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RepublicofthePhilippines
SUPREMECOURT
Manila

SECONDDIVISION

G.R.No.L31061August17,1976

SULONGBAYANINC.,plaintiffappellant,
vs.
GREGORIOARANETA,INC.,PARADISEFARMS,INC.,NATIONALWATERWORKS&SEWERAGE
AUTHORITY,HACIENDACARETAS,INC,andREGISTEROFDEEDSOFBULACAN,defendantsappellees.

Hill&AssociatesLawOfficesforappellant.

Araneta,Mendoza&PapaforappelleeGregorioAraneta,Inc.

Carlos,Madarang,Carballo&ValdezforParadiseFarms,Inc.

LeopoldoM.Abellera,ArsenioJ.Magpale&RaulG.Bernardo,OfficeoftheGovernmentCorporateCounselfor
appelleeNationalWaterworks&SewerageAuthority.

CandidoG.delRosarioforappelleeHaciendaCaretas,Inc.

ANTONIO,J.:

Theissueposedinthisappealiswhetherornotplaintiffcorporation(nonstockmayinstituteanactioninbehalf
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
parcelsoflandforadeclarationof"plaintiff'smembersasabsoluteownersoftheproperty"andtheissuanceof
thecorrespondingcertificateoftitleandfordamages.

OnApril26,1966,plaintiffappellantSulongBayan,Inc.filedanaccionderevindicacion with the Court of First

Instance of Bulacan, Fifth Judicial District, Valenzuela, Bulacan, against defendantsappellees 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'predecessorsininterest. 1Thecomplaint,asamendedonJune13,1966,specificallyallegedthatplaintiffis
acorporationorganizedandexistingunderthelawsofthePhilippines,withitsprincipalofficeandplaceofbusinessatSan
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 predecessorsininterest, had pioneered in the
clearingoftheforementionedtractofland,cultivatedthesamesincetheSpanishregimeandcontinuouslypossessedthe
said property openly and public under concept of ownership adverse against the whole world that defendantappellee
Gregorio Araneta, Inc., sometime in the year 1958, through force and intimidation, ejected the members of the plaintiff
corporationfrotheirpossessionoftheaforementionedvasttractoflandthatuponinvestigationconductedbythemembers
and officers of plaintiff corporation, they found out for the first time in the year 1961 that the land in question "had been
eitherfraudelentlyorerroneouslyincluded,bydirectorconstructivefraud,inOriginalCertificateofTitleNo.466oftheLand
of Records of the province of Bulacan", issued on May 11, 1916, which title is fictitious, nonexistent and devoid of legal
efficacyduetothefactthat"nooriginalsurveynorplanwhatsoever"appearstohavebeensubmittedasabasisthereofand
thattheCourtofFirstInstanceofBulacanwhichissuedthedecreeofregistrationdidnotacquirejurisdictionovertheland
registrationcasebecausenonoticeofsuchproceedingwasgiventothemembersoftheplaintiffcorporationwhowerethen
inactualpossessionofsaidpropertiesthatasaconsequenceofthenullityoftheoriginaltitle,allsubsequenttitlesderived
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
nameofParadiseFarms,Inc.,arethereforevoid.Plaintiffappellantconsequentlyprayed(1)thatOriginalCertificateofTitle
No.466,aswellasalltransfercertificatesoftitleissuedandderivedtherefrom,benullified(2)that"plaintiff'smembers"be
declaredasabsoluteownersincommonofsaidpropertyandthatthecorrespondingcertificateoftitlebeissuedtoplaintiff
and(3)thatdefendantappelleeGregorioAraneta,Inc.beorderedtopaytoplaintiffthedamagesthereinspecified.

On September 2, 1966, defendantappellee Gregorio Araneta, Inc. filed a motion to dismiss the amended
complaintonthegroundsthat(1)thecomplaintstatesnocauseofactionand(2)thecauseofaction,ifany,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
plaintiffappellantandthebarringofsuchactionbyprescriptionandlaches.

During the pendency of the motion to dismiss, plaintiffappellant filed a motion, dated October 7, 1966, praying
thatthecasebetransferredtoanotherbranchoftheCourtofFirstInstancesittingatMalolos,Bulacan,According
todefendantsappellees,theywerenotfurnishedacopyofsaidmotion,hence,onOctober14,1966,thelower
courtissuedanOrderrequiringplaintiffappellanttofurnishtheappelleescopyofsaidmotion,hence,onOctober
14,1966,defendantappellant'smotiondatedOctober7,1966and,consequently,prayedthatthesaidmotionbe
denied for lack of notice and for failure of the plaintiffappellant to comply with the Order of October 14, 1966.
Similarly, defendantappellee paradise Farms, Inc. filed, on December 2, 1966, a manifestation information the
courtthatitalsodidnotreceiveacopyoftheaforementionedofappellant.OnJanuary24,1967,thetrialcourt
issuedanOrderdismissingtheamendedcomplaint.

OnFebruary14,1967,appellantfiledamotiontoreconsidertheOrderofdismissalonthegroundsthatthecourt
had no jurisdiction to issue the Order of dismissal, because its request for the transfer of the case from the
ValenzuelaBranchoftheCourtofFirstInstancetotheMalolosBranchofthesaidcourthasbeenapprovedby
theDepartmentofJusticethatthecomplaintstatesasufficientcauseofactionbecausethesubjectmatterofthe
controversyinoneofcommoninteresttothemembersofthecorporationwhoaresonumerousthatthepresent
complaintshouldbetreatedasaclasssuitandthattheactionisnotbarredbythestatuteoflimitationsbecause
(a)anactionforthereconveyanceofpropertyregisteredthroughfrauddoesnotprescribe,and(b)anactionto
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 aforementioned Order of dismissal and the Order denying its motion for
reconsideration,plaintiffappellantappealedtotheCourtofAppeals.

OnSeptember3,1969,theCourtofAppeals,uponfindingthatnoquestionoffactwasinvolvedintheappealbut
onlyquestionsoflawandjurisdiction,certifiedthiscasetothisCourtforresolutionofthelegalissuesinvolvedin
thecontroversy.

Appellant contends, as a first assignment of error, that the trial court acted without authority and jurisdiction in
dismissingtheamendedcomplaintwhentheSecretaryofJusticehadalreadyapprovedthetransferofthecaseto
anyoneofthetwobranchesoftheCourtofFirstInstanceofMalolos,Bulacan.

Appellantconfusesthejurisdictionofacourtandthevenueofcaseswiththeassignmentofcasesinthedifferent
branchesofthesameCourtofFirstInstance.Jurisdictionimpliesthepowerofthecourttodecideacase,while
venuetheplaceofaction.Thereisnoquestionthatrespondentcourthasjurisdictionoverthecase.Thevenueof
actionsintheCourtofFirstInstanceisprescribedinSection2,Rule4oftheRevisedRulesofCourt.Thelaying
ofvenueisnotlefttothecapriceofplaintiff,butmustbeinaccordancewiththeaforesaidprovisionoftherules.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
changethevenueoftheaction.Ascorrectlyobservedbythetrialcourt,theindorsementoftheUndersecretaryofJustice
didnotorderthetransferofthecasetotheMalolosBranchoftheBulacanCourtofFirstInstance,butonly"authorized"it
forthereasongivenbyplaintiff'scounselthatthetransferwouldbeconvenientfortheparties.Thetrialcourtisnotwithout
powertoeithergrantordenythemotion,especiallyinthelightofastrongoppositiontheretofiledbythedefendant.Wehold
thatthecourtaquoactedwithinitsauthorityindenyingthemotionforthetransferthecasetoMalolosnotwithstandingthe
authorization"ofthesamebytheSecretaryofJustice.

II

LetusnowconsiderthesubstantiveaspectoftheOrderofdismissal.

Indismissingtheamendedcomplaint,thecourtaquosaid:

Theissueoflackofcauseofactionraisedinthemotionstodismissrefertothelackofpersonalityof
plaintifftofiletheinstantaction.Essentially,theterm'causeofaction'iscomposedoftwoelements:
(1)therightoftheplaintiffand(2)theviolationofsuchrightbythedefendant.(Moran,Vol.1,p.111).
Forthesereasons,therulesrequirethateveryactionmustbeprosecutedanddefendedinthename
oftherealpartyininterestandthatallpersonshavinganinterestinthesubjectoftheactionandin
obtainingthereliefdemandedshallbejoinedasplaintiffs(Sec.2,Rule3).Intheamendedcomplaint,
thepeoplewhoserightswereallegedtohavebeenviolatedbybeingdeprivedanddispossessedof
 theirlandarethemembersofthecorporationandnotthecorporationitself.Thecorporationhasa
separate.anddistinctpersonalityfromitsmembers,andthisisnotameretechnicalitybutamatterof
substantive law. There is no allegation that the members have assigned their rights to the
corporationoranyshowingthatthecorporationhasinanywayormannersucceededtosuchrights.
Thecorporationevidentlydidnothaveanyrightsviolatedbythedefendantsforwhichitcouldseek
redress. Even if the Court should find against the defendants, therefore, the plaintiff corporation
wouldnotbeentitledtothereliefsprayedfor,whicharerecoveriesofownershipandpossessionof
theland,issuanceofthecorrespondingtitleinitsname,andpaymentofdamages.Neithercansuch
reliefsbeawardedtothemembersallegedlydeprivedoftheirland,sincetheyarenotpartiestothe
suit.Itappearingclearlythattheactionhasnotbeenfiledinthenamesoftherealpartiesininterest,
thecomplaintmustbedismissedonthegroundoflackofcauseofaction.3

Viewedinthelightofexistinglawandjurisprudence,Wefindthatthetrialcourtcorrectlydismissedtheamended
complaint.

Itisadoctrinewellestablishedandobtainsbothatlawandinequitythatacorporationisadistinctlegalentityto
be considered as separate and apart from the individual stockholders or members who compose it, and is not
affectedbythepersonalrights,obligationsandtransactionsofitsstockholdersormembers. 4 The property of the
corporation is its property and not that of the stockholders, as owners, although they have equities in it. Properties
registeredinthenameofthecorporationareownedbyitasanentityseparateanddistinctfromitsmembers. 5Conversely,
a corporation ordinarily has no interest in the individual property of its stockholders unless transferred to the corporation,
"even in the case of a oneman corporation. 6 The mere fact that one is president of a corporation does not render the
propertywhichheownsorpossessesthepropertyofthecorporation,sincethepresident,asindividual,andthecorporation
are separate similarities. 7 Similarly, stockholders in a corporation engaged in buying and dealing in real estate whose
certificatesofstockentitledtheholderthereoftoanallotmentinthedistributionofthelandofthecorporationuponsurrender
oftheirstockcertificateswereconsiderednottohavesuchlegalorequitabletitleorinterestintheland,aswouldsupporta
suitfortitle,especiallyagainstpartiesotherthanthecorporation.8

It must be noted, however, that the juridical personality of the corporation, as separate and distinct from the
personscomposingit,isbutalegalfictionintroducedforthepurposeofconvenienceandtosubservetheendsof
justice.9Thisseparatepersonalityofthecorporationmaybedisregarded,ortheveilofcorporatefictionpierced,incases
whereitisusedasacloakorcoverforfraudorillegality,ortoworkaninjustice,orwherenecessarytoachieveequity.10

Thus,when"thenotionoflegalentityisusedtodefeatpublicconvenience,justifywrong,protectfraud,ordefend
crime, ... the law will regard the corporation as an association of persons, or in the case of two corporations,
mergethemintoone,theonebeingmerelyregardedaspartorinstrumentalityoftheother. 11 The same is true
whereacorporationisadummyandservesnobusinesspurposeandisintendedonlyasablind,oranalteregoorbusiness
conduit for the sole benefit of the stockholders. 12 This doctrine of disregarding the distinct personality of the corporation
hasbeenappliedbythecourtsinthosecaseswhenthecorporateentityisusedfortheevasionoftaxes 13orwhentheveil
of corporate fiction is used to confuse legitimate issue of employeremployee 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
measureprotectionforthirdpartiestopreventfraud,illegalityorinjustice.16

It has not been claimed that the members have assigned or transferred whatever rights they may have on the
landinquestiontotheplaintiffcorporation.Absentanyshowingofinterest,therefore,acorporation,likeplaintiff
appellant herein, has no personality to bring an action for and in behalf of its stockholders or members for the
purposeofrecoveringpropertywhichbelongstosaidstockholdersormembersintheirpersonalcapacities.

Itisfundamentalthattherecannotbeacauseofaction'withoutanantecedentprimarylegalrightconferred'by
law upon a person. 17 Evidently, there can be no wrong without a corresponding right, and no breach of duty by one
personwithoutacorrespondingrightbelongingtosomeotherperson. 18Thus,theessentialelementsofacauseofaction
arelegalrightoftheplaintiff,correlativeobligationofthedefendant,anactoromissionofthedefendantinviolationofthe
aforesaidlegalright. 19Clearly,norightofactionexistsinfavorofplaintiffcorporation,forasshownheretoforeitdoesnot
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
partyininterest.

III

Appellantmaintains,however,thattheamendedcomplaintmaybetreatedasaclasssuit,pursuanttoSection12
ofRule3oftheRevisedRulesofCourt.

Inorderthataclasssuitmayprosper,thefollowingrequisitesmustbepresent:(1)thatthesubjectmatterofthe
controversyisoneofcommonorgeneralinteresttomanypersonsand(2)thatthepartiesaresonumerousthat
itisimpracticabletobringthemallbeforethecourt.20

Underthefirstrequisite,thepersonwhosuesmusthaveaninterestinthecontroversy,commonwiththosefor
whom he sues, and there must be that unity of interest between him and all such other persons which would
entitlethemtomaintaintheactionifsuitwasbroughtbythemjointly.21

Astowhatconstitutescommoninterestinthesubjectmatterofthecontroversy,ithasbeenexplainedinScottv.
Donald22thus:

Theinterestthatwillallowpartiestojoininabillofcomplaint,orthatwillenablethecourttodispense
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
interestgrowingoutofthenatureandconditionoftherightindisputefor,althoughtheremaynotbe
anyprivitybetweenthenumerousparties,thereisacommontitle out of which the question arises,
andwhichliesatthefoundationoftheproceedings...[here]theonlymatterincommonamongthe
plaintiffs, or between them and the defendants, is an interest in the Question involved which alone
cannotlayafoundationforthejoinderofparties.Thereisscarcelyasuitatlaw,orinequitywhich
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,thereisonlyonepartyplaintiff,andtheplaintiffcorporationdoesnotevenhaveaninterestinthesubject
matterofthecontroversy,andcannot,therefore,representitsmembersorstockholderswhoclaimtoownintheir
individualcapacitiesownershipofthesaidproperty.Moreover,ascorrectlystatedbytheappellees,aclasssuit
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
portionoftheland,sothattheycannotallbeheldtohaveIdenticaltitlethroughacquisitionprescription.23

Havingshownthatnocauseofactioninfavoroftheplaintiffexistsandthattheactioninthelowercourtcannotbe
consideredasaclasssuit,itwouldbeunnecessaryandanIdleexerciseforthisCourttoresolvetheremaining
issueofwhetherornottheplaintiffsactionforreconveyanceofrealpropertybaseduponconstructiveorimplied
trusthadalreadyprescribed.

ACCORDINGLY,theinstantappealisherebyDISMISSEDwithcostsagainsttheplaintiffappellant.

Fernando,C.J.,Barredo,AquinoandConcepcion,Jr.,JJ.,concur.

Footnotes

1CivilCaseNo.233V,entitledSulongBayan,Inc.,Plaintiff,versusGregorioAraneta,Inc.,Paradise
Farms,Inc.,NationalWaterworks&SewerageAuthority(NWSA)HaciendaCaretas,Inc.,and
RegisterofDeedsofBulacan,Defendants.

2Evangelistav.Santos,86Phil.387.

3RecordonAppeal,pp.101103.

4IFletcherCyclopediaCorporations,1974Ed.,sec.25,pp.99100Borjav.Vasquez,74Phil.560,
566567'VillaReyTransit,Inc.v.Ferrer,25SCRA845,857.

5StockholderofF.GuanzonandSons,Inc.v.RegisterofDeedsofManila,6SCRA373.Ashareof
stockonlytypifiesanaliquotpartofthecorporation'sproperty,ortherighttoshareinitsproceedsto
thatextentwhendistributedaccordingtolawandequity(Hall&Faleyv.AlabamaTerminal,173Ala.,
398,56So.,235),butitsholderisnottheownerofanydefiniteportionofitspropertyorassets
(Gottfriedv.Miller,104U.S.,521Jonesv.Davis35OhioSt.474).Thestockholderisnotacoowner
ortenantincommonofthecorporateproperty(Hartonv.Hohnston,166Ala.,317,51So.,992).
(Ibid.,pp.375376.)

6IFletcher,supra,pp.132133.

7Recchiov.Manufacturers&TradersTrustCo.,55Mis.2d.788,286,NYS2d.390.

8Bylerleyv.Camey,161SW2d.1105.

9LagunaTrans.Co.,Inc.v.SocialSecuritySystem,107Phil.833,837.
 10IFletcher,supra,sec.41,p.16618Am.Jur.2d.561.

11Yutivo&SonsHardwareCo.v.CourtofTaxAppeals,1SCRA160,citingKoppel(Phil.)Inc.v.
Yatco,77Phil.497IFletcher,supra,pp.135136.

12McConnelv.CourtofAppeals,1SCRA722NAMARCOv.AssociatedFinanceCo.,Inc.,19SCRA
962.Thedoctrineofalteregoisbaseduponthemisuseofacorporationbyanindividualforwrongful
orinequitablepurposes,andinsuchcasethecourtmerelydisregardsthecorporateentityandholds
theindividualresponsibleforactsknowinglyandintentionallydoneinthenameofthecorporation."
(Ivyv.Plyler,246Cal.App.2d.678,54Cal.Reptr.894.)Thedoctrineofalteregoimposesuponthe
individualwhousesacorporationmerelyasaninstrumentalitytoconducthisownbusinessliabilityas
aconsequenceoffraudorinjusticeperpetuatednotonthecorporation,butonthirdpersonsdealing
withthecorporation.

13CommissionerofInternalRevenuev.Norton&HarisonCo.,11SCRA714.

14R.F.Sugay&Co.,Inc.v.Reyes,12SCRA700,705.

15RamirezTelephoneCorporationv.BankofAmerica,29SCRA191.

16GregorioAraneta,Inc.v.DePaternoandVidal,91Phil.78618Am.Jur.2d.561,562.

17Rowev.Richards,151N.W.1001.

18Mckeev.Dodd,152Cal.637,93P.854Hartiganv.CasualtyCo.,167NYS645Hydev.
Minnesota,136N.W.92l1Am.Jur.2d.590.

19MaaoSugarCentralCo.v.Barrios,79Phil.666Caseasv.Rosales,19SCRA462Remiterev.
Vda.DeYulo,16SCRA251,256.

20Sec.12,Rule3,RevisedRulesofCourt.

21IMartin,RulesofCourt,1972Ed.,p.220,citingCertiav.NotreDameDuLacUniv.,82Ind.A.A.
542N.E.318.

22165U.S.107,41Law.Ed.447,52S.Ct.217.

23Bersesv.Villanueva,25Phil.471Rallonzav.Evangilista,15Phil.531Statev.LakeCircuitCourt,
145N.E.2d.15.

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