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BENNY Y.
HUNG,* Petitioner, - versus - BPI CARD FINANCE CORP., Respondent. |
G.R. No. 182398
Present: CORONA,
C. J., Chairperson, BRION,* ABAD,
*** and PEREZ,
JJ. Promulgated: July 20, 2010 |
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PEREZ, J.:
For our resolution is the instant
petition for review by certiorari assailing
the Decision[1] dated 31 August 2007 and
Resolution[2]
dated 14 April 2008 of the Court of Appeals in CA-G.R. CV No. 84641. The Court of Appeals’ Decision affirmed the
Order[3]
dated 30 November 2004 of the Regional Trial Court (RTC) of Makati City in
Civil Case No. 99-2040, entitled BPI Card
Finance Corporation v. B & R Sportswear Distributor, Inc., finding
petitioner Benny Hung liable to respondent BPI Card Finance Corporation (BPI
for brevity) for the satisfaction of the RTC’s 24 June 2002 Decision[4]
against B & R Sportswear Distributor, Inc.
The pertinent portion of the Decision states:
xxx
The delivery by the plaintiff to the
defendant of P3,480,427.43 pursuant to the Merchant Agreements was sufficiently
proven by the checks, Exhibits B to V-5.
Plaintiff’s evidence that the amount due to the defendant was
P139,484.38 only was not controverted by the defendant, hence the preponderance
of evidence is in favor of the plaintiff.
The lack of controversy on the amount due to the defendant when considered
with the contents of the letter of the defendant, Exhibit TT when it returned
to plaintiff P963,604.03 “as partial settlement of overpayments made by BPI
Card Corporation to B & R Sportswear, pending final reconciliation of exact
amount of overpayment” amply support the finding of the Court that plaintiff
indeed has a right to be paid by the defendant of the amount of P2,516,826.68.
Plaintiff claims interest of 12%. The obligation of the defendant to return did
not arose out of a loan or forbearance of money, hence, applying Eastern
Shipping Lines Inc. vs. Court of Appeals, 234 SCRA 78 (1994) the rate due is
only 6% computed from October 4, 1999 the date the letter of demand was
presumably received by the defendant.
The foregoing effectively dispose of
the defenses raised by the defendant and furnish the reason of the Court for
not giving due course to them.
WHEREFORE, judgment is rendered
directing defendant to pay plaintiff P2,516,826.68 with interest at the rate of
6% from October 4, 1999 until full
payment.
The antecedent facts of the case are
as follows:
Guess? Footwear and BPI Express Card
Corporation entered into two merchant agreements,[5]
dated 25 August 1994 and 16 November 1994, 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 three hundred fifty-two (352)
checks, Three Million Four Hundred Eighty Thousand Four Hundred Twenty-Seven
Pesos and 23/100 (P3,480,427.23) to the account of Guess? Footwear. When informed of the overpayments,[6]
petitioner Benny Hung transferred Nine Hundred Sixty-Three Thousand Six Hundred
Four Pesos and 03/100 (P963,604.03) from the bank account of B & R
Sportswear Enterprises to BPI’s account as partial payment.[7] The letter dated 31 May 1999 was worded as
follows:
Dear Sir/Madame
This
is to authorize BPI Ortigas Branch to transfer the amount of P963,604.03 from
the account of B & R Sportswear Enterprises to the account of BPI Card
Corporation.
The aforementioned amount shall
represent partial settlement of overpayments made by BPI Card Corporation to B & R Sportswear, pending final
reconciliation of exact amount of overpayment.
(Emphasis supplied.)
Thank you for your usual kind cooperation.
Very truly yours,
(Sgd.)
Benny Hung
In a letter dated 27 September 1999,
BPI demanded the balance payment amounting to Two Million Five Hundred Sixteen
Thousand Eight Hundred Twenty-Six Pesos and 68/100 (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.[8] 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.[9]
On 24 June 2002, the RTC rendered a
decision ordering defendant B & R Sportswear Distributor, Inc., to pay the
plaintiff (BPI) P2,516,826.68 with 6% interest from 4 October 1999. 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[10]
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, respondent filed a Motion[11]
to pierce the corporate veil of B & R Footwear Distributors, Inc. to hold
its stockholders and officers, including petitioner Benny Hung, personally
liable. In its 30 November 2004 Order,
the RTC ruled that petitioner is liable for the satisfaction of the judgment,
since he signed the merchant agreements in his personal capacity.[12]
The Court of Appeals affirmed the
order and dismissed petitioner’s 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 the respondent BPI and the RTC to believe that it is a
corporation.[13]
After his motion for reconsideration
was denied, petitioner filed the instant petition anchored on the following
grounds:
I.
PIERCING THE VEIL OF CORPORATE FICTION CANNOT JUSTIFY
EXECUTION AGAINST [HIM].
II.
FOR LACK OF SERVICE OF SUMMONS AND A COPY OF THE
COMPLAINT UPON [HIM], THE ASSAILED DECISION OF THE COURT OF APPEALS, AS WELL
AS, ITS RESOLUTION DENYING [HIS] MOTION FOR RECONSIDERATION SHOULD BE DECLARED
NULL AND VOID FOR LACK OF JURISDICTION.[14]
In essence, the basic issue is
whether petitioner can be held liable for the satisfaction of the RTC’s
Decision against B & R Sportswear Distributor, Inc.? As we answer this question, we shall pass
upon the grounds raised by petitioner.
Petitioner claims that he never
represented B & R Sportswear Distributor, Inc., the non-existent
corporation sued by respondent; that it would be unfair to treat his single
proprietorship B & R Sportswear Enterprises as B & R Sportswear Distributor,
Inc.; that the confusing similarity in the names should not be taken against
him because he established his single proprietorship long before respondent
sued; that he did not defraud respondent; that he even paid respondent “in the
course of their mutual transactions;” and that without fraud, he cannot be held
liable for the obligations of B & R Footwear Distributors, Inc. or B &
R Sportswear Distributor, Inc. by piercing the veil of corporate fiction.
Petitioner also states that the “real
corporation” B & R Footwear Distributors, Inc. or Guess? Footwear
acknowledged itself as the “real defendant.”
It answered the complaint and participated in the trial. According to petitioner, respondent should
have executed the judgment against it as the “real contracting party” in the
merchant agreements. Execution against
him was wrong since he was not served with summons nor was he a party to the
case. Thus, the lower courts did not
acquire jurisdiction over him, and their decisions are null and void for lack
of due process.
Respondent counters that petitioner’s
initial silence on the non-existence of B & R Sportswear Distributor, Inc.
was intended to mislead. Still, the
evidence showed that petitioner treats B & R Footwear Distributors, Inc.
and his single proprietorship B & R Sportswear Enterprises as one and the
same entity. Petitioner ordered the
partial payment using the letterhead of B & R Footwear Distributor, Inc.
and yet the fund transferred belongs to his single proprietorship B & R
Sportswear Enterprises. This fact,
according to respondent, justifies piercing the corporate veil of B & R
Footwear Distributor, Inc. to hold petitioner personally liable.
Citing Sections 4 and 5, Rule 10 of
the Rules of Court, respondent also prays that the name of the inexistent defendant
B & R Sportswear Distributor, Inc. be amended and changed to Benny Hung
and/or B & R Footwear Distributors, Inc.
Moreover, respondent avers that
petitioner cannot claim that he was not served with summons because it was
served at his address and the building standing thereon is registered in his
name per the tax declaration.
At the outset, we note the cause of
respondent’s predicament in failing to execute the 2002 judgment in its favor:
its own failure to state the correct name of the defendant it sued and seek a
correction earlier. Instead of suing
Guess? Footwear and B & R Sportswear Enterprises, the contracting parties
in the merchant agreements, BPI named B & R Sportswear Distributor, Inc. as
defendant. BPI likewise failed to sue
petitioner Benny Hung who signed the agreements as owner/manager and president
of Guess? Footwear and B & R Sportswear Enterprises. Moreover, when B &
R Footwear Distributors, Inc. appeared as defendant, no corresponding
correction was sought. Unfortunately, BPI has buried its omission by silence
and lamented instead petitioner’s alleged initial silence on the non-existence
of B & R Sportswear Distributor, Inc.
Respondent even accused the “defendant” in its motion to pierce the
corporate veil of B & R Footwear Distributors, Inc. of having “employed
deceit, bad faith and illegal scheme/maneuver,”[15]
an accusation no longer pursued before us.
Our impression that respondent BPI
should have named petitioner as a defendant finds validation from (1)
petitioner’s own admission that B & R Sportswear Enterprises is his sole
proprietorship and (2) respondent’s belated prayer that defendant’s name be
changed to Benny Hung and/or B & R Footwear Distributors, Inc. on the
ground that such relief is allowed under Sections 4[16]
and 5,[17]
Rule 10 of the Rules of Court.
Indeed, we can validly make the
formal correction on the name of the defendant from B & R Sportswear
Distributor, Inc. to B & R Footwear Distributors, Inc. Such correction only confirms the voluntary
correction already made by B & R Footwear Distributors, Inc. which answered
the complaint and claimed that it is the defendant. Section 4, Rule 10 of the Rules of Court also
allows a summary correction of this formal defect. Such correction can be made even if the case
is already before us as it can be made at any stage of the action.[18] Respondent’s belated prayer for correction is
also sufficient since a court can even make the correction motu propio. More
importantly, no prejudice is caused to B & R Footwear Distributors, Inc.
considering its participation in the trial.
Hence, petitioner has basis for saying that respondent should have tried
to execute the judgment against B & R Footwear Distributors, Inc.
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.[19] 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.[20] 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.
On petitioner’s alleged intention to
mislead for his initial silence on the non-existence of the named defendant, we
find more notable respondent’s own silence on the error it committed. Contrary to the allegation, the “real”
defendant has even corrected respondent’s error. While the evidence showed that petitioner has
treated B & R Footwear Distributors, Inc. or Guess? Footwear as B & R
Sportswear Enterprises, respondent did not rely on this ground in filing the
motion to pierce the corporate veil of B & R Footwear Distributors,
Inc. Respondent’s main contention
therein was petitioner’s alleged act to represent a non-existent corporation amounting
to deceit, bad faith and illegal scheme/maneuver.
With regard to the imposable rate of
legal interest, we find application of the rule laid down by this Court in Eastern Shipping Lines, Inc. vs. Court of
Appeals,[21] to wit:
2. When an obligation, not constituting a
loan or forbearance of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion
of the court at the rate of 6% per
annum. No interest, however, shall
be adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin
to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.
3.
When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1
or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
Since this case before us involves an
obligation not arising from a loan or forbearance of money, the applicable
interest rate is 6% per annum. The legal
interest rate of 6% shall be computed from 4 October 1999, the date the letter
of demand was presumably received by the defendant.[22] And in accordance with the aforesaid
decision, the rate of 12% per annum shall be charged on the total amount
outstanding, from the time the judgment becomes final and executory until its
satisfaction.
WHEREFORE, we DENY the petition for lack of merit,
and ORDER B & R Footwear
Distributors, Inc. and petitioner Benny Hung TO PAY respondent BPI Card Finance Corporation: (a) P2,516,823.40,
representing the overpayments, with interest at the rate of 6% per annum
from 4 October 1999 until finality of judgment;
and (b) additional interest of 12% per annum from finality of judgment until
full payment.
No pronouncement as to costs.
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SO ORDERED. JOSE
Associate Justice |
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WE CONCUR: RENATO C. CORONA
Chief Justice Chairperson |
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C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify
that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division. RENATO C. CORONA Chief Justice |
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* Also referred to as Benny Y. Hung and Benny W. Hung in the records.
* Designated as an additional member in lieu of Associate Justice Teresita J. Leonardo-De Castro per Special Order No. 856 dated 1 July 2010.
** Designated as Acting Working Chairperson in lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order No. 853 dated 1 July 2010.
*** Designated as an additional member in lieu of Associate Justice Antonio Eduardo B. Nachura per Special Order No. 869 dated 5 July 2010.
[1] Penned by Associate Justice Monina Arevalo-Zenarosa, with Acting Presiding Justice Conrado M. Vasquez, Jr. and Associate Justice Edgardo F. Sundiam, concurring. Rollo, pp. 29-41.
[2] Penned
by Associate Justice Monina Arevalo-Zenarosa, with Presiding Justice Conrado M.
Vasquez, Jr. and Associate Justice Edgardo F. Sundiam, concurring.
[3]
[4] Penned
by Judge Sixto Marella, Jr.,
[5]
[6]
[7]
[8]
[9]
[10] Based on the figures stated, the amount
payable should be P2,516,823.40, or P3.28 lower.
[11]
[12]
[13]
[14]
[15]
[16] SEC. 4. Formal amendments. – A defect in the designation of the parties and other clearly clerical or typographical errors may be summarily corrected by the court at any stage of the action, at its initiative or on motion, provided no prejudice is caused thereby to the adverse party.
[17] SEC. 5. Amendments to conform to or authorize presentation of evidence. – When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made.
[18] See also Yao Ka Sin Trading v. Court of Appeals, G. R. No. 53820, 15 June 1992, 209 SCRA 763, 780.
[19]
[20] See General Credit Corporation v. Alsons Development and Investment Corporation, G.R. No. 154975, 29 January 2007, 413 SCRA 225, 238.
[21] G. R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.
[22] Supra note 4.