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Case Digest on Manila Hotel Corp. vs. National

Labor Relations Commission (334 SCRA 1)July 27, 2010

Manila Hotel Corp. v. National Labor Relations Commission [343 SCRA 1 (Oct.13, 2000)]Requisites to Piercing the Veil of Corporate Fiction

Facts: Marcelo Santos was an overseas worker, a printer at the Mazoon Printing Press, Sultanate ofOman when he was directly hired by the Palace Hotel, Beijing by its GM Gerhard Shmidt as he wasrecommended by Nestor Buenio, his friend. Santos resigned from Mazoon and thereafter signed anemployment contract mailed to him. The contract stated it would be for a period of 2 years.After a short vacation in the Phil & barely a year into the contract, Santos was terminated from his jobdue to retrenchment, and repatriated to the Phil. Santos, through his lawyer, demanded fullcompensation pursuant to the employment agreement which Shmidt denied. Santos then filed acomplaint with the NLRC against MHC, MHICL, the Palace Hotel & Shmidt for illegal dismissal.

The Labor Arbiter grants payment of damages to Santos which was vacated on appeal by the NLRC.On an MR, the NLRC found Santos illegally dismissed & recommended that he be paid actual damagesequivalent to his salaries for the unexpired portion of his contract. MRs were denied, hence thispetition.

Issue: WON MHC is liable to Santos.

Held: Granted. Piercing the veil of corporate fiction fact that MHC is an incorporator & owns 50%of the capital stock of MHICL is not enough to pierce the veil. Even if we assume: NLRC hadjurisdiction over the case & MHICL was liable for Santos retrenchment, still MHC, as a separate &distinct juridical entity, cannot be held liable. Piercing the veil is an equitable remedy. When the notionof legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, thelaw will regard the corp as an association of persons. It is done only when the corp is a mere alter egoor business conduit of a person or another corp.

Clear & convincing evidence is needed to pierce the veil of corporate fiction. There is no such evidenceto show that MHICL & MHC are 1 & the same entity.

Test to enable piercing of the veil, except in express agency, estoppel or direct tort: a)Control, not meremajority or complete domination; b)Such control must have been used by the defendant to commitfraud or wrong, etc.; c)The aforesaid control & breach of duty must approximately cause the injury orunjust loss complained of.

Fact that the Palace Hotel is a member of the Manila Hotel Group is not enough to pierce the corporateveil there is no evidence to show that they are 1 & the same entity.

Contrary to what Santos claims that MHICL signed his employment contract, MHICL Vice-Presidentsigned as a mere witness under the word noted. Furthermore, there is no EER between Santos &MHICL.