Hung v. BPI Card Finance Corporation
REITERATIONFacts
The Antecedents: Guess? Footwear and BPI Express Card Corporation entered into two merchant agreements, with petitioner Benny Hung signing as owner/manager and later as president of Guess? Footwear (also referred to as B & R Sportswear Enterprises). From May 1997 to January 1999, BPI mistakenly credited P3,480,427.23 to Guess? Footwear's account. Benny Hung transferred P963,604.03 from B & R Sportswear Enterprises to BPI as partial settlement, stating it was pending final reconciliation of overpayments. Procedural History: BPI demanded the balance of P2,516,826.68, which was not paid. BPI filed a collection suit against B & R Sportswear Distributor, Inc. B & R Footwear Distributors, Inc. answered and participated in the trial. The RTC ruled in favor of BPI, ordering B & R Sportswear Distributor, Inc. to pay P2,516,826.68 with 6% interest. During execution, it was discovered that B & R Sportswear Distributor, Inc. was a non-existent entity. BPI filed a motion to pierce the corporate veil of B & R Footwear Distributors, Inc. to hold its officers, including Benny Hung, personally liable. The RTC granted the motion, finding Benny Hung liable as he signed the agreements in his personal capacity. The Court of Appeals affirmed this, ruling that since B & R Sportswear Distributor, Inc. was not a corporation, it had no personality separate from Benny Hung. The Petition: Benny Hung filed a petition for review on certiorari, assailing the Court of Appeals' decision and resolution. He argued that piercing the corporate veil could not justify execution against him, and that the decisions were void for lack of jurisdiction due to lack of service of summons upon him.
Issue(s)
Whether petitioner Benny Hung can be held liable for the satisfaction of the RTC's Decision against B & R Sportswear Distributor, Inc., and whether the Court of Appeals erred in affirming the RTC's order to pierce the corporate veil and hold petitioner personally liable. Whether the decisions of the lower courts are void for lack of jurisdiction due to alleged lack of service of summons upon the petitioner. On the rate of legal interest.
Ruling
The Supreme Court denied the petition for lack of merit. It affirmed the finding of the RTC that Benny Hung is liable for the satisfaction of the judgment, with the clarification that the defendant should be corrected to include B & R Footwear Distributors, Inc. and Benny Hung. The Court ordered B & R Footwear Distributors, Inc. and Benny Hung to pay BPI Card Finance Corporation P2,516,823.40 with 6% interest from October 4, 1999, until finality of judgment, and an additional 12% interest from finality until full payment.
Ratio Decidendi
On the liability of Benny Hung and the correction of the defendant's name; On piercing the corporate veil: The Court found that BPI's failure to state the correct name of the defendant was the cause of its predicament. Instead of suing Guess? Footwear and B & R Sportswear Enterprises, the contracting parties, BPI sued the non-existent B & R Sportswear Distributor, Inc. The Court noted that B & R Footwear Distributors, Inc. had already appeared and participated in the trial, effectively correcting the formal defect. The Court also found that Benny Hung's sole proprietorship, B & R Sportswear Enterprises, had no juridical personality separate from him, making him the proper defendant. The Court cited Sections 4 and 5 of Rule 10 of the Rules of Court, which allow for the correction of names of parties at any stage of the action, even motu proprio, without prejudice to the parties. The Court clarified that Benny Hung signed the second merchant agreement in his personal capacity, as his sole proprietorship had no separate legal identity. The Court stated that the correction of the defendant's name rendered further discussion on piercing the corporate veil moot. However, it addressed the issue by noting that the respondent had abandoned its accusation of "deceit, bad faith and illegal scheme/maneuver." The Court found that the evidence only attested to the inexistence of B & R Sportswear Distributor, Inc. due to BPI's error, and not to petitioner's misrepresentation of a non-existent corporation. The Court also found BPI's own silence on its error to be more notable than petitioner's initial silence. On the alleged lack of service of summons and due process: The Court found this argument to be without merit. It reasoned that B & R Footwear Distributors, Inc. or Guess? Footwear, which is also B & R Sportswear Enterprises, had answered the complaint and participated in the trial. Therefore, the entity that was summoned and participated in the proceedings was the one that effectively represented the interests involved, and the petitioner, as the alter ego of his sole proprietorship, was deemed to have been properly brought into the proceedings through the appearance of his business entities. On the rate of legal interest: The Court applied the rule in Eastern Shipping Lines, Inc. vs. Court of Appeals. For obligations not arising from a loan or forbearance of money, the applicable interest rate is 6% per annum, computed from the date the letter of demand was presumably received (October 4, 1999). Upon finality of the judgment, the rate of legal interest shall be 12% per annum until full satisfaction.
Main Doctrine
The Supreme Court affirmed the liability of Benny Hung for the satisfaction of the judgment against B & R Sportswear Distributor, Inc., clarifying that the correction of the defendant's name from the non-existent B & R Sportswear Distributor, Inc. to B & R Footwear Distributors, Inc. and Benny Hung was proper, as Benny Hung's sole proprietorship, B & R Sportswear Enterprises, had no juridical personality separate from him, and he signed the merchant agreements in his personal capacity.