GR 119002; (October, 2000) (Digest)
G.R. No. 119002 ; October 19, 2000
International Express Travel & Tour Services, Inc. vs. Hon. Court of Appeals, Henri Kahn, Philippine Football Federation
FACTS
Petitioner International Express Travel provided airline tickets for the Philippine Football Federation (PFF), through its President Henri Kahn, amounting to P449,654.83. After partial payments, an unpaid balance of P207,524.20 remained. Petitioner filed a civil case against Kahn personally and, alternatively, against the PFF. The PFF was declared in default. The Regional Trial Court ruled in favor of the petitioner, holding Kahn personally liable. The court reasoned that the PFF’s corporate existence was not proven, and as a mere unincorporated sports association, its contracts were not binding on it, making its acting officers personally liable.
The Court of Appeals reversed the trial court, dismissing the complaint against Kahn. It recognized the PFF’s separate juridical personality and found no proof that Kahn guaranteed the obligation. Petitioner’s motion for reconsideration, which included an alternative prayer to hold the PFF liable, was denied. The appellate court held that the PFF was not a party to the appeal, as the trial court’s dismissal of the complaint against it had become final due to petitioner’s failure to appeal that specific dismissal.
ISSUE
Whether private respondent Henri Kahn can be held personally liable for the unpaid obligations incurred by the Philippine Football Federation.
RULING
Yes, Henri Kahn is personally liable. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision. The legal logic centers on the PFF’s lack of a separate juridical personality. For a sports association to attain corporate existence under relevant laws (R.A. 3135 and P.D. 604), it must be duly recognized and accredited. Kahn failed to substantiate such recognition; the mere submission of the PFF’s constitution and by-laws was insufficient proof. Consequently, the PFF was an unincorporated association.
A settled principle in corporation law is that a person acting on behalf of a non-existent corporation assumes personal liability for contracts entered into on its behalf. As President, Kahn is presumed to know the PFF’s defective incorporation. The Court of Appeals erroneously applied the doctrine of corporation by estoppel against the petitioner. This doctrine estops a third party who has contracted with a defectively incorporated entity as if it were a corporation from later denying its corporate existence to escape liability. Here, the petitioner is not trying to escape liability but is instead seeking to enforce the contract; thus, the doctrine does not apply. Therefore, Kahn, having acted for an unincorporated entity, is personally answerable for the unpaid debt.