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