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 the instant petition for review on certiorari, the decision1 [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 and Justice Portia Alino-Hormachuelos, Thirteenth Division.] of the Court of Appeals promulgated on 18 April 1996, in CA-GR SP No. 38617, which nullified and set aside the orders dated 04 July 19952 [Rollo, p.83.], 12 September 19953 [Rollo, pp.92-94.] and 15 September 19954 [Ibid, 95-97.] 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".

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 nephew George Luy, filed on 17 March 1995, a joint petition5 [Docketed as Special Proceeding No. Q-95-23334;Rollo, pp. 76-82.] 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, then filed a motion6 [Rollo, p.32.] for the lifting of lis pendens and motion7 [Rollo, pp. 84-87.] for exclusion of certain properties from the estate of the decedent.

In an order8 [Rollo, p.33.] 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:

Subsequently, Rufina Luy Lim filed a verified amended petition9 [Ibid.] which contained the following averments:

On 04 July 1995, the Regional Trial Court acting on petitioner’s motion issued an order10 [Ibid, p.35.], thus:

On 04 September 1995, the probate court appointed Rufina Lim as special administrator11 [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.] and Miguel Lim and Lawyer Donald Lee, as co-special administrators of the estate of Pastor Y. Lim, after which letters of administration were accordingly issued.

In an order12 [Order dated 12 September 1995, issued by RTC- Quezon City, Branch 93, Presiding Judge Amado M. Costales, in SP. Proc. No. Q-95-23334; Rollo, pp. 92-94.] dated 12 September 1995, the probate court denied anew private respondents’ motion for exclusion, in this wise:

On 15 September 1995, the probate court acting on an ex parte motion filed by petitioner, issued an order13 [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.] the dispositive portion of which reads:

Private respondent filed a special civil action for certiorari14 [Rollo, p. 32.], 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 decision15 [Ibid, pp. 32-40.], the decretal portion of which declares:

Through the expediency of Rule 45 of the Rules of Court, herein petitioner Rufina Luy Lim now comes before us with a lone assignment of error16 [Petition for Review in GR No. 124715; Rollo, pp. 20-21.]:

Petitioner’s 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.

The provisions of Republic Act 769117 [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.], which introduced amendments to Batas Pambansa Blg. 129, are pertinent:

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.

This Court, in PASTOR, JR. vs. COURT OF APPEALS,18 [GR No. L-56340, 24 June 1983; 122 SCRA 885.] held:

We reiterated the rule in PEREIRA vs. COURT OF APPEALS 19 [GR No. L-81147, 20 June 1989; 174 SCRA 154.]:

Further, in MORALES vs. CFI OF CAVITE20 [GR No. L-47125, 29 December 1986; 146 SCRA 373.] citing CUIZON vs. RAMOLETE21 [129 SCRA 495.], We made an exposition on the probate court’s limited jurisdiction:

Again, in VALERA vs. INSERTO22 [GR No. L-56504, May 7, 1987; 149 SCRA 533.], We had occasion to elucidate, through Mr. Justice Andres Narvasa23 [Later Chief Justice of the Supreme Court.]:

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., ALCID24 [GR No. L-45494, August 31, 1978; 85 SCRA 213.] is of great essence and finds applicability, thus:

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:

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:

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 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 decedent’s 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 wholly-owned the five corporations, which are the private respondents in the instant case.25 [Rollo, p.17.] Petitioner thus attached as Annexes "F"26 [Affidavit executed by Teresa T. Lim, dated 13 January 1995; Rollo, p.74.] and "G"27 [Affidavit executed by Lani G. Wenceslao; Rollo, p. 75.] 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 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 its stockholders or those of the entities connected with it.28 [Mataguina Integrated Wood Products, Inc. vs. Court of Appeals, 263 SCRA 490.]

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, in FIRST PHILIPPINE INTERNATIONAL BANK vs. COURT OF APPEALS29 [252 SCRA 259.], We enunciated:

Piercing 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.30 [Traders Royal Bank vs. Court of Appeals, 269 SCRA 15.]

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 legal entity should come to naught.31 [Concept Builders, Inc. vs. NLRC, 257, SCRA 149.]

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 prevent "piercing the corporate veil".32 [257 SCRA 149.]

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.33 [Traders Royal Bank vs. Court of Appeals,269 SCRA 15.]

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

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 PEOPLE BANK AND TRUST COMPANY vs. LEONIDAS35 [207 SCRA 164.] finds pertinence:

As to the order36 [Rollo, pp.95-97.] of the lower court, dated 15 September 1995, the Court of Appeals correctly observed that the Regional Trial Court, Branch 93 acted without jurisdiction 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.

Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr., JJ., concur.