G.R. No.

131673

SECOND DIVISION

G.R. No. 131673 September 10, 2004

RUBEN MARTINEZ,* substituted by his heirs, MENA CONSTANTINO

MARTINEZ, WILFRIDO C. MARTINEZ, EMMA M. NAVA, and EDNA M.
SAKHRANI, petitioners,
vs.
COURT OF APPEALS and BPI INTERNATIONAL FINANCE,
respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the

Court of Appeals, in CA-G.R. CV No. 43985, modifying the Decision2 of
the Regional Trial Court of Kalookan City, Branch 122, in Civil Case No. C-
10811.

The antecedents are as follows:

Respondent BPI International Finance3 is a foreign corporation not doing

business in the Philippines, with office address at the Bank of America
Tower, 12 Harcourt Road, Central Hongkong. It was a deposit-taking
company organized and existing under and by virtue of the laws of
Hongkong, and was also engaged in investment banking operations
therein.

Cintas Largas, Ltd. (CLL) was also a foreign corporation, established in

Hongkong, with a paid-up capital of HK$10,000. The registered
shareholders of the CLL in Hongkong were the Overseas Nominee, Ltd.
and Shares Nominee, Ltd., which were mainly nominee shareholders. In
Hongkong, the nominee shareholder of CLL was Baker & McKenzie
Nominees, Ltd., a leading solicitor firm. However, beneficially, the
company was equally owned by Messrs. Ramon Siy, Ricardo Lopa,
Wilfrido C. Martinez, and Miguel J. Lacson.4 The registered office
address of CLL in Hongkong was 22/F, Prince’s Building, also the office
address of Price Waterhouse & Co., a large accounting firm in Hongkong.

The bulk of the business of the CLL was the importation of molasses
from the Philippines, principally from the Mar Tierra Corporation, and the
resale thereof in the international market.5 However, Mar Tierra
Corporation also sold molasses to its customers.6 Wilfrido C. Martinez
was the president of Mar Tierra Corporation, while its executive vice-
president was Blamar Gonzales. The business operations of both the
CLL and Mar Tierra Corporation were run by Wilfrido Martinez and
Gonzales.

About 42% of the capital stock of Mar Tierra Corporation was owned by
RJL Martinez Fishing Corporation (RJL), the leading tuna fishing outfit in
the Philippines. Petitioner Ruben Martinez was the president of RJL and a
member of the board of directors thereof. The majority stockholders of
RJL were Ruben Martinez and his brothers, Jose and Luis Martinez.
Sixty-eight (68) percent of the total assets of Ruben Martinez were in the
RJL.

In 1979, respondent BPI International Finance (then AIFL) granted CLL a

letter of credit in the amount of US$3,000,000. Wilfrido Martinez signed
the letter agreement with the respondent for the CLL. The respondent
and the CLL had made the following arrangements:

Cintas Largas, Ltd. will purchase molasses from the Philippines,

mainly from Mar Tierra Corporation, and then sell the molasses to
foreign countries. Both the purchase of the molasses from the
Philippines and the subsequent sale thereof to foreign customers
were effected by means of Letters of Credit. A Letter of Credit would
be opened by Cintas Largas, Ltd. in favour of Mar Tierra Corporation
or any other seller in the Philippines. Upon the sale of the molasses
to foreign buyers, a Letter of Credit would then be opened by such
buyers, in favour of Cintas Largas, Ltd. The Letters of Credit were
effected through the Letter of Credit Facility of Cintas Largas, Ltd. in
plaintiff. The profits of Cintas Largas, Ltd. from these transactions
were then deposited in either the deposit account of Cintas Largas,
Ltd. with plaintiff or the Money Market Placement Account Nos. 063
and 084, depending upon the instructions of Wilfrido C. Martinez
and Blamar C. Gonzales, principally.7

On January 24, 1979, the CLL opened a money market placement with
the respondent bearing MMP No. 063, with an initial placement of
US$390,000.8 The CLL also opened and maintained a foreign currency
account and a deposit account with the respondent. The authorized
signatory in both accounts of CLL was Wilfrido C. Martinez. Some
instructions also came from Gonzales, to be confirmed by Wilfrido
Martinez.9 On March 21, 1980, petitioner Ruben Martinez and/or his son
Wilfrido C. Martinez and/or Miguel J. Lacson affixed their signatures on
the two signature cards furnished by the respondent which became
MMP No. 063 and MMP No. 084. On the face of the cards, the
signatories became joint account holders of the said money market
placements.10
On March 25, 1980, the CLL opened a money market placement account
with the respondent bearing MMP No. 084 with an initial placement of
US$68,768.60, transferred from MMP No. 063.11 At times, funds in MMP
Nos. 063 and 084 were transferred to the CLL’s deposit account, and
vice versa.

On May 19, 1980, the CLL, through Wilfrido Martinez, and the
respondent, through Senen L. Matoto and Michael Sung, Senior Manager
of the Money Management Division of the respondent, executed a letter-
agreement in which the existing back-to-back credit facility granted to
the CLL way back in 1979 was extended up to July 1980, and increased
to US$5,000,000. The credit facility was to be secured as follows:

SECURITY: (i) Back-to-Back L/C – to be secured by an L/C issued,

by a bank acceptable to AFHK, in favor of Cintas Largas.

(ii) AFHK L/C issued prior to receipt of Backing L/C – to be secured

by a 10% margin by way of a hold out on cash deposit with AFHK
with interest at LIBOR. The Backing L/C, however, shall be opened
not later than 120 days after the issuance of AFHK’s L/C.

(iii) JSS of Messrs. Ramon Siy, Wilfrido C. Martinez, Ricardo Lopa

and Miguel J. Lacson for both of the above cases.

DOCUMENTATION: Standard AFHK L/C documentation.12

The facility was designed to finance the purchases of molasses made by

the CLL from the Philippines for re-export.13

In compliance with the letter-agreement, Wilfrido C. Martinez, Miguel J.

Lacson, Ricardo Lopa, and Ramon Siy executed a continuing suretyship
agreement in which they bound and obliged themselves, jointly and
severally, with the CLL to pay the latter’s obligation under the said credit
facility.14
As of September 26, 1980, the balance of the deposit account of the CLL
with the respondent was US$1,025,052.06.15 On the other hand, the
balance of the money placement in MMP No. 063, as of September 25,
1980 was US$312,708.43,16 while the balance of the money market
placement in MMP No. 084 as of September 8, 1980 stood at
US$768,258.24.17

On October 10, 1980, Blamar Gonzales, acting for Mar Tierra

Corporation, sent to the respondent a telex confirming his telephone
conversation with Michael Sung/Bing Matoto requesting the respondent
to transfer US$340,000 to Account No. FCD SA 18402-7, registered in
the name of Mar Tierra Corporation, Philippine Banking Corporation,
Union Cement Building, Port Area, Manila, as payee, with the following
specific instructions: (a) there should be no mention of Wilfrido Martinez
or Mar Tierra Corporation; (b) the telex instruction should be signed only
by Wilfrido Martinez and sent only through the telex machine of Mar
Tierra Corporation; and, (c) the final confirmation of the transfer should
be made by telephone call.18 Gonzales requested the respondent, in the
same telex, to confirm its total available account so that instructions on
the transfer of the funds to FCD SA 18402-7 could be formalized.19

On October 13, 1980, Sung sent a telex to Gonzales informing the latter
of the balances of the MMP Nos. 063 and 084 and in the CLL account
deposit, with the corresponding maturity dates thereof, thus:

1. DETAIL OF PLACEMENT IN VARIOUS A/C.

MMP – 063

VALUE MATURITY
DATE AMOUNT MATURITY VALUE
DATE DATE
12-
25/9/80 28/11/80 USD306,043.48 USD 312,708.43
1/4
MMP –
 084
12-
25/09/80 28/11/80 USD751,883.88 USD 768,258.24
1/4
------------
--
USD1080,966.67
==============

CINTAS LARGAS

VALUE MATURITY MATURITY

DATE AMOUNT
DATE DATE VALUE
1 DAY 10-
15/9/80 USD 46,131.26
CALL 7/8
1 DAY 11-
25/9/80 USD500,000.00
CALL 1/4
(RATE ADJ: TO 12-1/4 VALUE 7/10/80)
12- USD
26/9/80 31/10/80 USD420,831.45
1/4 425,843.44

2. ACCORDING TO AIDC, O/S OF PESO LOAN IS 10,930,000.00,

AND THE HOLDOUT REQUIRED IS 120 PCT

COMPUTATION: PESO 10,930,000.00

7.89 (EXCHANGE
RATE)
1.20 (120 PCT)
-----------------
1,662,357.00
==========

3. ACCORDINGLY, THE FUND AVAILABLE IS APPROX.

USD340,000.00. PLS REVERT.20

Sung informed Gonzales that the account available was approximately

US$340,000, considering the CLL deposit account and the money
market placements.21 On October 14, 1980, the respondent received a
telex from Wilfrido C. Martinez requesting that the transfer of
US$340,000 from the deposit account of the CLL or any deposit
available be effected by telegraphic transfer as soon as possible to their
account, payee FCD SA 18402-7, Philippine Banking Corporation, Port
Area, Manila.22 On October 21, 1980, Wilfrido Martinez wrote the
respondent confirming his request for the transfer of US$340,000 to
"their" account, FCD SA 18402-7, with the Philippine Banking
Corporation, through Wells Fargo Bank of New York, Philippine Banking
Corporation Account No. FCDU SA No. 003-019205.23

The respondent complied with the request of the CLL, through Wilfrido
Martinez and Gonzales, and remitted US$340,000 as instructed.24
However, instead of deducting the amount from the funds in the CLL
foreign currency or deposit accounts and/or MMP Nos. 063 and 084, the
respondent merely "posted" the US$340,000 as an account receivable
of the CLL since, at that time, the money market placements had not yet
matured.25 When the money market placements matured, however, the
respondent did not collect the US$340,000 therefrom. Instead, the
respondent allowed the CLL and/or Wilfrido C. Martinez to withdraw, up
to July 3, 1981, the bulk of the CLL deposit account and MMP Nos. 084
and 063;26 hence, it failed to secure reimbursement for the US$340,000
from the said deposit account and/or money market placements.

In the meantime, problems ensued in the reconciliation of the

transactions involving the funds of the CLL, including the MMP Nos. 063
and 084 with the respondent, as well as the receivables of Mar Tierra
Corporation. There was also a need to audit the said funds. Sometime in
July 1982, conferences were held between the executive committee of
Mar Tierra Corporation and some of its officers, including Miguel J.
Lacson, where the means to reduce the administrative expenses and
accountants’ fees, and the possibility of placing the CLL on an "inactive
status" were discussed.27 The respondent pressured the CLL, Wilfrido
Martinez, and Gonzales to pay the US$340,000 it remitted to Account
No. FCD SA 18402-7.28 Eventually, Wilfrido C. Martinez and Blamar
Gonzales engaged the services of the auditing firm, the Jacinto, Belano,
Castro & Co., to review the flow of the CLL’s funds and the receivables of
Mar Tierra Corporation.

On August 16, 1982, the CLL, through its certified public accountant,
wrote the respondent requesting the latter to furnish its accountant with
a copy of the financial report prepared by its auditors.29 An audit was,
thereafter, conducted by the Jacinto, Belano, Castro & Co., certified
public accountants of the CLL and Mar Tierra Corporation. Based on
their report, the auditors found that the CLL owed the respondent
US$340,000.30

In the meantime, the respondent demanded from the CLL, Wilfrido

Martinez, Lacson, Gonzales, and petitioner Ruben Martinez, the payment
of the US$340,000 remitted by it to FCD SA 18402-7, per instructions of
Gonzales and Wilfrido Martinez. No remittance was made to the
respondent. Petitioner Ruben Martinez denied knowledge of any such
remittance, as well as any liability for the amount thereof.

On June 17, 1983, the respondent filed a complaint against the CLL,
Wilfrido Martinez, Lacson, Gonzales, and petitioner Ruben Martinez, with
the RTC of Kaloocan City for the collection of the principal amount of
US$340,000, with a plea for a writ of preliminary attachment. Two
alternative causes of action against the defendants were alleged therein,
viz:

FIRST ALTERNATIVE CAUSE OF ACTION

2.1 The allegations contained in the foregoing paragraphs are

repleaded herein by reference.

2.2 The remittance by plaintiff of the sum of US$340,000.00 as

previously explained in the foregoing paragraphs was made upon
the express instructions of defendants GONZALES and WILFRIDO C.
MARTINEZ acting for and in behalf of the defendant CINTAS,
defendants GONZALES and WILFRIDO C. MARTINEZ being the duly
authorized representatives of defendant CINTAS to transact any and
all of its business with plaintiff.

2.3 The remittance of US$340,000.00 was made under an

agreement for plaintiff to advance the said amount and for
defendants GONZALES, WILFRIDO C. MARTINEZ and CINTAS to
repay plaintiff all such monies so advanced to said defendants or to
their order.

2.4 In making said remittance, plaintiff acted as the agent of the

foregoing defendants in meeting the latter’s liability to the
recipient/s of the amount so remitted.

2.5 The remittance of US$340,000.00 which remains unsettled to

date is a just, binding and lawful obligation of the defendants
GONZALES, WILFRIDO C. MARTINEZ and CINTAS.

2.6 Defendant CINTAS is a reinvoicing or paper company with

nominee shareholders in Hongkong. The real and beneficial
shareholders of the foregoing defendants are the defendants
LACSON and WILFRIDO C. MARTINEZ.

2.7 Defendant CINTAS is being used by the foregoing defendants as

an alter ego or business conduit for their sole benefit and/or to
defeat public convenience.

2.8 Defendant CINTAS, being a mere alter ego or business conduit

for the foregoing defendants, has no corporate personality distinct
and separate from that of its beneficial shareholders and, likewise,
has no substantial assets in its own name.
2.9 The remittance of US$340,000.00 as referred to previously,
although made upon the instructions of defendants GONZALES,
WILFRIDO C. MARTINEZ and CINTAS, was in fact a remittance made
for the benefit of the beneficial shareholders of defendant CINTAS.

2.10 Any and all obligations of defendant CINTAS are the obligations
of its beneficial shareholders since the former is being used by the
latter as an alter ego or business conduit for their sole benefit and/or
to defeat public convenience.

SECOND ALTERNATIVE CAUSE OF ACTION

3.1 The allegations contained in the foregoing paragraphs are

incorporated herein by reference.

3.2 Defendants RUBEN MARTINEZ, WILFRIDO C. MARTINEZ and

LACSON are joint account holders of Money Market Placement
Account Nos. 063 and 084 (hereinafter referred to as MMP 063 and
084 for brevity) opened and maintained by said defendants with the
plaintiff.

3.3 Said money market placement accounts, although nominally

opened and maintained by said defendants, were in reality for the
account and benefit of all the defendants.

3.4 Defendant CINTAS likewise opened and maintained a deposit

account with plaintiff.

3.5 Defendants W.C. Martinez and Gonzales upon giving instructions

to plaintiff to remit the amount of US$340,000.00 as previously
discussed also instructed plaintiff to reimburse itself from available
funds in MMP Account Nos. 063 and 084 and the defendant
CINTAS’ deposit account.

3.6 Due to excusable mistake, plaintiff was unable to obtain

 reimbursement for the remittance it made from MMP Account Nos.
063, 084 and from the deposit account of defendant CINTAS.

3.7 As a consequence of said mistake, plaintiff delivered to the

foregoing defendants and/or to third parties upon orders of the
defendants substantially all the funds in MMP Account Nos. 063,
084 and the deposit account of defendant CINTAS.

3.8 The amount of US$340,000.00 delivered by plaintiff to the

foregoing defendants constituted an overpayment and/or erroneous
payment as defendants had no right to demand the same; further,
said amount having been unduly delivered by mistake, the foregoing
defendants were obliged to return it.

3.9 Since the foregoing defendants had no legal right to the

overpayment or erroneous payment of US$340,000.00 they,
therefore, hold said money in trust for the plaintiff.

3.10 Despite numerous demands to the defendants WILFRIDO C.

MARTINEZ, RUBEN MARTINEZ, LACSON and CINTAS for restitution
of the funds erroneously paid or overpaid to said defendants, they
have failed and continue to fail to make any restitution.31

The respondent prayed therein that, after due proceedings, judgment be

rendered in its favor, viz:

ON THE FIRST ALTERNATIVE CAUSE OF ACTION

4.1 Ordering defendants GONZALES, WILFRIDO C. MARTINEZ and

CINTAS, jointly and severally, liable to pay plaintiff the amount of
US$340,000.00 with interests thereon from February 20, 1982 until
fully paid.

4.2 Declaring that defendant CINTAS is a mere alter ego or business

conduit of defendants LACSON and WILFRIDO C. MARTINEZ;
 hence, the foregoing defendants are, jointly and severally, liable to
pay plaintiff the amount of US$340,000.00 with interests thereon.

4.3 Ordering the foregoing defendants to be, jointly and severally,

liable for the amount of ₱100,000.00 as and for attorney’s fees; and

4.4 Ordering the foregoing defendants to be, jointly and severally,

liable to plaintiff for actual damages in an amount to be proved at
the trial. Or -

ON THE SECOND ALTERNATIVE CAUSE OF ACTION

5.1 Declaring that plaintiff made an erroneous payment in the

amount of US$340,000.00 to defendants LACSON, WILFRIDO C.
MARTINEZ, RUBEN MARTINEZ and CINTAS.

5.2 Declaring the foregoing defendants to be, jointly and severally,

liable to reimburse plaintiff the amount of US$340,000.00 with
interest thereon from February 20, 1982 until fully paid.

5.3 Ordering defendants to be, jointly and severally, liable for the
amount of ₱100,000.00 as and for attorney’s fees; and

5.4 Ordering defendants to be, jointly and severally, liable to plaintiff

for actual damages in an amount to be proved at the trial.

5.5 A writ of preliminary attachment be issued against the properties

of the defendants WILFRIDO C. MARTINEZ, RUBEN MARTINEZ,
LACSON and CINTAS as a security for the satisfaction of any
judgment that may be recovered.

Plaintiff further prays for such other relief as may be deemed just
and equitable in the premises.32

In his answer to the complaint, petitioner Ruben Martinez interposed the

following special and affirmative defenses:

BY WAY OF SPECIAL AND AFFIRMATIVE DEFENSES, answering

defendant respectfully states:

2. Defendant is not the holder, owner, depositor, trustee and has no

interest whatsoever in the account in Philippine Banking Corporation
(FCD SA 18402-7) where the plaintiff remitted the amount sought to
be recovered. Hence, he did not benefit directly or indirectly from
the said remittance;

3. Defendant did not participate in any manner whatsoever in the

remittance of funds from the plaintiff to the alleged FCD Account in
the Philippine Banking Corporation;

4. Defendant has not received nor benefited from the alleged

remittance, "payment," "overpayment" or "erroneous payment"
allegedly made by plaintiff; hence, insofar as he is concerned, there
is nothing to return to or to "hold in trust" for the plaintiff;

5. Plaintiff’s alleged remittance of the amount by mere telex or

telephone instruction was highly irregular and questionable
considering that the undertaking was that no remittance or transfer
could be done without the prior signature of the authorized
signatories;

6. The alleged telex instructions to the plaintiff was for it to confirm

the amounts that are "free and available" which it did;

7. Plaintiff is guilty of estoppel or laches by making it appear that the

funds so remitted are "free and available" and by not acting within
reasonable time to correct the alleged mistake;
 8. The alleged remittance, "overpayment" and "erroneous payment"
was manipulated by plaintiff’s own employees, officers or
representatives without connivance or collusion on the part of the
answering defendant; hence, plaintiff has only itself to blame for the
same; likewise, its recourse is not against answering defendant;

9. Plaintiff’s Complaint is defective in that it has failed to state the

facts constituting the "mistake" regarding its failure to obtain
reimbursement from MMP 063 and 084;

10. Plaintiff is guilty of gross negligence and it only has itself to

blame for its alleged loss;

11. Sometime on or about 1980, defendant was made to sign blank

forms concerning opening of money market placements and
perhaps, this is how he became a "joint account holder" of MMP
063 and 084; defendant at that time did not realize the import or
significance of his act; afterwards, defendant did not do any act or
omission by which he could be implicated in this case;

12. Assuming that defendant is a "joint account holder" of said MMP

063 and 084, plaintiff has failed to plead defendant’s obligations, if
any, by being said "joint account holder;" likewise, the Complaint
fails to attach the corresponding documents showing defendant’s
being a "joint account holder."33

The CLL was declared in default for its failure to file an answer to the
complaint.

After trial, the RTC rendered its decision, the dispositive portion of which
reads as follows:

PREMISES CONSIDERED, judgment is hereby rendered as follows:

1. Ordering all the defendants, jointly and severally, to pay

 plaintiff the amount of US$340,000.00 or its equivalent in
Philippine currency measured at the Central Bank prevailing
rate of exchange in October 1980 and with legal interest
thereon computed from the filing of plaintiff’s complaint on
June 17, 1983 until fully paid;

2. Declaring that defendant Cintas Largas Ltd. is a mere

business conduit and alter ego of the individual defendants,
thereby holding the individual defendants, jointly and severally,
liable to pay plaintiff the aforesaid amount of US$340,000.00 or
its equivalent in Philippine Currency measured at the Central
Bank prevailing rate of exchange in October 1980, with interest
thereon as above-stated;

3. Ordering all defendants to, jointly and severally, pay unto

plaintiff the amount of ₱50,000.00 as and for attorney’s fees,
plus costs.

All counterclaims and cross-claims are dismissed for lack of merit.

SO ORDERED.34

The trial court ruled that the CLL was a mere paper company with
nominee shareholders in Hongkong. It ruled that the principle of piercing
the veil of corporate entity was applicable in this case, and held the
defendants liable, jointly and severally, for the claim of the respondent,
on its finding that the defendants merely used the CLL as their business
conduit. The trial court declared that the majority shareholder of Mar
Tierra Corporation was the RJL, controlled by petitioner Ruben Martinez
and his brothers, Jose and Luis Martinez, as majority shareholders
thereof. Moreover, petitioner Ruben Martinez was a joint account holder
of MMP Nos. 063 and 084. The trial court, likewise, found that the
auditors of Mar Tierra Corporation and the CLL confirmed that the
defendants owed US$340,000. The trial court concluded that the
respondent had established its causes of action against Wilfrido
Martinez, Lacson, Gonzales, and petitioner Ruben Martinez; hence, held
all of them liable for the claim of the respondent.

The decision was appealed to the CA. On June 27, 1997, the CA rendered
its decision, the dispositive portion of which reads:

WHEREFORE, the decision of the Court a quo dated December

[19], 1991 is hereby MODIFIED, by exonerating appellant Blamar
Gonzales from any liability to appellee and the complaint against him
is DISMISSED. The decision appealed from is AFFIRMED in all other
respect.

SO ORDERED.35

The appellate court exonerated Gonzales of any liability, reasoning that

he was not a stockholder of the CLL nor of Mar Tierra Corporation, but
was a mere employee of the latter corporation.36 Petitioner Ruben
Martinez sought a reconsideration of the decision of the CA, to no
avail.37

Dissatisfied with the decision and resolution of the appellate court, the
petitioner, filed the petition at bar, on the following grounds:

RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT

HEREIN PETITIONER RUBEN MARTINEZ IS LIABLE TO
RESPONDENT BPI INTERNATIONAL FINANCE FOR
REIMBURSEMENT OF THE US$340,000.00 REMITTED BY SAID
RESPONDENT BPI INTERNATIONAL FINANCE TO FCD SA
ACCOUNT NO. 18402-7 AT THE PHILIPPINE BANKING
CORPORATION, PORT AREA BRANCH.

II
 RESPONDENT COURT OF APPEALS ERRED IN NOT GRANTING THE
COUNTER-CLAIM OF PETITIONER RUBEN MARTINEZ
CONSIDERING THE EVIDENCE ON RECORD THAT PROVES THE
SAME.38

The paramount issue posed for resolution is whether or not the petitioner
is obliged to reimburse to the respondent the principal amount of
US$340,000.

The petitioner asserts that the trial and appellate courts erred when they
held him liable for the reimbursement of US$340,000 to the respondent.
He contends that he is not in actuality a stockholder of Mar Tierra
Corporation, nor a stockholder of the CLL. He was not involved in any
way in the operations of the said corporations. He added that while he
may have signed the signature cards of MMP Nos. 063 and 084 in blank,
he never had any involvement in the management and disposition of the
said accounts, nor of any deposits in or withdrawals from either or both
accounts. He was not aware of any transactions between the
respondent, Wilfrido Martinez, and Gonzales, with reference to the
remittance of the US$340,000 to FCD SA 18402-7; nor did he oblige
himself to pay the said amount to the respondent. According to the
petitioner, there is no evidence that he had benefited from any of the
following: (a) the remittance by the respondent of the US$340,000 to
Account No. FCD SA 18402-7 owned by Mar Tierra Corporation; (b) the
money market placements in MMP Nos. 063 and 084, or, (c) from any
deposits in or withdrawals from the said account and money market
placements.

On the other hand, the appellate court found the petitioner and his co-
defendants, jointly and severally, liable to the respondent for the
payment of the US$340,000 based on the following findings of the trial
court:

The Court finds that defendant Cintas Largas (Ltd.) with

capitalization of $10,000.00 divided into 1,000 shares at HK$10 per
share, is a mere paper company with nominee shareholders in
Hongkong, namely: Overseas Nominees Ltd. and Shares Nominees
Ltd., with defendants Wilfrido and Miguel J. Lacson as the sole
directors (Exh. A). Since the said shareholders are mere nominee
companies, it would appear that the said defendants Wilfrido and
Miguel J. Lacson who are the sole directors are the real and
beneficial shareholders (t.s.n., 9-1-87, p. 5). Further, defendant
Cintas Largas Ltd. has no real office in Hongkong as it is merely
being accommodated by Price Waterhouse, a large accounting
office in Hongkong (t.s.n., 9-1-87, pp. 7-8).

Defendant Cintas Largas Ltd., being a mere alter ego or business

conduit for the individual defendants with no corporate personality
distinct and separate from that of its beneficial shareholders and
with no substantial assets in its own name, it is safe to conclude that
the remittance of US$340,000.00 was, in fact, a remittance made
for the benefit of the individual defendants. Plaintiff was supposed
to deduct the US$340,000.00 remitted to the foreign currency
deposit account from Cintas Largas (Ltd.) funds or from money
market placement account Nos. 063 and 084 as well as Cintas
Largas Ltd. deposit account (Exh. FF-24).

Defendant Cintas Largas Ltd. was established only for financing

(t.s.n., 12-19-88, pp. 25-26) and the active owners of Cintas are
defendants Miguel Lacson and Wilfrido C. Martinez (t.s.n., 12-19-88,
p. 22). Mar Tierra Corporation of which defendant Wilfrido Martinez
is the President and one of its owners and defendant Blamar
Gonzales as the Vice President, sells molasses to defendant Cintas
Largas Ltd. Defendant Miguel J. Lacson is a business partner in
purchasing molasses for Mar Tierra Corporation. Mar Tierra
 Corporation was selling molasses to Cintas Largas Ltd. which were
purchased by Miguel Lacson and Wilfrido C. Martinez (t.s.n., 12-19-
88, pp. 23-24). The majority owner of Mar Tierra Corporation is RJL
Martinez Fishing Corporation which is owned by brothers Ruben
Martinez, Jose Martinez and Luis Martinez (t.s.n., 12-19-88, pp. 24-
25; t.s.n., 6-20-88, pp. 11-12). The FCD SA-18402-7 account at
Philippine Banking Corporation, Port Area Branch, where the
US$340,000.00 was remitted by the plaintiff is the account of Mar
Tierra Corporation, and with the interlapping connection of the
defendants to each other, these could be the reason why the funds
of Cintas Largas Ltd. were being co-mingled and controlled by
defendants more particularly defendants Blamar Gonzales and
Wilfrido C. Martinez (Exhs. D, E, F, G, H, I, J, L, M, N, O, P, R, S, and
T).

On the basis of the evidence, the Court finds and so holds that the
cause of action of the plaintiff against the defendants has been
established.39

We do not agree with the trial court and appellate court.

We note that the question of whether or not a corporation is merely an

alter ego is purely one of fact.40 So is the question of whether or not a
corporation is a paper company or a sham or subterfuge or whether the
respondent adduced the requisite quantum of evidence warranting the
piercing of the veil of corporate entity of the CLL.41 The Court is not a
trier of facts. Hence, the factual findings of the trial court, as affirmed by
the appellate court, are generally conclusive upon this Court.42 However,
the rule is subject to the following exceptions: (a) where the conclusion is
a finding grounded entirely on speculation, surmise and conjectures; (b)
where the information made is manifestly mistaken; (c) where there is
grave abuse of discretion; (d) where the judgment is based on a
misapplication of facts, and the findings of facts of the trial court and the
appellate court are contradicted by the evidence on record; and (e) when
certain material facts and circumstances had been overlooked by the
trial court which, if taken into account, would alter the result of the case.

We have reviewed the records and find that some substantial factual
findings of the trial court and the appellate court and, consequently, their
conclusions based on the said findings, are not supported by the
evidence on record.

The general rule is that a corporation is clothed with a personality

separate and distinct from the persons composing it. Such corporation
may not be held liable for the obligation of the persons composing it; and
neither can its stockholders be held liable for such obligation.43 A
corporation has a separate personality distinct from its stockholders and
from other corporation to which it may be connected.44 This separate
and distinct personality of a corporation is a fiction created by law for
convenience and to prevent injustice.45

Nevertheless, being a mere fiction of law, peculiar situations or valid

grounds can exist to warrant, albeit sparingly, the disregard of its
independent being and the piercing of the corporate veil.46 Thus, the veil
of separate corporate personality may be lifted when such personality is
used to defeat public convenience, justify wrong, protect fraud or defend
crime; or used as a shield to confuse the legitimate issues; or when the
corporation is merely an adjunct, a business conduit or an alter ego of
another corporation or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation;47 or
when the corporation is used as a cloak or cover for fraud or illegality, or
to work injustice, or where necessary to achieve equity or for the
protection of the creditors.48 In such cases where valid grounds exist for
piercing the veil of corporate entity, the corporation will be considered as
a mere association of persons.49 The liability will directly attach to
them.50

However, 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 to disregard the separate corporate
personality. The substantial identity of the incorporators of two or more
corporations does not warrantly imply that there was fraud so as to
justify the piercing of the writ of corporate fiction.51 To disregard the said
separate juridical personality of a corporation, the wrongdoing must be
proven clearly and convincingly.52

The test in determining the application of the instrumentality or alter ego

doctrine is as follows:

1. Control, not mere majority or complete stock control, but

complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate
mind, will or existence of its own;

2. Such control must have been used by the defendant to commit

fraud or wrong, to perpetuate the violation of a statutory or other
positive legal duty, or dishonest and unjust act in contravention of
plaintiff’s legal rights; and

3. The aforesaid control and breach of duty must proximately cause

the injury or unjust loss complained of.

The absence of any one of these elements prevents "piercing the

corporate veil." In applying the "instrumentality" or "alter ego" doctrine,
the courts are concerned with reality and not form, with how the
corporation operated and the individual defendant’s relationship to that
operation.53
In this case, the respondent failed to adduce the quantum of evidence
necessary to prove any valid ground for the piercing of the veil of
corporate entity of Mar Tierra Corporation, or of RJL for that matter, and
render the petitioner liable for the respondent’s claim, jointly and
severally, with Wilfrido Martinez and Lacson. The mere fact that the
majority stockholder of Mar Tierra Corporation is the RJL, and that the
petitioner, along with Jose and Luis Martinez, owned about 42% of the
capital stock of RJL, do not constitute sufficient evidence that the latter
corporation, and/or the petitioner and his brothers, had complete
domination of Mar Tierra Corporation. It does not automatically follow
that the said corporation was used by the petitioner for the purpose of
committing fraud or wrong, or to perpetrate an injustice on the
respondent. There is no evidence on record that the petitioner had any
involvement in the purchases of molasses by Wilfrido Martinez, Gonzales
and Lacson, and the subsequent sale thereof to the CLL, through Mar
Tierra Corporation. On the contrary, the evidence on record shows that
the CLL purchased molasses from Mar Tierra Corporation and paid for
the same through the credit facility granted by the respondent to the
CLL. The CLL, thereafter, made remittances to Mar Tierra Corporation
from its deposit account and MMP Nos. 063 and 084 with the
respondent. The close business relationship of the two corporations
does not warrant a finding that Mar Tierra Corporation was but a conduit
of the CLL.

Likewise, the respondent failed to adduce preponderant evidence to

prove that the Mar Tierra Corporation and the RJL were so organized and
controlled, its affairs so conducted as to make the latter corporation
merely an instrumentality, agency, conduit or adjunct of the former or of
Wilfrido Martinez, Gonzales, and Lacson for that matter, or that such
corporations were organized to defraud their creditors, including the
respondent. The mere fact, therefore, that the businesses of two or more
corporations are interrelated is not a justification for disregarding their
separate personalities, absent sufficient showing that the corporate
entity was purposely used as a shield to defraud creditors and third
persons of their rights.54

Also, the mere fact that part of the proceeds of the sale of molasses
made by Mar Tierra Corporation to the CLL may have been used by the
latter as deposits in its deposit account with the respondent or in the
money market placements in MMP Nos. 063 and 084, or that the funds
of Mar Tierra Corporation and the CLL with the respondent were
mingled, and their disposition controlled by Wilfrido Martinez, does not
constitute preponderant evidence that the petitioner, Wilfrido Martinez
and Lacson used the Mar Tierra Corporation and the RJL to defraud the
respondent. The respondent treated the CLL and Mar Tierra Corporation
as separate entities and considered them as one and the same entity
only when Wilfrido C. Martinez and/or Blamar Gonzales failed to pay the
US$340,000 remitted by the respondent to FCD SA 18402-7. This being
the case, there is no factual and legal basis to hold the petitioner liable to
the respondent for the said amount.

Contrary to the ruling of the trial court and the appellate court, the
auditors of the CLL and the Mar Tierra Corporation, in their report, did
not find the petitioner liable for the respondent’s claim in their report.
The auditors, in fact, found the CLL alone liable for the said amount.55
Even a cursory reading of the report will show that the name of the
petitioner was not mentioned therein.

The respondent failed to adduce evidence that the petitioner had any
involvement in the transactions between the CLL, through Wilfrido
Martinez and Gonzales, and the respondent, with reference to the
remittance of the US$340,000 to FCD SA 18402-7. In fact, the said
transaction was so confidential that Gonzales even suggested to the
respondent that the name of Wilfrido Martinez or Mar Tierra Corporation
be not made of record, and to authorize only Wilfrido Martinez to sign
the telex instruction:
OCT. 10, 1980

TO: AYALA FINANCE

ATTN: MICHAEL SUNG/BING MATOTO

FR: B. GONZALES

RE: TRANSFER OF FUNDS

THIS IS TO CONFRM OUR TELEPHONE CONVERSATION THAT WE

WLD LIKE TO SUGGEST THE FF PROCEDURES FOR FUND
TRANSFER.

1. TLX INSTRUCTION THAT FUNDS BE TRANSFERRED TO OUR

FCD ACCT BY TELEGRAPHIC TRANSFER.

2. WE WILL ONLY USE ONE ACCT W/C IS FCD SA 18402-7 OF

PHILBANKING CORPORATION, PORT AREA BRANCH, UNION
CEMENT BLDG, BONIFACIO DRIVE, PORT AREA, METRO
MANILA, PHILS.

3. PAYEE SHLD BE FCD SA 18402-7 AND NO MENTION OF

W.C. MARTINEZ OR MAR TIERRA CORP. TLX INSTRUCTION
SHLD BE SIGNED BY W.C. MARTINEZ AND WILL BE SENT
ONLY THRU TLX MACHINE OF MAR TIERRA CORP.

4. FINAL CONFIRMATION OF THE TRANSFER BY TELEPHONE

CALL.

PLS CONFRM TODAY TOTAL AMT. THAT IS FREE AND AVAILABLE

SO WE CAN FORMALIZE INSTRUCTION OF TRANSFER IF THE
ABOVE PROCEDURE IS APPROVED BY YOU. PLS CONFRM ALSO
LIST OF CORRESPONDENT BANK IN HK.

IN CASE OF WELLS FARGO HK, WE WLD LIKE TO SUGGEST THE FF

 PROCEDURE:

1. WELLS FARGO HK WIL SEND A TLX TO MANILA

INSTRUCTING PHIL BANKING CORP TO CREDIT FCD SA
18402-7.

2. REIMBURSEMENT INSTRUCTION, AT THE SAME TIME

WELLS FARGO HK WIL REQUEST WELLS FARGO NEW YORK
TO CREDIT FCDU NO. 003-019205 FOR THE ACCT OF PHIL
BANKING CORP.56

Even the respondent admitted, in its complaint, that the CLL, Gonzales,
and Wilfrido Martinez, bound and obliged themselves to repay the
US$340,000, viz:

2.2 The remittance by plaintiff of the sum of US$340,000.00 as

previously explained in the foregoing paragraphs was made upon
the express instructions of defendants GONZALES and WILFRIDO C.
MARTINEZ acting for and in behalf of the defendant CINTAS,
defendants GONZALES and WILFRIDO C. MARTINEZ being the duly
authorized representatives of defendant CINTAS to transact any and
all of its business with plaintiff.

2.3 The remittance of US$340,000.00 was made under an

agreement for plaintiff to advance the said amount and for
defendants GONZALES, WILFRIDO C. MARTINEZ and CINTAS to
repay plaintiff all such monies so advanced to said defendants or to
their order.

2.4 In making said remittance, plaintiff acted as the agent of the

foregoing defendants in meeting the latter’s liability to the
recipient/s of the amount so remitted.

2.5 The remittance of US$340,000.00 which remains unsettled to

 date is a just, binding and lawful obligation of the defendants
GONZALES, WILFRIDO C. MARTINEZ and CINTAS.

2.6 Defendant CINTAS is a reinvoicing or paper company with

nominee shareholders in Hongkong. The real and beneficial
shareholders of the foregoing defendants are the defendants
LACSON, and WILFRIDO C. MARTINEZ.

2.7 Defendant CINTAS is being used by the foregoing defendants as

an alter ego or business conduit for their sole benefit and/or to
defeat public convenience.

2.8 Defendant CINTAS, being a mere alter ego or business conduit

for the foregoing defendants, has no corporate personality distinct
and separate from that of its beneficial shareholders and likewise
has no substantial assets in its own name.

2.9 The remittance of US$340,000.00 as referred to previously,

although made upon the instructions of defendants GONZALES,
WILFRIDO C. MARTINEZ and CINTAS, was in fact a remittance made
for the benefit of the beneficial shareholders of defendant
CINTAS.57

The admissions made by the respondent in its complaint are judicial

admissions which cannot be contradicted unless there is a showing that
it was made through palpable mistake or that no such admission was
made.58

The respondent impleaded the petitioner only in its second alternative

cause of action, on its allegation that the latter was a joint account holder
of MMP Nos. 063 and 084, simply because he signed the signature
cards with Wilfrido Martinez and/or Lacson in blank. The trial court found
the submission of the respondent duly established, based on Wilfrido
Martinez’s answer to the complaint, and held the petitioner liable for the
said amount based on the signature cards in this language:

Defendants Ruben Martinez, Wilfrido C. Martinez and Miguel Lacson

are joint account holders of the money market placement account
Nos. 063 and 084 (par. 17 page 4 Answer of defendant Wilfrido C.
Martinez; par. 2, page 5, Amended Answer of defendant Lacson;
t.s.n., 4-18-88, p. 7).59

The appellate court affirmed the ruling of the trial court without making
any specific reference to the aforequoted ruling of the trial court.60

We do not agree. The judicial admissions made by Wilfrido Martinez in

his answer to the complaint are not binding on the petitioner.61 The
evidence on record shows that the petitioner affixed his signatures on
the signature cards merely upon the request of his son, Wilfrido
Martinez. The signature cards were printed forms of the respondent with
the names of the signatories and the supposed account holders
typewritten thereon and, except for the account number, were similarly
worded, viz:

SIGNATURE CARD

Account Mr. Ruben Martinez Account Number: MMP-

Name: and/or 063
Mr. Wilfrido C.
Martinez
and/or Mr. Miguel J.
Lacson
I.D. Card/Passport No.:
_____________________________________________

Residence Address:
________________________________________________

_________________________________________ Tel.: ___________________

Office Address:
 ____________________________________________________

_________________________________________ Tel.: ___________________

Number of signature required to withdraw funds:

_________________________
Confirmation/Correspondence to ___ Office
be mailed to:
___ Residence

___ Others:
________________

__________________________
Other Instructions:
_______________________________________________

_________________________________________________________________

_________________________________________________________________

Specimen of signature:
(Ruben (Wilfrido
1. Sgd. 3. Sgd.
Martinez) Martinez)
SIGNATURE NAME SIGNATURE NAME
(Ruben (Miguel J.
2. Sgd. 4. Sgd.
Martinez) Lacson)
SIGNATURE NAME SIGNATURE NAME62

The respondent failed to adduce any evidence, testimonial or

documentary, including the relevant laws63 of Hongkong where the
placements were made to hold the petitioner liable for the respondent’s
claims. Other than the signature cards, the respondent failed to adduce a
shred of evidence to prove (a) the terms and conditions of the money
market placements of the CLL in MMP Nos. 063 and 084; and, (b) the
rights and obligations of the petitioner, Wilfrido Martinez and Lacson,
over the money market placements. In light of the evidence on record,
the CLL and/or Wilfrido Martinez never surrendered their ownership over
the funds in favor of the petitioner when the latter co-signed the
signature cards. The CLL and/or Wilfrido Martinez retained complete
control and dominion over the funds.

By merely affixing his signatures on the signature cards, the petitioner

did not necessarily become a joint and solidary creditor of the
respondent over the said placements. Neither did the petitioner bind
himself to pay to the respondent the US$340,000 which was borrowed
by the CLL and/or Wilfrido Martinez, and later remitted to FCD SA
18402-7.

The respondent has no one but itself to blame for its failure to deduct the
US$340,000 from the foreign currency and deposit accounts and money
market placements of the CLL. The evidence on record shows that the
respondent was supposed to deduct the said amount from the money
market placements of the CLL in MMP Nos. 063 and 084, but failed to do
so. The respondent remitted the amount from its own funds and, by its
negligence, merely posted the amount in the account of the CLL. Worse,
the respondent allowed the CLL and Wilfrido Martinez to withdraw the
entirety of the deposits in the said accounts, without first deducting the
US$340,000. By the time the respondent realized its mistakes, the funds
in the said accounts had already been withdrawn solely by the CLL
and/or Wilfrido Martinez. This was the testimony of Michael Sung, the
witness for the respondent.

Q: Do you know whether this US$340,000 was really transferred to

Foreign Currency Deposit Account No. 18402-7 of the Philippine
Banking Corporation in Manila?

A: Yes.

Q: Pursuant to the procedure for fund transfer as contained in Exhs.

B, C, D and E, after having made such remittance of
US$340,000.00, what was plaintiff supposed to do, if any, in order
 to get reimbursement for such transfer?

A: Plaintiff was supposed to deduct the US$340,000.00 remitted to

the foreign currency deposit account from the Cintas Largas funds
or from Money Market Placement Account Nos. 063 and 084 as well
as the Cintas Largas, Ltd. deposit account.

Q: Do you know if plaintiff was able to obtain reimbursement of the

US$340,000 remitted to the Philippine Banking Corporation in
Manila?

A: No, because instead of deducting the remittance of US$340,000

from the funds in the money market placement accounts and/or the
Cintas Largas Deposit Account, we posted the US$340,000
remittance as an account receivable of Cintas Largas, Ltd. since at
that time the money market placement deposits have not yet
matured. Subsequently, we failed to charge the deposit and MMP
accounts when they matured and Cintas Largas, Ltd. and/or Wilfrido
C. Martinez had already withdrawn the bulk of the funds contained
in Money Market Placement Account No. 063 and the Cintas Largas,
Ltd. Deposit Account thus, we were unable to obtain reimbursement
therefrom.64

It cannot even be argued that if the petitioner would not be adjudged

liable for the respondent’s claim, he would thereby be enriching himself
at the expense of the respondent. There is no evidence on record that
the petitioner withdrew a single centavo from or was personally
benefited by the funds in MMP Nos. 063 and 084. The testimonial and
documentary evidence of the respondent clearly shows that the CLL
and/or Wilfrido Martinez used and disposed of the said funds without the
knowledge, involvement, and consent of the petitioner. Furthermore, the
documentary evidence of the respondent shows the following:

MMP – 063
 Statement of Accounts (Deposit)
Value
Funds In Funds Out Remarks
Date
…
28/11/80 6,664.95 Interests earned
29/12/80 4,779.66 " "
21/01/81 4,024.83 " "
21/01/81 119,478.51 Purchase
HK$632,041.33
@5.29 &
transferred to its
statement A/C
13/02/81 2,321.99 Interests earned
" 100,015.00 Transfer to Cintas
Largas’ A/C
Receivable.
17/02/81 55.07 Interests earned
18/03/81 1,317.27 " "
" 100,000.00 Purchase
HK$525,000.00
@5.25 cheque
made payable to
Grand Solid
Enterprises Co.,
Ltd.
" 5,713.74 Transfer to A/C
Receivable
(MMP-063)
_____________ _____________
US$443,975.85 US$443,975.85 65

============ ============

…
MMP – 084
Statement of Accounts (Deposit)
 Value
Funds In Funds Out Remarks
Date
…
28/11/80 16,374.36 Interests earned
01/12/80 488.16 " "
04/12/80 1,089.06 " "
Transfer to A/C of
" US$250,000.00
Cintas Largas
09/12/80 1,290.56 Interests earned
Transfer to Cintas
" 200,000.00
Largas’ A/R.
18/12/80 1,545.42 Interests earned
T/T to Chase
" 200,000.00
Manhattan NY for
Credit A/C Allied
Capital F/O
Frank Chan B/O
Grand Solid.
02/03/81 4,608.27 Interests earned
Transfer to A/C of
" 20,470.74
Grand Solid
09/03/81 321.91 Interests earned
Transfer to A/C of
" 60,000.00
Trinisia Ltd.
20/03/81 213.40 Interests earned
T/T to Nitto Trading
" 45,286.26
& Josho
Ind. Co., Ltd.,
Japan.
Transfer to A/C
" 2,028.02
Receivable
(MMP-084)
 " 30.00 Cable Charges

_____________ _____________
US$777,815.02 US$777,815.02 66

============ ============

…
CINTAS LARGAS
Statement of Accounts (Deposit)
Value
Funds In Funds Out Remarks
Date
…
31/10/80 5,011.99 Interests earned
17/11/80 8,067.70 " "
Transfer to A/C of
" 350,000.00
Grand Solid
09/11/80 3,062.23 Interests earned
" 350,000.00 Purchase
HK$1,789,200.00
@5.112, Cheque
made payable to
Grand Solid.
26/11/80 3,264.34 Interests earned
" 300,000.00 Purchase
HK$1,535,100.00
@5.117, Cheque
made payable to
Grand Solid
21/01/81 1,299.80 Interests earned
Remittance from C.
" 81,415.00
Itoh & Co., NY
02/03/81 2,445.49 Interests earned
Transfer to Grand
" 129,529.26 Solid’s A/C
Receivable
 Transfer from CL’s
02/04/81 143,000.00 Statement A/C

10/04/81 456.81 Interests earned

" 50,000.00 Purchase
HK$267,150.00
@5.343, Cheque
made payable to
Grand Solid.
13/04/81 US$ 40.89 Interests earned
21/04/81 311.66 " "
" US$ 50,000.00 Purchase
HK$268,850.00
@5.377, cheque
made payable to
Grand Solid.
28/04/81 132.04 Interests earned
" 40,000.00 Purchase
HK$214,480.00
@5.362, cheque
made payable to
Grand Solid.
" 52,692.00 Remittance from
Dai Ichi Kangyo
Bank NY. REF.
KOMEIMARU
Transfer from CL’s
19/05/81 178,465.18
A/C Receivable
Remittance from C.
22/05/81 46,472.00 Itoh & Co., NY Re.
Pacific Geory.
26/05/81 28.40 Interests earned
04/06/81 1,242.80 " "
" 50,000.00 Purchase
HK$275,750.00
 @5.515, Cheque
made payable to
Grand Solid
11/06/81 2,252.36 Interests earned
" 66,400.00 T/T to Security
Pacific Nat’l Bank
LA for A/C of
Twentieth Century
Fox Int’l Corp.
" 15.00 Cable Charge
" 31.65 Purchase
HK$175.00 @5.53
for payment of
Business
Registration Fee.
25/06/81 1,192.24 Interests earned
" 60,000.00 Purchase
HK$331,500.00
@5.525, cheque
made payable to
Grand Solid.
" 22,656.88 T/T to Daiwa Bank,
Los Angeles for
A/C of OAC
Equipment Corp.
T/T to Josho Ind.
" 45,800.00
Co. Ltd., Japan
" 15.00 Cable Charge
03/07/81 165.47 Interests earned
" 11,870.00 T/T to Bank of
Tokyo, Kobe
Branch for A/C of
Furuno Electric Co.
Ref.: Mar Tierra
Takashiro Maru,
Eatelite Nav. and
 Radar.
" 15.00 Cable Charge
06/07/81 17.60 Interests earned

07/07/81 14.83 " "

" 16,000.00 T/T to Dai Ichi
Kangyo Bank,
Shimizu Branch for
A/C of Takashiro
Maru.
" 15.00 Cable Charge
15/09/81 US$ 482.29 Interests earned
" US$ 1,250.00 Reimbursement of
expenses paid to
Price Waterhouse
& Co.
17/09/81 11.91 Interests earned
" 237.43 Purchase
HK$1,421.50 for
cheque payment to
Price Waterhouse
& Co.
Remittance from C.
08/01/82 70,360.00
Itoh & Co., NY
19/01/82 268.74 Interests earned
" 3,064.81 Transfer to CL’s
Margin A/C
" 50,000.00 Purchase
HK$295,100.00,
cheque made
payable to Grand
Solid.
Transfer to A/C of
" 5,952.38
Trinisia Ltd.
_____________ ______________
 TOTAL : US$1,756,387.32 US$1,732,103.25
Outstanding
- 24,284.07
deposits
______________ ______________
US$1,756,387.32 US$1,756,387.32 67
============== ==============

Clearly from the foregoing, the withdrawals from the deposit and foreign
currency accounts and MMP Nos. 063 and 084 of the CLL, after the
respondent remitted the US$340,000, were for the account of the CLL
and/or Wilfrido Martinez, and not of the petitioner.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The

Decision of the Court of Appeals is REVERSED AND SET ASIDE. The
complaint of the respondent against the petitioner in Civil Case No. C-
10811 is DISMISSED. No costs.

SO ORDERED.

Puno, Austria-Martinez**, Tinga, and Chico-Nazario***, JJ., concur.

Footnotes

* Counsel for Ruben Martinez notified the Court of the death of his
client on February 10, 2004. (Rollo, pp. 253 and 364).

** On official leave.

*** On leave.

1Penned by Associate Justice Demetrio G. Demetria (retired), with

Associate Justices Jainal D. Rasul (retired) and Godardo A. Jacinto,
concurring.

2 Penned by then Judge Bennie A. Adefuin-dela Cruz (later

Associate Justice of the Court of Appeals).

3 Formerly known as Ayala Finance Hongkong, Ltd. (AIFL).

4 Exhibit "GG-1," Records, Vol. II, p. 172.

5 Ibid.

6 Exhibits "III" to "III-15," Records, Vol. III, pp. 157-173.

7 Exhibit "FF," Id. at 140.

8 Exhibit "DDD-6," Id. at 84.

MONEY-MARKET ACCOUNT: An interest-bearing account at a

bank or other financial institution.

Such an account usually pays interest competitive with money-

market funds but allows a limited number of transactions per
month. (Black’s Law Dictionary, 5th ed., p. 1022.)

9 Exhibit "FF," Records, Vol. II, p. 142.

10 Exhibits "MM" and "NN," Records, Vol. II, pp. 188-189.

11 Exhibit "DDD-7," Records, Vol. II, p. 85.

12 Exhibit "II," Id. at 176.

13 Id. at 175-176.

14 Exhibits "KK" and "LL," Records, Vol. II, pp. 180-187.

15 Exhibit "DDD," Id. at 206.

16 Exhibit "DDD-6," Id. at 84.

17 Exhibit "DDD-2," Id. at 85.

18 Exhibit "B," Id. at 74.

19 Ibid.

20 Exhibit "C," Records, Vol. II, p. 75.

21 Ibid.

22 Exhibit "D," Records, Vol. II, p. 76.

23 Records, Vol. I, p. 257.

24 Exhibit "FF," Records, Vol. II, p. 155.

25 Ibid.

26 Exhibits "OO," "QQ" to "CCC."

27 TSN, 23 April 1985, pp. 19-20; Exhibit "AA."

28 Exhibit "CC," Records, Vol. II, p. 369.

29 Exhibit "GGG-27," Records, Vol. I, p. 341.

30 Exhibit "JJJ," Records, Vol. III, p. 175.

31 Records, Vol. I, pp. 7-11.

32 Id. at 13-15.

33 Id. at 34-36.

34 Records, Vol. III, p. 212.

35 Rollo, p. 55.

36 Id. at 34-55.
37 Id. at 57-58.

38 Id. at 16.

39 Records, Vol. III, p. 211.

40 Heirs of Ramon Durano, Sr. v. Uy, 344 SCRA 238 (2000).

41 Concept Builders, Inc. v. NLRC, 257 SCRA 149 (1996).

42 Ruiz, Sr. v. Court of Appeals, 362 SCRA 40 (2001).

43 Padilla v. Court of Appeals, 370 SCRA 208 (2001).

44 Francisco Motors Corporation v. Court of Appeals, 309 SCRA 72

(1999).

45 Concept Builders, Inc. v. NLRC, supra.

46 Santos v. NLRC, 254 SCRA 673 (1996).

47 Umali v. Court of Appeals, 189 SCRA 529 (1990).

48 Boyer-Roxas v. Court of Appeals, 211 SCRA 470 (1992).

49 Umali v. Court of Appeals, supra.

50 Francisco Motors Corporation v. Court of Appeals, supra.

51Complex Electronics Employees Association v. NLRC, 310 SCRA

403 (1999).

52 Ibid.

53 Concept Builders, Inc. v. NLRC, supra.

54 Umali v. Court of Appeals, supra.

55 Exhibit "JJJ-6," Records, Vol. III, p. 180.

56 Records, Vol. I, p. 5.

57 Records, Vol. I, pp. 7-8. (Underscoring supplied.)

58 Section 4, Rule 129 of the Rules of Court.

59 Records, Vol. III, p. 211.

60 Rollo, p. 54.

61 Section 28, Rule 130 of the Rules of Court.

62 Records, Vol. I, p. 437.

63 1. MONEY DEPOSITS

A deposit of money, whether as a sum or in specie, is naturally

bound to the place of the banking or financing institution to
which it is entrusted. Logically, the law of that place governs the
deposit. Prof. Rabel cites two reasons for the rule: (1) the
money is brought to that place to be conserved and repaid
there; (2) the transaction is one of a mass of similar
transactions by the institution. Hence, if a Filipino makes a
deposit with the Swiss Credit Bank in Zurich, all questions
arising from the deposit such as service charges, the manner of
keeping the deposit, the effects of currency fluctuations, the
mode of withdrawal of the deposits in Switzerland will usually
be determined by the law prevailing in that place. (Salonga,
Private International Law, 1995 ed., p. 366.)

64 Records, Vol. II, p. 155. (Underscoring supplied.)

65 Id. at 84.
 66 Id. at 85.

67 Id. at 78-80.

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