Lim vs CA Case Digest GR 124715 ; January 24, 2000 ; 323 SCRA 102

Lim vs CA Case Digest

 GR 124715 ; January 24, 2000 ; 323 SCRA 102

PRINCIPLE/S:

Special Proceedings

a) Jurisdiction over matters of probate

Jurisdiction over matters of probate depends upon the gross value of the estate of the decedent (Batas Pambansa Blg. 129 (Judiciary Reorganization Act of 1980)

RTC:

Outside Metro Manila - Gross value of the estate exceeds One Hundred Thousand Pesos (P100,000)

Metro Manila - Gross value exceeds Two Hundred Thousand Pesos (P200,000)

MTC:

Outside Metro Manila - does not exceed One Hundred Thousand Pesos (P100,000) Metro Manila - does not exceed Two Hundred Thousand Pesos (P200,000)

b) Authority of the probate court over issues of ownership

General Rule: Probate court may provisionally pass upon title to certain properties for the purpose of determining whether a certain property should or should not be included in the inventory. This ruling of the probate court is subject to the final decision in a separate action to resolve title.

Reason: Regional Trial Court, acting as a probate court, exercises limited jurisdiction.

Exceptions:

1) 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 adjudgment, or

2) The interests of third persons are not thereby prejudiced

Land Titles

a) Collateral attack on Torrens Title proscribed

P.D. 1529 (The Property Registration Decree) proscribes collateral attack on Torrens Title.

b) Presumptive conclusiveness of title

- If a property covered by Torrens title is involved, the presumptive conclusiveness of such title should be given due weight.

- The holder of the title should be considered as the owner of the property in controversy until his title is nullified or modified in an appropriate ordinary action or in the absence of strong compelling evidence to the contrary.

Corporation Law

a) Corporation has its own legal personality

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. 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.

b) When piercing the corporate veil doctrine is applicable

1) Corporation is just but the alter ego of a person or of another corporation.

2) Where badges of fraud exist.

3) Where public convenience is defeated.

4) Where a wrong is sought to be justified thereby.

c) Test in determining the applicability of the doctrine of piercing the veil of corporate fiction:

(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.

NOTE: The absence of any of these elements prevent "piercing the corporate veil".

Evidence

a) Affidavits are hearsay evidence

Reasons:

- Not generally prepared by the affiant but by another who uses his own language in writing the affiant's statements, which may thus be either omitted or misunderstood by the one writing them.

- Adverse party is deprived of the opportunity to cross-examine the affiants.

b) How to make an affidavit admissible as evidence

The affiant themselves are placed on the witness stand to testify on the affidavits.

FACTS:  Pastor Lim died intestate. Petitioner, Pastor Lim’s surviving spouse, filed a joint petition for the administration of the estate of Pastor Lim before the RTC. Private respondents corporations, whose properties were included in the inventory of the estate of Pastor Lim, filed a motion for the lifting of lis pendens and motion for exclusion of certain properties from the estate of the decedent. RTC, as probate court, granted these 2 motions. Petitioner filed a verified amended petition. RTC acting on petitioner's motion issued an order directing the Registry of Deeds to reinstate the annotation of lis pendens. Probate court also issued an order denying private respondents' motion for exclusion.

Private respondent filed a special civil action for certiorari before the CA questioning the orders of the Regional Trial Court, sitting as a probate court. CA ruled in favor of herein private respondents. Petitioner files this instant petition praying that SC affirm the orders issued by the probate court which were subsequently set aside by the Court of Appeals.

ISSUE/S: WON the doctrine of piercing the veil of corporate entity is applicable to be able to include in the probate proceedings the company formed by deceased Pastor Lim, which are the respondent corporation.

HELD: NO since 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.

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 protective mantle and imbued with by law with a character alien to the persons comprising it.

Nonetheless, the shield is not at all times invincible. 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 or the notion of the legal entity should come to naught. (Piercing the Corporate Veil Doctrine)

Further, the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: 1.) Control, not merely the 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 so separate mind, will or existence of its own; 2.) Such control must have been used by the defendant to commit fraud on wrong to perpetuate the violation of a statutory or other positive legal duty, on 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.”

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 personalities. Moreover, to disregard the separate juridical personality of a corporation, the wrong doing must be clearly and convincingly established, it cannot be presumed.

Furthermore, granting arguendo that the RTC 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. The reliance reposed by petitioner on the affidavits executed by Lim and Wenceslao is unavailing considering that the aforementioned documents possess no weighty probative value pursuant to the hearsay rule.