G.R. No. 177493, 19 March 2014
Petitioner Eric Godfrey Stanley Livesey filed a complaint for illegal dismissal with money claimsagainst CBB Philippines Strategic Property Services, Inc. (CBB) and Paul Dwyer. CBB was a domestic corporation engaged in real estate brokerage and Dwyer was its President.
Livesey alleged that CBB hired him as Director and Head of Business Space Development. Later, he was appointed as Managing Director and his salary was increased. Allegedly, despite the several deals for CBB he drew up, CBB failed to pay him a significant portion of his salary. For this reason, he was compelled to resign and claimed CBB for his unpaid salaries.
CBB denied liability. It alleged that it engaged Livesey as a corporate officer and thereafter, he became President. It claimed that Livesey was later designated as Managing Director when it became an extension office of its principal in Hongkong. CBB posited that the labor arbiter (LA) had no jurisdiction as the complaint involved an intra-corporate dispute.
The LA’s decision favored Livesey. Thereafter, the parties entered into a compromise agreement which the LA approved. CBB paid Livesey the initial amount of US$13,000.00, but not the next two installments as the company ceased operations. In reaction, Livesey moved for the issuance of a writ of execution.
However, it was not enforced. Livesey then filed a motion for the issuance of an alias writ of execution, alleging that in the process of serving respondents the writ, he learned “that respondents, in a clear and willful attempt to avoid their liabilities to complainant x x x have organized another corporation, [Binswanger] Philippines, Inc.”Invoking the doctrine of piercing the veil of corporate fiction, Livesey prayed that an alias writ of execution be issued against respondents Binswanger and Keith Elliot, CBB’s former President, and now Binswanger’s President and Chief Executive Officer (CEO). Such alias writ was denied.
The case was elevated before the Court of Appeals. The CA disagreed with the NLRC finding that the respondents are jointly and severally liable with CBB in the case. It emphasized that the mere fact that Binswanger and CBB have the same President is not in itself sufficient to pierce the veil of corporate fiction of the two entities, and that although Elliot was formerly CBB’s President, this circumstance alone does not make him answerable for CBB’s liabilities, there being no proof that he was motivated by malice or bad faith when he signed the compromise agreement in CBB’s behalf; neither was there proof that Binswanger was formed, or that it was operated, for the purpose of shielding fraudulent or illegal activities of its officers or stockholders or that the corporate veil was used to conceal fraud, illegality or inequity at the expense of third persons like Livesey.
Hence, the present petition.
Whether the CA erred in not applying the doctrine of piercing the veil of corporate fiction to the case.
YES, the CA erred, there is substantial evidence in the records for the doctrine to be applied.
It has long been settled that the law vests a corporation with a personality distinct and separate from its stockholders or members. In the same vein, a corporation, by legal fiction and convenience, is an entity shielded by a protective mantle and imbued by law with a character alien to the persons comprising it. Nonetheless, the shield is not at all times impenetrable and cannot be extended to a point beyond its reason and policy. Circumstances might deny a claim for corporate personality, under the “doctrine of piercing the veil of corporate fiction.”
Piercing the veil of corporate fiction is an equitable doctrine developed to address situations where the separate corporate personality of a corporation is abused or used for wrongful purposes. Under the doctrine, the corporate existence may be disregarded where the entity is formed or used for non-legitimate purposes, such as to evade a just and due obligation, or to justify a wrong, to shield or perpetrate fraud or to carry out similar or inequitable considerations, other unjustifiable aims or intentions, in which case, the fiction will be disregarded and the individuals composing it and the two corporations will be treated as identical.
In the present case, we see an indubitable link between CBB’s closure and Binswanger’s incorporation. CBB ceased to exist only in name; it re-emerged in the person of Binswanger for an urgent purpose — to avoid payment by CBB of the last two installments of its monetary obligation to Livesey, as well as its other financial liabilities. Freed of CBB’s liabilities, especially that owing to Livesey, Binswanger can continue, as it did continue, CBB’s real estate brokerage business.
Livesey’s evidence, whose existence the respondents never denied, converged to show this continuity of business operations from CBB to Binswanger. It was not just coincidence that Binswanger is engaged in the same line of business CBB embarked on:
(1) it even holds office in the very same building and on the very same floor where CBB once stood;
(2) CBB’s key officers, Elliot, no less, and Catral moved over to Binswanger, performing the tasks they were doing at CBB;
(3) notwithstanding CBB’s closure, Binswanger’s Web Editor (Young), in an e-mail correspondence, supplied the information that Binswanger is “now known” as either CBB (Chesterton Blumenauer Binswanger or as Chesterton Petty, Ltd., in the Philippines;
(4) the use of Binswanger of CBB’s paraphernalia (receiving stamp) in connection with a labor case where Binswanger was summoned by the authorities, although Elliot claimed that he bought the item with his own money; and
(5) Binswanger’s takeover of CBB’s project with the PNB.
Therefore, through the confluence of events surrounding CBB’s closure and Binswanger’s sudden emergence, a reasonable mind would arrive at the conclusion that Binswanger is CBB’s alter ego or that CBB and Binswanger are one and the same corporation. Binswanger Philippines, Inc. and Keith Elliot (its President and CEO) are declared jointly and severally liable for the second and third installments of CBB’s liability to Eric Godfrey Stanley Livesey under the compromise agreement.
*Case digest by Doreena Pauline V. Aranal, JD – 4, Andres Bonifacio College, SY 2019 – 2020