323 SCRA 102 Business Organization Corporation Law

Piercing the Veil of Corporate Fiction

In 1994, Pastor Lim died. His wife, Rufina Lim petitioned with the
lower court, acting as a probate court, for the inclusion of 5
corporations into the inventory of the estate of Pastor Lim. The 5
corporations were: Auto Truck Corporation, Alliance Marketing
Corporation, Speed Distributing, Inc., Active Distributing, Inc. and
Action Company. Rufina alleged that the assets of these corporations
were owned wholly by Pastor; that these corporations themselves are
owned by Pastor and they are mere dummies of Pastor. The
corporations filed a motion for exclusion from the estate. They
presented proof (Torrens Titles) showing that the assets of the
corporations are in their respective names and titles. The probate
court denied their motion. The Court of Appeals reversed the decision
of the probate court.
ISSUE: Whether or not the corporations and/or their assets should be
included in the inventory of the estate.
HELD: No. As regards the assets, the corporations were able to
present their respective Torrens Titles over the disputed assets. It is
true that a probate court may pass upon the question ownership
albeit in a provisional manner but still, a Torrens Title cannot be
attacked collaterally in a probate proceeding, it must be attacked
directly in a separate proceeding.
As regards the corporations, to include them in the inventory is
tantamount to the piercing of the veil of corporate fiction because the
probate court effectively adopted the theory of Rufina. This cannot be
done. Firstly, the probate court is sitting in a limited capacity.
Secondly, Rufina was not able to present sufficient evidence that
indeed the corporations are mere conduits of Pastor. 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. The veil

cant be pierced without any showing that indeed the corporation is
being used merely as a dummy. To disregard the separate juridical
personality of a corporation, the wrong-doing must be clearly and
convincingly established. It cannot be presumed.