Livesey vs. Binswanger Philippines, Inc.

The separate corporate personality will be disregarded and a successor corporation and its president held jointly and severally liable where substantial evidence shows the predecessor ceased operations shortly after compromising a labor award and re-emerged in the same business, premises, officers, and projects for the purpose of evading payment.

CBB Philippines Strategic Property Services, Inc. was a domestic corporation engaged in real estate brokerage, headed at the relevant time by President Paul Dwyer and later by Keith Elliot. Eric Godfrey Stanley Livesey was engaged by CBB in April 2001 as a corporate officer, serving successively as Vice-President, President, and Managing Director. Binswanger Philippines, Inc. was a subsequently incorporated entity engaged in the same real estate brokerage line, headed by Elliot as President and Chief Executive Officer.

In December 2001, Eric Godfrey Stanley Livesey filed a complaint for illegal dismissal with money claims against CBB Philippines Strategic Property Services, Inc. and Paul Dwyer. According to Livesey, CBB hired him on April 12, 2001 as Director and Head of Business Space Development at US$5,000.00 monthly plus shareholdings and benefits, appointed him Managing Director in August 2001 at US$16,000.00 monthly, then failed to pay a significant portion of his salary despite deals he drew up, compelling his resignation on December 18, 2001 with US$23,000.00 in unpaid salaries claimed. CBB denied liability, alleging Livesey was elected Vice-President at P75,000.00 monthly and later President at P1,200,000.00 yearly, then designated Managing Director when it became an extension office of its Hongkong principal, and asserting the dispute was intra-corporate outside the labor arbiter's jurisdiction after Livesey demanded US$25,000.00 and resigned on December 17, 2001.

LA Jaime M. Reyno decided on September 20, 2002 that Livesey had been illegally dismissed, ordering reinstatement as Managing Director and payment of US$23,000.00 accrued salaries from July to December 2001, US$5,000.00 monthly back salaries from January 2002 until reinstatement, and 10% attorney's fees. Thereafter the parties compromised, as approved November 6, 2002, for US$31,000.00 in full satisfaction: US$13,000.00 upon signing, US$9,000.00 on or before June 30, 2003, and US$9,000.00 on or before September 30, 2003, with CBB barred unless and until fully paid from selling substantially all assets, suspending or ceasing substantial operations, substantially changing its business, or declaring bankruptcy or insolvency.

CBB paid only the initial US$13,000.00 and failed to pay the next two installments as it ceased operations. A writ of execution granted by LA Eduardo G. Magno was not enforced. Livesey then moved for an alias writ, alleging service attempts revealed respondents had organized Binswanger Philippines, Inc. to avoid liability, that CBB stood for Chesterton Blumenauer Binswanger, and invoking piercing to include Binswanger and Keith Elliot, CBB's former President now Binswanger's President and CEO. The factual findings material to review were that CBB ceased operations after the compromise, Binswanger was established almost simultaneously in July 2003 beside CBB's office at Peninsula Court Building in Makati City in the same brokerage business, key CBB officers and employees including Elliot, Ferdie Catral, Evangeline Agcaoili, and Janet Pei moved to Binswanger, and documentary links connected the two entities' names, correspondence, receiving stamp, and Philippine National Bank project.

• Timeliness of Rule 65 Petition: Petitioner argued that the CA erred in not dismissing the certiorari petition as filed out of time, maintaining the 60-day period ran from January 19, 2006 receipt by counsel of record, Corporate Counsels Philippines, Law Offices, not from March 17, 2006 when Atty. Genaro S. Jacosalem secured a copy, because Jacosalem never formally entered appearance, gave no office address, and mere signing of the reconsideration motion did not effect substitution.
• Piercing the Corporate Veil: Petitioner maintained that overwhelming evidence proved CBB and Binswanger were one and the same, citing the CBB acronym, near-simultaneous closure and incorporation, same building and floor, transfer of key officers and employees, use of CBB receiving stamp, web editor e-mail identifying CBB/Binswanger, Binswanger takeover of the CBB-PNB project, the De Guzman affidavit on Elliot's plan to close and reorganize to evade liabilities, and LA Guerrero's findings in the De Guzman case.
• Personal Liability of Elliot: Petitioner argued that Elliot, as CBB signatory who agreed to the compromise knowing it would not be fully satisfied and as guiding hand in CBB's closure and Binswanger's creation in the same post, acted with malice, bad faith, and fraud distinguishable from Laperal Development Corporation vs. Court of Appeals, Sunio, et al. vs. NLRC, et al., and Palay, Inc., et al. vs. Clave, etc., et al., warranting liability under A.C. Ransom Labor Union-CCLU vs. NLRC.

• Intra-Corporate Jurisdiction: Respondent countered that the NLRC had no jurisdiction because the dispute with Livesey, appointed Managing Director and shareholder and thus a corporate officer, was an intra-corporate controversy cognizable by the Regional Trial Court under Republic Act No. 8799.
• Absence of Employer-Employee Relationship: Respondent argued that under Article 217 of the Labor Code, labor arbiters and the NLRC have jurisdiction only where an employer-employee relationship exists, which was absent between Livesey and Binswanger.
• Inapplicability of Piercing: Respondent countered that piercing rested on mere assumptions, disputing each item: the Young e-mail mentioned no Binswanger Philippines, Inc.; the De Guzman affidavit was self-serving conjecture; CBB had already been abandoned and without operations when Binswanger was organized; mere transfer of Elliot and Catral was insufficient; and the NLRC relied only on LA Guerrero's De Guzman decision.
• Timeliness of Filing: Respondent maintained the certiorari petition was timely, filed May 15, 2006 or fifty-nine days from March 17, 2006 when Atty. Jacosalem, presumed engaged counsel, secured the NLRC resolution, and failure to indicate address did not deprive him of notices.

• Timeliness of Certiorari: Whether the 60-day period for the Rule 65 petition should be reckoned from receipt by counsel of record on January 19, 2006 or by Atty. Jacosalem on March 17, 2006.
• Jurisdiction Over Intra-Corporate Dispute: Whether the NLRC had jurisdiction over the Livesey-CBB controversy claimed to be intra-corporate.
• Piercing the Corporate Veil: Whether Binswanger Philippines, Inc. is the alter ego of CBB such that the corporate veil should be pierced to enforce the compromise award.
• Officer Personal Liability: Whether Keith Elliot is personally liable with Binswanger for CBB's unfulfilled obligation under the compromise agreement.

• Timeliness of Certiorari: Yes, filed out of time. The period ran from January 19, 2006 receipt by counsel of record, pursuant to Section 6(a), Rule III of the NLRC Revised Rules of Procedure, absent valid substitution or withdrawal.
• Jurisdiction Over Intra-Corporate Dispute: Rendered academic. The compromise agreement approved by LA Reyno superseded the jurisdictional dispute, and non-fulfillment did not revive it to frustrate settlement.
• Piercing the Corporate Veil: Yes. Substantial evidence of continuity and badges of fraud showed Binswanger was CBB's alter ego formed and used to evade the last two installments.
• Officer Personal Liability: Yes. Elliot, aware of and signatory to the compromise who allowed closure in breach of its non-cessation condition, orchestrated evasion and is jointly and severally liable.

• Timeliness of Certiorari: Service was properly made on Corporate Counsels Philippines, Law Offices, still counsel of record on January 19, 2006, there having been no discharge or withdrawal until April 28, 2006. Atty. Jacosalem's signing of the reconsideration motion without entering appearance or leaving a forwarding address, admitted as a lapse, did not make him counsel of record, and waiting from October 28, 2005 until March 17, 2006 to inquire showed lack of diligence. Reliance on Rinconada Telephone Co., Inc. vs. Hon. Buenviaje was misplaced because implied recognition could not be inferred where the NLRC correctly served counsel of record.
• Jurisdiction Over Intra-Corporate Dispute: Based on the facts, the issue was rendered academic by the compromise agreement between Livesey and CBB approved by LA Reyno. CBB's reneging on its obligation supplied no reason to revive the issue and further frustrate full settlement as agreed.
• Piercing the Corporate Veil: Although a corporation enjoys distinct personality, the veil is disregarded where the entity is formed or used to evade a just obligation, justify a wrong, or shield fraud or inequity. Shortly after Elliot forged the compromise for CBB, undisputed closure followed and Binswanger suddenly appeared almost simultaneously with Elliot as President and CEO. Converging evidence — same line of business, same building and floor, transfer of key officers performing the same tasks, web editor representation, use of CBB paraphernalia, and takeover of the PNB project — would lead a reasonable mind to conclude alter ego status and a strategy to continue brokerage freed of Livesey's claim.
• Officer Personal Liability: Elliot agreed to and accepted the compromise terms for CBB knowing installments were due June 30 and September 30, 2003, yet allowed closure despite the express condition against suspending, discontinuing, or ceasing substantial operations until full payment. His guiding hand in CBB's demise and Binswanger's creation, corroborated by De Guzman's account of his stated plan to close and reorganize to evade liabilities, established wrongful intent attributable to him where stockholders had nothing to do with operations. The fiction was therefore disregarded to treat Elliot, Binswanger, and CBB as identical for the unpaid obligation.

• Piercing the Veil of Corporate Fiction — A corporation has a distinct and separate personality shielding stockholders and members, but the shield is not impenetrable. 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, justify a wrong, shield or perpetrate fraud, or carry out inequitable or unjustifiable aims, in which case the individuals composing it and the two corporations will be treated as identical. Applied here to treat Binswanger as CBB's alter ego and Elliot as liable for evading the compromise installments through closure and re-emergence.
• Substantial Evidence in Labor Cases — Substantial evidence is more than a scintilla; it means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Applied to sustain the NLRC's reversal of the labor arbiter's denial of execution, based on the confluence of events surrounding CBB's closure and Binswanger's emergence plus badges of fraud.
• Service on Counsel of Record for Reckoning Periods — For purposes of appeal, the period is counted from receipt of decisions, resolutions, or orders by the counsel or representative of record, absent valid substitution or withdrawal. Applied to hold the Rule 65 period ran from January 19, 2006 receipt by Corporate Counsels Philippines, Law Offices, not from Atty. Jacosalem's March 17, 2006 procurement of a copy.

• "Substantial evidence is more than a scintilla; it means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." — States the evidentiary standard sustaining the NLRC's finding of alter ego and evasion despite respondents' claim of mere assumptions.
• "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." — Defines the controlling equitable basis for disregarding Binswanger's separate personality.
• "It has long been settled that the law vests a corporation with a personality distinct and separate from its stockholders or members." — States the general rule on corporate personality before explaining its limits and the exception applied.
• "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." — Articulates the core factual conclusion linking closure to incorporation as evasion.

• Rinconada Telephone Co., Inc. vs. Hon. Buenviaje, 263 Phil. 654 (1990) — Cited by the CA to treat Atty. Jacosalem's receipt as reckoning date on implied recognition; held misapplied because no valid substitution occurred and service on counsel of record remained proper.
• Gelmart Industries (Phils.), Inc. vs. Hon. Leogardo, Jr., 239 Phil. 386 (1987); Ang Tibay vs. Court of Industrial Relations, 69 Phil. 635 (1940) — Cited for the definition of substantial evidence supporting the NLRC's alter-ego finding.
• Lim vs. Court of Appeals, 380 Phil. 60 (2000) — Cited for the rule on distinct corporate personality and its limits.
• Philippine National Bank vs. Ritratto Group, Inc., 414 Phil. 494 (2001) — Cited for piercing as an equitable doctrine against abuse of separate personality.
• Laperal Development Corporation vs. Court of Appeals, G.R. No. 96354, June 8, 1993, 223 SCRA 261; Sunio, et al. vs. NLRC, et al., 212 Phil. 355 (1984); Palay, Inc., et al. vs. Clave, etc., et al., 209 Phil. 523 (1983) — Relied upon by the CA to absolve Elliot absent malice or fraud; distinguished because badges of fraud and knowing evasion were present here.
• A.C. Ransom Labor Union-CCLU vs. NLRC, 226 Phil. 199 (1986) — Invoked by petitioner on liability for workers' claims when a corporation ceases operations; applied in spirit to hold Elliot and Binswanger answerable for the unsatisfied award.

• Section 6(a), Rule III, NLRC Revised Rules of Procedure — Provides the appeal period is counted from receipt by counsel or representative of record; applied to reckon timeliness from January 19, 2006 receipt by Corporate Counsels Philippines, Law Offices.
• Rule 65, Rules of Court — Governs the 60-day certiorari period; applied to find respondents' May 15, 2006 petition filed out of time.
• Article 217, Labor Code — Confers jurisdiction on labor arbiters and NLRC only over disputes with employer-employee relationship; invoked by respondents to contest jurisdiction over Binswanger, but issue deemed academic after compromise.
• Republic Act No. 8799 — Vests Regional Trial Courts with jurisdiction over intra-corporate controversies; invoked by respondents to contest NLRC jurisdiction, but issue deemed academic after compromise.

Antonio T. Carpio, Chairperson, Mariano C. Del Castillo, Jose Portugal Perez, Bienvenido L. Reyes (Designated Acting Member in lieu of Estela M. Perlas-Bernabe per Special Order No. 1650 dated March 13, 2014)