Lim Vs CA, 323 SCRA 102 (2000)

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102
SUPREME COURT REPORTS ANNOTATED

Lim vs. Court of Appeals
*
G.R. No. 124715. January 24, 2000.
RUFINA LUY LIM, petitioner, vs. COURT OF APPEALS,

AUTO
TRUCK
TBA
CORPORATION,
SPEED
DISTRIBUTING,
INC.,
ACTIVE
DISTRIBUTORS,
ALLIANCE MARKETING CORPORATION, ACTION
COMPANY, INC., respondents.
Succession; Testate and Intestate Proceedings; Probate Courts;
Jurisdiction; The determination of which court exercises
jurisdiction over matters of probate depends upon the gross value
of the estate of the decedent.The determination of which court
exercises jurisdiction over matters of probate depends upon the
gross value of the estate of the decedent.
Same; Same; Corporation Law; Ownership; Land Titles;
Where real properties included in the inventory of the estate of a
decedent are in the possession of and are registered in the name of
corporations, in the absence of any cogency to shred the veil of
corporate fiction, the presumption of conclusiveness of said titles in
favor of said corporations should stand undisturbed.Inasmuch
as the real properties included in the inventory of the estate of the
late Pastor Y. Lim are in the possession of and are registered in
the name of private respondent corporations, which under the law
possess a personality
________________
*
SECOND DIVISION.
103
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VOL. 323, JANUARY 24, 2000
103
separate and distinct from their stockholders, and in the absence

of any cogency to shred the veil of corporate fiction, the
presumption of conclusiveness of said titles in favor of private
respondents should stand undisturbed.
Corporation Law; Piercing the Veil of Corporate Fiction
Doctrine; Rudimentary is the rule that a corporation is invested by
law with a personality distinct and separate from its stockholders
or membersby legal fiction and convenience it is shielded by a
protective mantle and imbued by law with a character alien to the
persons comprising it.It is settled that a corporation is clothed
with personality separate and distinct from that of the persons
composing it. It may not generally be held liable for that of the
persons composing it. It may not be held liable for the personal
indebtedness of its stockholders or those of the entities connected
with it. Rudimentary is the rule that a corporation is invested by
law with a personality distinct and separate from its stockholders
or members. In the same vein, a corporation by legal fiction and
convenience is an entity shielded by a protective mantle and
imbued by law with a character alien to the persons comprising it.
Same; Same; Piercing the veil of corporate fiction requires the
court to see through the protective shroud which exempts its
stockholders from liabilities that ordinarily, they could be subject
to, or distinguishes one corporation from a seemingly separate one,
were it not for the existing corporate fiction.Nonetheless, the
shield is not at all times invincible. Thus, in First Philippine
International Bank vs. Court of Appeals, We enunciated: x x x
When the fiction is urged as a means of perpetrating a fraud or an
illegal act or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes, the achievement or perfection of a
monopoly or generally the perpetration of knavery or crime, the
veil with which the law covers and isolates the corporation from
the members or stockholders who compose it will be lifted to allow
for its consideration merely as an aggregation of individuals, x x
xPiercing the veil of corporate entity requires the court to see
through the protective shroud which exempts its stockholders
from liabilities that ordinarily, they could be subject to, or
distinguishes one corporation from a seemingly separate one,
were it not for the existing corporate fiction. The corporate mask
may be lifted and the corporate veil may be pierced when a
corporation is just but the alter ego of a person or of another
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corporation. Where
convenience is
badges
of
fraud
exist;
where
public
104
104

defeated; where a wrong is sought to be justified thereby, the

corporate fiction or the notion of legal entity should come to
naught.
Same; Same; Test in determining the applicability of the
doctrine of piercing the veil of corporate fiction.The test in
determining the applicability of the doctrine of piercing the veil of
corporate fiction 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 plaintiffs legal right; and (3) The aforesaid
control and breach of duty must proximately cause the injury or
unjust loss complained of. The absence of any of these elements
prevent piercing the corporate veil.
Same; Same.Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding the
fiction of separate corporate personalities.
Same; Same.Moreover, to disregard the separate juridical
personality of a corporation, the wrong-doing must be clearly and
convincingly established. It cannot be presumed.
Same; Same; Evidence; Hearsay Rule; Affidavits; Affidavits
are inadmissible in evidence where the affiants were not presented
during the course of the proceedings.Granting arguendo that the
Regional Trial Court in this case was not merely acting in a
limited capacity as a probate court, petitioner nonetheless failed
to adduce competent evidence that would have justified the court
to impale the veil of corporate fiction. Truly, the reliance reposed
by petitioner on the affidavits executed by Teresa Lim and Lani
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Wenceslao is unavailing considering that the aforementioned

documents possess no weighty probative value pursuant to the
hearsay rule. Besides it is imperative for us to stress that such
affidavits are inadmissible in evidence inasmuch as the affiants
were not at all presented during the course of the proceedings in
the lower court. To put it differently, for this Court to uphold the
admissibility of said documents would
105
VOL. 323, JANUARY 24, 2000
105
be to relegate from Our duty to apply such basic rule of evidence

in a manner consistent with the law and jurisprudence.
PETITION for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.
Antonio F. Navarrete for petitioner.
Paul Bernard T. Irao for private respondents.
BUENA, J.:
May a corporation, in its universality, be the proper subject
of and be included in the inventory of the estate of a
deceased person?
Petitioner disputes before us through 1 the instant
petition for review on certiorari, the decision of the Court
of Appeals promulgated on 18 April 1996, in CA-GR SP No.
38617, which
nullified and set3 aside the orders dated 4 04
2
July 1995, 12 September 1995 and 15 September 1995 of
the Regional Trial Court of Quezon City, Branch 93, sitting
as a probate court.
Petitioner Rufina Luy Lim is the surviving spouse of the
late Pastor Y. Lim whose estate is the subject of probate
proceedings in Special Proceedings Q-95-23334, entitled,
In Re: Intestate Estate of Pastor Y. Lim Rufina Luy Lim,
represented by George Luy, Petitioner.
________________
1
In CA GR SP No. 38617, promulgated on 18 April 1996, penned by
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Justice Ramon A. Barcelona and concurred in by Justice Artemon D. Luna

and Justice Portia Alino-Hormachuelos, Thirteenth Division.
2
Rollo, p. 83.
Rollo, pp. 92-94.
Ibid., 95-97.
106
106

Private respondents Auto Truck Corporation, Alliance

Marketing Corporation, Speed Distributing, Inc., Active
Distributing, Inc. and Action Company are corporations
formed, organized and existing under Philippine laws and
which owned real properties covered under the Torrens
system.
On 11 June 1994, Pastor Y. Lim died intestate. Herein
petitioner, as surviving spouse and duly represented by her
nephew5 George Luy, filed on 17 March 1995, a joint
petition for the administration of the estate of Pastor Y.
Lim before the Regional Trial Court of Quezon City.
Private respondent corporations, whose properties were
included in the inventory
of the estate of Pastor Y. Lim,
6
then filed
a motion for the lifting of lis pendens and
7
motion for exclusion of certain properties from the estate
of the decedent.8
In an order dated 08 June 1995, the Regional Trial
Court of Quezon City, Branch 93, sitting as a probate court,
granted the private respondents twin motions, in this wise:
Wherefore, the Register of Deeds of Quezon City is hereby
ordered to lift, expunge or delete the annotation of lis pendens on
Transfer Certificates of Title Nos. 116716, 116717, 116718,
116719 and 5182 and it is hereby further ordered that the
properties covered by the same titles as well as those properties
by (sic) Transfer Certificate of Title Nos. 613494, 363123, 236236
and 263236 are excluded from these proceedings.
SO ORDERED.
Subsequently,
Rufina Luy Lim filed a verified amended
9
petition which contained the following averments: 3. The
late Pastor Y. Lim personally owned during his lifetime the
following business entities, to wit:
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________________
5
Docketed as Special Proceedings No. Q-95-23334; Rollo, pp. 76-82.
Rollo, p. 32.
Rollo, pp. 84-87.
Rollo, p. 33.
Ibid.
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107

Business Entity
Address:
xxxx
Alliance
Marketing, Inc.
Block 3, Lot 6, Dacca

BF Homes, Paraaque, Metro Manila.
xxxx
Speed
Distributing, Inc.
910 Barrio Niog,

Aguinaldo Highway,
Bacoor, Cavite.
xxxx
Auto Truck TBA

Corp.
2251 Roosevelt Avenue,

Quezon City.
xxxx
Active
Distributors, Inc.
Block 3, Lot 6, Dacca BF

Homes, Paraaque, Metro Manila.
xxxx
Action Company
100 20th Avenue Murphy, Quezon City

or 92-D Mc-Arthur Highway
Valenzuela Bulacan.
3.1 Although the above business entities dealt and

engaged in business with the public as corporations,
all their capital, assets and equity were however,
personally owned by the late Pastor Y. Lim. Hence
the alleged stockholders and officers appearing in
the respective articles of incorporation of the above
business entities were mere dummies of Pastor Y.
Lim, and they were listed therein only for purposes
of registration with the Securities and Exchange
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Commission.
4. Pastor Lim, likewise, had Time, Savings and
Current Deposits with the following banks: (a)
Metrobank, Grace Park, Caloocan City and Quezon
Avenue, Quezon City Branches and (b) First
Intestate Bank (formerly Producers Bank), Rizal
Commercial Banking Corporation and in other
banks whose identities are yet to be determined.
5. That the following real properties, although
registered in the name of the above entities, were
actually acquired by Pastor Y. Lim during his
marriage with petitioner, to wit:
108
108

Corporation
Title
Location
xxxx
k.
Auto Truck TBA

Corporation Cainta,
Rizal
TCT No. Sto.

617726 Domingo
q.
Alliance Marketing
TCT No. Prance,

27896
Metro
Manila
Copies of the above-mentioned Transfer Certificate of Title and/or

Tax Declarations are hereto attached as Annexes Cto W.
xxxx
7. The aforementioned properties and/or real interests

left by the late Pastor Y. Lim, are all conjugal in
nature, having been acquired by him during the
existence of his marriage with petitioner.
8. There are other real and personal properties owned
by Pastor Y. Lim which petitioner could not as yet
identify. Petitioner, however will submit to this
Honorable Court the identities thereof and the
necessary documents covering the same as soon as
possible.
On 04 July 1995, the Regional Trial Court acting on
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10
petitioners motion issued an order, thus:

Wherefore, the order dated 08 June 1995 is hereby set aside and
the Registry of Deeds of Quezon City is hereby directed to
reinstate the annotation of lis pendens in case said annotation
had already been deleted and/or cancelled said TCT Nos. 116716,
116717, 116718, 116719 and 51282.
Further more (sic), said properties covered by TCT Nos.
613494, 365123, 236256 and 236237 by virtue of the petitioner are
included in the instant petition.
SO ORDERED.
On 04 September 1995, the probate

court appointed Rufina
11
Lim as special administrator and Miguel Lim and Lawyer
________________
10
Ibid., p. 35.
11
Order dated 04 September 1995, issued by RTC-Quezon City Branch
93, Presiding Judge Amado M. Costales, in SP Proc. No. Q-95-23334;

Rollo, pp. 88-91.
109
VOL. 323, JANUARY 24, 2000
109
Donald Lee, as co-special administrators of the estate of

Pastor Y. Lim, after which letters of administration were
accordingly issued.
12
In an order dated 12 September 1995, the probate court
denied anew private respondents motion for exclusion, in
this wise:
The issue precisely raised by the petitioner in her petition is
whether the corporations are the mere alter egos or
instrumentalities of Pastor Lim, Otherwise (sic) stated, the issue
involves the piercing of the corporate veil, a matter that is clearly
within the jurisdiction of this Honorable Court and not the
Securities and Exchange Commission. Thus, in the case of Cease
vs. Court of Appeals, 93 SCRA 483, the crucial issue decided by
the regular court was whether the corporation involved therein
was the mere extension of the decedent. After finding in the
affirmative, the Court ruled that the assets of the corporation are
also assets of the estate. A reading of P.D. 902, the law relied
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upon by oppositors, shows that the SECs exclusive (sic) applies

only to intra-corporate controversy. It is simply a suit to settle the
intestate estate of a deceased person who, during his lifetime,
acquired several properties and put up corporations as his
instrumentalities.
SO ORDERED.
On 15 September 1995, the probate court acting on 13an ex

parte motion filed by petitioner, issued an order the
dispositive portion of which reads:
Wherefore, the parties and the following banks concerned
hereinunder enumerated are hereby ordered to comply strictly
with this order and to produce and submit to the special
administrators, through this Honorable Court within (5) five days
from receipt of
________________
12
Order dated 12 September 1995, issued by RTC-Quezon City, Branch 93,
Presiding Judge Amado M. Costales, in SP Proc. No. Q-9523334; Rollo, pp. 92-94.
13
Order dated 15 September, issued by RTC-Quezon City, Branch 93, Presiding
Judge Amado M. Costales, in SP Proc. No. Q-95-23334; Rollo, pp. 95-97.
110
110

this order their respective records of the savings/current

accounts/time deposits and other deposits in the names of Pastor
Lim and/or corporations above-mentioned, showing all the
transactions made or done concerning savings/current accounts
from January 1994 up to their receipt of this court order.
xxx
xxx
xxx
SO ORDERED.
Private respondent
filed a special civil action for
14
certiorari, with an urgent prayer for a restraining order or
writ of preliminary injunction, before the Court of Appeals
questioning the orders of the Regional Trial Court, sitting
as a probate court.
On 18 April 1996, the Court of Appeals, finding in favor
of herein
private respondents, rendered the assailed
15
decision, the decretal portion of which declares:
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Wherefore, premises considered, the instant special civil action

for certiorari is hereby granted. The impugned orders issued by
respondent court on July 4, 1995 and September 12, 1995 are
hereby nullified and set aside. The impugned order issued by
respondent on September 15, 1995 is nullified insofar as
petitioner corporations bank accounts and records are concerned.
SO ORDERED.
Through the expediency of Rule 45 of the Rules of Court,

herein petitioner Rufina Luy
Lim now comes before us with
16
a lone assignment of error:
The respondent Court of Appeals erred in reversing the orders of
the lower court which merely allowed the preliminary or
provisional inclusion of the private respondents as part of the
estate of the late deceased (sic) Pastor Y. Lim with the respondent
Court of Appeals arrogating unto itself the power to repeal, to
disobey or to ignore the clear and explicit provisions of Rules 81,
83, 84 and 87 of
________________
14
Rollo, p. 32.
15
Ibid., pp. 32-40.
16
Petition for Review in GR No. 124715; Rollo, pp. 20-21.
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VOL. 323, JANUARY 24, 2000
111
the Rules of Court and thereby preventing the petitioner, from

performing her duty as special administrator of the estate as
expressly provided in the said Rules.
Petitioners contentions tread on perilous grounds. In the

instant petition for review, petitioner prays that we
affirm the orders issued by the probate court which were
subsequently set aside by the Court of Appeals.
Yet, before we delve into the merits of the case a review
of the rules on jurisdiction over probate proceedings is
indeed in order.
17
The provisions of Republic Act 7691, which introduced
amendments to Batas Pambansa Blg. 129, are pertinent:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise
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known as the Judiciary Reorganization Act of 1980,is hereby

amended to read as follows:
Section 19. Jurisdiction in civil cases. Regional Trial Courts
shall exercise exclusive jurisdiction:
xxx
xxx
xxx
(4) In all matters of probate, both testate and intestate, where
the gross value of the estate exceeds One Hundred Thousand
Pesos (P100,000) or, in probate matters in Metro Manila, where
such gross value exceeds Two Hundred Thousand Pesos
(P200,000);
xxx
xxx
xxx
Section 3. Section 33 of the same law is. hereby amended to
read as follows:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in Civil Cases.Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts
shall exercise:
________________
17
Republic Act 7691, otherwise known as An Act Expanding the Jurisdiction of
the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts, Amending for the Purpose Batas Pambansa Blg. 129, Otherwise Known as
the Judiciary Reorganization Act of 1980,approved on 25 March 1994.
112
112

1. Exclusive original jurisdiction over civil actions and

probate proceedings, testate and intestate, including the
grant of provisional remedies in proper cases, where the
value of the personal property, estate or amount of the
demand does not exceed One Hundred Thousand Pesos
(P100,000) or, in Metro Manila where such personal
property, estate or amount of the demand does not exceed
Two Hundred Thousand Pesos (P200,000), exclusive of
interest, damages of whatever kind, attorneys fees,
litigation expenses and costs, the amount of which must
be specifically alleged, Provided, that interest, damages of
whatever kind, attorneys, litigation expenses and costs
shall be included in the determination of the filing fees,
Provided further, that where there are several claims or
causes of actions between the same or different parties,
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embodied in the same complaint, the amount of the

demand shall be the totality of the claims in all the causes
of action, irrespective of whether the causes of action arose
out of the same or different transactions;
xxx
xxx
x x x
Simply put, the determination of which court exercises

jurisdiction over matters of probate depends upon the gross
value of the estate of the decedent.
As to the power and authority of the probate court,
petitioner relies heavily on the principle that a probate
court may pass upon title to certain properties, albeit
provisionally, for the purpose of determining whether a
certain property should or should not be included in the
inventory.
In a litany of cases, We defined the parameters by which
the court may extend its probing arms in the determination
of the question of title in probate proceedings.
18
This Court, in Pastor, Jr. vs. Court of Appeals, held:
x x x As a rule, the question of ownership is an extraneous
matter which the probate court cannot resolve with finality. Thus,
for the purpose of determining whether a certain property should
or should not be included in the inventory of estate properties, the
_______________
18
GR No. L-56340, 24 June 1983, 122 SCRA 885.
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113
Probate Court may pass upon the title thereto, but such
determination is provisional, not conclusive, and is subject to the
final decision in a separate action to resolve title.
19
We reiterated the rule in Pereira vs. Court of Appeals:
x x x The function of resolving whether or not a certain property

should be included in the inventory or list of properties to be
administered by the administrator is one clearly within the
competence of the probate court. However, the courts
determination is only provisional in character, not conclusive, and
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is subject to the final decision in a separate action which may be

instituted by the parties.
20
Further, in
Morales vs. CFI of Cavite citing Cuizon vs.
21
Ramolete, We made an exposition on the probate courts
limited jurisdiction:
It is a well-settled rule that a probate court or one in charge of
proceedings whether testate or intestate cannot adjudicate or
determine title to properties claimed to be a part of the estate and
which are equally claimed to belong to outside parties. All that
the said court could do as regards said properties is to determine
whether they should or should not be included in the inventory or
list of properties to be administered by the administrator. If there
is no dispute, well and good; but if there is, then the parties, the
administrator and the opposing parties have to resort to an
ordinary action for a final determination of the conflicting claims
of title because the probate court cannot do so.
22
Again, in Valera vs. Inserto, We had23occasion to elucidate,

through Mr. Justice Andres Narvasa:
________________
19
GR No. L-81147, 20 June 1989, 174 SCRA 154.
20
GR No. L-47125, 29 December 1986, 146 SCRA 373.
21
129 SCRA 495.
22
GR No. L-56504, May 7, 1987, 149 SCRA 533.
23
Later Chief Justice of the Supreme Court.

114
114

Settled is the rule that a Court of First Instance (now Regional

Trial Court), acting as a probate court, exercises but limited
jurisdiction, and thus has no power to take cognizance of and
determine the issue of title to property claimed by a third person
adversely to the decedent, unless the claimant and all other
parties having legal interest in the property consent, expressly or
impliedly, to the submission of the question to the probate court
for adjudg-ment, or the interests of third persons are not thereby
prejudiced, the reason for the exception being that the question of
whether or not a particular matter should be resolved by the court
in the exercise of its general jurisdiction or of its limited
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jurisdiction as a special court (e.g. probate, and registration, etc.),

is in reality not a jurisdictional but in essence of procedural one,
involving a mode of practice which may be waived, x x x
x x x. These considerations assume greater cogency where, as
here, the Torrens title is not in the decedents name but in others,
a situation on which this Court has already had occasion to rule x
x x.(emphasis Ours)
Petitioner, in the present case, argues that the parcels of

land covered under the Torrens system and registered in
the name of private respondent corporations should be
included in the inventory of the estate of the decedent
Pastor Y. Lim, alleging that after all the determination by
the probate court of whether these properties should be
included or not is merely provisional in nature, thus, not
conclusive and subject to a final determination in a
separate action brought for the purpose of adjudging once
and for all the issue of title.
Yet, under the peculiar circumstances, where the parcels
of land are registered in the name of private respondent
corporations,
the jurisprudence pronounced in Bolisay vs.
24
Alcid is of great essence and finds applicability, thus:
It does not matter that respondent-administratrix has evidence
purporting to support her claim of ownership, for, on the other
hand, petitioners have a Torrens title in their favor, which under
the law is endowed with incontestability until after it has been set
aside
________________
24
GR No. L-45494, August 31, 1978, 85 SCRA 213.
115
VOL. 323, JANUARY 24, 2000
115
in the manner indicated in the law itself, which, of course, does

not include, bringing up the matter as a mere incident in special
proceedings for the settlement of the estate of deceased persons, x
x x x x x. In regard to such incident of inclusion or exclusion, We
hold that if a property covered by Torrens title is involved, the
presumptive conclusiveness of such title should be given due
weight, and in the absence of strong compelling evidence to the
contrary, the holder thereof should be considered as the owner of
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the property in controversy until his title is nullified or modified

in an appropriate ordinary action, particularly, when as in the
case at bar, possession of the property itself is in the persons
named in the title, x x x
A perusal of the records would reveal that no strong

compelling evidence was ever presented by petitioner to
bolster her bare assertions as to the title of the deceased
Pastor Y. Lim over the properties. Even so, P.D. 1529,
otherwise known as, The Property Registration Decree,
proscribes collateral attack on Torrens Title, hence:
x x x
xxx
xxx
Section 48. Certificate not subject to collateral attack.A
certificate of title shall not be subject to collateral attack. It
cannot be altered, modified or cancelled except in a direct
proceeding in accordance with law.
In Cuizon vs. Ramolete, where similarly as in the case at

bar, the property subject of the controversy was duly
registered under the Torrens system, We categorically
stated:
x x x Having been apprised of the fact that the property in
question was in the possession of third parties and more
important, covered by a transfer certificate of title issued in the
name of such third parties, the respondent court should have
denied the motion of the respondent administrator and excluded
the property in question from the inventory of the property of the
estate. It had no authority to deprive such third persons of their
possession and ownership of the property, x x x
116
116

Inasmuch as the real properties included in the inventory

of the estate of the late Pastor Y. Lim are in the possession
of and are registered in the name of private respondent
corporations, which under the law possess a personality
separate and distinct from their stockholders, and in the
absence of any cogency to shred the veil of corporate fiction,
the presumption of conclusiveness of said titles in favor of
private respondents should stand undisturbed.
Accordingly, the probate court was remiss in denying
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private respondents motion for exclusion. While it may be

true that the Regional Trial Court, acting in a restricted
capacity and exercising limited jurisdiction as a probate
court, is competent to issue orders involving inclusion or
exclusion of certain properties in the inventory of the estate
of the decedent, and to adjudge, albeit, provisionally the
question of title over properties, it is no less true that such
authority conferred upon by law and reinforced by
jurisprudence, should be exercised judiciously, with due
regard and caution to the peculiar circumstances of each
individual case.
Notwithstanding that the real properties were duly
registered under the Torrens system in the name of private
respondents, and as such were to be afforded the
presumptive conclusiveness of title, the probate court
obviously opted to shut its eyes to this gleamy fact and still
proceeded to issue the impugned orders.
By its denial of the motion for exclusion, the probate
court in effect acted in utter disregard of the presumption
of conclusiveness of title in favor of private respondents.
Certainly, the probate court through such brazen act
transgressed the clear provisions of law and infringed
settled jurisprudence on this matter.
Moreover, petitioner urges that not only the properties
of private respondent corporations are properly part of the
decedents estate but also the private respondent
corporations themselves. To rivet such flimsy contention,
petitioner cited that the late Pastor Y. Lim during his
lifetime, organized and
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117
wholly-owned the five corporations,

which are the private
25
respondents in the26 instant case.
Petitioner thus attached
27
as Annexes F and G of the petition for review
affidavits executed by Teresa Lim and Lani Wenceslao
which among others, contained averments that the
incorporators of Uniwide Distributing, Inc. included on the
list had no actual participation in the organization and
incorporation of the said corporation. The affiants added
that the persons whose names appeared on the articles of
incorporation
of
Uniwide
Distributing,
Inc.,
as
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incorporators thereof, are mere dummies since they have

not actually contributed any amount to the capital stock of
the corporation and have been merely asked by the late
Pastor Y. Lim to affix their respective signatures thereon.
It is settled that a corporation is clothed with
personality separate and distinct from that of the persons
composing it. It may not generally be held liable for that of
the persons composing it. It may not be held liable for the
personal indebtedness of 28its stockholders or those of the
entities connected with it.
Rudimentary is the rule that a corporation is invested
by law with a personality distinct and separate from its
stockholders or members. In the same vein, a corporation
by legal fiction and convenience is an entity shielded by a
protective mantle and imbued by law with a character alien
to the persons comprising it.
Nonetheless, the shield is not at all times invincible.
Thus, in29First Philippine International Bank vs. Court of
Appeals, We enunciated:
________________
25
Rollo, p. 17.
26
Affidavit executed by Teresa T. Lim, dated 13 January 1995; Rollo, p.
74.
27
Affidavit executed by Lani G. Wenceslao; Rollo, p. 75.
28
Mataguina Integrated Wood Products, Inc. vs. Court of Appeals, 263
SCRA 490.
29
252 SCRA 259.

118
118

x x x When the fiction is urged as a means of perpetrating a

fraud or an illegal act or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, the achievement or
perfection of a monopoly or generally the perpetration of knavery
or crime, the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will
be lifted to allow for its consideration merely as an aggregation of
individuals, x x x
Piercing the veil of corporate entity requires the court to

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see through the protective shroud which exempts its

stockholders from liabilities that ordinarily, they could be
subject to, or distinguishes one corporation from a
seemingly separate
one, were it not for the existing
30
corporate fiction.
The corporate mask may be lifted and the corporate veil
may be pierced when a corporation is just but the alter ego
of a person or of another corporation. Where badges of
fraud exist, where public convenience is defeated; where a
wrong is sought to be justified thereby, the corporate
fiction
31
or the notion of legal entity should come to naught:
Further, the test in determining the applicability of the
doctrine of piercing the veil of corporate fiction 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 plaintiffs legal
right; and (3) The aforesaid control and breach of duty
must proximately cause the injury or unjust loss
complained of. The absence of any
of these elements
32
prevent piercing the corporate veil.
________________
30
Traders Royal Bank vs. Court of Appeals, 269 SCRA 15.
31
Concept Builders, Inc vs. NLRC, 257 SCRA 149.
32
257 SCRA 149.

119
VOL. 323, JANUARY 24, 2000
119
Mere ownership by a single stockholder or by another

corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for
disregarding 33 the
fiction
of
separate
corporate
personalities.
Moreover, to disregard the separate juridical personality
of a corporation, the wrong-doing must be clearly and
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34
convincingly established. It cannot be presumed.

Granting arguendo that the Regional Trial Court in this
case was not merely acting in a limited capacity as a
probate court, petitioner nonetheless failed to adduce
competent evidence that would have justified the court to
impale the veil of corporate fiction. Truly, the reliance
reposed by petitioner on the affidavits executed by Teresa
Lim and Lani Wenceslao is unavailing considering that the
aforementioned documents possess no weighty probative
value pursuant to the hearsay rule. Besides it is imperative
for us to stress that such affidavits are inadmissible in
evidence inasmuch as the affiants were not at all presented
during the course of the proceedings in the lower court. To
put it differently, for this Court to uphold the admissibility
of said documents would be to relegate from Our duty to
apply such basic rule of evidence in a manner consistent
with the law and jurisprudence.
Our pronouncement
in Peoples Bank and Trust
35
Company vs. Leonidas finds pertinence:
Affidavits are classified as hearsay evidence since they are not
generally prepared by the affiant but by another who uses his own
language in writing the affiants statements, which may thus be
either omitted or misunderstood by the one writing them.
Moreover, the adverse party is deprived of the opportunity to
cross-examine the affiants. For this reason, affidavits are
generally rejected for being hearsay, unless the affiant themselves
are placed on the witness stand to testify thereon.
_______________
33
Traders Royal Bank vs. Court of Appeals, 269 SCRA 15.
34
Mataguina Integrated Wood Products, Inc. vs. Court of Appeals, 263
SCRA 491, citing Del Rosario vs. NLRC, GR No. 85416, 24 July 1990, 187
SCRA 777,
35
207 SCRA 164.

120
120

36
As to the order of the lower court, dated 15 September

1995, the Court of Appeals correctly observed that the
Regional Trial Court, Branch 93 acted without jurisdiction
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in issuing said order. The probate court had no authority to

demand the production of bank accounts in the name of the
private respondent corporations.
WHEREFORE, in view of the foregoing disquisitions,
the instant petition is hereby DISMISSED for lack of merit
and the decision of the Court of Appeals which nullified
and set aside the orders issued by the Regional Trial Court,
Branch 93, acting as a probate court, dated 04 July 1995
and 12 September 1995 is AFFIRMED.
SO ORDERED.
Bellosillo (Chairman), Mendoza, Quisumbing and
De Leon, Jr., JJ., concur.
Petition dismissed, judgment affirmed.
Notes.The question of whether a corporation is a
mere alter ego, a mere sheet or paper corporation, a sham
or a subterfuge is purely one of fact. (Concept Builders, Inc.
vs. National Labor Relations Commission, 257 SCRA 149
[1996])
For the separate juridical personality of a corporation to
be disregarded, the wrongdoing must be clearly and
convincingly establishedit cannot be presumed. (Matuguina
Integrated Wood Products, Inc. vs. Court of Appeals, 263
SCRA 490 [1996])
Even if the corporate fiction of a juridical entity is
disregarded, still private individuals cannot be divested of
their shares of stock unless, in a proper forum, they have
been shown to have committed some wrongdoing in
acquiring them. (Republic vs. Sandiganbayan, 266 SCRA
515 [1997])
o0o
_______________
36
Rollo, pp. 95-97.

121
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SUPREME COURT REPORTS ANNOTATED

G.R. No. 124715. January 24, 2000.

RUFINA LUY LIM, petitioner, vs. COURT OF APPEALS,

VOL. 323, JANUARY 24, 2000

Lim vs. Court of Appeals

separate and distinct from their stockholders, and in the absence

SUPREME COURT REPORTS ANNOTATED

defeated; where a wrong is sought to be justified thereby, the

Wenceslao is unavailing considering that the aforementioned

VOL. 323, JANUARY 24, 2000

Lim vs. Court of Appeals

be to relegate from Our duty to apply such basic rule of evidence

PETITION for review on certiorari of a decision of the

In CA GR SP No. 38617, promulgated on 18 April 1996, penned by

Justice Ramon A. Barcelona and concurred in by Justice Artemon D. Luna

Rollo, pp. 92-94.

SUPREME COURT REPORTS ANNOTATED

Private respondents Auto Truck Corporation, Alliance

Docketed as Special Proceedings No. Q-95-23334; Rollo, pp. 76-82.

Rollo, pp. 84-87.

VOL. 323, JANUARY 24, 2000

Lim vs. Court of Appeals

Block 3, Lot 6, Dacca

910 Barrio Niog,

Auto Truck TBA

2251 Roosevelt Avenue,

Block 3, Lot 6, Dacca BF

100 20th Avenue Murphy, Quezon City

3.1 Although the above business entities dealt and

SUPREME COURT REPORTS ANNOTATED

Auto Truck TBA

TCT No. Sto.

TCT No. Prance,

Copies of the above-mentioned Transfer Certificate of Title and/or

7. The aforementioned properties and/or real interests

petitioners motion issued an order, thus:

On 04 September 1995, the probate

Order dated 04 September 1995, issued by RTC-Quezon City Branch

93, Presiding Judge Amado M. Costales, in SP Proc. No. Q-95-23334;

VOL. 323, JANUARY 24, 2000

Lim vs. Court of Appeals

Donald Lee, as co-special administrators of the estate of

upon by oppositors, shows that the SECs exclusive (sic) applies

On 15 September 1995, the probate court acting on 13an ex

Order dated 12 September 1995, issued by RTC-Quezon City, Branch 93,

Order dated 15 September, issued by RTC-Quezon City, Branch 93, Presiding

Judge Amado M. Costales, in SP Proc. No. Q-95-23334; Rollo, pp. 95-97.

SUPREME COURT REPORTS ANNOTATED

this order their respective records of the savings/current

Wherefore, premises considered, the instant special civil action

Through the expediency of Rule 45 of the Rules of Court,

Ibid., pp. 32-40.

Petition for Review in GR No. 124715; Rollo, pp. 20-21.

VOL. 323, JANUARY 24, 2000

Lim vs. Court of Appeals

the Rules of Court and thereby preventing the petitioner, from

Petitioners contentions tread on perilous grounds. In the

known as the Judiciary Reorganization Act of 1980,is hereby