6.

MARTINEZ vs CA
Topic: D. 1. What is a corporation and what is the role
of the state in its creation?Nature: petition for review on ce
rtiorari of the decision of the court of appealsFacts:
•
PERSONALITIES
o
BPI International Finance (respondent) - a foreign deposit-
taking company organizedunder the laws of HongKong.
o
CCL (Cintas Largas, Ltd)- also a foreign corporation with a pa
id-up capital of HK$10,000.Its shareholders were mainly
nominee shareholders
in HK but it was also equally
owned by

Wilfredo Martinez and Miguel Lacson,

Ramon Siy, and Ricardo Lopa. It’sbusiness was mainly the i
mportation of molasses from the Philippines and selling it in
theinternational market. It imported the molasses from Mar
Tierra Corporation.
o
Mar Tierra Corporation- Its President was
Wilfredo Martinez
and Executive VP was
Blamar Gonzales
.
o
RJL Fishing Corp- owned 42% of the stocks of Mar Tierra. O
ne of its majority stockholdersis
Ruben Martinez, father of Wilfredo Martinez
.
•
The business operations of CLL and Mar Tierra were r
un by Wilfredo Martinez and Gonzales.
•
68% of Ruben Martinez’s assets were in RJL.

BPI International Finance (respondent) granted CLL a letter o

f credit for US$3,000,000. In January1979 and March 1980,
CLL opened a money market placement with the respondent
bearing MMP No.063 with an initial placement of US$390,0
00, and MMP No. 084 with an initial placement of US$68,76
8,transferred from MMP No. 063. Wilfredo Martinez was the
authorized signatory in both accounts but thetwo signature c
ards also bore Ruben Martinez, and Miguel Lacson’s signatu
res. The three of thembecame the joint account holders of th
e said money market placements.At times, the funds in thes
e MMPs were transferred to CLL’s deposit account and vice v
ersa. Toresolve this, Wilfredo Matrinez and the respondent ex
ecuted a back-to-
back credit facility. WilfredoMartinez, aand the other owners
of CLL executed a suretyship agreement where they obligedt
hemselves solidarily with CLL in order to pay for CLL’s credit
facility. The CLL deposit account, MMP063, and MMP 084 h
ad subsisting balances. Blamar Gonzales requested the resp
ondent to transferUS$340,000 to an account registered to M
ar Tierra as payee. The respondent confirmed thatUS$340,0
00 was the account available considering the CLL deposit ac
count and money marketplacements. Months later Wilfredo
Martinez also made the same request for the transfer. Theres
pondent complied but instead of deducting the funds from ei
ther of the three accounts mentioned, itposted the US$340,0
00 as account receivable of CLL since the money market plac
ements hadn’tmatured yet. When these have matured, they j
ust allowed Wilfredo to make withdrawals and did notcollect
the US$340,000 so it failed to secure its reimbursement.Late
r problems came up regarding these three accounts and the
respondent pressured Wilfredoand Blamar Gonzales to pay t
he US$340,000. Wilfredo and Martinez had CLL’s account a
udited and itwas confirmed that the corporation owed the re
spondent this amount. Despite the respondent’sdemands, W
ilfredo, Gonzales, Lacson and ruben Martinez did not make a
ny remittance. Ruben Martinezeven denied having knowledg
e of such liability. The respondent then filed a suit to recover
the sumstating that the CLL was merely a paper company or
an alter ego of Wilfredo and Ruben. The RTC andCA ruled in
its favor.

Issue:WON the liability incurred by CLL can be attributed to

Ruben Martinez because CLL is merely their alteregoHeld:N
O.Rationale: The general rule is that a corporation is clo
thed with a personality separate and distinct from thep
ersons composing it—
this separate and distinct personality of a corporation is a fict
ion created by lawfor convenience and to prevent injustice. S
uch corporation cannot be liable for the obligations of theper
sons composing it and vice versa. There are valid grounds th
ough to pierce this veil of corporateentity. The test to determi
ne whether this can be done is as follows:

1.
Control, and not mere majority stock control, of policy and b
usiness practice in respect to thetransaction attacked.2.Suc
h control must have been used by the defendant to com
mit fraud or wrong.3.The said control and breach of du
ty must proximately cause injury or unjust loss compla
ined of. The absence of any one of these three elements
prevents the “piercing of the corporate veil”. Inthis case,
the respondent failed to prove complete control by the petitio
ners. Mere ownership by asingle stockholder or by another c
orporation of all or nearly all of the capital stocks of a corpor
ation isnot by itself a sufficient ground separate corporate pe
rsonality. The mere fact that the majority stock-
holder of Mar Tierra is RJL and that Ruben Martinez owned
about 42% of the capital stocks of RJL do notconstitute suffi
cient evidence that the latter corporation, had complete contr
ol of Mar Tierra. They alsofailed to prove that Mar Tierra and
RJL were organized as an instrument of Wilfredo Martinez a
ndBlamar Gonzales.mthere is also no evidence that the petiti
oner had any involvement in the transactionbetween Wilfred
o and the respondent.

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