6. MARTINEZ vs CA Topic: D. 1. What is a corporation corporation and what what is is the role of the state in its creation? creation? Nature: petition for review on certiorari of the decision of the court of appeals Facts: •
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PERSONALITIES BPI International Finance (respondent) - a foreign foreig n deposit-taking company organized o under the laws of HongKong. CCL (Cintas Largas, Ltd)- also a foreign corporation with a paid-up capital of HK$10,000. o Its shareholders were mainly nominee shareholders in HK but it was also equally owned by Wilfredo Martinez and Miguel Lacson, Ramon Siy, and Ricardo Lopa. It’s business was mainly the importation of molasses from the Philippines and selling it in the international market. It imported the molasses from Mar Tierra Corporation. Mar Tierra Corporation- Its President was Wilfredo Martinez and Executive VP was o Blamar Gonzales. Gonzales. o RJL Fishing Corp- owned 42% of the stocks of Mar Tierra. One of its majority stockholders is Ruben Martinez, father of Wilfredo Martinez. Martinez. The busines business s operation operations s of CLL and and Mar Mar Tierra Tierra were were run by by Wilfredo Wilfredo Martinez Martinez and and Gonzale Gonzales. s. 68% of Ruben Martinez’s assets were in RJL.
BPI International Finance (respondent) granted CLL a letter of credit for US$3,000,000. In January 1979 and March 1980, CLL opened a money market placement with the respondent bearing MMP No. 063 with an initial placement of US$390,000, and MMP No. 084 with an initial placement of US$68,768, transferred from MMP No. 063. Wilfredo Martinez was the authorized signatory in both accounts but the two signature cards also bore Ruben Martinez, and Miguel Lacson’s signatures. The three of them became the joint account holders of o f the said money market placements. At times, the funds in these MMPs were transferred to CLL’s deposit account and vice versa. To resolve this, Wilfredo Matrinez and the respondent executed a back-to-back credit facility. Wilfredo Martinez, aand the other owners of CLL executed a suretyship agreement where they obliged themselves solidarily with CLL in order to pay for CLL’s credit facility. The CLL deposit account, MMP 063, and MMP 084 had subsisting balances. Blamar Gonzales requested the respondent to transfer US$340,000 to an account registered to Mar Tierra as payee. The respondent confirmed that t hat US$340,000 was the account available considering the CLL deposit account and money market placements. Months later Wilfredo Martinez also made the same request for the transfer. The respondent complied but instead of deducting the funds from either of the three accounts mentioned, it posted the US$340,000 as account receivable of CLL since the money market placements hadn’t matured yet. When these have matured, they just allowed Wilfredo to make withdrawals and did not collect the US$340,000 so it failed to secure its reimbursement. Later problems came up regarding these three accounts and the respondent pressured Wilfredo and Blamar Gonzales to pay the US$340,000. US$ 340,000. Wilfredo and Martinez had CLL’s account audited and it was confirmed that the corporation owed the respondent this amount. Despite the respondent’s r espondent’s demands, Wilfredo, Gonzales, Lacson and ruben Martinez did not make any remittance. Ruben Martinez even denied having knowledge of such liability. The respondent then filed a suit to recover the sum stating that the CLL was merely a paper company or an alter ego of Wilfredo and Ruben. The RTC and CA ruled in its favor. Issue: WON the liability incurred by CLL can be attributed to Ruben Martinez because CLL is i s merely their alter ego Held: NO. Rationale: The general general rule is that that a corpora corporation tion is clothed clothed with a personali personality ty separa separate te and and distinct distinct from the the persons composing it—this separate and distinct personality of a corporation is a fiction created by law for convenience and to prevent injustice. Such corporation cannot be liable for the obligations of the persons composing it and vice versa. There are valid grounds though to pierce this veil of corporate entity. The test to determine whether this can be done is as follows:
1. Control, and not mere majority stock control, of policy and business practice in respect to the transaction attacked. 2. Such control control must must have been used used by the the defendant defendant to commit commit fraud fraud or wrong. wrong. 3. The said control control and breach breach of duty must proximate proximately ly cause injury injury or unjust unjust loss complained complained of. The absenc absence e of any one one of these three elements elements prevents prevents the the “piercin “piercing g of the corporat corporate e veil”. veil”. In In this case, the respondent failed to prove complete control by the petitioners. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stocks of a corporation is not by itself a sufficient ground separate corporate personality. The mere fact that the majority stockholder of Mar Tierra is RJL and that Ruben Martinez owned about 42% of the capital stocks of RJL do not constitute sufficient evidence that the latter corporation, had complete control of Mar Tierra. They also failed to prove that Mar Tierra and RJL were organized as an instrument of Wilfredo Martinez and Blamar Gonzales.mthere is also no evidence that the petitioner had any involvement in the transaction between Wilfredo and the respondent.
