 1990, which included a coverage clause applying to the company's plant facilities and installations and to any extension and expansion thereat.

Petitioner Indophil Textile Mill Workers Union-PTGWO is the exclusive bargaining agent of rank-and-file employees of Indophil Textile Mills, Inc., a corporation engaged in the manufacture, sale, and export of yarns, with plants at Barrio Lambakin, Marilao, Bulacan. In April 1987, the union and the company executed a collective bargaining agreement effective from April 1, 1987 to March 31, 1990. Section 1(c), Article I of the CBA provided: "This Agreement shall apply to the Company's plant facilities and installations and to any extension and expansion thereat."

On November 3, 1967, Indophil Acrylic Manufacturing Corporation was formed and registered with the Securities and Exchange Commission. Acrylic subsequently applied for registration with the Board of Investments for incentives under the 1987 Omnibus Investments Code, and the application was approved on a preferred non-pioneer status. In 1988, Acrylic became operational and hired workers according to its own criteria and standards. In July 1989, Acrylic's workers unionized and a duly certified collective bargaining agreement was executed.

In 1990, the petitioner union claimed that the plant facilities built and set up by Acrylic should be considered an extension or expansion of the company's facilities pursuant to Section 1(c), Article I of the CBA. The union contended that Acrylic is part of the Indophil bargaining unit, while the company opposed this, submitting that Acrylic is a juridical entity separate and distinct from it. The union pointed to evidence that the two corporations have practically the same incorporators, directors, and officers, and that seventy percent of Acrylic's total stock subscription was subscribed to by the company. The union also noted that the two corporations have their physical plants, offices, and facilities in the same compound; that many of the company's machineries were transferred to and installed in the Acrylic plant; that services of units, departments, or sections of the company are provided to Acrylic; and that the company's employees are the same persons manning and servicing Acrylic's units.

The company insisted that the existence of a bona fide business relationship between Acrylic and the company is not proof of being a single corporate entity, because the services provided to Acrylic are auxiliary services not essential to Acrylic's actual production, and the essential services are discharged exclusively by Acrylic personnel under the control and supervision of Acrylic managers and supervisors. The existing impasse led the parties to enter into a submission agreement on September 6, 1990, jointly requesting the Voluntary Arbitrator to resolve the dispute. After the parties submitted their position papers and replies, the Voluntary Arbitrator rendered an award on December 8, 1990, finding that the CBA provision does not extend to Acrylic's employees.

• Erroneous Interpretation of the CBA: Petitioner maintained that the Voluntary Arbitrator gravely erred in interpreting Section 1(c), Article I of the CBA in its literal meaning without taking cognizance of the facts adduced that the creation of Indophil Acrylic is but a devise of the company to evade the application of the CBA between the union and the company.
• Same Business Purpose: Petitioner stressed that the articles of incorporation of the two corporations establish that the two entities are engaged in the same kind of business, which is the manufacture and sale of yarns of various counts and kinds and of other materials of kindred character or nature.
• Common Incorporators and Control: Petitioner emphasized that the two corporations have practically the same incorporators, directors, and officers, and that seventy percent of Acrylic's total stock subscription was subscribed to by the company.
• Evidence of Extension or Expansion: Petitioner noted that the evidence sufficiently establishes that Acrylic is an extension or expansion of the company, citing: (a) the two corporations have their physical plants, offices, and facilities situated in the same compound; (b) many of the company's machineries were transferred to and installed in the Acrylic plant; (c) services of units, departments, or sections of the company are provided to Acrylic; and (d) the company's employees are the same persons manning and servicing Acrylic's units.
• Grave Abuse of Discretion: Petitioner insisted that the Voluntary Arbitrator committed grave abuse of discretion amounting to lack or excess of jurisdiction in erroneously interpreting the CBA provision and in failing to disregard the corporate entity of Acrylic.

• Separate Legitimate Business Purpose: The Solicitor General argued that Indophil Acrylic is not an alter ego or adjunct or business conduit of the company because it has a separate legitimate business purpose. The primary purpose of the company is to engage in the business of manufacturing yarns and textiles, while Acrylic's primary purpose is to manufacture, buy, sell at wholesale basis, barter, import, export, and otherwise deal in yarns. Unlike the company, Acrylic cannot manufacture textiles, while the company cannot buy or import yarns.
• Separate Juridical Personality: Private respondent cited Diatagon Labor Federation vs. Ople, which ruled that two corporations cannot be treated as a single bargaining unit even if their businesses are related, and submitted that the fact that there are as many bargaining units as there are companies in a conglomeration is positive proof that a corporation is endowed with a legal personality distinctly its own.
• Auxiliary Services Not Proof of Single Entity: Private respondent insisted that the existence of a bona fide business relationship between Acrylic and the company is not proof of being a single corporate entity because the services provided to Acrylic are auxiliary services or activities not really essential in the actual production of Acrylic, and the essential services are discharged exclusively by Acrylic personnel under the control and supervision of Acrylic managers and supervisors.

• Interpretation of the CBA Provision: Whether the respondent arbitrator erred in interpreting Section 1(c), Article I of the CBA between the petitioner union and respondent company.
• Separate Corporate Entity: Whether Indophil Acrylic is a separate and distinct entity from respondent company for purposes of union representation.
• Grave Abuse of Discretion: Whether the respondent arbitrator gravely abused his discretion amounting to lack or in excess of his jurisdiction.
• Due Process: Whether the respondent arbitrator violated the petitioner union's cardinal primary right to due process.

• Interpretation of the CBA Provision: No. The Voluntary Arbitrator's interpretation of Section 1(c), Article I of the CBA was upheld, the Court finding that Acrylic is not an extension or expansion of the company.
• Separate Corporate Entity: Yes. Indophil Acrylic is a separate and distinct juridical entity from the company, and the facts presented were insufficient to justify piercing the corporate veil.
• Grave Abuse of Discretion: No. The Voluntary Arbitrator did not commit grave abuse of discretion, having cited facts and the law upon which he based the award.
• Due Process: No. The Voluntary Arbitrator did not violate the petitioner union's right to due process, as the parties submitted their respective position papers and replies before the award was rendered.

• Interpretation of the CBA Provision: The Court emphasized that decisions of voluntary arbitrators are to be given the highest respect and a certain measure of finality, though this is not a hard and fast rule and does not preclude judicial review where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law are brought to attention. The Voluntary Arbitrator, a professor of the U.P. Asian Labor Education Center, found that existing law and jurisprudence supported the company's contentions, and he cited facts and the law upon which he based the award. Thus, he did not abuse his discretion in interpreting the CBA provision.

• Separate Corporate Entity: The Court applied the doctrine of piercing the veil of corporate entity, which applies when the 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. While the Court did not discount the possibility of the similarities of the businesses of the company and Acrylic, it was not inclined to apply the doctrine. The facts that the businesses are related, that some employees of the company are the same persons manning and providing auxiliary services to Acrylic's units, and that the physical plants, offices, and facilities are situated in the same compound are not sufficient to justify piercing the corporate veil. Citing Umali vs. Court of Appeals, the Court emphasized that 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, which was not the case here.

• Grave Abuse of Discretion: The Court found that the Voluntary Arbitrator did not commit grave abuse of discretion in his interpretation of Section 1(c), Article I of the CBA. Citing Diatagon Labor Federation vs. Ople, the Court ruled that it is grave abuse of discretion to treat two companies as a single bargaining unit when these companies are indubitably distinct entities with separate juridical personalities.

• Due Process: The Court found no violation of due process, as the parties were given the opportunity to submit their respective position papers and replies before the Voluntary Arbitrator rendered his award.

• Piercing the Veil of Corporate Entity — The doctrine allows the legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders to be disregarded when valid grounds exist. The doctrine applies when the 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. In this case, the Court held that the facts presented — related businesses, shared facilities, common personnel providing auxiliary services, and common incorporators — were not sufficient to justify piercing Acrylic's corporate veil.

• Separate Bargaining Units for Separate Corporations — Two corporations cannot be treated as a single bargaining unit even if their businesses are related. The fact that there are as many bargaining units as there are companies in a conglomeration of companies is positive proof that a corporation is endowed with a legal personality distinctly its own, independent and separate from other corporations. It is grave abuse of discretion to treat two companies as a single bargaining unit when these companies are indubitably distinct entities with separate juridical personalities.

• Finality of Voluntary Arbitrators' Decisions — Decisions of voluntary arbitrators are to be given the highest respect and a certain measure of finality, but this is not a hard and fast rule. Judicial review is not precluded where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law are brought to the Court's attention.

• "Time and again, We stress that the decisions of voluntary arbitrators are to be given the highest respect and a certain measure of finality, but this is not a hard and fast rule, it does not preclude judicial review thereof where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law were brought to our attention." — This passage establishes the standard of judicial review applicable to voluntary arbitrators' awards, which is central to the Court's analysis of whether the arbitrator committed grave abuse of discretion.

• "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." — This passage articulates the canonical formulation of the piercing the veil doctrine, which the Court applied in determining whether Acrylic should be treated as part of the company's bargaining unit.

• "The fact that the businesses of private respondent and Acrylic are related, that some of the employees of the private respondent are the same persons manning and providing for auxilliary services to the units of Acrylic, and that the physical plants, offices and facilities are situated in the same compound, it is our considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of Acrylic." — This passage states the Court's application of the doctrine to the facts, holding that the evidence presented was insufficient to disregard Acrylic's separate corporate personality.

• "We already ruled in the case of Diatagon Labor Federation Local 110 of the ULGWP v. Ople (supra) that it is grave abuse of discretion to treat two companies as a single bargaining unit when these companies are indubitably distinct entities with separate juridical personalities." — This passage applies the controlling precedent to the case, establishing that treating distinct corporations as a single bargaining unit constitutes grave abuse of discretion.

• Diatagon Labor Federation vs. Ople, G.R. No. L-44493-94, December 3, 1980, 101 SCRA 534 — Controlling precedent cited by the Court for the rule that two corporations cannot be treated as a single bargaining unit even if their businesses are related, and that it is grave abuse of discretion to treat two companies as a single bargaining unit when they are distinct entities with separate juridical personalities.

• Umali et al. vs. Court of Appeals, G.R. No. 89561, September 13, 1990, 189 SCRA 529 — Cited for the doctrine of piercing the veil of corporate entity and for the rule that 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.

• Ocampo et al. vs. National Labor Relations Commission, G.R. No. 81677, July 25, 1990 — Cited for the principle that decisions of voluntary arbitrators are given the highest respect and a certain measure of finality, but judicial review is not precluded where want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the law are brought to attention.

• Oceanic Bic Division (FFW) vs. Romero, G.R. No. L-43890, July 16, 1984, 130 SCRA 392 — Cited in Ocampo for the same principle regarding the finality of voluntary arbitrators' decisions and the exceptions to such finality.

• Section 1(c), Article I, Collective Bargaining Agreement — The CBA provision stating: "This Agreement shall apply to the Company's plant facilities and installations and to any extension and expansion thereat." The Court interpreted this provision as not extending to Acrylic's employees because Acrylic is a separate juridical entity and not an extension or expansion of the company.

• 1987 Omnibus Investments Code — The statute under which Acrylic applied for registration with the Board of Investments for incentives, which was approved on a preferred non-pioneer status. This fact was relevant to establishing Acrylic's separate legitimate business purpose.

• Chief Justice Narvasa
• Justice Cruz
• Justice Grino-Aquino