31 BENNY HUNG v. BPI FINANCE CORP.

PEREZ, J. | July 20, 2010.

Definition and Attributes of a Corporation;
Alternative Forms of Business Organizations (Differentiated From a Corporation)
PETITION for review on certiorari of the decision and resolution of the CA.

PARTIES:
1. Petitioner – BENNY Y. HUNG (Owner/Manager/President of Guess Footwear/B & R
Sportswear Enterprises)
2. Respondent – BPI CARD FINANCE CORP.

DISPUTED MATTER: Personal liability of Benny Hung as owner of the sole proprietorship B &
R Sportswear Enterprises.

SYNOPSIS:
Benny Hung (doing business as Guess Footwear – “Guess” for short) and BPI entered into
merchant agreements. In one of such Hung signed as President of Guess, indicating that
Guess is also referred to as B & R Sportswear Enterprises (a sole proprietorship owned by
Hung – “BSE” for short). BPI erroneously deposited amounts in the bank account of Guess.
Hung made partial refund thereof from the funds of BSE. In ordering the bank to do so, he
used the letterhead of B & R Footwear Distributors, Inc. (an existing corporation – “BFD” for
short). Guess failed to pay the balance despite demand from BPI. The latter filed a collection
suit against B & R Sportswear Distributor, Inc. (a non-existing corporation – “BSD” for short). It
was BFD who answered and participated in trial. Judgement was rendered in favor of BPI but
execution failed given that BSD is non-existent. BPI moved to pierce the veil of BFD. RTC
granted and held Hung liable. CA affirmed. SC affirmed saying that BFD voluntarily
acknowledge that it is the real party to the case by reason of his participation thereto. SC also
found that Hung represented to BPI that Guess or BFD is also BSE, his sole proprietorship.
And since a sole proprietorship has no personality separate and distinct from its owner, the
judgment may be enforced against Hung as such.

FACTS:
1. Guess Footwear/ B & R Sportswear Enterprises (Guess) and BPI Express Card
Corporation (BPI) entered into two merchant agreements. Guess agreed to honor
validly issued BPI Express Credit Cards presented by cardholders in the purchase of its
goods and services.
a. First Agreement – Hung signed as Owner and Manager of Guess Footwear
b. Second Agreement – Hung signed as President of Guess Footwear which he
also referred to as B & R Sportswear Enterprises (sole proprietorship owned by
Hung).

2. BPI mistakenly credited/deposited in the account of Guess Footwear P3.48M (via

352 checks). BPI informed Hung.
a. As partial settlement, Hung transferred to BPI P964K from the bank account of B
& R Sportswear Enterprises
b. Guess Footwear failed to pay the P2.52M balance, despite BPI’s demand.

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3. BPI filed a collection suit against B & R Sportswear Distributor, Inc.
a. Despite not being named defendant, B & R Footwear Distributors, Inc. filed the
answer, appeared and participated in trial.

4. Lower court decisions

a. RTC – held B & R Sportswear Distributor, Inc. liable.
i. Execution failed as it was found out that B & R Sportswear Distributor,
Inc. was a non-existing entity.
ii. BPI filed a motion to pierce the corporate veil of B & R Footwear
Distributors, Inc., and to hold its stockholders and officers personally
liable including Hung.
iii. RTC found Hung personally liable since he signed the merchant
agreements in his personal capacity.
b. CA – affirmed.
i. Since B & R Sportswear Distributor, Inc. is not a corporation, it has no
personality separate from Hung who induced BPI and the RTC to believe
that it is a corporation.

5. SC affirmed. Hung made personally liable.

6. Arguments of the parties

a. HUNG
i. He never represented B & R Sportswear Distributor, Inc., the non-existent
corporation sued by BPI
ii. It would be unfair to treat his single proprietorship B & R Sportswear
Enterprises as B & R Sportswear Distributor, Inc.
iii. The confusing similarity in the names should not be taken against him
iv. He did not defraud BPI
v. 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
vi. B & R Footwear Distributors, Inc. and Guess Footwear acknowledged
themselves as the real defendant. The judgment should have been
executed against these corporations as the “real contracting parties” in
the merchant agreements
vii. The lower courts did not acquire jurisdiction over him and the judgment
was null and void for lack of due process.
b. BPI
i. Hung’s silence on the non-existence of B & R Sportswear Distributor, Inc.
was intended to mislead
ii. Evidence shows Hung treats B & R Footwear Distributors, Inc. and B & R
Sportswear Enterprises as one and the same entity
1. The partial payment was made in the letterhead of B & R
Footwear Distributors, Inc. though the fund transferred belonged
to B & R Sportswear Enterprises

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 iii. It prayed for the amendment of the name of the defendant from B & R
Sportswear Distributor, Inc. to Benny Hung and/or B & R Footwear
Distributors, Inc.

ISSUES-HELD-RATIO:

May Hung be held liable for the satisfaction of the RTC’s Decision against B & R
Sportswear Distributor, Inc.?

YES.

1. SC can validly make the formal correction on the name of the defendant B & R
Sportswear Distributor, Inc. to B & R Footwear Distributors, Inc.
a. B & R Footwear Distributors, Inc. already voluntary made such correction when it
answered the complaint and claimed that it is the defendant.
b. BPI’s prayer to change the name of defendant, though belated, was sufficient. In
fact, the SC can even make the amendment motu proprio.
c. No prejudice is caused to B & R Footwear Distributors, Inc. since it was able to
participate in the trial.

2. B & R Sportswear Enterprises is also a “real contracting party”

a. In the Second Agreement, Hung indicated that Guess Footwear is also referred
to as B & R Sportswear Enterprises
b. Hung’s directive to the bank to transfer funds to BPI was made in the letterhead
of B & R Footwear Distributors, Inc. though funds came from the account of B &
R Sportswear Enterprises
c. Hence, Hung represented in his dealings with BPI that Guess Footwear or B & R
Footwear Distributors, Inc. is also B & R Sportswear Enterprises

3. Hung is the proper defendant since B & R Sportswear Enterprises, his sole
proprietorship, has no personality separate and distinct from him.

DISPOSITIVE:

Petition denied.

DOCTRINE:
A sole proprietorship, unlike a corporation, has no personality separate and distinct from those
who compose it.