LIVESY v BINGSWANGER
March 9, 2014 | Brion, J. | Piercing the veil of corporate fiction
PETITIONER: ERIC GODFREY STANLEY LIVESEY
RESPONDENT: BINSWANGER PHILIPPINES, INC. and KEITH ELLIOT
SUMMARY: Livsey filed a complaint for illegal dismissal and unpaid salaries vs CBB. The LA granted the claim, but it was not
executed because CBB ceased operations and allegedly organized another corp (Bingswanger) to evade obligations. The SC pierced
the veil of corporate fiction, holding that the second corp was a mere alter ego of CBB and was created to evade liabilities, as seen in
links between the closure of one and the incorporation of the other.
DOCTRINE: See Ratio #3
FACTS:
Eric Godfrey and Stanley Livsey filed a complaint for
ILLEGAL DISMISSAL with money claims vs CBB (real estate
brokerage corp) and its Pres. Livsey was hired as Director and
Head of Business Space Development. CBB allegedly failed to
pay 23k of his salaries, so he RESIGNED and filed a claim with
the LA (Granted)
CBB and Livsey entered into a COMPROMISE
AGREEMENT
Livsey to receive $31k in installments
Unless and until the agreement is fully satisfied, CBB
shall not:
1. sell, alienate, or otherwise dispose of all or
substantially all of its assets or business;
2. suspend, discontinue, or cease its entire, or a
substantial portion of its business operations;
3. substantially change the nature of its business; and
4. declare bankruptcy or insolvency
CBB paid Livesey the initial amount of $13k, but not the next
two installments as the company ceased operations. Livesey
moved for the issuance of a writ of execution, which was
granted, but not enforced.
Livesy moved for an alias writ, alleging that in the process
of serving respondents the writ, he learned that
respondents, in a clear and willful attempt to avoid their
liabilities, have organized another corporation,
Philippines, Inc (BB). He INVOKED THE DOCTRINE
OF PIERCING THE VEIL OF CORPORATE FICTION
CBB stands for Chesterton Blumenauer Binswanger
After executing compromise agreement, CBB ceased
operations following a transaction where a substantial
amount of CBB shares changed hands
Almost simultaneously with CBBs closing, BB was
established with its headquarters set up beside CBB's
office in Makati City.
Key CBB officers and employees moved to BB (Pres,
director and head of operations, etc)
Summons served on BB in an earlier labor case was
received by Binswanger using CBBs receiving stamp
Email was sent to Bingswanger's web editor asking if
CBB was the same as BB, she answered saying they are
known either as CBB or BB, with the same office
BB solicited money from PNB for a CBB project
A former CBB employee with an illegal dismissal case
was told of CBBs plan to close the corporation and to
organize another for the purpose of evading CBBs
liabilities
ISSUE: W/N BB was formed to evade CBBs liabilities-Yes
HELD/RATIO: YES
1. There is an indubitable link between CBBs closure and
Binswangers 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. There was a continuity of business
operations from CBB to Binswanger, as seen in evidence
enumerated by Livesy.
2. Shortly after Elliot forged the compromise agreement with
Livesey, CBB ceased operations, a corporate event that was
not disputed by the respondents. Then Binswanger suddenly
appeared. It was established almost simultaneously with
CBBs closure, with the same President and CEO. Through
the confluence of events surrounding CBBs closure and
Binswangers sudden emergence, a reasonable mind would
arrive at the conclusion that Binswanger is CBBs alter ego or
that CBB and Binswanger are one and the same corporation.
There are also indications of badges of fraud in Binswangers
incorporation. It was a business strategy to evade CBBs
financial liabilities, including its outstanding obligation to
Livesey.
3. 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.