This Supreme Court case clarifies that a person can file a lawsuit on behalf of a sole proprietorship they own, even if the contracts related to the business are signed by someone else, like their spouse. The ruling emphasizes that the owner of the business is the real party-in-interest and has the right to pursue legal action to protect the business’s interests. This is true even if the business is considered conjugal property, as either spouse can act on its behalf.

When a Trade Name Sparks a Legal Tussle: Can a Wife Sue for Her Husband’s Business Deals?

The case of Roger V. Navarro against Hon. Jose L. Escobido and Karen T. Go revolves around a dispute over lease agreements. Karen Go, doing business under the name Kargo Enterprises, filed complaints against Navarro for replevin (recovering property) and sums of money. Navarro argued that Karen Go had no right to sue because the lease agreements were between him and Glenn Go, Karen’s husband, who represented Kargo Enterprises. The central legal question is whether Karen Go, as the owner of Kargo Enterprises, is the real party-in-interest and can pursue the case, even though she didn’t personally sign the agreements.

Navarro contended that Kargo Enterprises, being a sole proprietorship, lacks a separate juridical personality, implying that only Glenn Go, as the signatory, could be the real party-in-interest. Building on this argument, he claimed that the complaints should have been dismissed outright, as Karen Go had no cause of action. The Regional Trial Court (RTC) initially dismissed the case but later reconsidered, ordering Karen Go to include her husband as a co-plaintiff, based on the presumption that the business was conjugal property. Navarro appealed, asserting that a complaint lacking a cause of action cannot be cured by amendment.

The Court of Appeals (CA) upheld the RTC’s decision, leading Navarro to elevate the case to the Supreme Court. Before the Supreme Court, Navarro maintained his position, arguing that including Glenn Go as co-plaintiff drastically changed the theory of the complaints and prejudiced him. He also disputed the RTC’s assumption that the leased vehicles were part of the conjugal property, suggesting they were Karen Go’s paraphernal property. Further, Navarro claimed the complaints were premature due to the lack of prior demand and that the writs of replevin were illegally issued.

Karen Go countered that she had a real interest in the complaints, as she owns Kargo Enterprises, and her husband signed the lease agreements as its manager. She also insisted that all property acquired during the marriage is presumed conjugal. The Supreme Court, in its analysis, emphasized that the determining factor was the business name, Kargo Enterprises. The Court highlighted that the complaints identified Karen Go as doing business under that name and that the lease agreements specified Glenn Go as representing Kargo Enterprises as its manager.

The Supreme Court acknowledged that Kargo Enterprises, as a sole proprietorship, is not a juridical person capable of suing on its own. However, citing previous jurisprudence, the Court clarified that in such cases, the action should be filed in the name of the owner of the business. The descriptive words “doing business as Kargo Enterprises” may be added to the title of the case, as is customary. As such, Karen Go, being the registered owner, is the party who stands to benefit or be injured by the judgment and is therefore the real party-in-interest.

The Court then addressed the issue of whether Kargo Enterprises was conjugal or paraphernal property. The Court highlighted that all property acquired during the marriage is presumed to be conjugal unless the contrary is proved. No evidence was presented to show that Kargo Enterprises and its properties were exclusively Karen Go’s. Therefore, for the purposes of this case, the Court deemed it conjugal property. This led the Court to consider Article 124 of the Family Code, which states, “The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly.”

This provision allows either spouse to manage the conjugal property. As clarified in Carandang v. Heirs of De Guzman, co-owners (in this case, the spouses) may bring actions for the recovery of co-owned property without necessarily joining all other co-owners as co-plaintiffs, because the suit is presumed to have been filed for the benefit of all co-owners. Thus, either Karen or Glenn Go could act on behalf of the business. Furthermore, the Court clarified that even if Glenn Go were an indispensable party, the non-joinder of such a party is not a ground for dismissal of the action. Citing Rule 3, Section 11 of the Rules of Court, the Court stated that parties may be dropped or added by order of the court.

Finally, the Supreme Court addressed Navarro’s argument that a prior demand was required before filing the replevin action. The Court stated that there is nothing in the provisions of Rule 60 (governing replevin) that requires the applicant to make a prior demand on the possessor of the property. Additionally, Navarro already admitted to receiving letters from Karen Go demanding payment or the return of the vehicles, making his claim unmeritorious. Ultimately, the Supreme Court denied the petition, affirming that Karen Go was the real party-in-interest and that the action was properly filed.

FAQs

What was the key issue in this case?	The key issue was whether Karen Go, as the owner of Kargo Enterprises, could sue Roger Navarro for breach of lease agreements when her husband, Glenn Go, signed the agreements on behalf of the business.
What is a sole proprietorship?	A sole proprietorship is a business owned and run by one person, where there is no legal distinction between the owner and the business. The owner receives all profits but is also personally liable for all business debts.
What does “real party-in-interest” mean?	The real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. This means they have a direct stake in the outcome of the case.
Can a sole proprietorship sue in its own name?	No, a sole proprietorship cannot sue in its own name because it doesn’t have a separate legal personality from its owner. The lawsuit must be filed in the name of the owner doing business under the trade name.
What is conjugal property?	Conjugal property refers to property acquired by a husband and wife during their marriage through their work, industry, or wages. It is co-owned by both spouses.
Who manages conjugal property?	Under Article 124 of the Family Code, both spouses jointly manage conjugal property. Either spouse can act on behalf of the conjugal partnership as long as they do not dispose of or encumber the property without the other spouse’s consent.
Is prior demand always required before filing a lawsuit?	No, prior demand is not always required. In this case, the Court clarified that prior demand is not a condition precedent to an action for a writ of replevin.
What is a writ of replevin?	A writ of replevin is a court order that allows a person to recover possession of personal property that is being wrongfully detained by another.
What happens if an indispensable party is not included in a lawsuit?	The non-joinder of an indispensable party is not a ground for dismissal of the action. The court can order the inclusion of the indispensable party at any stage of the action.

This case underscores the importance of understanding who is the real party-in-interest when dealing with sole proprietorships and marital property. It clarifies that the owner of the business generally has the right to sue, even if someone else signed the contract on behalf of the business. This ruling provides clarity for business owners and clarifies the procedural aspects of filing lawsuits related to businesses operated as sole proprietorships.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ROGER V. NAVARRO v. HON. JOSE L. ESCOBIDO and KAREN T. GO, G.R. No. 153788, November 27, 2009