G.R. No. 182398, 20 July 2010
Guess? Footwear and BPI Express Card Corporation entered into two merchant agreements whereby Guess? Footwear agreed to honor validly issued BPI Express Credit Cards presented by cardholders in the purchase of its goods and services. In the first agreement, petitioner Benny Hung signed as owner and manager of Guess? Footwear. He signed the second agreement as president of Guess? Footwear which he also referred to as B & R Sportswear Enterprises.
From May 1997 to January 1999, respondent BPI mistakenly credited, through 352 checks amounting to P3,480,427.23 to the account of Guess? Footwear. When informed of the overpayments, petitioner Benny Hung transferred P963,604.03 from the bank account of B & R Sportswear Enterprises to BPIs account as partial payment.In a letter dated 27 September 1999, BPI demanded the balance payment amounting to P2,516,826.68 but Guess? Footwear failed to pay.
BPI filed a collection suit before the RTC of Makati City naming as defendant B & R Sportswear Distributor, Inc. Although the case was against B & R Sportswear Distributor, Inc., it was B & R Footwear Distributors, Inc., that filed an answer, appeared and participated in the trial. The RTC rendered a decision ordering defendant B & R Sportswear Distributor, Inc., to pay BPI P2,516,826.68 with 6% interest. The RTC ruled that the overpayment of P3,480,427.43 was proven by checks credited to the account of Guess? Footwear and the P963,604.03 partial payment proved that defendant ought to pay P2,516,826.68 more. During the execution of judgment, it was discovered that B & R Sportswear Distributor, Inc., is a non-existing entity. Thus, the trial court failed to execute the judgment.
Consequently, BPI filed a Motion to pierce the corporate veil of B & R Footwear Distributors, Inc. to hold its stockholders and officers, including petitioner Benny Hung, personally liable. The RTC ruled that Hung is liable for the satisfaction of the judgment, since he signed the merchant agreements in his personal capacity. The Court of Appeals affirmed the order and dismissed petitioners appeal. It ruled that since B & R Sportswear Distributor, Inc. is not a corporation, it therefore has no personality separate from petitioner Benny Hung who induced BPI and the RTC to believe that it is a corporation.
Whether Benny Hung can be held liable for the satisfaction of the RTCs Decision against B & R Sportswear Distributor, Inc.
Yes. But we cannot agree with petitioner that B & R Footwear Distributors, Inc. or Guess? Footwear is the only “real contracting party.” The facts show that B & R Sportswear Enterprises is also a contracting party.
Petitioner conveniently ignores this fact although he himself signed the second agreement indicating that Guess? Footwear is also referred to as B & R Sportswear Enterprises. Petitioner also tries to soften the significance of his directive to the bank, under the letterhead of B & R Footwear Distributor’s, Inc., to transfer the funds belonging to his sole proprietorship B & R Sportswear Enterprises as partial payment to the overpayments made by respondent to Guess? Footwear. He now claims the partial payment as his payment to respondent “in the course of their mutual transactions.”
Clearly, petitioner has represented in his dealings with respondent that Guess? Footwear or B & R Footwear Distributors, Inc. is also B & R Sportswear Enterprises. For this reason, the more complete correction on the name of defendant should be from B & R Sportswear Distributor, Inc. to B & R Footwear Distributors, Inc. and Benny Hung.
Petitioner is the proper defendant because his sole proprietorship B & R Sportswear Enterprises has no juridical personality apart from him. Again, the correction only confirms the voluntary correction already made by B & R Footwear Distributors, Inc. or Guess? Footwear which is also B & R Sportswear Enterprises. Correction of this formal defect is also allowed by Section 4, Rule 10 of the Rules of Court.
Relatedly, petitioner cannot complain of non-service of summons upon his person. Suffice it to say that B & R Footwear Distributors, Inc. or Guess? Footwear which is also B & R Sportswear Enterprises had answered the summons and the complaint and participated in the trial.
Accordingly, we find petitioner liable to respondent and we affirm, with the foregoing clarification, the finding of the RTC that he signed the second merchant agreement in his personal capacity.
The correction on the name of the defendant has rendered moot any further discussion on the doctrine of piercing the veil of corporate fiction. In any event, we have said that whether the separate personality of a corporation should be pierced hinges on facts pleaded and proved. In seeking to pierce the corporate veil of B & R Footwear Distributors, Inc., respondent complained of “deceit, bad faith and illegal scheme/maneuver.”
As stated earlier, respondent has abandoned such accusation. And respondent’s proof – the SEC certification that B & R Sportswear Distributor, Inc. is not an existing corporation – would surely attest to no other fact but the inexistence of a corporation named B & R Sportswear Distributor, Inc. as such name only surfaced because of its own error. Hence, we cannot agree with the Court of Appeals that petitioner has represented a non-existing corporation and induced the respondent and the RTC to believe in his representation.
*Case digest by Paul Jason G. Acasio, JD-IV, Andres Bonifacio Law School, SY 2019-2020