GR 182398; (July, 2010) (Digest)
G.R. No. 182398; July 20, 2010
BENNY Y. HUNG, Petitioner, vs. BPI CARD FINANCE CORP., Respondent.
FACTS
Respondent BPI Card Finance Corp. entered into merchant agreements with Guess? Footwear, represented by petitioner Benny Hung, to honor BPI credit cards. From 1997 to 1999, BPI mistakenly overpaid Guess? Footwear via numerous checks totaling P3,480,427.23. Upon discovery, Hung authorized a partial reimbursement of P963,604.03, stating it was a “partial settlement… pending final reconciliation.” BPI later demanded the balance of P2,516,826.68. When payment was not made, BPI filed a collection suit against “B & R Sportswear Distributor, Inc.,” a name used by Hung in the agreements. The RTC ruled in BPI’s favor.
During execution, it was discovered that “B & R Sportswear Distributor, Inc.” was a non-existent corporation. BPI moved to pierce the corporate veil to hold Hung personally liable. The RTC granted the motion, finding Hung signed the agreements in his personal capacity and induced BPI to contract with a non-entity. The Court of Appeals affirmed.
ISSUE
Whether petitioner Benny Hung can be held personally liable for the judgment debt against the non-existent “B & R Sportswear Distributor, Inc.”
RULING
Yes, the Supreme Court affirmed Hung’s personal liability. The legal logic rests on the principle that a corporation’s separate juridical personality cannot be used as a shield for fraud or to perpetrate injustice. Here, “B & R Sportswear Distributor, Inc.” had no corporate existence. An entity that is not a corporation has no legal personality separate from its owner. Consequently, Hung, who signed the agreements and conducted business under that name, cannot hide behind a corporate fiction that never legally existed.
The Court rejected Hung’s claim of lack of jurisdiction due to improper service of summons. The suit, though nominally against a non-existent corporation, was effectively an action against Hung himself, who actively participated through his proprietorship, B & R Sportswear Enterprises. By filing an answer and participating in the trial, he voluntarily submitted to the court’s jurisdiction. His act of making a substantial partial payment further confirmed his personal acknowledgment of the debt. Therefore, holding him personally liable for the judgment was proper to prevent a miscarriage of justice, as he had misled BPI into dealing with a sham corporate entity.