GR 188047; (November, 2016) (Digest)
G.R. No. 188047, November 28, 2016
Light Rail Transit Authority, Petitioner, vs. Bienvenido R. Alvarez, Carlos S. Velasco, Ascencion A. Gargalicano, Marlon E. Aguinaldo, Petronilo T. Legaspi, Bonifacio A. Estopia, Andre A. Dela Merced, Jose Novier D. Bayot, Rolando Amazon and Marlino Herrera, Respondents.
FACTS
The respondents were former employees of the Metro Transit Organization, Inc. (METRO). In 1984, petitioner Light Rail Transit Authority (LRTA), a government-owned corporation, entered into an Agreement for the Management and Operation of the Light Rail Transit System (AMO-LRTS) with METRO, wherein LRTA funded all operating expenses, including employee benefits under a Collective Bargaining Agreement (CBA). After the Commission on Audit nullified the AMO-LRTS in 1989, LRTA acquired METRO as a wholly-owned subsidiary, appointed its management, and continued to honor the CBA and the employees’ retirement plan.
In 1997, METRO’s LRTA-appointed general manager announced a severance benefit of 1.5 months’ salary per year of service. When LRTA ceased METRO’s operations in 2000, the board approved the release of 50% of the severance pay to displaced employees, including respondents. LRTA even earmarked funds for this purpose in its 2002 budget following a COA opinion holding it liable. However, only half was paid.
ISSUE
Whether the LRTA can be held jointly and severally liable with METRO for the payment of the remaining balance of the respondents’ severance benefits.
RULING
Yes, the Supreme Court affirmed the findings of the Labor Arbiter, the NLRC, and the Court of Appeals, holding LRTA jointly and severally liable. The legal logic rests on the application of the doctrine of piercing the corporate veil and LRTA’s direct assumption of obligation. While METRO remained a separate juridical entity, the Court found that LRTA completely dominated and controlled its subsidiary’s operations, finances, and management, making METRO a mere instrumentality.
More critically, LRTA’s own actions established its direct liability. It originally contractually bound itself under the AMO-LRTS to fund all of METRO’s operating expenses, which included employee wages and benefits. This obligation continued de facto after the acquisition. LRTA’s board sanctioned the CBA containing the severance benefit, its appointed manager announced it, and LRTA itself allocated a specific budget for the full payment, thereby unequivocally assuming the obligation. Having paid the first 50%, LRTA was estopped from denying liability for the balance. The separate corporate personality of METRO was disregarded to prevent injustice, as LRTA used it as a shield to evade a legitimate debt it had directly undertaken to pay.