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G.R. No.

L-31061 August 17, 1976


SULO NG BAYAN INC. vs. GREGORIO ARANETA, INC., PARADISE FARMS, INC., NATIONAL
WATERWORKS & SEWERAGE AUTHORITY, HACIENDA CARETAS, INC, and REGISTER OF
DEEDS OF BULACAN
FACTS:
On April 26, 1966, Sulo ng Bayan, Inc. filed an accion de revindicacion with the CFI 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. The complaint, as amended on June 13, 1966, specifically alleged that Sulo ng
Bayan, Inc 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 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.

Gregorio Araneta, Inc., sometime in the year 1958, through force and intimidation, ejected the members
of the plaintiff corporation from their possession of the aforementioned vast tract of land;

Upon investigation conducted by the members and officers of plaintiff corporation, they found out in the
year 1961 that the land in question "had been either fraudelently or erroneously included, by direct or
constructive fraud, in OCT 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.

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.

ISSUE: 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

HELD: NO

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.

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. 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. 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. 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. 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.

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.