civpro30

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-16797 February 27, 1963

RODRIGO ENRIQUEZ, ET AL., plaintiffs-appellees, vs.SOCORRO A. RAMOS, ET AL., defendants-appellants.

Gelasio L. Dimaano for plaintiffs-appellees.Vicente K. Aranda for defendants-appellants.

REYES, J.B.L., J.:

Direct appeal on points of law from a decision of the Court of First Instance of Rizal in its Civil Case No. Q-4232.

The record is to the effect that on 24 November 1958, Rodrigo Enriquez and the spouses Urbano Dizon and Aurea Soriano de Dizon sold to Socorro A. Ramos, by a notarial deed of even date, eleven (11) parcels of land situated in Bago Bantay, Quezon City, and covered by their corresponding certificates of title, for the stipulated price of P101,000.00. The vendee paid P5,000.00 down, P2,500.00 in cash, and P2,500.00 by a check drawn against the Philippine National Bank, and agreed to satisfy the balance of P96,000.00 within ninety (90) days. To secure the said balance, the vendee Socorro A. Ramos, in the same deed of sale, mortgaged the eleven parcels in favor of the vendors. By way of additional security, Socorro A. Ramos, as attorney-in-fact of her children, Enrique, Antonio, Milagros, and Lourdes, and as judicial guardian of her minor child Angelita Ramos, executed another mortgage on Lot No. 409 of the Malinta Estate.

Because of the vendee-mortgagor's failure to comply with some conditions of the mortgage, this action for foreclosure of the mortgage was filed by the vendors-mortgagees in the court below, on 29 April 1959. Defendant Socorro Ramos moved to dismiss, alleging that the plaintiffs previously had filed action against her in the Court of First Instance of Manila on 24 February 1959 for the recovery of P2,500.00 paid by check as part of the down payment on the price of the mortgaged lands; that at the time this first suit was filed, the mortgage debt was already accrued and demandable; that plaintiffs were, therefore, guilty of splitting a single cause of action, and under section 4 of Rule 2 of the Rules of Court, the filing of the first action for P2,500.00 was a defense that could be pleaded in abatement of the second suit. Upon opposition by the plaintiffs, the Court of First Instance of Quezon City denied the motion to dismiss; but defendant Ramos repleaded the averments as a special defense in her answer. After trial, on 16 December 1959, the Court of First Instance of Quezon City rendered judgment against defendant Ramos; ordered her to pay P96,000.00, with 12% interest from 24 February 1959 until payment, 10% of the amount due as attorney's fees, and the costs of the suit; and further decreed the foreclosure sale of the mortgaged properties in case of non-payment within ninety (90) days.

Socorro Ramos appealed directly to this Court, and here insists that the action should be dismissed on account of the alleged splitting of appellee's cause of action, and that the obligation not having fixed a period, although one was intended, the court below should have set first a date of maturity before ordering payment or foreclosure.

We find no merit in the appeal.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1wph1.t

An examination of the first complaint filed against appellant in the Court of First Instance of Manila shows that it was based on appellants' having unlawfully stopped payment of the check for P2,500.00 she had issued in favor of appellees; while the complaint in the present action was for non-payment of the balance of P96,000.00 guaranteed by the mortgage. The claim for P2,500.00 was, therefore, a distinct debt not covered by the security; and since the mortgage was constituted on lands situated in Quezon City, the appellees could not ask for its foreclosure in the Manila courts. The two causes of action being different, section 4 of Rule 2 does not apply.

On the second assignment of error: the stipulation in the mortgage contract that the obligation for P96,000.00 was to be

without interest, payable within ninety (90) days from this date, provided that in case of default it shall bear interest at the rate of 12% per annum,

clearly fixes a date of maturity, the stipulated twelve per cent in case of default being nothing more than a penalty, designed to induce the debtor to pay on or before the expiration of the ninety (90) days. Hence, there was no call upon the court to set another due date.

Finding no error in the judgment appealed from, the same is affirmed, with costs against appellants.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal,

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-64013November 28, 1983

UNION GLASS & CONTAINER CORPORATION and CARLOS PALANCA, JR., in his capacity as President of Union Glass & Container Corporation, petitioners, vs.THE SECURITIES AND EXCHANGE COMMISSION and CAROLINA HOFILEA, respondents.

Eduardo R. Ceniza for petitioners.

The Solicitor General for respondent SEC.

Remedios C. Balbin for respondent Carolina Y. Hofilea.

ESCOLIN, J.:+.wph!1

This petition for certiorari and prohibition seeks to annul and set aside the Order of the Securities and Exchange Commission, dated September 25, 1981, upholding its jurisdiction in SEC Case No. 2035, entitled "Carolina Hofilea, Complainant, versus Development Bank of the Philippines, et al., Respondents."

Private respondent Carolina Hofilea, complainant in SEC Case No. 2035, is a stockholder of Pioneer Glass Manufacturing Corporation, Pioneer Glass for short, a domestic corporation engaged in the operation of silica mines and the manufacture of glass and glassware. Since 1967, Pioneer Glass had obtained various loan accommodations from the Development Bank of the Philippines [DBP], and also from other local and foreign sources which DBP guaranteed.

As security for said loan accommodations, Pioneer Glass mortgaged and/or assigned its assets, real and personal, to the DBP, in addition to the mortgages executed by some of its corporate officers over their personal assets. The proceeds of said financial exposure of the DBP were used in the construction of a glass plant in Rosario, Cavite, and the operation of seven silica mining claims owned by the corporation.

It appears that through the conversion into equity of the accumulated unpaid interests on the various loans amounting to P5.4 million as of January 1975, and subsequently increased by another P2.2 million in 1976, the DBP was able to gain control of the outstanding shares of common stocks of Pioneer Glass, and to get two, later three, regular seats in the corporation's board of directors.

Sometime in March, 1978, when Pioneer Glass suffered serious liquidity problems such that it could no longer meet its financial obligations with DBP, it entered into a dacion en pago agreement with the latter, whereby all its assets mortgaged to DBP were ceded to the latter in full satisfaction of the corporation's obligations in the total amount of P59,000,000.00. Part of the assets transferred to the DBP was the glass plant in Rosario, Cavite, which DBP leased and subsequently sold to herein petitioner Union Glass and Container Corporation, hereinafter referred to as Union Glass.

On April 1, 1981, Carolina Hofilea filed a complaint before the respondent Securities and Exchange Commission against the DBP, Union Glass and Pioneer Glass, docketed as SEC Case No. 2035. Of the five causes of action pleaded therein, only the first cause of action concerned petitioner Union Glass as transferee and possessor of the glass plant. Said first cause of action was based on the alleged illegality of the aforesaid dacion en pago resulting from: [1] the supposed unilateral and unsupported undervaluation of the assets of Pioneer Glass covered by the agreement; [2] the self-dealing indulged in by DBP, having acted both as stockholder/director and secured creditor of Pioneer Glass; and [3] the wrongful inclusion by DBP in its statement of account of P26M as due from Pioneer Glass when the same had already been converted into equity.

Thus, with respect to said first cause of action, respondent Hofilea prayed that the SEC issue an order:t.hqw

1.Holding that the so called dacion en pago conveying all the assets of Pioneer Glass and the Hofilea personal properties to Union Glass be declared null and void on the ground that the said conveyance was tainted with.t.hqw

A.Self-dealing on the part of DBP which was acting both as a controlling stockholder/director and as secured creditor of the Pioneer Glass, all to its advantage and to that of Union Glass, and to the gross prejudice of the Pioneer Glass,

B.That the dacion en pago is void because there was gross undervaluation of the assets included in the so-called dacion en pago by more than 100% to the prejudice of Pioneer Glass and to the undue advantage of DBP and Union Glass;

C.That the DBP unduly favored Union Glass over another buyer, San Miguel Corporation, notwithstanding the clearly advantageous terms offered by the latter to the prejudice of Pioneer Glass, its other creditors and so-called 'Minority stockholders.'

2.Holding that the assets of the Pioneer Glass taken over by DBP and part of which was delivered to Union Glass particularly the glass plant to be returned accordingly.

3.That the DBP be ordered to accept and recognize the appraisal conducted by the Asian Appraisal Inc. in 1975 and again in t978 of the asset of Pioneer Glass. 1

In her common prayer, Hofilea asked that DBP be sentenced to pay Pioneer Glass actual, consequential, moral and exemplary damages, for its alleged illegal acts and gross bad faith; and for DBP and Union Glass to pay her a reasonable amount as attorney's fees. 2

On April 21, 1981, Pioneer Glass filed its answer. On May 8, 1981, petitioners moved for dismissal of the case on the ground that the SEC had no jurisdiction over the subject matter or nature of the suit. Respondent Hofilea filed her opposition to said motion, to which herein petitioners filed a rejoinder.

On July 23, 1981, SEC Hearing Officer Eugenio E. Reyes, to whom the case was assigned, granted the motion to dismiss for lack of jurisdiction. However, on September 25, 1981, upon motion for reconsideration filed by respondent Hofilea, Hearing Officer Reyes reversed his original order by upholding the SEC's jurisdiction over the subject matter and over the persons of petitioners. Unable to secure a reconsideration of the Order as well as to have the same reviewed by the Commission En Banc, petitioners filed the instant petition for certiorari and prohibition to set aside the order of September 25, 1981, and to prevent respondent SEC from taking cognizance of SEC Case No. 2035.

The issue raised in the petition may be propounded thus: Is it the regular court or the SEC that has jurisdiction over the case?

In upholding the SEC's jurisdiction over the case Hearing Officer Reyes rationalized his conclusion thus:t.hqw

As correctly pointed out by the complainant, the present action is in the form of a derivative suit instituted by a stockholder for the benefit of the corporation, respondent Pioneer Glass and Manufacturing Corporation, principally against another stockholder, respondent Development Bank of the Philippines, for alleged illegal acts and gross bad faith which resulted in the dacion en pago arrangement now being questioned by complainant. These alleged illegal acts and gross bad faith came about precisely by virtue of respondent Development Bank of the Philippine's status as a stockholder of co-respondent Pioneer Glass Manufacturing Corporation although its status as such stockholder, was gained as a result of its being a creditor of the latter. The derivative nature of this instant action can also be gleaned from the common prayer of the complainant which seeks for an order directing respondent Development Bank of the Philippines to pay co-respondent Pioneer Glass Manufacturing Corporation damages for the alleged illegal acts and gross bad faith as above-mentioned.

As far as respondent Union Glass and Container Corporation is concerned, its inclusion as a party-respondent by virtue of its being an indispensable party to the present action, it being in possession of the assets subject of the dacion en pago and, therefore, situated in such a way that it will be affected by any judgment thereon, 3

In the ordinary course of things, petitioner Union Glass, as transferee and possessor of the glass plant covered by the dacion en pago agreement, should be joined as party-defendant under the general rule which requires the joinder of every party who has an interest in or lien on the property subject matter of the dispute. 4 Such joinder of parties avoids multiplicity of suits as well as ensures the convenient, speedy and orderly administration of justice.

But since petitioner Union Glass has no intra-corporate relation with either the complainant or the DBP, its joinder as party-defendant in SEC Case No. 2035 brings the cause of action asserted against it outside the jurisdiction of the respondent SEC.

The jurisdiction of the SEC is delineated by Section 5 of PD No. 902-A as follows:t.hqw

Sec. 5. In addition to the regulatory and adjudicative function of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and devices, it shall have original and exclusive jurisdiction to hear and decide cases involving:

a]Devices and schemes employed by or any acts, of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or the stockholders, partners, members of associations or organizations registered with the Commission

b]Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership, or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity;

c]Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.

This grant of jurisdiction must be viewed in the light of the nature and function of the SEC under the law. Section 3 of PD No. 902-A confers upon the latter "absolute jurisdiction, supervision, and control over all corporations, partnerships or associations, who are grantees of primary franchise and/or license or permit issued by the government to operate in the Philippines ... " The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment in these entities may be encouraged and protected, and their activities pursued for the promotion of economic development. 5

It is in aid of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly specified and delimited its jurisdiction to matters intrinsically connected with the regulation of corporations, partnerships and associations and those dealing with the internal affairs of such corporations, partnerships or associations.

Otherwise stated, in order that the SEC can take cognizance of a case, the controversy must pertain to any of the following relationships: [a] between the corporation, partnership or association and the public; [b] between the corporation, partnership or association and its stockholders, partners, members, or officers; [c] between the corporation, partnership or association and the state in so far as its franchise, permit or license to operate is concerned; and [d] among the stockholders, partners or associates themselves.

The fact that the controversy at bar involves the rights of petitioner Union Glass who has no intra-corporate relation either with complainant or the DBP, places the suit beyond the jurisdiction of the respondent SEC. The case should be tried and decided by the court of general jurisdiction, the Regional Trial Court. This view is in accord with the rudimentary principle that administrative agencies, like the SEC, are tribunals of limited jurisdiction 6 and, as such, could wield only such powers as are specifically granted to them by their enabling statutes. 7 As We held in Sunset View Condominium Corp. vs. Campos, Jr.: 8t.hqw

Inasmuch as the private respondents are not shareholders of the petitioner condominium corporation, the instant cases for collection cannot be a 'controversy arising out of intra-corporate or partnership relations between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively,' which controversies are under the original and exclusive jurisdiction of the Securities & Exchange Commission, pursuant to Section 5 [b] of P.D. No. 902-A. ...

As heretofore pointed out, petitioner Union Glass is involved only in the first cause of action of Hofileas complaint in SEC Case No, 2035. While the Rules of Court, which applies suppletorily to proceedings before the SEC, allows the joinder of causes of action in one complaint, such procedure however is subject to the rules regarding jurisdiction, venue and joinder of parties. 9 Since petitioner has no intra-corporate relationship with the complainant, it cannot be joined as party-defendant in said case as to do so would violate the rule or jurisdiction. Hofileas complaint against petitioner for cancellation of the sale of the glass plant should therefore be brought separately before the regular court But such action, if instituted, shall be suspended to await the final outcome of SEC Case No. 2035, for the issue of the validity of the dacion en pago posed in the last mentioned case is a prejudicial question, the resolution of which is a logical antecedent of the issue involved in the action against petitioner Union Glass. Thus, Hofileas complaint against the latter can only prosper if final judgment is rendered in SEC Case No. 2035, annulling the dacion en pago executed in favor of the DBP.

WHEREFORE, the instant petition is hereby granted, and the questioned Orders of respondent SEC, dated September 25, 1981, March 25, 1982 and May 28, 1982, are hereby set aside. Respondent Commission is ordered to drop petitioner Union Glass from SEC Case No. 2035, without prejudice to the filing of a separate suit before the regular court of justice. No pronouncement as to costs.

SO ORDERED.1wph1.t

Concepcion, Jr., Guerrero, Abad Santos, De Castro, Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur.

Separate Opinions

TEEHANKEE, J., concurring:

I concur in the Court's judgment penned by Mr. Justice Escolin setting aside the questioned orders of respondent SEC and ordering that petitioner Union Glass be dropped from SEC Case No. 2035 for lack of SEC jurisdiction over it as a third party purchaser of the glass plant acquired by the DBP by dacion en pago from Pioneer Glass, without prejudice to Hofilea filing a separate suit in the regular courts of justice against Union Glass for recovery and cancellation of the said sale of the glass plant in favor of Union Glass.

I concur also with the statement in the Court's opinion that the final outcome of SEC Case No. 2035 with regard to the validity of the dacion en pago is a prejudicial case. If Hofilea's complaint against said dacion en pago fails in the SEC, then it clearly has no cause of action against Union Glass for cancellation of DBP's sale of the plant to Union Glass.

The purpose of this brief concurrence is with reference to the statement in the Court's opinion that "Thus, Hofileas complaint against the latter can only prosper if final judgment is rendered in SEC Case No. 2035, annulling the dacion en pago executed in favor of the DBP," to erase any impression that a favorable judgment secured by Hofilea in SEC Case No. 2035 against the DBP and Pioneer Glass would necessarily mean that its action against Union Glass in the regular courts of justice for recovery and cancellation of the DBP sale of the glass plant to Union Glass would necessarily prosper. It must be borne in mind that as already indicated, the SEC has no jurisdiction over Union Glass as an outsider. The suit in the regular courts of justice that Hofilea might bring against Union Glass is of course subject to all defenses as to the validity of the sale of the glass plant in its favor as a buyer in good faith and should it successfully substantiate such defenses, then Hofileas action against it for cancellation of the sale might fail as a consequence.

AQUINO, J., dissenting:

I dissent with due deference to Justice Escolin's opinion. What are belatedly assailed in this certiorari and prohibition case filed on May 17, 1983 are the order of September 25, 1981 of Eugenio E. Reyes, a SEC hearing officer, and the orders of March 25 and May 28, 1982 of Antonio R. Manabat, another SEC hearing officer.

Although a jurisdictional issue is raised and jurisdiction over the subject matter may be raised at any stage of the case, nevertheless, the petitioners are guilty of laches and nonexhaustion of the remedy of appeal with the Securities and Exchange Commission en banc.

The petitioners resorted to the special civil actions of certiorari and prohibition because they assail the orders of mere SEC hearing officers. This is not a review of the order, decision or ruling of the SEC sitting en banc which, according to section 6 of Presidential Decree No. 902-A (1976), may be made by this Court "in accordance with the pertinent provisions of the Rules of Court."

Rule 43 of the Rules of Court used to allow review by this Court of the SEC order, ruling or decision. Republic Act 5434 (1968) substituted the Court of Appeals for this Court in line with the policy of lightening our heavy jurisdictional burden. But this Court seems to have been restored as the reviewing authority by Presidential Decree No. 902-A.

However, section 9 of the Judiciary Reorganization Law returned to the Intermediate Appellate Court the exclusive jurisdiction to review the ruling, order or decision of the SEC as a quasi-judicial agency. The same section 9 granted to the Appellate Court jurisdiction in certiorari and prohibition cases over the SEC although not exclusive.t.hqw

In this case, the SEC seems to have adopted the orders of the two hearing officers as its own orders as shown by the stand taken by the Solicitor General in defending the SEC. If that were so, that is, if the orders of the hearing officers should be treated as the orders of the SEC itself en banc, this Court would have no jurisdiction over this case. It should be the Appellate Court that should exercise the power of review.

Carolina Hofilea has been a stockholder since 1958 of the Pioneer Glass Manufacturing Corporation. Her personal assets valued at P6,804,810 were apparently or supposedly mortgaged to the DBP to secure the obligations of Pioneer Glass (p. 32, Rollo).

Pioneer Glass became indebted to the Development Bank of the Philippines in the total sum of P59,000,000. Part of the loan was used by Pioneer Glass to establish its glass plant in Rosario, Cavite. The unpaid interest on the loan amounting to around seven million pesos became the DBP's equity in Pioneer Glass. The DBP became a substantial stockholder of Pioneer Glass. Three members of the Pioneer Glass' board of directors were from the DBP.

The glass plant commenced operations in 1977. At that time, Pioneer Glass was heavily indebted to the DBP. Instead of foreclosing its mortgage, DBP maneuvered to have the mortgaged assets of Pioneer Glass, including the glass plant, transferred to the DBP by way of dacion en pago. This transaction was alleged to be an "auto contract" or a case of the DBP contracting with itself since the DBP had a dominant position in Pioneer Glass.

Hofilea alleged that although the debt to the DBP of Pioneer Glass amounted to P59,000,000, the glass plant in 1977 had a "sound value" of P77,329,000 and a "reproduction cost" of P90,403,000. She further alleged that San Miguel Corporation was willing to buy the glass plant for P40,000,000 cash, whereas it was actually sold to Union Glass & Container Corporation for the same amount under a 25-year term of payment (pp. 32-34, Rollo).

On March 31, 1981; Carmen Hofilea filed with the SEC a complaint against the DBP, Union Glass, Pioneer Glass and Rafael Sison as chairman of the DBP and Pioneer Glass boards of directors. Union Glass filed a motion to dismiss on the ground that jurisdiction over the case is lodged in the Court of First Instance. Hofilea opposed the motion. Hearing Officer Reyes in his order of July 23, 1981 dismissed the complaint on the ground that the case is beyond the jurisdiction of the SEC.

Hofilea filed a motion for reconsideration which was opposed by Union Glass. Hearing Officer Reyes in his order of September 25, 1981 reconsidered his dismissal order and ruled that Union Glass is an indispensable party because it is the transferee of the controverted assets given by way of dacion en pago to the DBP. He ruled that the SEC has jurisdiction over the case.

Union Glass filed a motion for reconsideration. Hearing Officer Antonio R. Manabat denied the motion on the ground "that the present action is an intra-corporate dispute involving stockholders of the same corporation (p. 26, Rollo).

Union Glass filed a second motion for reconsideration with the prayer that the SEC should decide the motion en banc. The hearing officer ruled that the remedy of Union Glass was to file a timely appeal. Hence, its second motion for reconsideration was denied by the hearing officer. (This ruling is a technicality which hinders substantial justice.)

It is clear that Union Glass has no cause of action for certiorari and prohibition. Its recourse was to appeal to the SEC en banc the denial of its first motion for reconsideration.

There is no question that the SEC has jurisdiction over the intra-corporate dispute between Hofilea and the DBP, both stockholders of Pioneer Glass, over the dacion en pago.

Now, does the SEC lose jurisdiction because of the joinder of Union Glass which has privity with the DBP since it was the transferee of the assets involved in the dacion en pago?

Certainly, the joinder of Union Glass does not divest the SEC of jurisdiction over the case. The joinder of Union Glass is necessary because the DBP, its transfer or, is being sued regarding the dacion en pago. The defenses of Union Glass are tied up with the defenses of the DBP in the intra-corporate dispute. Hofileas cause of action should not be split.

It would not be judicious and expedient to require Hofilea to sue the DBP and Union Glass in the Regional Trial Court. The SEC is more competent than the said court to decide the intra-corporate dispute.

The SEC, as the agency enforcing Presidential Decree No. 902-A, is in the best position to know the extent of its jurisdiction. Its determination that it has jurisdiction in this case has persuasive weight.

Concepcion, Jr., Guerro, Abad Santos, De Castro, Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur.

Separate Opinions


























Fernando, C.J. and Makasiar, J., join Aquino, J., dissent.

Separate Opinions


























Fernando, C.J. and Makasiar, J., join Aquino, J., dissent.

G.R. No. L-19596 October 30, 1964

LAVERN R. DILWEG, plaintiff-appellant, vs.ROBERT O. PHILLIPS, INOCENTES DINEROS and ISAAC S. ECETA, defendants-appellees.

Antonio C. Amor, Enrique D. Tayag and Alonzo Q. Ancheta for plaintiff-appellant. Lopez-De Joya, Dimaguila, Hermoso & Divino and Melotindos and Dictado for defendants-appellees.

REYES, J.B.L., J.:

Direct appeal on pure question of law from an order rendered by the Court of First Instance of Rizal, Branch II, in its Civil Case No. 4850, dismissing plaintiff's complaint as well as from the order denying a motion to reconsider said order of dismissal.

The record disclosed that on 7 February 1958 plaintiff Lavern R. Dilweg a nonresident American, through counsel, instituted the complaint at bar consisting of six causes of action against defendants. Robert O. Phillips, Inocentes G. Dineros, and Isaac S. Esceta, claiming civil damages arising out of alleged libelous and defamatory statements uttered and published in the Philippines by the latter. On 24 February 1958 the first two named defendants presented a motion to dismiss the complaint. Plaintiff interposed an opposition thereto on 7 March 1958.

On 13 May 1958 the trial court, acting on this motion, denied the same; consequently, on 17 May 1958 the two defendants filed their joint answer with six causes of action as counterclaims for damages against the plaintiff. On 24 May 1958, plaintiff answered the defendant's counterclaims.

On 11 June 1958, defendant Isaac S. Eceta, who was represented by a different counsel, filed his answer adopting in toto as his own the answer as well as the counterclaims of his co-defendants. On 26 June 1958, plaintiff answered defendant Eceta's counterclaims.

The trial court, in its order dated 17 September 1958, scheduled the hearing of the case for 10 and 11 December, 1958.

On 8 March 1961, in the course of the trial on the merits, defendants Robert O. Phillips and Inocentes G. Dineros presented a written motion for reconsideration of the order dated 13 May 1958 denying their motion to dismiss the plaintiff's complaint. An opposition thereto was interposed by plaintiff on 7 April 1961.

On 11 May 1961 the trial court issued an order, which is the subject of the present appeal, the pertinent portion of which is as follows:

This action is one for damages by reason of alleged libelous statements uttered in the Philippines by the defendants against the plaintiff. In otherwords, it is an action based on a tort or act, which under the law of the Philippines, is defined as a criminal offense. At the time the said libelous statements were uttered, the plaintiff was in Washington D.C. where he was and has always been a resident. There is no allegation in the complaint that plaintiff has ever been in the Philippines or has resided at anytime therein.

The general rule in this jurisdiction is that a court acquires jurisdiction over the person of the plaintiff by the filing of his complaint. (Manila Railroad Co. vs. Attorney General, 20 Phil. 523). In King Mau Wu vs. Sycip, 50 O.G. page 5366, April 23, 1954 it was contended that as the plaintiff therein has never been a resident of the Philippines, the courts of this country have not acquired jurisdiction to take cognizance of his action based on a contract which was executed in the State of New York, U.S.A. The Supreme Court held that a non-resident may sue a resident in the courts of his country for the collection of money arising from a contract notwithstanding the fact that said contract was executed outside the country. In Western Equipment and Supply Co. vs. Reyes, 51 Phil. 116, it was held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, may sue in the courts of the Philippines for the purpose of restraining certain residents and inhabitants of the Philippines from organizing a corporation in this country bearing the same name as that of the plaintiff because the action involves the use of a tradename and hence, it is one in rem.

The instant case is however different because it is a personal action based on an act defined as a crime under Philippine Law. It is therefore of first impression. Defendants contend that if a counterclaim is filed against the plaintiff for damages, it cannot be enforced because the Court has not acquired jurisdiction over his person as he has never been and is not now present in this country. It may be stated in addition, that in such a case, if a judgment is rendered against him by this Court since he has no property in the Philippines, the decision cannot be enforced because the decision of a court of this country is not enforceable outside of Philippine jurisdiction.

In some European countries, it is a requirement that before a non-resident alien may file an action, he must file a bond, the so-called "Judicatum Solvi", in order to protect the interest of residents from unwarranted actions. There is no law of this kind in this jurisdiction.

As there are no doctrines in this jurisdiction covering the issue raised by the defendants, this Court is bound to rely on American doctrines for the reason that our rules on jurisdiction have been copied and patterned upon American laws and statutes. The following are some of the doctrines which have some bearing on the case, aside from those cited by the movants:

A difficulty may sometimes arise, in determining whether a particular law applies to the citizen of a foreign country, and (is) intended to subject him to its provision. But if the law applies to him, and embraces his case, it is unquestionably binding upon him when he is within the jurisdiction of the United States. (Brown vs. Duchesne, Mass. 19. How., U.S. 183, 194, 51 L. Ed. 595. (Ibid).

While the presence of the res or property within the territorial limits of the sovereignty under which the court acts may confer jurisdiction in rem on the court, in personal actions jurisdiction both of the subject matter and of the person or party whose right are to be affected are essential, and a state court can acquire no jurisdiction where neither the person nor any property of can be found within the state. (Emmanuel vs. Ferris 41 S.E. 20, 63 S.C. 104). If a court having jurisdiction of the subject matter acquires jurisdiction of the person it has the right and power to hear and determine the particular case; and unless jurisdiction of the subject matter and of the person exists it is the duty of the court to decline to do more than ascertain and declare that it has no power to examine or to decide the merits of the case ... . While a court may have general jurisdiction of the subject matter of a class of actions, it does not necessarily follow that it may hear and determine a particular case submitted for its consideration (21 C.J.S. 43-44)

In El Banco Espaol Filipino v. Palanca, 37 Phil. 921, and Perkins v. Dizon 69 Phil. 189, it has been also held that in order that the court may validly try a case, it must have jurisdiction over the subject matter and over the persons of the parties. Jurisdiction over the persons of the parties is acquired by their voluntary appearance in court and their submission to its authority, or by the coercive power of legal process exerted over their persons.

Applying the principles laid down in the above-quoted doctrines and those cited in the motion for reconsideration of the defendants, the Court has come to the conclusion that in order that the court may validly try a case, it must have jurisdiction not only over the persons of the parties and over the subject matter and that plaintiff must be a resident within the territorial jurisdiction of this Court in order that jurisdiction over his person can be acquired, otherwise the Court will not be able to render a valid judgment against him.

IN VIEW OF THE FOREGOING CONSIDERATIONS and of the fact that the question of jurisdiction, may be raised at any time, the Court hereby grants the motion for reconsideration; sets aside the former order deriving defendants' motion to dismiss and hereby dismisses this case, without costs.

SO ORDERED. (Rec. on Appeal, pp. 99-103)

On 28 June 1961, a motion to have the above-quoted order reconsidered was presented by the plaintiff and an opposition thereto was filed by the defendants on 10 July 1961. Plaintiff, in return, submitted a reply to said opposition on 22 July 1961. On 7 November 1961, the trial court, acting on said motion, denied it; hence, the present appeal.

The sole issue posed in the present appeal is whether or not our Philippine courts can rightfully refuse to assume jurisdiction over a personal action instituted by a nonresident alien who is not within the territorial jurisdiction of our courts.

In refusing to assume jurisdiction over this case, the court below upheld defendants' contention that in a personal action it can only acquire jurisdiction over the person of the plaintiff if he resides within our territorial jurisdiction. We believe and hold that the trial court is in error in this point. In fact, this Court only recently has upheld the right of non-residents to maintain personal actions against our residents in Philippine courts Sharruf v. Bubla, G.R. No. L-17029, September 30, 1964).

In an American case with facts similar to those obtaining in the case at bar, and in which the same identical issue was raised, the Court of Appeals of New York held:

There is no objection to the maintenance of the action in our courts in the fact that the plaintiff was an English subject, or that he was a non-resident. As a personal action, sounding in tort, it was transitory in its nature, following the person of the defendant. Our courts were open to the plaintiff for redress of any personal injury suffered by reason of defendant' acts Story's Conflict of Laws, Sec. 625; Wharton's Conflict of Laws, Secs. 478, 707, 743; Gardner vs. Thomas, 14 Johns, 134, 7 Am. Dec. 445; De Witt v. Buchanan 54 Barb. 31. (Crashley v. Press Pub. Co., 71 N. E. 258, 259).

This position is supported by practically unanimous American authority (3 Am. Jur. 2d, Aliens, Sec. 43, p. 895; 21 C.J.S. (Courts), sec. 75 pp. 112-113).

It is thus evident that, contrary to the conclusion reached by the court below, it is not indispensable for a foreigner to establish residence, nor need he be physically present in a state of which he is not a resident or citizen in order that he may initiate or maintain a personal action against a resident or citizen of that other state for rights of action arising in, or for violations of laws committed within, the territorial jurisdiction of that other state. In this jurisdiction, no general law has come to our knowledge or notice which restricts the right of non-resident aliens to sue in our courts. It is not disputed that plaintiff's causes of action arose in, and that the defendants are within, our territorial jurisdiction. It is conceded by both parties that the law under which the instant case falls is silent on the matter of the right of an alien to sue in our courts. On the other hand, the particular law evidently availed of by the plaintiff in filing his complaint is article 33 of the Civil Code of the Philippines, which provides:

In cases of defamation, fraud, and physical injuries, a civil action for damages entirely separate and distinct from the criminal action may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution and shall require only preponderance of evidence.

The above-quoted provision of law does not make any distinction as to whether the "injured party", who may maintain an action for damages based on defamation, is a Filipino citizen or a resident or an alien.

The American decisions cited in the order of 11 May 1961 are not applicable to the case at bar because there the defendants invoked the issue of lack of jurisdiction over their own persons and not against the person of the plaintiff.

The fact that there are counterclaims against the non-resident plaintiff does not alter the case. The Rules of Court provide for remedies against nonresident defendants.

WHEREFORE, the order appealed from is set aside, and the case is ordered remanded to the court below for further proceedings consonant with this opinion. Costs against respondents Phillips, Dineros and Eceta.

G.R. No. L-12902, Marcelo v. De Leon, 105 Phil. 1175, 56 Off. Gaz. [No. 37] 5738Republic of the PhilippinesSUPREME COURTManila

EN BANC

July 29, 1959

G.R. No. L-12902CEFERINO MARCELO, plaintiff-appellant, vs.NAZARIO DE LEON, defendant-appellee.

Pedro D. Maldia and San Vicente and Jardiel for appellant.Inciong and Bacalso for appellee.

BENGZON, J.:

The plaintiff has appealed from the order of judge Jose N. Leuterio of the Nueva Ecija court of first instance, dismissing his complaint whereby he had asked that defendant be required to vacate a parcel of land and to pay damages. The dismissal rested on two grounds, (a) the case pertained to the Court of Agrarian Relations; and (b) as attorney-in-fact of the true owner of the land, the plaintiff had no right to bring the action.

The record disclose that on February 4, 1957, Ceferino Marcelo, filed in the justice of the peace court of San Antonio, Nueva Ecija, a complaint to recover possession of a lot of 2,000 square meters belonging to Severino P. Marcelo (who had given him a full power-of-attorney) which was held by defendant "on the understanding that one-half of all the products raised in the occupied area, would be given" to the landowner. The complaint alleged that after plaintiff had assumed the administration of Severino Marcelo's properties, defendant delivered the products corresponding to the owner; but when in September 1956, plaintiff notified defendant that in addition to giving half of the produce, he would have to pay a rental of two pesos per month, the latter refused, and continued refusing to pay such additional charges. Wherefore, complainant prayed for judgment ordering defendant to leave the premises and to pay damages and costs.

The defendant questioned the court's jurisdiction, arguing that the matter involved tenancy relations falling within the authority of the Agrarian Court; he also challenged the capacity of plaintiff to sue. He lost in the justice of the peace court; however, on appeal to the court of first instance, he raised the same issues on a motion to dismiss, and then his views prevailed.

In this appeal, plaintiff insists he merely filed ejectment or detainer proceedings, which fall within the justice of the peace court's jurisdiction. He claims the lot to be residential, and not agricultural. On this point, His Honor noted that "the land covered by the title of plaintiff's principal covers an area of 59,646 square meters situated in the barrio of San Mariano, San Antonio, Nueva Ecija. This land obviously is agricultural, and it is too much to presume that barrio folks would occupy an area of 2,000 square meters more or less of land for a residence. The cultivation of the land by the defendant and the sharing of the products thereof with the owner of the land characterize the relationship between the defendant and the plaintiff's principal as one of the landlord and tenant.

Indeed, from the allegations of the complaint, one could conclude that defendant had physical possession of the land for the purpose of cultivating it and giving the owner a share in the crop. This was agricultural tenancy of the kind called "share tenancy". In judging this relationship, the 2-pesos-a-month-rental alleged in the complaint may be disregarded, because defendant never having agreed to such imposition, it may not be held a part of the compensation payable for holding the land. The circumstance that defendant built a dwelling on the agricultural lot does not ipso facto make it residential considering specially that the dwelling photograph submitted with brief does not occupy more than 80 square meters occupied by him. In this connection, plaintiff argues as follows:

The defendant does not till or cultivate the land in order to grow the fruit bearing trees because they are already full grown. He does not even do the actual gathering, and after deducting the expenses, he gives one-half of the fruits to the plaintiff all in consideration of his stay in the land. He is not, therefore, a tenant within the meaning of that term as used in Republic Act. No. 1199 for "A tenant shall mean a person who, himself and with the aid available from within his immediate farm household, cultivate the land for purposes of production . . ."

Anyone who had fruit trees in his yard, will disagree with the above description of the relationship. He knows the caretaker must water the trees, even fertilize them for better production, uproot weeds and turn the soil, sometimes fumigate to eliminate plants pests, etc. Those chores obviously mean "working or cultivating" the land. Besides, it seems that defendant planted other crops, (i.e. cultivated the lot) giving the landowner his corresponding share.

Now, the statutes provide that "All cases involving dispossession of a tenant by the landholder . . . shall be under the original and exclusive jurisdiction of such court as may now or hereafter be authorized by law to take cognizance of tenancy relations and disputes". Sec. 2, Republic Act 1199); and the court (Agrarian Relations) "shall have original and exclusive jurisdiction to consider, investigate, decide and settle all questions and matters involving all those relationships established by law which determine the varying rights of persons in cultivation and use of agricultural land where one of the parties works the land". (Sec. 7, Republic Act 1267 as amended by Republic Act 1409.)

In Tumbagan vs. Vasquez, L-8719, July 17, 1956, we impliedly held that where a farmland occupies agricultural land and erects a house thereon, the tenancy relationship continues subject to tenancy laws not to those governing leases.

In fact, the Agricultural Tenancy Law (Republic Act 1199) requires the landholder to give his tenant an area wherein the latter may construct his dwelling (sec. 26), of course without thereby changing the nature of their relationship, from landowner and tenant to lessor and lessee.

At any rate, this action must fail upon the second ground of defendant's motion to dismiss: the plaintiff is a mere apoderado of the owner, Severino P. Marcelo.[[1]] The rule is that every action must be prosecuted in the name of the real party in interest, (sec 2, Rule 3).

However, plaintiff quotes that part of sec. 1 of Rule 72, permitting "the legal representative" of any landlord to bring an action of ejectment, and insists in his right now to litigate. Supposing that "legal representative" as used in sec. 1, includes attorneys-in-fact, we find that plaintiff's power attached to the complaint, authorizes him to sue for and in the name of Severino Marcelo, to "pursue any and all kinds of suits and actions for me and in my name in the courts of the land". This action is not in the name of plaintiff's principal.

For all the foregoing, the appealed order is affirmed with costs chargeable against appellant.

Paras, C.J., Padilla, Montemayor, Bautista Angelo, Concepcion, Endencia and Barrera, JJ., concur.

G.R. No. L-31061August 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.

Footnotes1Civil 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.

2Evangelista v. Santos, 86 Phil. 387.

3Record on Appeal, pp. 101-103.

4I 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.

5Stockholder 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.)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.

[G.R. No. L-7020. June 30, 1954.]

ALICIA GO, ET AL., Plaintiffs-Appellees, v. ALBERTO GO, ET AL., Defendants-Appellants.

Enrique V. Filamor and Nicolas Belmonte for Appellants.

Emmanuel T. Jacinto for Appellees.

SYLLABUS

1. PLEADING AND PRACTICE; JOINDER OF PARTIES, APPLICABLE TO BOTH COMPLAINT AND COUNTERCLAIM. The rule permitting the joinder of parties applies with equal force to a counterclaim in view of the similarity of rules applicable to both complaint and counterclaim.

2. ID.; COUNTERCLAIMS; TEST TO DETERMINE JURISDICTION OF JUSTICE OF THE PEACE COURT. If the claim is composed of several accounts each distinct from the other or arising from different transactions, they may joined in a single action even if the total exceeds the jurisdiction of the justices of the peace court. Each account furnishes the test. But if the claim is composed of several accounts which arise out of the same transaction and can not be divided, the same should be stated in one cause of action and van not be divided for the purpose of bringing the case within the jurisdiction of the justice of the peace court.

3. ID.; ID.; CLAIM COMPOSED OF SEVERAL ACCOUNTING EACH DISTINCT FROM THE OTHER CAN NOT BE JOINED IN ONE SINGLE CLAIM. Where the first claim refers to the recovery of an amount arising from the alleged unlawful taking by the plaintiffs of certain furniture and equipment belonging to the defendants, while the second and third causes of action arose, not from the illegal taking of the property, but from the alleged unlawful institution by the plaintiffs of the action of ejectment in the Municipal Court, the claims can not be joined in one single claim because they arise from different sets of facts.

4. ID.; ID.; COMPULSORY COUNTERCLAIM TO BE SET UP REGARDLESS OF AMOUNT CLAIMED BARRED IF NOT SET UP. If a counterclaim arises from, or is necessarily connected with, the facts alleged in the complaint, then that counterclaim should be set up regardless of its amount. Failure to do so would render it barred under the rules.

5. ID.; ID.; ID.; COMPULSORY COUNTERCLAIM SET UP, COGNIZABLE BY COURT OF FIRST INSTANCE. The second and third claims of defendant being compulsory, and the respective amounts, considered separately, are within the jurisdiction of the municipal court, the Court of First Instance can act on them in the exercise of its appellate jurisdiction.

D E C I S I O N

BAUTISTA ANGELO, J.:

On December 18, 1951, plaintiffs brought an action in the Municipal Court of Manila to recover from defendants the possession of a house situated at 921 Dagupan St., Manila, and the sum of P2,000 as damages and P200.00 as attorneys fees.

Defendants in their answer set up several special defenses and a counterclaim. The counterclaim was divided into three causes of action as follows: the first is for P2,000 representing the value of certain furniture and equipment belonging to defendants and which are claimed to have been taken away by plaintiffs from the house in litigation; the second is for P1,000 representing expenses incurred by defendants arising from the falsity of the facts alleged in the complaint; and the third is for P500 as attorneys fees arising from the institution of the present action.

The court found for the plaintiffs, after due hearing, ordering defendants to vacate the house in litigation and to pay the costs, but denied the claim for damages both of plaintiffs and defendants on the ground that their amounts are beyond its jurisdiction. The defendants, in due time, perfected their appeal to the Court of First Instance, and after the latter had filed their answer as required by the rules, plaintiffs filed an amended complaint wherein they reiterated their original allegations with some slight modifications. To his amended complaint, defendants filed an amended answer reiterating the counterclaim they had alleged in their original answer which, as previously stated, has been divided into three causes of action involving an aggregat

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