Excellent Quality Apparel v. Win Multi Rich Builders (G.R. No. 175048)

Facts:

In 1996, petitioner Excellent Quality Apparel entered into a contract with Multi-Rich Builders, a registered sole proprietorship, for the construction of a garment factory. In 1997, herein respondent Win Multi Rich Builders was incorporated with the SEC. It then filed a complaint for sum of money against petitioner. In a hearing held, the counsel of respondent Win moved that that its name in the case be changed to that of Multi Rich Builders. Petitioner noticing the variance in the name moved to dismiss the case asserting Win was not the contractor neither a party to the contract, thus it cannot institute the case.

Issue:

Whether or not Win has legal personality to institute the case.

*click here for the Remedial Law issue*

Ruling: NO.

Win admitted that the contract was executed between Multi-Rich and petitioner. It further admitted that Multi-Rich was a sole proprietorship with a business permit issued by the Office of the Mayor of Manila. A sole proprietorship is the oldest, simplest, and most prevalent form of business enterprise. It is an unorganized business owned by one person. The sole proprietor is personally liable for all the debts and obligations of the business. A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise. The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.

The original petition was instituted by Win, which is a SEC-registered corporation. It filed a collection of sum of money suit which involved a construction contract entered into by petitioner and Multi-Rich, a sole proprietorship. The counsel of Win wanted to change the name of the plaintiff in the suit to Multi-Rich. The change cannot be countenanced. The plaintiff in the collection suit is a corporation. The name cannot be changed to that of a sole proprietorship. Again, a sole proprietorship is not vested with juridical personality to file or defend an action.

In order for a corporation to be able to file suit and claim the receivables of its predecessor in business, in this case a sole proprietorship, it must show proof that the corporation had acquired the assets and liabilities of the sole proprietorship. Win could have easily presented or attached any document e.g., deed of assignment which will show whether the assets, liabilities and receivables of Multi-Rich were acquired by Win. Having been given the opportunity to rebut the allegations made by petitioner, Win failed to use that opportunity. Thus, we cannot presume that Multi-Rich is the predecessor-in-business of Win and hold that the latter has standing to institute the collection suit.

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