G.R. No.

133000 October 2, 2001

PATRICIA NATCHER, petitioner,

vs.
HON. COURT OFAPPEALS AND THE HEIR OF GRACIANO DEL ROSARIO – LETICIA DEL
ROSARIO, EMILIA DEL RESORIO – MANANGAN, ROSALINDA FUENTES LLANA, RODOLFO
FUENTES, ALBERTO FUENTES, EVELYN DEL ROSARIO, and EDUARDO DEL
ROSARIO, respondent..

BUENA, J.:

May a Regional Trial Court, acting as a court of general jurisdiction in an action for reconveyance annulment of
title with damages, adjudicate matters relating to the settlement of the estate of a deceased person particularly on
questions as to advancement of property made by the decedent to any of the heirs?

Sought to be reversed in this petition for review on certiorari under Rule 45 is the decision1 of public
respondent Court of Appeals, the decretal portion of which declares:

"Wherefore in view of the foregoing considerations, judgment appealed from is reversed and set aside
and another one entered annulling the Deed of Sale executed by Graciano Del Rosario in favor of
defendant-appellee Patricia Natcher, and ordering the Register of Deeds to Cancel TCT No. 186059
and reinstate TCT No. 107443 without prejudice to the filing of a special proceeding for the settlement
of the estate of Graciano Del Rosario in a proper court. No costs.

"So ordered."

Spouses Graciano del Rosario and Graciana Esguerra were registered owners of a parcel of land with an area of
9,322 square meters located in Manila and covered by Transfer Certificate of Title No. 11889. Upon the death of
Graciana in 1951, Graciano, together with his six children, namely: Bayani, Ricardo, Rafael, Leticia, Emiliana
and Nieves, entered into an extrajudicial settlement of Graciana's estate on 09 February 1954 adjudicating and
dividing among themselves the real property subject of TCT No. 11889. Under the agreement, Graciano
received 8/14 share while each of the six children received 1/14 share of the said property. Accordingly, TCT
No. 11889 was cancelled, and in lieu thereof, TCT No. 35980 was issued in the name of Graciano and the Six
children.1âwphi1.nêt

Further, on 09 February 1954, said heirs executed and forged an "Agreement of Consolidation-Subdivision of
Real Property with Waiver of Rights" where they subdivided among themselves the parcel of land covered by
TCT No. 35980 into several lots. Graciano then donated to his children, share and share alike, a portion of his
interest in the land amounting to 4,849.38 square meters leaving only 447.60 square meters registered under
Graciano's name, as covered by TCT No. 35988. Subsequently, the land subject of TCT No. 35988 was further
subdivided into two separate lots where the first lot with a land area of 80.90 square meter was registered under
TCT No. 107442 and the second lot with a land area of 396.70 square meters was registered under TCT No.
107443. Eventually, Graciano sold the first lot2 to a third person but retained ownership over the second lot. 3

On 20 March 1980, Graciano married herein petitioner Patricia Natcher. During their marriage, Graciano sold
the land covered by TCT No. 107443 to his wife Patricia as a result of which TCT No. 186059 4 was issued in
the latter's name. On 07 October 1985,Graciano died leaving his second wife Patricia and his six children by his
first marriage, as heirs.

In a complaint5 filed in Civil Case No. 71075 before the Regional Trial Court of Manila, Branch 55, herein
private respondents alleged that upon Graciano's death, petitioner Natcher, through the employment of fraud,
misrepresentation and forgery, acquired TCT No. 107443, by making it appear that Graciano executed a Deed of
Sale dated 25 June 19876 in favor herein petitioner resulting in the cancellation of TCT No. 107443 and the
issuance of TCT no. 186059 in the name of Patricia Natcher. Similarly, herein private respondents alleged in
said complaint that as a consequence of such fraudulent sale, their legitimes have been impaired.

In her answer7 dated 19 August 1994, herein petitioner Natcher averred that she was legally married to Graciano
in 20 March 1980 and thus, under the law, she was likewise considered a compulsory heir of the latter.
Petitioner further alleged that during Graciano's lifetime, Graciano already distributed, in advance, properties to
his children, hence, herein private respondents may not anymore claim against Graciano's estate or against
herein petitioner's property.

After trial, the Regional Trial Court of Manila, Branch 55, rendered a decision dated 26 January 1996 holding: 8

"1) The deed of sale executed by the late Graciano del Rosario in favor of Patricia Natcher is prohibited
by law and thus a complete nullity. There being no evidence that a separation of property was agreed
upon in the marriage settlements or that there has been decreed a judicial separation of property
between them, the spouses are prohibited from entering (into) a contract of sale;

"2) The deed as sale cannot be likewise regarded as a valid donation as it was equally prohibited by law
under Article 133 of the New Civil Code;

"3) Although the deed of sale cannot be regarded as such or as a donation, it may however be regarded
as an extension of advance inheritance of Patricia Natcher being a compulsory heir of the deceased."

On appeal, the Court of Appeals reversed and set aside the lower court's decision ratiocinating, inter alia:

"It is the probate court that has exclusive jurisdiction to make a just and legal distribution of the estate.
The court a quo, trying an ordinary action for reconveyance / annulment of title, went beyond its
jurisdiction when it performed the acts proper only in a special proceeding for the settlement of estate
of a deceased person. XXX

"X X X Thus the court a quo erred in regarding the subject property as advance inheritance. What the
court should have done was merely to rule on the validity of (the) sale and leave the issue on
advancement to be resolved in a separate proceeding instituted for that purpose. XXX"

Aggrieved, herein petitioner seeks refuge under our protective mantle through the expediency of Rule 45 of the
Rules of Court and assails the appellate court's decision "for being contrary to law and the facts of the case."

We concur with the Court of Appeals and find no merit in the instant petition.

Section 3, Rule 1 of the 1997 Rules of Civil Procedure defines civil action and special proceedings, in this wise:

"XXX a) A civil action is one by which a party sues another for the enforcement or protection of a
right, or the prevention or redress of a wrong.

"A civil action may either be ordinary or special. Both are government by the rules for ordinary civil
actions, subject to specific rules prescribed for a special civil action.

"XXX

"c) A special proceeding is a remedy by which a party seeks to establish a status, a right or a particular
fact."

As could be gleaned from the foregoing, there lies a marked distinction between an action and a special
proceeding. An action is a formal demand of one's right in a court of justice in the manner prescribed by the
court or by the law. It is the method of applying legal remedies according to definite established rules. The term
"special proceeding" may be defined as an application or proceeding to establish the status or right of a party, or
a particular fact. Usually, in special proceedings, no formal pleadings are required unless the statute expressly so
provides. In special proceedings, the remedy is granted generally upon an application or motion." 9

Citing American Jurisprudence, a noted authority in Remedial Law expounds further:

 "It may accordingly be stated generally that actions include those proceedings which are instituted and
prosecuted according to the ordinary rules and provisions relating to actions at law or suits in equity,
and that special proceedings include those proceedings which are not ordinary in this sense, but is
instituted and prosecuted according to some special mode as in the case of proceedings commenced
without summons and prosecuted without regular pleadings, which are characteristics of ordinary
actions. XXX A special proceeding must therefore be in the nature of a distinct and independent
proceeding for particular relief, such as may be instituted independently of a pending action, by petition
or motion upon notice."10

Applying these principles, an action for reconveyance and annulment of title with damages is a civil action,
whereas matters relating to settlement of the estate of a deceased person such as advancement of property made
by the decedent, partake of the nature of a special proceeding, which concomitantly requires the application of
specific rules as provided for in the Rules of Court.

Clearly, matters which involve settlement and distribution of the estate of the decedent fall within the exclusive
province of the probate court in the exercise of its limited jurisdiction.

Thus, under Section 2, Rule 90 of the Rules of Court, questions as to advancement made or alleged to have been
made by the deceased to any heir may be heard and determined by the court having jurisdiction of the estate
proceedings; and the final order of the court thereon shall be binding on the person raising the questions and on
the heir.

While it may be true that the Rules used the word "may", it is nevertheless clear that the same
provision11contemplates a probate court when it speaks of the "court having jurisdiction of the estate
proceedings".

Corollarily, the Regional Trial Court in the instant case, acting in its general jurisdiction, is devoid of authority
to render an adjudication and resolve the issue of advancement of the real property in favor of herein petitioner
Natcher, inasmuch as Civil Case No. 471075 for reconveyance and annulment of title with damages is not, to
our mind, the proper vehicle to thresh out said question. Moreover, under the present circumstances, the RTC of
Manila, Branch 55 was not properly constituted as a probate court so as to validly pass upon the question of
advancement made by the decedent Graciano Del Rosario to his wife, herein petitioner Natcher.

At this point, the appellate court's disquisition is elucidating:

"Before a court can make a partition and distribution of the estate of a deceased, it must first settle the
estate in a special proceeding instituted for the purpose. In the case at hand, the court a quo determined
the respective legitimes of the plaintiffs-appellants and assigned the subject property owned by the
estate of the deceased to defendant-appellee without observing the proper proceedings provided (for)
by the Rules of Court. From the aforecited discussions, it is clear that trial courts trying an ordinary
action cannot resolve to perform acts pertaining to a special proceeding because it is subject to specific
prescribed rules. Thus, the court a quo erred in regarding the subject property as an advance
inheritance."12

In resolving the case at bench, this Court is not unaware of our pronouncement in Coca vs.
Borromeo13 and Mendoza vs. Teh14 that whether a particular matter should be resolved by the Regional Trial
Court (then Court of First Instance) in the exercise of its general jurisdiction or its limited probate jurisdiction is
not a jurisdictional issue but a mere question of procedure. In essence, it is procedural question involving a
mode of practice "which may be waived".15

Notwithstanding, we do not see any waiver on the part of herein private respondents inasmuch as the six
children of the decedent even assailed the authority of the trail court, acting in its general jurisdiction, to rule on
this specific issue of advancement made by the decedent to petitioner.

Analogously, in a train of decisions, this Court has consistently enunciated the long standing principle that
although generally, a probate court may not decide a question of title or ownership, yet if the interested parties
are all heirs, or the question is one of collation or advancement, or the parties consent to the assumption of
jurisdiction by the probate court and the rights of third parties are not impaired, then the probate court is
competent to decide the question of ownership.16

Similarly in Mendoza vs. Teh, we had occasion to hold:

"In the present suit, no settlement of estate is involved, but merely an allegation seeking appointment as
estate administratrix which does not necessarily involve settlement of estate that would have invited
the exercise of the limited jurisdiction of a probate court.17 (emphasis supplied)

Of equal importance is that before any conclusion about the legal share due to a compulsory heir may be
reached, it is necessary that certain steps be taken first.18 The net estate of the decedent must be ascertained, by
deducting all payable obligations and charges from the value of the property owned by the deceased at the time
of his death; then, all donations subject to collation would be added to it. With the partible estate thus
determined, the legitime of the compulsory heir or heirs can be established; and only thereafter can it be
ascertained whether or not a donation had prejudiced the legitimes. 19

A perusal of the records, specifically the antecedents and proceedings in the present case, reveals that the trial
court failed to observe established rules of procedure governing the settlement of the estate of Graciano Del
Rosario. This Court sees no cogent reason to sanction the non-observance of these well-entrenched rules and
hereby holds that under the prevailing circumstances, a probate court, in the exercise of its limited jurisdiction,
is indeed the best forum to ventilate and adjudge the issue of advancement as well as other related matters
involving the settlement of Graciano Del Rosario's estate.1âwphi1.nêt

WHEREFORE, premises considered, the assailed decision of the Court of Appeals is hereby AFFIRMED and
the instant petition is DISMISSED for lack of merit.
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.

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 the instant petition for review on certiorari, the decision1 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 , 12 September 19953 and 15 September 19954 of the Regional Trial Court of Quezon City, Branch
93, sitting as a probate court.

Petitioner Rufina Luy Lim is the surviving spouse of 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".1âwphi1.nêt

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, fried on 17 March 1995, a joint petition 5 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 for the lifting of lis pendens and motion7 for exclusion of certain properties from the estate
of the decedent.

In an order8 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 petition9 which contained the following averments:

3. The late Pastor Y. Lim personally owned during his lifetime the following business entities, to wit:

Business
Address:
Entity

xxx xxx xxx

Alliance Block 3, Lot 6, Dacca BF

Marketing, Inc. Homes, Parañaque, Metro
Manila.
 xxx xxx xxx

Speed
910 Barrio Niog, Aguinaldo
Distributing
Highway, Bacoor, Cavite.
Inc.

xxx xxx xxx

Auto Truck 2251 Roosevelt Avenue, Quezon

TBA Corp. City.

xxx xxx xxx

Active Block 3, Lot 6, Dacca BF

Distributors, Homes, Parañaque, Metro
Inc. Manila.

xxx xxx xxx

Action 100 20th Avenue Murphy,

Company 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
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:

Corporation Title Location

xxx xxx xxx

k. Auto Truck TCT No. 617726 Sto. Domingo TBA

Corporation Cainta, Rizal

q. Alliance Marketing TCT No. 27896 Prance, Metro Manila

Copies of the above-mentioned Transfer Certificate of Title and/or Tax Declarations are hereto
attached as Annexes "C" to "W".

xxx xxx xxx

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 petitioner's motion issued an order 10 , 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 Lim as special administrator 11 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 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 upon by oppositors, shows that the SEC's 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 an ex parte motion filed by petitioner, issued an order13 the
dispositive portion of which reads:

Wherefore, the parties and the following banks concerned herein under 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 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 certiorari14 , 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 , the decretal portion of which declares:

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 a lone assignment of
error16 :

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 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.

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 , which introduced amendments to Batas Pambansa Blg. 129, are
pertinent:

Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act
of 1980", is hereby amended to read as follows:

Sec. 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

Sec. 3. Section 33 of the same law is hereby amended to read as follows:

Sec. 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:

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, attorney's fees, litigation expenses and costs, the amount of which
must be specifically alleged, Provided, that interest, damages of whatever kind, attorney's,
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, 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 xxx

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 held:

. . . 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 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.

We reiterated the rule in PEREIRA vs. COURT OF APPEALS19 :

. . . 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 court's determination is only provisional in character, not conclusive, and
is subject to the final decision in a separate action which may be instituted by the parties.

Further, in MORALES vs. CFI OF CAVITE20 citing CUIZON vs. RAMOLETE21 , We made an exposition on the
probate court's 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.

Again, in VALERA vs. INSERTO22 , We had occasion to elucidate, through Mr. Justice Andres Narvasa 23 :

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 adjudgment, 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 jurisdiction as
a special court (e.g. probate, land registration, etc.), is in reality not a jurisdictional but in essence of
procedural one, involving a mode of practice which may be waived. . . .

. . . . These considerations assume greater cogency where, as here, the Torrens title is not in the
decedent's name but in others, a situation on which this Court has already had occasion to rule . . . .
(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., ALCID 24 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 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. . . .

. . . . 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 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. . . .

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:

xxx xxx xxx

Sec. 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:

. . . 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. . . .

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 Petitioner thus attached as Annexes
"F"26 and "G"27 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 and 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

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 , We enunciated:

. . . 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. . . .

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

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

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

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

Moreover, to disregard the separate juridical personality of a corporation, the wrong-doing must be clearly and
convincingly established. It cannot be presumed.34

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 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 affiant's 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.

As to the order36 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.1âwphi1.nêt
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-55509 April 27, 1984

ETHEL GRIMM ROBERTS, petitioner,

vs.
JUDGE TOMAS R. LEONIDAS, Branch 38, Court of First Instance of Manila; MAXINE TATE-
GRIMM, EDWARD MILLER GRIMM II and LINDA GRIMM, respondents.

N. J. Quisumbing and Associates for petitioners.

Angara, Abello, Concepcion, Regala and Cruz for respondents.

AQUINO, J.:ñé+.£ªwph!1

The question in this case is whether a petition for allowance of wills and to annul a partition, approved in
an intestateproceeding by Branch 20 of the Manila Court of First Instance, can be entertained by its Branch
38 (after a probate in the Utah district court).

Antecedents. — Edward M. Grimm an American resident of Manila, died at 78 in the Makati Medical Center on
November 27, 1977. He was survived by his second wife, Maxine Tate Grimm and their two children, named
Edward Miller Grimm II (Pete) and Linda Grimm and by Juanita Grimm Morris and Ethel Grimm Roberts
(McFadden), his two children by a first marriage which ended in divorce (Sub-Annexes A and B. pp. 36-47,
Rollo).

He executed on January 23, 1959 two wills in San Francisco, California. One will disposed of his Philippine
estate which he described as conjugal property of himself and his second wife. The second win disposed of his
estate outside the Philippines.

In both wills, the second wife and two children were favored. The two children of the first marriage were given
their legitimes in the will disposing of the estate situated in this country. In the will dealing with his property
outside this country, the testator said: têñ.£îhqwâ£

I purposely have made no provision in this will for my daughter, Juanita Grimm Morris, or my
daughter, Elsa Grimm McFadden (Ethel Grimm Roberts), because I have provided for each of
them in a separate will disposing of my Philippine property. (First clause, pp. 43-47, Rollo).

The two wills and a codicil were presented for probate by Maxine Tate Grimm and E. LaVar Tate on March 7,
1978 in Probate No. 3720 of the Third Judicial District Court of Tooele County, Utah. Juanita Grimm Morris of
Cupertino, California and Mrs. Roberts of 15 C. Benitez Street, Horseshoe Village, Quezon City were notified
of the probate proceeding (Sub-Annex C, pp. 48-55, Rollo).

Maxine admitted that she received notice of the intestate petition filed in Manila by Ethel in January, 1978 (p.
53, Rollo). In its order dated April 10, 1978, the Third Judicial District Court admitted to probate the two wills
and the codicil It was issued upon consideration of the stipulation dated April 4, 1978 "by and between the
attorneys for Maxine Tate Grimm, Linda Grimm, Edward Miller Grimm II, E. LaVar Tate, Juanita Kegley
Grimm (first wife), Juanita Grimm Morris and Ethel Grimm Roberts" (Annex C, pp. 48-51, Rollo).

Two weeks later, or on April 25, 1978, Maxine and her two children Linda and Pete, as the first parties, and
Ethel, Juanita Grimm Morris and their mother Juanita Kegley Grimm as the second parties, with knowledge of
the intestate proceeding in Manila, entered into a compromise agreement in Utah regarding the estate. It was
signed by David E. Salisbury and Donald B. Holbrook, as lawyers of the parties, by Pete and Linda and the
attorney-in-fact of Maxine and by the attorney-in-fact of Ethel, Juanita Grimm Morris and Juanita Kegley
Grimm.

In that agreement, it was stipulated that Maxine, Pete and Ethel would be designated as personal representatives
(administrators) of Grimm's Philippine estate (par. 2). It was also stipulated that Maxine's one-half conjugal
share in the estate should be reserved for her and that would not be less than $1,500,000 plus the homes in Utah
and Santa Mesa, Manila (par. 4). The agreement indicated the computation of the "net distributable estate". It
recognized that the estate was liable to pay the fees of the Angara law firm (par. 5).

It was stipulated in paragraph 6 that the decedent's four children "shall share equally in the Net Distributable
Estate" and that Ethel and Juanita Morris should each receive at least 12-1/2% of the total of the net
distributable estate and marital share. A supplemental memorandum also dated April 25, 1978 was executed by
the parties (Sub-Annex F, pp. 49-61, Annex, F-1, pp. 75-76, Testate case).

Intestate proceeding No. 113024.-At this juncture, it should be stated that forty- three days after Grimm's death,
or January 9, 1978, his daughter of the first marriage, Ethel, 49, through lawyers Deogracias T. Reyes and.
Gerardo B. Macaraeg, filed with Branch 20 of the Manila Court of First Instance intestate proceeding No.
113024 for the settlement of his estate. She was named special administratrix.

On March 11, the second wife, Maxine, through the Angara law office, filed an opposition and motion to
dismiss the intestate proceeding on the ground of the pendency of Utah of a proceeding for the probate of
Grimm's will. She also moved that she be appointed special administratrix, She submitted to the court a copy of
Grimm's will disposing of his Philippine estate. It is found in pages 58 to 64 of the record.

The intestate court in its orders of May 23 and June 2 noted that Maxine, through a new lawyer, William C.
Limqueco (partner of Gerardo B. Macaraeg, p. 78, testate case withdrew that opposition and motion to dismiss
and, at the behest of Maxine, Ethel and Pete, appointed them joint administrators. Apparently, this was done
pursuant to the aforementioned Utah compromise agreement. The court ignored the will already found in the
record.

The three administrators submitted an inventory. With the authority and approval of the court, they sold for
P75,000 on March 21, 1979 the so-called Palawan Pearl Project, a business owned by the deceased. Linda and
Juanita allegedly conformed with the sale (pp. 120-129, Record). It turned out that the buyer, Makiling
Management Co., Inc., was incorporated by Ethel and her husband, Rex Roberts, and by lawyer Limqueco
(Annex L, p. 90, testate case).

Also with the court's approval and the consent of Linda and Juanita, they sold for P1,546,136 to Joseph Server
and others 193,267 shares of RFM Corporation (p. 135, Record).

Acting on the declaration of heirs and project of partition signed and filed by lawyers Limqueco and Macaraeg
(not signed by Maxine and her two children), Judge Conrado M. Molina in his order of July 27, 1979
adjudicated to Maxine onehalf (4/8) of the decedent's Philippine estate and one-eighth (1/8) each to his four
children or 12-1/2% (pp. 140-142, Record). No mention at all was made of the will in that order.

Six days later, or on August 2, Maxine and her two children replaced Limqueco with Octavio del Callar as their
lawyer who on August 9, moved to defer approval of the project of partition. The court considered the motion
moot considering that it had already approved the declaration of heirs and project of partition (p. 149, Record).

Lawyer Limqueco in a letter to Maxine dated August 2, 1979 alleged that he was no longer connected with
Makiling Management Co., Inc. when the Palawan Pearl Project was sold: that it was Maxine's son Pete who
negotiated the sale with Rex Roberts and that he (Limqueco) was going to sue Maxine for the lies she imputed
to him (Annex H, p. 78, testate case).

Ethel submitted to the court a certification of the Assistant Commissioner of Internal Revenue dated October 2,
1979. It was stated therein that Maxine paid P1,992,233.69 as estate tax and penalties and that he interposed no
objection to the transfer of the estate to Grimm's heirs (p. 153, Record). The court noted the certification as in
conformity with its order of July 27, 1979.
After November, 1979 or for a period of more than five months, there was no movement or activity in the
intestate case. On April 18, 1980 Juanita Grimm Morris, through Ethel's lawyers, filed a motion for accounting
"so that the Estate properties can be partitioned among the heirs and the present intestate estate be closed." Del
Callar, Maxine's lawyer was notified of that motion.

Before that motion could be heard, or on June 10, 1980, the Angara law firm filed again its appearance in
collaboration with Del Callar as counsel for Maxine and her two children, Linda and Pete. It should be recalled
that the firm had previously appeared in the case as Maxine's counsel on March 11, 1978, when it filed a motion
to dismiss the intestate proceeding and furnished the court with a copy of Grimm's will. As already noted, the
firm was then superseded by lawyer Limqueco.

Petition to annul partition and testate proceeding No. 134559. — On September 8, 1980, Rogelio A. Vinluan of
the Angara law firm in behalf of Maxine, Pete and Linda, filed in Branch 38 of the lower court a petition
praying for the probate of Grimm's two wills (already probated in Utah), that the 1979 partition approved by the
intestate court be set aside and the letters of administration revoked, that Maxine be appointed executrix and that
Ethel and Juanita Morris be ordered to account for the properties received by them and to return the same to
Maxine (pp. 25-35, Rollo).

Grimm's second wife and two children alleged that they were defraud due to the machinations of the Roberts
spouses, that the 1978 Utah compromise agreement was illegal, that the intestate proceeding is void because
Grimm died testate and that the partition was contrary to the decedent's wills.

Ethel filed a motion to dismiss the petition. Judge Leonidas denied it for lack of merit in his order of October 27,
1980. Ethel then filed a petition for certiorari and prohibition in this Court, praying that the testate proceeding be
dismissed, or. alternatively that the two proceedings be consolidated and heard in Branch 20 and that the matter
of the annulment of the Utah compromise agreement be heard prior to the petition for probate (pp. 22-23,
Rollo).

Ruling. — We hold that respondent judge did not commit any grave abuse of discretion, amounting to lack of
jurisdiction, in denying Ethel's motion to dismiss.

A testate proceeding is proper in this case because Grimm died with two wills and "no will shall pass either real
or personal property unless it is proved and allowed" (Art. 838, Civil Code; sec. 1, Rule 75, Rules of Court).

The probate of the will is mandatory (Guevara vs. Guevara, 74 Phil. 479 and 98 Phil. 249; Baluyot vs. Panio, L-
42088, May 7, 1976, 71 SCRA 86). It is anomalous that the estate of a person who died testate should be settled
in an intestate proceeding. Therefore, the intestate case should be consolidated with the testate proceeding and
the judge assigned to the testate proceeding should continue hearing the two cases.

Ethel may file within twenty days from notice of the finality of this judgment an opposition and answer to the
petition unless she considers her motion to dismiss and other pleadings sufficient for the purpose. Juanita G.
Morris, who appeared in the intestate case, should be served with copies of orders, notices and other papers in
the testate case.

WHEREFORE the petition is dismissed. The temporary restraining order is dissolved. No costs.

SO ORDERED.1