Sta. Monica Industrial and Development Corp. v.

DAR
G.R. No. 164846

Facts:
Asuncion Trinidad is the owner of five parcels of land with a total area of 4.69 hectares
in Calumpit, Bulacan. Private respondent Basilio De Guzman is the agricultural
leasehold tenant of Trinidad.

As an agricultural leasehold tenant, De Guzman was issued certificates of Land

Transfer on July 22, 1981.

De Guzman filed a petition for the issuance of patent under his name with the Regional
Office of DAR. The DAR sent notices to Trinidad requiring her to comment. Instead of
complying, Trinidad filed a motion for bill of particulars.

After due proceedings, the Regional Director of DAR issued the order granting
Emancipation Patent in favor of De Guzman as qualified farmer­beneficiary of Agrarian
Reform Program.

Trinidad filed a motion for reconsideration, but her motion was denied.

A year later, petitioner Sta. Monica filed a petition for certiorari and prohibition with CA
assailing the order of DAR. Sta. Monica claimed that while it is true that Trinidad was
the former owner of the disputed parcel of land, the said landholding was sold on Jan.
27, 1986 in favor of Sta. Monica.

Sta. Monica asserted that there was a denial of due process because it was not
furnished a notice of coverage under the CARP law.

The CA dismissed the petition of Sta. Monica for lack of merit. The CA held that Sta.
Monica is not a real party­in­interest because it cannot be considered as an owner of
the land it bought from Trinidad.

Issue:
Whether Sta. Monica, a corporation with separate juridical personality has been denied
of the opportunity of notice and hearing when the DAR awarded land ownership to an
agrarian reform farmer­beneficiary, in the person of De Guzman.

Ruling:
No. The corporation Sta. Monica was not denied of the opportunity of notice and
hearing. Trinidad is still deemed the owner of the agricultural land sold to Sta. Monica;
no need for separate notice of coverage under CARP law.
Buyer Sta. Monica is owned and controlled by Trinidad and her family of which they
own 98% of the outstanding capital stock. As owners of 98% of outstanding capital
stock, they are beneficial owners of all the assets of the corporation including the
agricultural land sold by Trinidad to Sta. Monica. At the very last, the notice to her is
already a notice to Sta. Monica because the corporation acted as a mere conduit of
Trinidad.

The sale of the land from Trinidad to Sta. Monica was a mere ploy to evade the
applicable provisions of the agrarian law. But it is a fiat that the corporate vehicle cannot
be used as a shield to protect fraud or justify wrong. Thus, the veil of corporate fiction
will be pierced when it is used to defeat public convenience and subvert public policy.
MARTINEZ vs CA

Facts:
∙ PERSONALITIES
o BPI International Finance (respondent) - a foreign deposit-taking company
organized under the laws of HongKong.
o CCL (Cintas Largas, Ltd)- also a foreign corporation with a paid-up capital of
HK$10,000. Its shareholders were mainly nominee shareholders in HK but it was
also equally owned by Wilfredo Martinez and Miguel Lacson, Ramon Siy, and
Ricardo Lopa. It’s business was mainly the importation of molasses from the
Philippines and selling it in the international market. It imported the molasses
from Mar Tierra Corporation.
o Mar Tierra Corporation- Its President was Wilfredo Martinez and Executive VP
was Blamar Gonzales.
o RJL Fishing Corp- owned 42% of the stocks of Mar Tierra. One of its majority
stockholders is Ruben Martinez, father of Wilfredo Martinez.
∙ The business operations of CLL and Mar Tierra were run by Wilfredo Martinez and
Gonzales.
∙ 68% of Ruben Martinez’s assets were in RJL.

BPI International Finance (respondent) granted CLL a letter of credit for US$3,000,000. In January
1979 and March 1980, CLL opened a money market placement with the respondent bearing MMP No. 063
with an initial placement of US$390,000, and MMP No. 084 with an initial placement of US$68,768,
transferred from MMP No. 063. Wilfredo Martinez was the authorized signatory in both accounts but the
two signature cards also bore Ruben Martinez, and Miguel Lacson’s signatures. The three of them became
the joint account holders of the said money market placements.
At times, the funds in these MMPs were transferred to CLL’s deposit account and vice versa. To
resolve this, Wilfredo Matrinez and the respondent executed a back­to­back credit facility. Wilfredo
Martinez, aand the other owners of CLL executed a suretyship agreement where they obliged themselves
solidarily with CLL in order to pay for CLL’s credit facility. The CLL deposit account, MMP 063, and
MMP 084 had subsisting balances. Blamar Gonzales requested the respondent to transfer US$340,000 to
an account registered to Mar Tierra as payee. The respondent confirmed that US$340,000 was the account
available considering the CLL deposit account and money market placements. Months later Wilfredo
Martinez also made the same request for the transfer. The respondent complied but instead of deducting
the funds from either of the three accounts mentioned, it posted the US$340,000 as account receivable of
CLL since the money market placements hadn’t matured yet. When these have matured, they just allowed
Wilfredo to make withdrawals and did not collect the US$340,000 so it failed to secure its reimbursement.
Later problems came up regarding these three accounts and the respondent pressured Wilfredo and
Blamar Gonzales to pay the US$340,000. Wilfredo and Martinez had CLL’s account audited and it was
confirmed that the corporation owed the respondent this amount. Despite the respondent’s demands,
Wilfredo, Gonzales, Lacson and ruben Martinez did not make any remittance. Ruben Martinez even
denied having knowledge of such liability. The respondent then filed a suit to recover the sum stating that
the CLL was merely a paper company or an alter ego of Wilfredo and Ruben. The RTC and CA ruled in its
favor.

Issue:
WON the liability incurred by CLL can be attributed to Ruben Martinez because CLL is merely their alter
ego

Held:
NO.

Rationale:
The general rule is that a corporation is clothed with a personality separate and distinct from the persons
composing it—this separate and distinct personality of a corporation is a fiction created by law for
convenience and to prevent injustice. Such corporation cannot be liable for the obligations of the persons
composing it and vice versa. There are valid grounds though to pierce this veil of corporate entity. The test
to determine whether this can be done is as follows:
1. Control, and not mere majority stock control, of policy and business practice in respect
to the transaction attacked.
2. Such control must have been used by the defendant to commit fraud or wrong.
3. The said control and breach of duty must proximately cause injury or unjust loss
complained of.

The absence of any one of these three elements prevents the “piercing of the corporate veil”. In this
case, the respondent failed to prove complete control by the petitioners. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stocks of a corporation is not by
itself a sufficient ground separate corporate personality. The mere fact that the majority stock­holder of
Mar Tierra is RJL and that Ruben Martinez owned about 42% of the capital stocks of RJL do not
constitute sufficient evidence that the latter corporation, had complete control of Mar Tierra. They also
failed to prove that Mar Tierra and RJL were organized as an instrument of Wilfredo Martinez and Blamar
Gonzales. There is also no evidence that the petitioner had any involvement in the transaction between
Wilfredo and the respondent.