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Case digest · Piercing the corporate veil
Livesey vs. Binswanger Philippines, Inc.
A company closed shortly after promising it wouldn’t. A new one opened on the same floor, with the same president.
Facts
December 2001
Livesey, managing director of CBB, a real estate brokerage, resigned over unpaid salary and won an illegal dismissal case.
The settlement
CBB agreed to pay US$31,000 in three installments and promised not to cease operations until it paid in full. It paid the first US$13,000, then closed.
July 2003
CBB closed in July 2003. Almost simultaneously, Binswanger Philippines was set up beside CBB’s office, on the same floor of the same Makati building. Keith Elliot, who had signed the settlement as CBB’s President and CEO, became Binswanger’s President and CEO.
The same business
The new company used CBB’s receiving stamp, took over CBB’s project with the PNB, and its web editor described the firm as “CBB.”
The plan
Hazel de Guzman, a former CBB associate director, swore in an affidavit that Elliot told her of CBB’s plan to close and organize another company to evade CBB’s liabilities.
Issue
Can Binswanger Philippines and Keith Elliot be made to pay CBB’s unpaid settlement by piercing the corporate veil?
Ruling
Yes. The veil was pierced. Binswanger and Elliot were held jointly and severally liable for the two unpaid installments.
The Court first held that the respondents’ petition to the Court of Appeals was filed out of time. Even on the merits, substantial evidence supported the NLRC’s piercing: CBB closed shortly after its no-closure promise, and the same president ran the same business from the same floor under a new name. The scheme could only be attributed to Elliot: knowing the settlement was unpaid, he allowed CBB to close despite the no-closure clause, which is why he was held liable too. (Because this was review of a labor tribunal, the standard was substantial evidence, not the clear and convincing proof required in cases like Kukan.)
“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…”
Doctrine
A corporation’s separate personality is “merely a fiction created by law for convenience and to promote justice” (Concept Builders, Inc. vs. NLRC, G.R. No. 108734, May 29, 1996). When it is used to evade an obligation, the courts may disregard it.
Compare: not pierced
In Kukan International Corporation vs. Reyes, G.R. No. 182729, September 29, 2010: “Mere ownership by a single stockholder or by another corporation of a substantial block of shares of a corporation does not, standing alone, provide sufficient justification for disregarding the separate corporate personality.”
Bar tip
Same owners or the same officers are not enough. What pierced the veil here was the purpose: the old company was closed to escape a settlement, and its business went on under a new name.
Hear it explained
Piercing the Corporate Veil, Podcast Ep. 1, at 2:36
This digest is general legal information for education, not legal advice, and it is not a substitute for reading the decision. Quoted passages are taken word for word from the full text.