Topic: Chapter IV: The Corporate Entity The CIR Chief Examiner submitted a report containing three
Case No.: GR No. L-30822. July 31, 1975. computations:
Case Name: Claparols vs CIR
Full Case Name: EDUARDO CLAPAROLS, ROMULO AGSAM a. The first computation covers the period February 1, 1957
and/or CLAPAROLS STEEL AND NAIL PLANT, to October 31, 1964;
petitioners, vs. COURT OF INDUSTRIAL b. The second is up to and including December 7, 1962,
RELATIONS, ALLIED WORKERS' when the corporation stopped operations; and
ASSOCIATION and/or DEMETRIO GARLITOS, c. The third is only up to June 30, 1957 when the Claparols
ALFREDO ONGSUCO, JORGE SEMILLANO, Steel and Nail Plant ceased to operate.
SALVADOR DOROTEO, ROSENDO
ESPINOSA, LUDOVICO BALOPENOS, ASER The CIR Chief Examiner’s explanation of the computation
AMANCIO, MAXIMO QUIOYO, GAUDENCIO provided that the records of the Claparols Steel Corporation
QUIOYO, and IGNACIO QUIOYO, show that it was established on July 1, 1957 succeeding the
respondents. Claparols Steel and Nail Plant which ceased operations on
Ponente: Makasiar, J. June 30, 1957, and that the Claparols Steel Corporation
Doctrine: "Avoiding-the-liability" scheme is where the stopped operations on December 7, 1962.
latter corporation is a continuation and
successor of the first entity, and its emergence Petitioners filed an opposition alleging Claparols could not
is skillfully timed to avoid the financial liability personally reinstate respondent workers; that assuming the
that already attached to its predecessor. Thus, workers are entitled to back wages, the same should only be
there is no break in the succession and limited to three months; and that since Claparols Steel
continuity of the same business. Corporation ceased to operate on December 7, 1962, re-
Digest Writer: Karl employment of respondent workers cannot go beyond
Nature: Petition for Review on Certiorari December 7, 1962.
A reply to petitioner's opposition was filed by respondent
RELEVANT FACTS workers, alleging among others, that Claparols Steel and Nail
Plant and Claparols Steel and Nail Corporation are one and
A complaint for unfair labor practice was filed by private the same corporation controlled by petitioner Claparols, with
respondent Allied Workers' Association, respondent Demetrio the latter corporation succeeding the former.
Garlitos and 10 respondent workers against herein petitioners
on account of the dismissal of respondent workers from
CIR upheld the report of the Examiner.
petitioner Claparols Steel and Nail Plant.
ISSUE
CIR found Mr. Claparols guilty of union busting and of having
dismissed the complainants because of their union activities. 1. WON CIR is correct in ruling that the amount of back wages
Also ordered, among others, to reinstate said complainants to recoverable by respondent workers from petitioners should be
their former or equivalent jobs, as soon as possible, with back the amount accruing up to December 7, 1962 when the
wages from the date of their dismissal up to their actual Claparols Steel Corporation ceased operations.
reinstatement.
RATIO DECIDENDI corporate entities should be disregarded.
Yes. It is very obvious that the second corporation seeks
the protective shield of a corporate fiction whose veil in
the present case could, and should, be pierced as it was DISPOSITIVE
deliberately and maliciously designed to evade its
financial obligation to its employees. WHEREFORE, PETITION IS HEREBY DENIED WITH TREBLE
COSTS AGAINST PETITIONERS TO BE PAID BY THEIR
Respondent Court's findings that indeed the Claparols Steel and Nail COUNSEL.
Plant, which ceased operation of June 30, 1957, was SUCCEEDED
by the Claparols Steel Corporation effective the next day, July 1, 1957 NO SEPARATE OPINIONS
up to December 7, 1962, when the latter finally ceased to operate,
were not disputed by petitioners. It is very clear that the latter
corporation was a continuation and successor of the first entity, and
its emergence was skillfully timed to avoid the financial liability that
already attached to its predecessor, the Claparols Steel and Nail
Plant. Both predecessors and successor were owned and controlled
by the petitioner Eduardo Claparols and there was no break in the
succession and continuity of the same business. This "avoiding-the-
liability" scheme is very patent, considering that 90% of the
subscribed shares of stocks of the Claparols Steel Corporation (the
second corporation) was owned by respondent (herein petitioner)
Claparols himself, and all the assets of the dissolved Claparols Steel
and Nail Plant were turned over to the emerging Claparols Steel
Corporation.
The following cases were cited by the SC:
Yutivo & Sons Hardware Company vs. Court of Tax Appeals: When
the notion of legal entity is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, the law will regard the
corporation as an association or persons, or, in the case of two
corporations, will merge them into one.
Liddel & Company, Inc. vs. Collector of Internal Revenue: Where a
corporation is a dummy and serves no business purpose and is
intended only as a blind, the corporate fiction may be ignored.
Commissioner of Internal Revenue vs. Norton and Harrison Company:
Where a corporation is merely an adjunct, business conduit or alter
ego of another corporation, the fiction of separate and distinct
