Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 96354 June 8, 1993

LAPERAL DEVELOPMENT CORPORATION and SUNBEAMS CONVENIENCE FOOD CORPORATION, petitioners, vs.HON. COURT OF APPEALS and THE HEIRS OF FILOTEO T. BANZON, respondents.

Vicente R. Acsay for petitioners.

CRUZ, J.:

In Civil Case No. Q-34907 in the Court of First Instance of Rizal, Quezon City, Atty. Filoteo T. Banzon sought recovery of attorney's fees from Oliverio Laperal, Laperal Development Corporation, and Imperial Development Corporation for professional services rendered by him in the following cases:

1. Land Registration Case No. 20, Court of First Instance of Bataan, Branch 1.

2. Land Registration Case, Court of First Instance of Bataan, Branch 2.

3. G.R. No. L-47074, Laperal Development Corp., et al. vs. Hon. Abraham P. Vera, Ascario Tuazon, et al.

4. Petition for Land Registration, Court of First Instance of Bataan, Branch 1.

5. Land Registration Case No. N-398, Court of First Instance of Baguio.

6. Civil Case No. 3922, Court of First Instance of Bataan, Branch 2, Oliverio Laperal vs. Mario Francisco.

7. Civil Case No. 4062, Court of First Instance of Bataan, Republic vs. Sunbeams Convenience Foods, Inc., et al.

8. Civil Case No. 4437, Court of First Instance of Bataan, Laperal Development Corporation et al. vs. Spouses Ascario Tyazon and Purificacion Ampil, et al.

9. Administrative action filed by the Solicitor General against Laperal Development Corporation for annulment of title to 400 hectares of land.

10. Civil Case No. Q-22933, Court of First Instance of Quezon City, Imperial Development Corp. vs. P & B Taxicab Inc..

On April 8, 1983, the case was decided on the basis of a Compromise Agreement reading in part as follows:

Atty. Filoteo Banzon by this agreement, does hereby voluntarily and freely waive, forfeit, or consider as fully paid any and all other claims of money or otherwise that he may have against the defendants, in all cases in the Philippines that he may have handled for the defendants in the past, including whatever money claims he may have in the above-entitled case outside of this agreement, inclusive of representation fees, representation expenses, appearance fees, or retainers fees, or other forms of attorneys fees and, hereby re-affirm that he will undertake upon his professional oath and standing, to protect the interest of the defendants in all unfinished appealed cases that the herein plaintiff had appeared in the past in representation of the defendants, without any further renumeration or attorneys fees, representation fees, appearance fees and expenses in connection therewith.

On May 19, 1987, Banzon filed a complaint against Oliverio Laperal. Laperal Development Corporation. Imperial Development Corporation, Sunbeams Convenience Foods, Inc. and Vicente Acsay for: 1) the annulment of the aforequoted portion of the Compromise Agreement; 2) the collection of attorney's fees for his services in the cases of: a) Imperial Development Corporation vs. Añover, b) Republic vs. Sunbeams Convenience Foods, Inc., et al., and c) Laperal Development vs. Ascario Tuazon and Ascario Tuazon v. Judge Maglalang, et al.; 3) the recovery of the amount of P10,000.00 that was adjudged payable to him as attorney's fees by Ascario Tuazon in Civil Case No. 3918; and 4) the payment to him of nominal damages and attorney's fees.

Docketed as Civil Case 50823 in Branch 92 of the Regional Trial Court of Quezon City, this case was dismissed on the ground that the trial court had no jurisdiction to annul the Compromise Agreement as approved by an equal and coordinate court. It was held that the issue was cognizable by the Court of Appeals. An additional ground was that the Compromise Agreement already covered the plaintiff's professional services in the aforementioned cases. 1

On appeal, the decision was affirmed on the issue of jurisdiction. The Court of Appeals held, however, that attorney's fees were due the private respondent in the cases of Laperal Development Corporation v. Ascario Tuazon and Ascario Tuazon v. Judge Maglalang and Republic v. Sunbeams Convenience Foods. Inc.. 2

The petitioners are now before us to challenge the decision insofar as it orders them to pay Banzon attorney's fees for his legal services in the aforementioned cases.

An examination of the list of cases for which Banzon was suing for attorney's fees in Civil Case No. Q-34907 shows that the case of Laperal Development Corporation v. Ascario Tuazon was included therein although it was erroneously referred to as Civil Case No. 4437. Even if it was not mentioned in the complaint, it was nevertheless covered by the Compromise Agreement, where Atty. Banzon waived all other claims against the defendants * "in all cases in the Philippines that he may have handled for the defendants in the past, including whatever money claims he may have in the above-entitled case outside of this agreement." He also undertook therein to protect the interest of the defendants in all unfinished appealed cases where he appeared in the past in representation of latter, without any further remuneration or attorney's fees, representation fees, appearance fees and expenses in connection therewith.

The undertaking clearly covered the case of Laperal Development Corporation v. Ascario Tuazon, (AC-G.R. CV No. 70186), which was still pending in the Court of Appeals at the time of the Compromise Agreement, and the subsequent case of Ascario Tuazon v. Judge Maglalang (CA-G.R. SP No. 07370). The respondent court erred in supposing that the said agreement covered only past services, disregarding the clear stipulation for the continuation of the private respondent's services in all pending appealed cases in which he had earlier appeared.

Concerning the case of Republic vs. Sunbeams Convenience Foods, Inc. (G.R. No. 50464), the Court of Appeals said:

At the time of the execution of the compromise agreement and rendition of the judgment based thereon on April 8, 1983, the aforementioned case bearing G.R. No. 50464 was still pending in the Supreme Court. It was not, however, the subject of the compromise agreement (Exhibits C and 2; Annex 2, answer, pp. 47-55, 65-66, rec.). It could not have been so because Sunbeams Convenience Foods, Inc. was not a party defendant in the second amended complaint, although reference was made to it in the appellant's seventh cause of action for which he has rendered professional services but for which attorney's fees were being claimed from the herein appellee Oliverio Laperal (Exhibits A and 1). But nothing is mentioned in the second amended complaint and in the compromise agreement (Exhibits A and 1; C and 2) which would indicate that Sunbeams Convenience Foods, Inc. itself was a party plaintiff therein privy to the case. Appellee Oliverio Laperal and Sunbeams Convenience Foods, Inc. do not appear to be one and the same.

It appearing that it was the herein appellant who filed the brief for Sunbeams Convenience Foods, Inc. in the Supreme Court on March 14, 1980 (Exhibit D), he should be compensated for his services.

Banzon's claim for attorney's fees in the said case was also among those enumerated in his complaint in Civil Case No. Q-34907 against Oliverio Laperal, Laperal Development Corporation, and Imperial Development Corporation. Notably, Sunbeams Convenience Foods, Inc. (Sunbeams, for brevity), referred to in the complaint as "Mr. Laperal's Corporation," was not joined by name as a party-defendant. Apparently, the private respondent believed that Oliverio Laperal, being the president of the

said company, was directly obligated to him for the attorney's fees due him for his handling of the case for Sunbeams.

It is settled that a corporation is clothed with a personality separate and distinct from that of the persons composing it. 3 It may not generally be held liable for the personal indebtedness of its stockholders or those of the entities connected with it. 4 Conversely, a stockholder cannot be made to answer for any of its financial obligations even if he should be its president. 5

There is no evidence that Sunbeams and Laperal are one and the same person. While it is true that Laperal is a stockholder, director and officer of Sunbeams, that status alone does not make him answerable for the liabilities of the said corporation. Such liabilities include Banzon's attorney's fees for representing it in the case of Republic v. Sunbeams Convenience Foods, Inc.

Sunbeams should have been joined as a party-defendant in order that the judgment of the lower court could legally affect it. But even if it was not impleaded, the court could still validly proceed with the case because Sunbeams was not an indespensable party but only a proper party. A proper party is one which ought to be a party if complete relief is to be accorded as between those already parties. 6 A party is indespensable if no final determination can be had of an action unless it is joined either as plaintiff or defendant. 7

The Compromise Agreement upon which the decision of the court was based was between plaintiff Atty. Banzon and the defendants represented by Oliverio Laperal. To repeat, Sunbeams was not a party to this agreement and so could not be affected by it.

It is noted, however, that in his complaint in Civil Case No. 50823 against Sunbeams et al., Banzon stated:

1. On the 1st cause of action, to declare the portions of the compromise agreement (Annex A) alleged in par. 4 of the 1st cause of action where plaintiff waives his attorney's fees and other fees in all other cases he handled in the past for the defendants Oliverio Laperal and his corporations not included in the complaint for attorney's fee . . . (emphasis supplied)

This declaration amounted to an admission that he had also waived his attorney's fees in the cases he had handled for Laperal's corporations which were not impleaded in Civil Case Q-34907, including Sunbeams.

Moreover, in the hearing Civil Case 50823, Banzon testified as follows.

Atty. Banzon: I am not claiming my attorney's fees from 1974 to 1981. What I was claiming was the attorney's fees for the services I have rendered after the compromise agreement in 1983 to 1987 by virtue of the new agreement . . .. (TSN, Sept. 15, p. 7 Records, Vol. II, p. 129).

xxx xxx xxx

Court: So you are not claiming anymore your attorney's fees in those ten cases?

Atty. Banzon: I am claiming only for the services I have rendered from 1983 to 1987 by virtue of a new agreement.

Court: These services of yours exclude the ten?

Atty. Banzon: Exclude the ten, Your Honor. (Ibid, p. 16)

xxx xxx xxx

Atty. Banzon: I admit, Your Honor that those 10 services are those services I rendered in the past wherein I waived my attorney's fees; my services covered from 1974 to 1981 but not my services after the compromise agreement. (ibid, p. 22).

The Sunbeams case was one of the ten cases listed in the complaint in Civil Case No. 34907. It was pending before this Court when Civil Case No. Q-34907 and Civil Case No. 50823 were instituted. To prove his claim for attorney's fees for his services in the Sunbeams case, Banzon submitted to the Regional Trial Court of Quezon City, Branch 92, "Petitioner's Brief" (Exh. "D") and "Petitioner's Reply to Respondents' Brief" (Exh. "D-1") dated March 14, 1980 and August 12, 1980, respectively, which had earlier been filled with this Court in connection with the said case. Significantly, the preparation and filing of those pleadings were done sometime in 1980, which means that they were among those ten cases referred to by Atty. Banzon for which he had waived his attorney's fees. There is no other proof of his services in the said case after 1983 to 1987.

The private respondent's claim for attorney's fees in the Sunbeam case was waived by him not by virtue of the Compromise Agreement to which Sunbeams, not being a defendant in Civil Case No. Q-34907, could not have been a party. What militates against his claim is his own judicial admission that he had waived his attorney's fees for the cases he had handled from 1974 to 1981 for Oliverio Laperal and his corporations, including those not impleaded in his complaint in Civil Case No. Q-34907.

ACCORDINGLY, the petition is GRANTED. The decision of the respondent court dated November 21, 1990 is MODIFIED. Petitioners Laperal Development Corporation and Sunbeams Convenience Foods, Inc. are declared no longer liable to the private respondents for attorney's fees in AC-G.R. CV No. 70186, CA-G.R. SP No. 07370 and G.R. No. 50464. Costs against the private respondent.

SO ORDERED.

Griño-Aquino, Bellosillo and Quiason, JJ., concur.

# Footnotes

1 Decided by Judge Tomas V. Taledo, Jr.; Court of Appeals Rollo, p. 13.

2 Penned by Ramirez, J., with Nocon and Santiago, JJ., concurring; Rollo, p. 25.

* In Civil Case No. Q-34907.

3 Philippine Bank of Communications v. Court of Appeals, 195 SCRA 567, Western Agro Industrial Corporation v. Court of Appeals, 188 SCRA 709; Traders Royal Bank vs. Court of Appeals, 177 SCRA 788.

4 Cease vs. Court of Appeals, 93 SCRA 483.

5 Palay, Inc. v. Clave, 124 SCRA 638.

6 Section 8, Rule 3, Revised Rules of Court.

7 Section 7, Rule 3, Revised Rules of Court.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 89879 April 20, 1990

JAIME PABALAN AND EDUARDO LAGDAMEO, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER AMBROSIO B. SISON, ELIZABETH RODEROS, ET AL., and THE SHERIFF OF THE NATIONAL LABOR RELATIONS COMMISSION, respondents.

Sofronio A. Larcia and Conrado Abriol Padilla for petitioners.

Apolinario N. Lomabao, Jr. for private respondents.

GANCAYCO, J.:

Once again the parameters of the liability of the officers of a corporation as to unpaid wages and other claims of the employees of a corporation which has a separate and distinct personality are brought to fore in this case.

On October 20, 1987, eighty-four (84) workers of the Philippine Inter-Fashion, Inc. (PIF) filed a complaint against the latter for illegal transfer simultaneous with illegal dismissal without justifiable cause and in violation of the provision of the Labor Code on security of tenure as well as the provisions of Batas Pambansa Blg. 130. Complainants demanded reinstatement with full backwages, living allowance, 13th month pay and other benefits under existing laws and/or separation pay.

On October 21, 1987, PIF, through its General Manager, was notified about the complaint and summons for the hearing set for November 6, 1987. The hearing was re-set for November 27, 1987 for failure of respondents to appear. On November 30, 1987 respondents (petitioners herein) moved for the cancellation of the hearing scheduled on November 6, 1987 so that they could engage a counsel to properly represent them preferably on November 17, 1987.

On December 10, 1987 both parties were directed to submit their respective position papers within ten (10) days. By mutual agreement the hearing was re-set on December 21, 1987 but on said date respondents and/or counsel failed to appear. The hearing was re-set on January 14, 1988 on which date respondents were given a deadline to submit their position paper.

On January 4, 1988 complainants filed their position paper. On January 14, 1988 counsel for respondents moved that he be given until January 22, 1988 to file their position paper. The labor arbiter granted the motion. The PIF filed its position paper on January 22, 1988. The heating for February 17, 1988 was re-set to March 9, 1988 and on March 29, 1988 on which dates respondents failed to appear.

On May 5, 1988, with leave of the labor arbiter, complainants filed their supplemental position paper impleading the petitioners as officers of the PIF in the complaint for their illegal transfer to a new firm.

On July 13, 1988 a decision was rendered by the labor arbiter the dispositive part of which reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATION, respondent Philippine Inter-Fashion and its officers Mr. Jaime Pabalan and Mr. Eduardo Lagdameo are hereby ordered to:

1. reinstate the sixty two (62) complainants to their former or equivalent position without loss of seniority rights and privileges;

2. to pay, jointly and severally, their backwages and other benefits from the time they were dismissed up to the time they are actually reinstated, the computation to be based from the latest minimum wage law at the time of their dismissal. (See attached Annex "A" of complainants' position paper.)

SO ORDERED. 1

Not satisfied therewith petitioners filed a motion for reconsideration in the First Division of the public respondent, National Labor Relations Commission (NLRC), which nevertheless, affirmed the appealed decision and dismissed the appeal for lack of merit in a resolution dated June 30, 1989. Petitioners were ordered to pay the appeal fee in accordance with law.

Hence the herein petition for certiorari with prayer for the issuance of a temporary restraining order wherein the petitioners raised the following issues:

A

THE ARBITER AND THE NLRC DID NOT ACQUIRE JURISDICTION OVER THE PERSONS OF THE PETITIONERS AND, THEREFORE, THE DECISION AND THE RESOLUTION, UNDER DISPUTE, ARE NULL AND VOID.

B

THE DECISION AND THE NLRC RESOLUTION SUFFER FROM A LEGAL AND CONSTITUTIONAL INFIRMITY BECAUSE THEY SANCTION A DEPRIVATION OF PETITIONERS' PROPERTIES WITHOUT DUE PROCESS OF LAW.

C

THE ARBITER AND THE NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN ADJUDGING PETITIONERS HEREIN AS JOINTLY AND SEVERALLY LIABLE WITH PHILIPPINE INTER-FASHION, INC. TO PAY THE JUDGMENT DEBT.

On September 25, 1989 this Court dismissed the petition for insufficiency in form and substance, having failed to comply with the Rules of Court and Administrative Circular No. 1-88 requiting the verification of the petition. A motion for reconsideration filed by the petitioners of the said resolution was denied on October 16, 1989 for failure to raise any substantial arguments to warrant a modification thereof. However, acting on an urgent motion to include the motion for reconsideration of the resolution of September 25, 1989 in the court's calendar which the Court granted, on November 30, 1989 the Court resolved to set aside said resolutions of September 25, 1989 and October 16, 1989, and to require respondents to comment thereon within ten (10) days from notice thereof. A temporary restraining order was issued enjoining respondents from enforcing or implementing the questioned decision of the labor arbiter affirmed by the NLRC upon a bond to be filed by petitioners in the amount of P100,000.00. However, on February 7, 1990 for failure of petitioner to file the required bond despite extensions of time granted them, the Court resolved to lift the temporary restraining order issued on November 13, 1989.

Now to the merit of the petition.

Petitioners do not question the merits of the decision insofar as PIF is concerned in this proceeding. The first two issues they raised are to the effect that the public respondents never acquired jurisdiction over them as they have not been served with summons and thus they were deprived due process.

The Court finds these grounds to be devoid of merit. As the record shows while originally it was PIF which was impleaded as respondent before the labor arbiter, petitioners also appeared in their behalf through counsel. Thereafter when the supplemental position paper was filed by complainants, petitioners were impleaded as respondents to which they filed an opposition inasmuch as they filed their own supplemental position papers. They were therefore properly served with summons and they were not deprived of due process.

Petitioners contend however that under the circumstances of the case as officers of the corporation PIF they could not be jointly and severally held liable with the corporation for its liability in this case.

The settled rule is that the corporation is vested by law with a personality separate and distinct from the persons composing it, including its officers as well as from that of any other legal entity to which it may

be related. Thus, a company manager acting in good faith within the scope of his authority in terminating the services of certain employees cannot be held personally liable for damages. 2 Mere ownership by a single stockholder or by another corporation of all or nearly all capital stocks of the corporation is not by itself sufficient ground for disregarding the separate corporate personality. 3

As a general rule, officers of a corporation are not personally liable for their official acts unless it is shown that they have exceeded their authority. 4 However, the legal fiction that a corporation has a personality separate and distinct from stockholders and members may be disregarded as follows:

This finding does not ignore the legal fiction that a corporation has a personality separate and distinct from its stockholders and members, for, as this Court had held "where the incorporators and directors belong to a single family, the corporation and its members can be considered as one in order to avoid its being used as an instrument to commit injustice," or to further an end subversive of justice. In the case of Claparols vs. CIR involving almost similar facts as in this case, it was also held that the shield of corporate fiction should be pierced when it is deliberately and maliciously designed to evade financial obligations to employees.

To the same effect . . . (are) this Court's rulings in still other cases:

When the notion of legal entity is used as a means to perpetrate fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, and or (to) confuse legitimate issues the veil which protects the corporation will be lifted. 5

In this particular case complainants did not allege or show that petitioners, as officers of the corporation deliberately and maliciously designed to evade the financial obligation of the corporation to its employees, or used the transfer of the employees as a means to perpetrate an illegal act or as a vehicle for the evasion of existing obligations, the circumvention of statutes, or to confuse the legitimate issues.

Indeed, in the questioned resolution of the NLRC dated June 30, 1989 there is no finding as to why petitioners were being held jointly and severally liable for the liability and obligation of the corporation except as to invocation of the ruling of this Court in A.C. Ransom Labor Union-CCLU vs. NLRC 6 in that the liability in the cases of illegal termination of employees extends not only to the corporation as a corporate entity but also to its responsible officers acting in the interest of the corporation or employer.

It must be noted, however, that A.C. Ransom Labor Union-CCLU vs. NLRC the corporation was a family corporation and that during the strike the members of the family organized another corporation which was the Rosario Industrial Corporation to which all the assets of the A.C. Ransom Corporation were transferred to continue its business which acts of such officers and agents of A.C. Ransom Corporation were intended to avoid payment of its obligations to its employees. In such case this Court considered the president of the corporation to be personally liable together with the corporation for the satisfaction of the claim of the employees. 7

Not one of the above circumstances has been shown to be present. Hence petitioners can not be held jointly and severally liable with the PIF corporation under the questioned decision and resolution of the public respondent.

WHEREFORE, the petition is GRANTED and the questioned resolution of the public respondent dated June 30, 1989 is hereby modified by relieving petitioners of any liability as officers of the PIF and holding that the liability shall be solely that of Philippine Inter-Fashion, Inc. No costs.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

Footnotes

1 Page 46, Rollo.

2 Sunio vs. National Labor Relations Commission, 127 SCRA 390 (1984).

3 Palay, Inc. vs. Clave, 124 SCRA 638 (1983).

4 Mindanao Motor Line, Inc. vs. CIR, 6 SCRA 710 (1962); see also Banque Generale Beige, SA de Amberes, Belgian Deutsch Asiatishe Bk., et al. vs. Walter Bull & Co., Inc., et al., 47 O.G. 138.

5 A.C. Ransom Labor Union-CCLU vs. NLRC, 150 SCRA 498, 505506 (1987), citations omitted.

6 142 SCRA 269 (1986).

7 See also A.C. Ransom Labor Union-CCLU vs. NLRC, supra, at note 5.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-31061 August 17, 1976

SULO NG BAYAN INC., plaintiff-appellant, vs.GREGORIO ARANETA, INC., PARADISE FARMS, INC., NATIONAL WATERWORKS & SEWERAGE AUTHORITY, HACIENDA CARETAS, INC, and REGISTER OF DEEDS OF BULACAN, defendants-appellees.

Hill & Associates Law Offices for appellant.

Araneta, Mendoza & Papa for appellee Gregorio Araneta, Inc.

Carlos, Madarang, Carballo & Valdez for Paradise Farms, Inc.

Leopoldo M. Abellera, Arsenio J. Magpale & Raul G. Bernardo, Office of the Government Corporate Counsel for appellee National Waterworks & Sewerage Authority.

Candido G. del Rosario for appellee Hacienda Caretas, Inc.

ANTONIO, J.:

The issue posed in this appeal is whether or not plaintiff corporation (non- stock may institute an action in behalf of its individual members for the recovery of certain parcels of land allegedly owned by said members; for the nullification of the transfer certificates of title issued in favor of defendants appellees covering the aforesaid parcels of land; for a declaration of "plaintiff's members as absolute owners of the property" and the issuance of the corresponding certificate of title; and for damages.

On April 26, 1966, plaintiff-appellant Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of First Instance of Bulacan, Fifth Judicial District, Valenzuela, Bulacan, against defendants-appellees to recover the ownership and possession of a large tract of land in San Jose del Monte, Bulacan, containing an area of 27,982,250 square meters, more or less, registered under the Torrens System in the name of defendants-appellees' predecessors-in-interest. 1 The complaint, as amended on June 13, 1966, specifically alleged that plaintiff is a corporation organized and existing under the laws of the Philippines, with its principal office and place of business at San Jose del Monte, Bulacan; that its membership is composed of natural persons residing at San Jose del Monte, Bulacan; that the members of the plaintiff corporation, through themselves and their predecessors-in-interest, had pioneered in the clearing of the

fore-mentioned tract of land, cultivated the same since the Spanish regime and continuously possessed the said property openly and public under concept of ownership adverse against the whole world; that defendant-appellee Gregorio Araneta, Inc., sometime in the year 1958, through force and intimidation, ejected the members of the plaintiff corporation fro their possession of the aforementioned vast tract of land; that upon investigation conducted by the members and officers of plaintiff corporation, they found out for the first time in the year 1961 that the land in question "had been either fraudelently or erroneously included, by direct or constructive fraud, in Original Certificate of Title No. 466 of the Land of Records of the province of Bulacan", issued on May 11, 1916, which title is fictitious, non-existent and devoid of legal efficacy due to the fact that "no original survey nor plan whatsoever" appears to have been submitted as a basis thereof and that the Court of First Instance of Bulacan which issued the decree of registration did not acquire jurisdiction over the land registration case because no notice of such proceeding was given to the members of the plaintiff corporation who were then in actual possession of said properties; that as a consequence of the nullity of the original title, all subsequent titles derived therefrom, such as Transfer Certificate of Title No. 4903 issued in favor of Gregorio Araneta and Carmen Zaragoza, which was subsequently cancelled by Transfer Certificate of Title No. 7573 in the name of Gregorio Araneta, Inc., Transfer Certificate of Title No. 4988 issued in the name of, the National Waterworks & Sewerage Authority (NWSA), Transfer Certificate of Title No. 4986 issued in the name of Hacienda Caretas, Inc., and another transfer certificate of title in the name of Paradise Farms, Inc., are therefore void. Plaintiff-appellant consequently prayed (1) that Original Certificate of Title No. 466, as well as all transfer certificates of title issued and derived therefrom, be nullified; (2) that "plaintiff's members" be declared as absolute owners in common of said property and that the corresponding certificate of title be issued to plaintiff; and (3) that defendant-appellee Gregorio Araneta, Inc. be ordered to pay to plaintiff the damages therein specified.

On September 2, 1966, defendant-appellee Gregorio Araneta, Inc. filed a motion to dismiss the amended complaint on the grounds that (1) the complaint states no cause of action; and (2) the cause of action, if any, is barred by prescription and laches. Paradise Farms, Inc. and Hacienda Caretas, Inc. filed motions to dismiss based on the same grounds. Appellee National Waterworks & Sewerage Authority did not file any motion to dismiss. However, it pleaded in its answer as special and affirmative defenses lack of cause of action by the plaintiff-appellant and the barring of such action by prescription and laches.

During the pendency of the motion to dismiss, plaintiff-appellant filed a motion, dated October 7, 1966, praying that the case be transferred to another branch of the Court of First Instance sitting at Malolos, Bulacan, According to defendants-appellees, they were not furnished a copy of said motion, hence, on October 14, 1966, the lower court issued an Order requiring plaintiff-appellant to furnish the appellees copy of said motion, hence, on October 14, 1966, defendant-appellant's motion dated October 7, 1966 and, consequently, prayed that the said motion be denied for lack of notice and for failure of the plaintiff-appellant to comply with the Order of October 14, 1966. Similarly, defendant-appellee paradise Farms, Inc. filed, on December 2, 1966, a manifestation information the court that it also did not receive a copy of the afore-mentioned of appellant. On January 24, 1967, the trial court issued an Order dismissing the amended complaint.

On February 14, 1967, appellant filed a motion to reconsider the Order of dismissal on the grounds that the court had no jurisdiction to issue the Order of dismissal, because its request for the transfer of the case from the Valenzuela Branch of the Court of First Instance to the Malolos Branch of the said court has been approved by the Department of Justice; that the complaint states a sufficient cause of action because the subject matter of the controversy in one of common interest to the members of the corporation who are so numerous that the present complaint should be treated as a class suit; and that the action is not barred by the statute of limitations because (a) an action for the reconveyance of property registered through fraud does not prescribe, and (b) an action to impugn a void judgment may be brought any time. This motion was denied by the trial court in its Order dated February 22, 1967. From the afore-mentioned Order of dismissal and the Order denying its motion for reconsideration, plaintiff-appellant appealed to the Court of Appeals.

On September 3, 1969, the Court of Appeals, upon finding that no question of fact was involved in the appeal but only questions of law and jurisdiction, certified this case to this Court for resolution of the legal issues involved in the controversy.

I

Appellant contends, as a first assignment of error, that the trial court acted without authority and jurisdiction in dismissing the amended complaint when the Secretary of Justice had already approved the transfer of the case to any one of the two branches of the Court of First Instance of Malolos, Bulacan.

Appellant confuses the jurisdiction of a court and the venue of cases with the assignment of cases in the different branches of the same Court of First Instance. Jurisdiction implies the power of the court to decide a case, while venue the place of action. There is no question that respondent court has jurisdiction over the case. The venue of actions in the Court of First Instance is prescribed in Section 2, Rule 4 of the Revised Rules of Court. The laying of venue is not left to the caprice of plaintiff, but must be in accordance with the aforesaid provision of the rules. 2 The mere fact that a request for the transfer of a case to another branch of the same court has been approved by the Secretary of Justice does not divest the court originally taking cognizance thereof of its jurisdiction, much less does it change the venue of the action. As correctly observed by the trial court, the indorsement of the Undersecretary of Justice did not order the transfer of the case to the Malolos Branch of the Bulacan Court of First Instance, but only "authorized" it for the reason given by plaintiff's counsel that the transfer would be convenient for the parties. The trial court is not without power to either grant or deny the motion, especially in the light of a strong opposition thereto filed by the defendant. We hold that the court a quo acted within its authority in denying the motion for the transfer the case to Malolos notwithstanding the authorization" of the same by the Secretary of Justice.

II

Let us now consider the substantive aspect of the Order of dismissal.

In dismissing the amended complaint, the court a quo said:

The issue of lack of cause of action raised in the motions to dismiss refer to the lack of personality of plaintiff to file the instant action. Essentially, the term 'cause of action' is composed of two elements: (1) the right of the plaintiff and (2) the violation of such right by the defendant. (Moran, Vol. 1, p. 111). For these reasons, the rules require that every action must be prosecuted and defended in the name of the real party in interest and that all persons having an interest in the subject of the action and in obtaining the relief demanded shall be joined as plaintiffs (Sec. 2, Rule 3). In the amended complaint, the people whose rights were alleged to have been violated by being deprived and dispossessed of their land are the members of the corporation and not the corporation itself. The corporation has a separate. and distinct personality from its members, and this is not a mere technicality but a matter of substantive law. There is no allegation that the members have assigned their rights to the corporation or any showing that the corporation has in any way or manner succeeded to such rights. The corporation evidently did not have any rights violated by the defendants for which it could seek redress. Even if the Court should find against the defendants, therefore, the plaintiff corporation would not be entitled to the reliefs prayed for, which are recoveries of ownership and possession of the land, issuance of the corresponding title in its name, and payment of damages. Neither can such reliefs be awarded to the members allegedly deprived of their land, since they are not parties to the suit. It appearing clearly that the action has not been filed in the names of the real parties in interest, the complaint must be dismissed on the ground of lack of cause of action. 3

Viewed in the light of existing law and jurisprudence, We find that the trial court correctly dismissed the amended complaint.

It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity to be considered as separate and apart from the individual stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members. 4 The property of the corporation is its property and not that of the stockholders, as owners, although they have equities in it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. 5 Conversely, a corporation ordinarily has no interest in the individual property of its stockholders unless transferred to the corporation, "even in the case of a one-man corporation. 6 The mere fact that one is president of a corporation does not render the property which he owns or possesses the property of the corporation, since the president, as individual, and the corporation are separate similarities. 7 Similarly, stockholders in a corporation engaged in buying and dealing in real estate whose certificates of stock entitled the holder thereof to an allotment in the distribution of the land of the corporation upon surrender of their stock certificates were considered not to have such legal or equitable title or interest in the land, as would support a suit for title, especially against parties other than the corporation. 8

It must be noted, however, that the juridical personality of the corporation, as separate and distinct from the persons composing it, is but a legal fiction introduced for the purpose of convenience and to subserve the ends of justice. 9 This separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work -an injustice, or where necessary to achieve equity. 10

Thus, when "the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, ... the law will regard the corporation as an association of persons, or in the case of two corporations, merge them into one, the one being merely regarded as part or instrumentality of the other. 11 The same is true where a corporation is a dummy and serves no business purpose and is intended only as a blind, or an alter ego or business conduit for the sole benefit of the stockholders. 12 This doctrine of disregarding the distinct personality of the corporation has been applied by the courts in those cases when the corporate entity is used for the evasion of taxes 13 or when the veil of corporate fiction is used to confuse legitimate issue of employer-employee relationship, 14 or when necessary for the protection of creditors, in which case the veil of corporate fiction may be pierced and the funds of the corporation may be garnished to satisfy the debts of a principal stockholder. 15 The aforecited principle is resorted to by the courts as a measure protection for third parties to prevent fraud, illegality or injustice. 16

It has not been claimed that the members have assigned or transferred whatever rights they may have on the land in question to the plaintiff corporation. Absent any showing of interest, therefore, a corporation, like plaintiff-appellant herein, has no personality to bring an action for and in behalf of its stockholders or members for the purpose of recovering property which belongs to said stockholders or members in their personal capacities.

It is fundamental that there cannot be a cause of action 'without an antecedent primary legal right conferred' by law upon a person. 17 Evidently, there can be no wrong without a corresponding right, and no breach of duty by one person without a corresponding right belonging to some other person. 18 Thus, the essential elements of a cause of action are legal right of the plaintiff, correlative obligation of the defendant, an act or omission of the defendant in violation of the aforesaid legal right. 19 Clearly, no right of action exists in favor of plaintiff corporation, for as shown heretofore it does not have any interest in the subject matter of the case which is material and, direct so as to entitle it to file the suit as a real party in interest.

III

Appellant maintains, however, that the amended complaint may be treated as a class suit, pursuant to Section 12 of Rule 3 of the Revised Rules of Court.

In order that a class suit may prosper, the following requisites must be present: (1) that the subject matter of the controversy is one of common or general interest to many persons; and (2) that the parties are so numerous that it is impracticable to bring them all before the court. 20

Under the first requisite, the person who sues must have an interest in the controversy, common with those for whom he sues, and there must be that unity of interest between him and all such other persons which would entitle them to maintain the action if suit was brought by them jointly. 21

As to what constitutes common interest in the subject matter of the controversy, it has been explained in Scott v. Donald 22 thus:

The interest that will allow parties to join in a bill of complaint, or that will enable the court to dispense with the presence of all the parties, when numerous, except a determinate number, is not only an interest in the question, but one in common in the subject Matter of the suit; ... a community of interest growing out of the nature and condition of the right in dispute; for, although there may not be any privity between the numerous parties, there is a common title out of which the question arises, and which lies at the foundation of the proceedings ... [here] the only matter in common among the plaintiffs, or between them and the defendants, is an interest in the Question involved which alone cannot lay a foundation for the joinder of parties. There is scarcely a suit at law, or in equity which settles a Principle or applies a principle to a given state of facts, or in which a general statute is interpreted, that does not involved a Question in which other parties are interested. ... (Emphasis supplied )

Here, there is only one party plaintiff, and the plaintiff corporation does not even have an interest in the subject matter of the controversy, and cannot, therefore, represent its members or stockholders who claim to own in their individual capacities ownership of the said property. Moreover, as correctly stated by the appellees, a class suit does not lie in actions for the recovery of property where several persons claim Partnership of their respective portions of the property, as each one could alleged and prove his respective right in a different way for each portion of the land, so that they cannot all be held to have Identical title through acquisition prescription. 23

Having shown that no cause of action in favor of the plaintiff exists and that the action in the lower court cannot be considered as a class suit, it would be unnecessary and an Idle exercise for this Court to resolve the remaining issue of whether or not the plaintiffs action for reconveyance of real property based upon constructive or implied trust had already prescribed.

ACCORDINGLY, the instant appeal is hereby DISMISSED with costs against the plaintiff-appellant.

Fernando, C.J., Barredo, Aquino and Concepcion, Jr., JJ., concur.

Footnotes

1 Civil Case No. 233-V, entitled Sulo ng Bayan, Inc., Plaintiff, versus Gregorio Araneta, Inc., Paradise Farms, Inc., National Waterworks & Sewerage Authority (NWSA) Hacienda Caretas, Inc., and Register of Deeds of Bulacan, Defendants.

2 Evangelista v. Santos, 86 Phil. 387.

3 Record on Appeal, pp. 101-103.

4 I Fletcher Cyclopedia Corporations, 1974 Ed., sec. 25, pp. 99-100; Borja v. Vasquez, 74 Phil. 560, 566-567' Villa-Rey Transit, Inc. v. Ferrer, 25 SCRA 845, 857.

5 Stockholder of F. Guanzon and Sons, Inc. v. Register of Deeds of Manila, 6 SCRA 373. A share of stock only typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that extent when distributed according to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala., 398, 56 So., 235), but its holder is not the owner of any definite portion of its property or assets (Gottfried v. Miller, 104 U.S., 521; Jones v. Davis 35 Ohio St. 474). The stockholder is not a co-owner or tenant in common of the corporate property (Harton v. Hohnston, 166 Ala., 317, 51 So., 992). (Ibid., pp. 375-376.)

6 I Fletcher, supra, pp. 132-133.

7 Recchio v. Manufacturers & Traders Trust Co., 55 Mis. 2d. 788, 286, NYS 2d. 390.

8 Bylerley v. Camey, 161 SW 2d. 1105.

9 Laguna Trans. Co., Inc. v. Social Security System, 107 Phil. 833, 837.

10 I Fletcher, supra, sec. 41, p. 166; 18 Am. Jur. 2d. 561.

11 Yutivo & Sons Hardware Co. v. Court of Tax Appeals, 1 SCRA 160, citing Koppel (Phil.) Inc. v. Yatco, 77 Phil. 497; I Fletcher, supra, pp. 135-136.

12 McConnel v. Court of Appeals, 1 SCRA 722; NAMARCO v. Associated Finance Co., Inc., 19 SCRA 962. The doctrine of alter ego is based upon the misuse of a corporation by an individual for wrongful or inequitable purposes, and in such case the court merely disregards the corporate entity and holds the individual responsible for acts knowingly and intentionally done in the name of the corporation." (Ivy v. Plyler, 246 Cal. App. 2d. 678, 54 Cal. Reptr. 894.) The doctrine of alter ego imposes upon the individual who uses a corporation merely as an instrumentality to conduct his own business liability as a consequence of fraud or injustice perpetuated not on the corporation, but on third persons dealing with the corporation.

13 Commissioner of Internal Revenue v. Norton & Harison Co., 11 SCRA 714.

14 R.F. Sugay & Co., Inc. v. Reyes, 12 SCRA 700, 705.

15 Ramirez Telephone Corporation v. Bank of America, 29 SCRA 191.

16 Gregorio Araneta, Inc. v. De Paterno and Vidal, 91 Phil. 786; 18 Am. Jur. 2d. 561, 562.

17 Rowe v. Richards, 151 N.W. 1001.

18 Mckee v. Dodd, 152 Cal. 637, 93 P. 854; Hartigan v. Casualty Co., 167 NYS 645; Hyde v. Minnesota, 136 N.W. 92l 1 Am. Jur. 2d. 590.

19 Ma-ao Sugar Central Co. v. Barrios, 79 Phil. 666; Caseñas v. Rosales, 19 SCRA 462; Remitere v. Vda. De Yulo, 16 SCRA 251, 256.

20 Sec. 12, Rule 3, Revised Rules of Court.

21 I Martin, Rules of Court, 1972 Ed., p. 220, citing Certia v. Notre Dame Du Lac Univ., 82 Ind. A.A. 542; N.E. 318.

22 165 U.S. 107, 41 Law. Ed. 447, 52 S. Ct. 217.

23 Berses v. Villanueva, 25 Phil. 471; Rallonza v. Evangilista, 15 Phil. 531; State v. Lake Circuit Court, 145 N.E. 2d. 15.