GR 225544; (December, 2017) (Digest)
G.R. No. 225544 . December 04, 2017
ROGEL N. ZARAGOZA, PETITIONER, V. KATHERINE L. TAN AND EMPERADOR DISTILLERS, INC., RESPONDENTS.
FACTS
Petitioner Rogel Zaragoza was illegally dismissed by his employer, Consolidated Distillers of the Far East, Inc. (Condis). The Labor Arbiter ordered his reinstatement with full backwages, a decision ultimately affirmed with finality by the Supreme Court. During execution, Zaragoza sought to hold respondents Katherine Tan (Condis President) and Emperador Distillers, Inc. (EDI) jointly and severally liable with Condis for his accrued reinstatement wages. He argued that Condis transferred its business to EDI through an Asset Purchase Agreement to evade its liabilities, justifying piercing the corporate veil.
The Labor Arbiter granted the motion, finding the transfer fraudulent. The NLRC reversed, holding that the Asset Purchase Agreement was executed before Zaragoza’s dismissal and that EDI was a separate corporate entity. The Court of Appeals affirmed the NLRC, prompting Zaragoza’s petition to the Supreme Court.
ISSUE
Whether the corporate veil of Condis may be pierced to hold respondents Katherine Tan and EDI jointly and solidarily liable for the judgment award in favor of Zaragoza.
RULING
No. The Supreme Court denied the petition and affirmed the CA and NLRC rulings. Piercing the corporate veil is an equitable remedy applied only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. The legal logic requires clear and convincing evidence that the corporation is a mere alter ego or business conduit, with control being so complete that the corporation has no separate will.
Here, Zaragoza failed to prove the requisite control and fraud to justify disregarding Condis’s separate personality from EDI. The Asset Purchase Agreement was executed months before his dismissal, negating the claim it was orchestrated to evade that specific liability. The fact that a former Condis officer signed documents for EDI and both companies shared a lawyer during proceedings are insufficient, by themselves, to prove fraudulent intent or complete control by one entity over the other. Mere suspicion of fraud is inadequate. The corporate separateness between Condis and EDI must be respected, as the petitioner did not discharge the heavy burden of proving that EDI was a mere instrumentality of Condis established to commit a wrong against him.