Rufina Lim vs Court of Appeals

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.