G.R. No. L-23495 and L-26432 September 30, 1970
LVN PICTURES EMPLOYEES AND WORKERS ASSOCIATION (NLU), petitioner, vs. LVN PICTURES, INC., respondent. (L-23495) / LVN PICTURES CHECKERS UNION (NLU), petitioner, vs. LVN PICTURES, INC. and/or DALISAY PICTURES INC., and the COURT OF INDUSTRIAL RELATIONS, respondents. (L-26432)

FACTS

LVN Pictures, Inc. (LVN) was a corporation engaged in producing Tagalog movies. It had a collective bargaining agreement with the LVN Pictures Employees and Workers Association (EWA) set to expire on December 31, 1960. From 1957 to 1961, LVN suffered heavy financial losses, amounting to P1,560,985.14 as of May 31, 1961, which exceeded its paid-up capital. Its liabilities also exceeded its assets, and it had nearly exhausted its overdraft lines with banks. To avoid closure and lay-offs, LVN proposed to the EWA a shift to a “pakiao” system per picture and later a graduated salary reduction, but both proposals were rejected. After the collective bargaining agreement expired and following a stockholders’ meeting, LVN decided to stop producing new pictures and close its movie production business effective May 31, 1961, dismissing all related personnel, including the 84 EWA members. LVN thereafter leased its equipment to various production companies, including the newly incorporated Dalisay Pictures, Inc. (DPI). Separately, the LVN Pictures Checkers’ Union (LPCU), organized in early 1961, also had its members dismissed by LVN. The EWA and LPCU filed separate complaints with the Court of Industrial Relations (CIR) charging LVN with unfair labor practice. The CIR ruled in favor of LVN (and DPI in the LPCU case), holding that the dismissals were due to serious business losses and that DPI was a separate entity from LVN.

ISSUE

1. Was LVN guilty of unfair labor practice in dismissing its employees who were members of the EWA and the LPCU?
2. Were LVN and DPI one and the same corporation or entity?

RULING

1. No, LVN was not guilty of unfair labor practice. The Supreme Court affirmed the CIR’s finding that LVN’s dismissal of employees was due to serious financial losses incurred in good faith from 1957 to 1961, which rendered the company insolvent and without operating capital. The proposals for a “pakiao” system and wage reductions were legitimate attempts to avoid bankruptcy and closure, not acts of unfair labor practice. The employees’ refusal to accept these measures left LVN with no alternative but to cease operations.
2. No, LVN and DPI were not the same entity. The Supreme Court upheld the CIR’s factual finding that DPI was a separate and distinct corporation with its own incorporators and fully paid capital stock. There was no evidence that DPI was organized to circumvent LVN’s legal obligations or that LVN controlled DPI. The CIR’s findings of fact, being supported by substantial evidence, are conclusive.
The appealed decisions and resolutions of the CIR were affirmed. The Court noted, however, that the award of one-month pay to LPCU members in the second case was not justified under the doctrine that separation pay is not due when employment is terminated for a just cause like business losses, but this error was not reviewed as LVN did not appeal that portion.