DUTCH MOVERS, INC. v. LEQUIN

DUTCH MOVERS, INC. ET AL VS EDILBERTO LEQUIN, ET AL

G.R No. 210032

April 25, 2017

FACTS:

This case is an offshoot of the illegal dismissal Complaint filed by Edilberto Lequin (Lequin), Christopher Salvador, Reynaldo Singsing, and Raffy Mascardo (respondents) against Dutch Movers, Inc. (DMI), and/or spouses Cesar Lee and Yolanda Lee (petitioners), its alleged President/Owner, and Manager respectively. Respondents stated that DMI, employed Lequin as truck and the rest of respondents as helpers. Cesar Lee, through the Supervisor Nazario Furio, informed them that DMI would cease its hauling operation for no reason; as such, they requested DMI to issue a formal notice regarding the matter but to no avail. Later, upon respondents' request, the DOLE NCR issued a certification revealing that DMI did not file any notice of business closure. Thus, respondents argued that they were illegally dismissed as their termination was without cause and only on the pretext of closure.

Labor Arbiter dismissed the case for lack of cause of action.  NLRC reversed and set aside the LA decision and ruled that respondents were illegally dismissed because DMI simply placed them on standby, and no longer provide them with work which said decision become final and executory.

Respondents filed a Motion for Writ of Execution. Pending resolution of the motions, respondents filed a Manifestation and Motion to Implead stating that upon investigation, they discovered that DMI no longer operates. They, nonetheless, insisted that petitioners who managed and operated DMI, and consistently represented to respondents that they were the owners of DMI continue to work at Toyota Alabang, which they (petitioners) also own and operate. They further averred that the Articles of Incorporation (AOI) of DMI ironically did not include petitioners as its directors or officers; and those named directors and officers were persons unknown to them. They likewise claimed that per inquiry with the SEC and the DOLE, they learned that DMI did not file any notice of business closure; and the creation and operation of DMI was attended with fraud making it convenient for petitioners to evade their legal obligations to them. Respondents prayed that petitioners, and the officers named in DMI’s AOI, which included Edgar Smith and Millicent Smith be impleaded and be held solidarily liable with DMI in paying the judgment awards.

ISSUE:

• Whether or not petitioners should be held solidarily liable for the judgement award?
• Whether or not there is legal basis to pierce the veil of corporate fiction of Dutch Movers, Inc?

RULINGS:

Applying the cases of Valderrama v. National Labor Relations Commission, and David v. Court of Appeals, the Court held that the principle of immutability of judgment, or the rule that once a judgment has become final and executory, the same can no longer be altered or modified and the court's duty is only to order its execution, is not absolute. One of its exceptions is when there is a supervening event occurring after the judgment becomes final and executory, which renders the decision unenforceable. Supervening events transpired in this case after the NLRC Decision became final and executory, which rendered its execution impossible and unjust. Like in Valderrama, during the execution stage, ceased its operation, and the same did not file any formal notice regarding it. Added to this, in their Opposition to the Motion to Implead, spouses Smith revealed that they only lent their names to petitioners, and they were included as incorporators just to assist the latter in forming DMI; after such undertaking, spouses Smith immediately transferred their rights in DMI to petitioners, which proved that petitioners were the ones in control of DMI, and used the same in furthering their business interests.

The Court is not unmindful of the basic tenet that a corporation has a separate and distinct personality from its stockholders, and from other corporations it may be connected with. However, such personality may be disregarded, or the veil of corporate fiction may be pierced attaching personal liability against responsible person if the corporation's personality "is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws x x x. Here, the veil of corporate fiction must be pierced and accordingly, petitioners should be held personally liable for judgment awards because the peculiarity of the situation shows that they controlled DMI; they actively participated in its operation such that DMI existed not as a separate entities but only as business conduit of petitioners.