La Campana Factory, Inc. vs. Kaisahan ng mga Manggagawa sa La Campana (KKM)

The doctrine that a corporation is a legal entity separate and apart from the persons composing it is a legal theory introduced for purposes of convenience and to subserve the ends of justice, and the concept cannot be extended beyond its reason and policy; when invoked in support of an end subversive of this policy, the corporate entity will be disregarded by the courts. Once the Court of Industrial Relations acquires jurisdiction over a case, it retains that jurisdiction until the case is completely decided, and such jurisdiction is not lost by the subsequent suspension of a party's permit.

Tan Tong had been engaged in the business of buying and selling gaugau under the trade name La Campana Gaugau Packing since 1932, with an establishment in Binondo, Manila, later transferred to España Extension, Quezon City. On July 6, 1950, Tan Tong, together with himself and members of his family, formed a family corporation known as La Campana Factory Co., Inc., with its principal office located in the same place as that of La Campana Gaugau Packing. The case arose under Commonwealth Act No. 103, which governed the jurisdiction of the Court of Industrial Relations over labor disputes, and Commonwealth Act No. 213, which concerned the right to collective bargaining.

Tan Tong, one of the petitioners, had since 1932 been engaged in the business of buying and selling gaugau under the trade name La Campana Gaugau Packing, with an establishment in Binondo, Manila, later transferred to España Extension, Quezon City. On July 6, 1950, Tan Tong, with himself and members of his family, formed a corporation known as La Campana Factory Co., Inc., with its principal office located in the same place as that of La Campana Gaugau Packing.

About a year before the formation of the corporation, on July 11, 1949, Tan Tong had entered into a collective bargaining agreement with the Philippine Legion of Organized Workers (PLOW), to which the union of Tan Tong's employees, headed by Manuel E. Sadde, was then affiliated. Seceding from the PLOW, Tan Tong's employees later formed their own organization known as Kaisahan Ng Mga Manggagawa Sa La Campana, one of the respondents, and applied for registration in the Department of Labor as an independent entity. Pending consideration of this application, the Department gave the new organization legal standing by issuing it a permit as an affiliate to the Kalipunan Ng Mga Manggagawa.

On July 19, 1951, the respondent Kaisahan, which as of that date counted 66 members — workers of both La Campana Gaugau Packing and La Campana Coffee Factory Co., Inc. — presented a demand for higher wages and more privileges, the demand being addressed to La Campana Starch and Coffee Factory. As the demand was not granted and an attempt at settlement through the mediation of the Conciliation Service of the Department of Labor gave no result, the Department certified the dispute to the Court of Industrial Relations on July 17, 1951, the case being docketed as Case No. 584-V.

With the case already pending in the industrial court, the Secretary of Labor, on September 5, 1951, revoked the Kalipunan Ng Mga Kaisahang Manggagawa's permit as a labor union on the strength of information received that it was dominated by subversive elements, and, in consequence, on the 20th of the same month, also suspended the permit of its affiliate, the respondent Kaisahan. Following the revocation of the Kaisahan's permit, La Campana Gaugau and Coffee Factory and the PLOW, which had been allowed to intervene as a party having an interest in the dispute, filed separate motions for the dismissal of the case on the following grounds: (1) that the action was directed against two different entities with distinct personalities; (2) that the workers of the La Campana Coffee Factory, Inc. were less than thirty-one; (3) that the petitioning union had no legal capacity to sue because its registration as an organized union had been revoked; and (4) that there was an existing valid contract between the respondent La Campana Gaugau Packing and the intervenor PLOW.

Several hearings were held on the above motions, in the course of which ocular inspections were also made. The Court of Industrial Relations found as a fact that: while the coffee corporation was a family corporation with Tan Tong, his wife, and children as the incorporators and stockholders, the La Campana Gaugau Packing was merely a business name; the lease of space in the bodega housing the gaugau factory to Tan Keng Lim, manager of the La Campana Coffee Factory, was executed only on September 1, 1951, while the dispute was pending before the Court; there was only one entity, La Campana Starch and Coffee Factory, as shown by the signboard, the advertisement in the delivery trucks, the packages of gaugau, and delivery forms; all the laborers working in the gaugau or in the coffee factory received their pay from the same person, the cashier, Miss Natividad Garcia, secretary of Tan Tong, and they were transferred from the gaugau to the coffee and vice-versa as the management so required; there had been only one payroll for the entire La Campana personnel, but after the case was certified to the Court on July 17, 1951, the company began making separate payrolls for the coffee factory and for the gaugau factory; and during the ocular inspection made in the factory on August 26, 1951, the Court found hundreds of bags of raw coffee behind the pile of gaugau sacks in the gaugau factory, women employees working on paper wrappers for gaugau, about 3,000 cans to be used as containers for coffee, and 16 trucks used both for the delivery of coffee and gaugau, with one truck found to contain boxes of gaugau and cans of coffee.

• Lack of Jurisdictional Number: Petitioners argued that the Court of Industrial Relations had no jurisdiction to take cognizance of the case because La Campana Coffee Factory, Inc. had only 14 employees, only 5 of whom were members of the respondent union, and therefore the absence of the jurisdictional number (30) as provided by sections 1 and 4 of Commonwealth Act No. 103 deprived the court of jurisdiction over the coffee factory.
• Loss of Union Personality: Petitioners argued that the suspension of respondent union's permit by the Secretary of Labor had the effect of taking away the union's right to collective bargaining under section 2 of Commonwealth Act No. 213 and consequently its personality to sue for and in behalf of its members.

• Single Management: The respondent union and the Court of Industrial Relations maintained that La Campana Gaugau Packing and La Campana Coffee Factory Co., Inc. were operating under one single management, as one business though with two trade names, as shown by the evidence and ocular inspections conducted by the industrial court.
• Retention of Jurisdiction: The respondents argued that the Court of Industrial Relations had duly acquired jurisdiction over the case upon certification by the Secretary of Labor, and this jurisdiction was retained until the case was completely decided, notwithstanding the subsequent suspension of the respondent union's permit.

• Jurisdiction over the Coffee Factory: Whether the Court of Industrial Relations had jurisdiction over La Campana Coffee Factory, Inc. despite the latter allegedly having only 14 employees, below the jurisdictional number of 30 required by Commonwealth Act No. 103.
• Effect of Permit Suspension: Whether the suspension of the respondent union's permit by the Secretary of Labor divested the Court of Industrial Relations of jurisdiction and deprived the union of its personality to sue.

• Jurisdiction over the Coffee Factory: Yes. The Court of Industrial Relations had jurisdiction over the case because La Campana Gaugau Packing and La Campana Coffee Factory Co., Inc. were operating under one single management, as one business though with two trade names, and the corporate entity of the coffee factory could not be invoked to defeat the ends of the law.
• Effect of Permit Suspension: No. The Court of Industrial Relations duly acquired jurisdiction over the case upon certification by the Secretary of Labor, and this jurisdiction was retained until the case was completely decided; the subsequent suspension of the respondent union's permit did not divest the court of jurisdiction.

• Jurisdiction over the Coffee Factory: The petitioners did not question that the number of employees of the La Campana Gaugau Packing involved in the case was more than the jurisdictional number (31) required by law, but contended that the industrial court had no jurisdiction over La Campana Coffee Factory, Inc. because it allegedly had only 14 laborers. This contention lost force because, as found by the industrial court — a finding conclusive upon the Supreme Court — the two entities were operating under one single management, as one business though with two trade names. While the coffee factory was a corporation and, by legal fiction, an entity existing separate and apart from the persons composing it, this fiction of law, introduced as a matter of convenience and to subserve the ends of justice, could not be invoked to further an end subversive of that purpose. The doctrine that a corporation is a legal entity separate and apart from the persons composing it is a legal theory introduced for purposes of convenience and to subserve the ends of justice; the concept cannot be extended to a point beyond its reason and policy, and when invoked in support of an end subversive of this policy, will be disregarded by the courts. In an appropriate case and in furtherance of the ends of justice, a corporation and the individual or individuals owning all its stocks and assets will be treated as identical, the corporate entity being disregarded where used as a cloak or cover for fraud or illegality. A subsidiary or auxiliary corporation created by a parent corporation merely as an agency for the latter may sometimes be regarded as identical with the parent corporation, especially if the stockholders or officers of the two corporations are substantially the same or their system of operation unified. In the present case, Tan Tong appeared to be the owner of the gaugau factory, and the coffee factory, though an incorporated business, was in reality owned exclusively by Tan Tong and his family. The two factories had but one office, one management, and one payroll, except after July 17, the day the case was certified to the Court of Industrial Relations, when the cashier began preparing separate payrolls for the two. The laborers of the gaugau factory and the coffee factory were interchangeable, transferred from one to the other and vice-versa. The attempt to make the two factories appear as two separate businesses, when in reality they were but one, was a device to defeat the ends of the law (the Act governing capital and labor relations) and should not be permitted to prevail.
• Effect of Permit Suspension: There being more than 30 laborers involved and the Secretary of Labor having certified the dispute to the Court of Industrial Relations, that court duly acquired jurisdiction over the case pursuant to section 4 of Commonwealth Act No. 103, citing International Oil Factory vs. NLU, Inc., 73 Phil., 401. This jurisdiction was not lost when the Department of Labor suspended the permit of the respondent Kaisahan as a labor organization. For once jurisdiction is acquired by the Court of Industrial Relations, it is retained until the case is completely decided, citing Manila Hotel Employees Association vs. Manila Hotel Co. et al., 73 Phil., 374.

• Disregarding the Corporate Entity — The doctrine that a corporation is a legal entity existing separate and apart from the persons composing it is a legal theory introduced for purposes of convenience and to subserve the ends of justice. The concept cannot be extended to a point beyond its reason and policy, and when invoked in support of an end subversive of this policy, will be disregarded by the courts. In an appropriate case and in furtherance of the ends of justice, a corporation and the individual or individuals owning all its stocks and assets will be treated as identical, the corporate entity being disregarded where used as a cloak or cover for fraud or illegality. The Court applied this doctrine to treat the gaugau factory and the coffee factory as one business under single management, rejecting the petitioners' attempt to use the corporate fiction to defeat the jurisdiction of the Court of Industrial Relations.
• Retention of Jurisdiction — Once jurisdiction is acquired by the Court of Industrial Relations, it is retained until the case is completely decided. The Court applied this doctrine to hold that the suspension of the respondent union's permit by the Department of Labor, which occurred after the Secretary of Labor had certified the dispute to the Court of Industrial Relations, did not divest the court of jurisdiction over the case.

• "The doctrine that a corporation is a legal entity existing separate and apart from the person composing it is a legal theory introduced for purposes of convenience and to subserve the ends of justice. The concept cannot, therefore, be extended to a point beyond its reason and policy, and when invoked in support of an end subversive of this policy, will be disregarded by the courts." — This passage articulates the canonical formulation of the doctrine of disregarding the corporate entity, which the Court applied to treat the two business entities as one for purposes of determining the jurisdiction of the Court of Industrial Relations.
• "In view of all these, the attempt to make the two factories appears as two separate businesses, when in reality they are but one, is but a device to defeat the ends of the law (the Act governing capital and labor relations) and should not be permitted to prevail." — This passage states the Court's conclusion that the petitioners' attempt to separate the two businesses was a device to defeat the law, forming the basis for disregarding the corporate entity.
• "For once jurisdiction is acquired by the Court of Industrial Relations it is retained until the case is completely decided." — This passage states the doctrine of retention of jurisdiction, which the Court applied to hold that the suspension of the respondent union's permit did not divest the Court of Industrial Relations of jurisdiction.

• International Oil Factory vs. NLU, Inc., 73 Phil., 401 — Cited as controlling authority for the proposition that the Court of Industrial Relations duly acquired jurisdiction over the case upon certification by the Secretary of Labor where more than 30 laborers were involved, pursuant to section 4 of Commonwealth Act No. 103.
• Manila Hotel Employees Association vs. Manila Hotel Co. et al., 73 Phil., 374 — Cited as controlling authority for the doctrine that once jurisdiction is acquired by the Court of Industrial Relations, it is retained until the case is completely decided.

• Section 1, Commonwealth Act No. 103 — The provision establishing the jurisdiction of the Court of Industrial Relations, which the petitioners invoked in arguing that the coffee factory had fewer than the jurisdictional number of 30 employees.
• Section 4, Commonwealth Act No. 103 — The provision governing certification of labor disputes to the Court of Industrial Relations by the Secretary of Labor, which the Court applied in holding that the court duly acquired jurisdiction over the case.
• Section 2, Commonwealth Act No. 213 — The provision concerning the right to collective bargaining, which the petitioners invoked in arguing that the suspension of the respondent union's permit deprived the union of its personality to sue.

Paras, C.J., Feria, Pablo, Bengzon, Tuason, Montemayor, Jugo, Bautista Angelo, and Labrador, JJ., concurred.