Livesey v. Binswanger Philippines, Inc.
REITERATIONFacts
The Antecedents: Eric Godfrey Stanley Livesey filed a complaint for illegal dismissal and money claims against CBB Philippines Strategic Property Services, Inc. (CBB) and its President, Paul Dwyer. Livesey alleged that he was hired as Director and Head of Business Space Development, later promoted to Managing Director, and was owed significant unpaid salaries. CBB denied liability, asserting Livesey was a corporate officer and that the dispute was intra-corporate. A Labor Arbiter found Livesey was illegally dismissed and ordered reinstatement and payment of back salaries and unpaid wages. The parties later entered into a compromise agreement, wherein CBB agreed to pay Livesey US$31,000.00 in installments, with stipulations against asset disposal, business cessation, or bankruptcy until full payment. Procedural History: CBB paid the initial installment but defaulted on the subsequent payments due to ceasing operations. Livesey sought a writ of execution, which was granted but not enforced. He then filed a motion for an alias writ of execution, alleging CBB had organized a new corporation, Binswanger Philippines, Inc. (Binswanger), to evade its liabilities, and sought to pierce the corporate veil. The Labor Arbiter denied the motion, finding the doctrine inapplicable and that the decision was final. The National Labor Relations Commission (NLRC) reversed this, holding Binswanger and its President, Keith Elliot, jointly and severally liable. Binswanger and Elliot sought relief from the Court of Appeals (CA) via a petition for certiorari, arguing the NLRC gravely abused its discretion. The CA granted their petition, reversing the NLRC decision and reinstating the Labor Arbiter's denial of the alias writ. The Petition: Livesey filed this petition for review on certiorari under Rule 45 of the Rules of Court, assailing the CA's decision. He argues the CA erred in not dismissing the respondents' petition for certiorari for being filed out of time, contending the reckoning date for the 60-day period should have been from the receipt by the respondents' counsel of record, not the subsequent counsel who filed the petition. Furthermore, Livesey contends the CA erred in not applying the doctrine of piercing the veil of corporate fiction to hold Binswanger and Elliot liable, presenting evidence of CBB's name containing "Binswanger," the simultaneous closure of CBB and establishment of Binswanger with key CBB personnel, shared office locations, and the use of CBB's paraphernalia by Binswanger. He also argues Elliot should be held liable for orchestrating the scheme to evade CBB's obligations.
Issue(s)
Whether the petition for certiorari filed before the Court of Appeals was filed out of time. Whether the National Labor Relations Commission had jurisdiction over the controversy. Whether the Court of Appeals erred in not applying the doctrine of piercing the veil of corporate fiction to hold Binswanger Philippines, Inc. and Keith Elliot liable. Whether Keith Elliot should be held liable for the judgment award.
Ruling
The Supreme Court GRANTED the petition, SET ASIDE the Court of Appeals' decision and resolution, and declared Binswanger Philippines, Inc. and Keith Elliot jointly and severally liable for the unpaid installments of CBB's liability to Eric Godfrey Stanley Livesey under the compromise agreement. The case was remanded to the NLRC for execution.
Ratio Decidendi
On the procedural issue of timeliness: The Court ruled that the petition for certiorari before the CA was filed out of time. The 60-day period should have been counted from January 19, 2006, the date of receipt by the respondents' counsel of record, Corporate Counsels Philippines, Law Offices, of the NLRC resolution denying their motion for reconsideration. The Court found that Atty. Jacosalem's receipt of a copy on March 17, 2006, could not be the reckoning date because he had not formally entered his appearance as new counsel and had failed to provide a forwarding address, which constituted a lapse in legal representation. The Court reiterated that the period for appeal is counted from the receipt by the counsel or representative of record, as provided by NLRC Revised Rules of Procedure. On the issue of NLRC jurisdiction: The Court found this issue to have been rendered academic by the compromise agreement between Livesey and CBB, which was approved by the LA. The fact that CBB reneged on its obligation did not revive the issue of whether the dispute was originally intra-corporate, as the primary concern was the settlement of the agreed obligation. On the application of the doctrine of piercing the veil of corporate fiction: The Court held that the CA committed a reversible error in not applying this doctrine. It found substantial evidence that Livesey was prevented from receiving his full monetary entitlements. The Court noted the confluence of events: CBB's cessation of operations shortly after the compromise agreement, followed by the sudden emergence of Binswanger with the same key officers, including Elliot as President and CEO. This, coupled with other indications like the use of CBB's paraphernalia by Binswanger and the continuity of business operations, led the Court to conclude that Binswanger was CBB's alter ego or that they were one and the same corporation, established to evade CBB's financial liabilities, particularly to Livesey. The Court emphasized that piercing the veil of corporate fiction is an equitable doctrine to address situations where the separate corporate personality is abused for wrongful purposes, such as evading just obligations. On the liability of Keith Elliot: The Court found Elliot personally liable. As President and CEO of CBB and signatory to the compromise agreement, he was aware of CBB's unfulfilled obligations and the condition that CBB should not cease operations until full payment. The Court found his "guiding hand" evident in CBB's demise and Binswanger's creation, which was an underhanded objective to evade CBB's liabilities. The Court cited the testimony of a former CBB employee that Elliot had planned to close CBB and organize another corporation to evade liabilities. Therefore, Elliot was deemed as liable as Binswanger for CBB's unfulfilled obligation to Livesey.
Main Doctrine
The doctrine of piercing the veil of corporate fiction may be applied when a corporation is formed or used to evade a just and due obligation, or to justify a wrong, to shield or perpetrate fraud, or to carry out inequitable considerations. The close proximity between a corporation's closure and the establishment of a new entity with the same key officers and business operations, especially when coupled with evidence of intent to evade financial liabilities, supports the application of this doctrine.