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Lim vs Court of Appeals

323 SCRA 102 [GR No. 124715 January 24, 2000]

Facts: 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.” 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 June 11, 1994, Pastor Y. Lim died intestate. Herein
petitioner, as surviving spouse and duly represented by her nephew, George
Luy filed on March 17, 1995, a joint petition for the administration of the estate
of Pastor Y. Lim before the Regional Trial Court of Quezon City. Private
respondents corporations whose properties were included in the inventory of
the estate of Pastor Y. Lim, then filed a motion for the lifting of his pendens an
motion for exclusion of certain properties fromthe estate of the decedent.

Issue: Whether or not 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 Y. Lim.

Held: No. 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.

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

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 subject to, or distinguishes one corporation from a
seemingly separate one, were it not for the existing corporate fiction.

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.

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.

[GR No. 39796. March 9, 1934.]

In the matter of the estate of the deceased Francisco Varela Calderon. ANTONIO
GUTIERREZ DEL CAMPO, administrator-appellee, v. MIGUEL VARELA CALDERON ET
AL., Oppositors-Appellants .

Avelino, Yatco & Samaniego for Appellants .

Eduardo Gutierrez Repolves for Appellee .

SYLLABUS
1. DESCENT AND DISTRIBUTION; RIGHT OF TESTATOR WITHOUT FORCED HEIRS TO
DISPOSE FREELY OF HIS PROPERTY; INTERVENTION BY THOSE WHO ARE NOT FORCED
HEIRS. - The appellants in this case are not forced heirs of the deceased and therefore have
no right to any part of the property left by the testator, eleven he had disposed of the same
by will. If any of them were forced heirs they would be entitled to intervene in this case and
protect their interest in so far as they have been prejudiced by the will. It is evident
therefore that they have not been injured or prejudiced in any manner whatsoever. Only
forced heirs whose rights have been prejudiced have a right to intervene in a case of this
character.

DECISION

GODDARD, J .:

The Court of First Instance of Manila issued, in this case, the following orders: jgc: chanrobles.com.ph

"Calling to the hearing the project of partition and adjudication presented to the judicial
administrator, the latter, through his lawyer, objected to the opposition filed by Miguel
Varela Calderon, Angel Varela Calderon, Jesus Varela Calderon, Trinidad Varela Calderon,
Paula Varela Calderon, Pilar Valera Calderon and Maria Valera Calderon, for the approval of
said project, since any evidence that the aforementioned opponents may wish to support in
support of their opposition is admitted or received on the ground that they are not heirs of
the and that they do not have any interest in or participation in the property left by the said
deceased and of which he has disposed by testament that has been legalized and approved
by this Court,whose decision has been upheld by the Supreme Court on appeal.

"Since the representation of both the judicial administrator and the opponents admitted as
indisputable facts that the late Dr. Francisco Valera Calderon died unmarried and leaving no
ascendant and that the opponents are legitimate brothers of the same, it is clear that the
said opponents do not have the (art. 807, Civil Code) and, therefore, have no right to
intervene in the consideration of property, nor to challenge the institution of heirs made by
the deceased in his will, since this, as it is unmarried and not having heirs forced, could
dispose by testament of all their goods or part of them in favor of any person who has the
capacity to acquire them (article 763, Civil Code).

"Therefore, the opposition filed by the aforementioned opponents is DESESTED and it is


stated that they have no right to intervene in the consideration of the project of partition
and adjudication of the property of the late Dr. Francisco Valera Calderon, which is deferred
for the day November 29, 1932, at 8:30 am This is

how it is ordered.

"Manila, November 17, 1932.

" EP REVILLA

"Judge"
"Having seen the project of partition and adjudication of relics of the late Don Francisco
Valera Calderon presented by the administrator of this testamentary on November 10,
1932, examined the same and appearing that is in accordance with the provisions contained
in the testament granted by the deceased and duly legalized by this Court, and there are no
grounds or reasons that oppose its approval,

"hereby approved the said project of partition and adjudication of property, which is an
integral part of this order.

"The administrator is required, within a period of ten days from the date of notification of
this order, to pay the corresponding inheritance tax and proceed with the delivery of the
assets awarded to the heirs established in the will in accordance with project partition and
adjudication of property here approved, realizing within the same period of compliance do
the terms of this order, so that it may be ordered closure and final file in this case. so
ordered.

"Manila, IF, 29 of November of 1932.

"EP REVILLA

" Judge "

The appellants duly excepted to both of these orders and upon appeal to this court make
the following assignments of error: jgc: chanrobles.com.ph

"I. The trial court erred in refusing to admit the opposition filed by the oppositors-appellants
to the approval of the project of partition, not being the forced heirs of the late Francisco
Varela Calderon, and refused them to present their proofs in support of their contention.

"II. The trial court erred in approving the partition and adjudication of the properties of the
late Francisco Varela Calderon in favor of the alleged heirs mentioned in Exhibit B,
disregarding completely the rights of the oppositors-appellants to inherit all the said
properties. " cralaw virtua1aw library

The judicial administrator of the estate of Francisco Varela Calderon, deceased, submitted a
project of partition for the approval of the lower court. The appellants filed an opposition to
the approval of said project. The administrator objected to the intervention of the appellants
in this case.

Quære: Did the trial court err in refusing to allow the appellants to intervene? If this
question is answered in the affirmative there will be no necessity for considering the second
assignment of error.

It is admitted that Francisco Varela Calderon was a bachelor, a citizen of the Philippine
Islands, and at the time he made his residency was temporarily in France and that at the
time of his death he left no ascendants. The appellants are brothers and sisters of full blood
of the deceased and therefore they are not his forced heirs. Article 763 of the Civil Code
reads: "Any person who has not forced heirs may dispose of all his property or any part of it
in favor of any person qualified to acquire it." cralaw virtua1aw library

The appellants contend that the beneficiaries under the will of Francisco Varela Calderon are
illegitimate children and that they are not qualified to inherit from the deceased. This court
has held in Barrios v. Enriquez (52 Phil., 509), that "while it is true that article 845 of the
Civil Code provides that 'illegitimate children who have the status of natural children shall
be entitled to support only.' and therefore can not demand any more of those bound by law
to support them, it does not prohibit said illegitimate children from receiving, nor their
parents from giving them, something more than support, so long as the legitimate children
are not prejudiced. (Article 808 of the Civil Code), there is no legal provision, moral or social
reason to prevent him from making that third to his illegitimate are who has not the status
of a natural son. On the contrary, by reason of blood, the son, although illegitimate, has a
preferential right over a stranger unless by his behavior he has become unworthy of such
consideration. "cralaw virtua1aw library

Manresa commenting on article 763 of the Civil Code says: jgc: chanrobles.com.ph

"As we discussed in articles 752 to 754, the authors discuss whether unrecognized natural
children can be instituted heirs by their parents in all or part of the inheritance of free
disposition, to understand some who do not have the ability to acquire by will , and article
763 expressly requires this capacity.We do not believe that there is any serious basis that
can give rise to this doubt: unrecognized natural children, even adulterers and sacrileges,
have no inability to acquire, nor can there be any article establishing it , they are not
entitled to legitimacy, according to article 845, that is all.As for their ability to acquire in
general or by testament the part in their case, freely available, unrecognized natural
children,they are not before the law of worse condition than the strange people.
"(Comments to the Spanish Civil Code, by Manresa, Volume 6, page 94, edition 5. a).

From the above citations it is apparent that the beneficiaries under the will of Francisco
Varela Calderon, granting that they are illegitimate children, are not incapacitated to take
property under the will of their father.

In a decision of the Supreme Court of Spain of December 24, 1913, it was held: jgc: chanrobles.com.ph

"That the power to challenge the legitimation and recognition granted to children who do
not have the legal status of natural , recorded in articles 128 and 138 of the Civil Code,
clearly and precisely establishes and confers on those who believe they have been or have
actually been injured in their rights: jgc: chanrobles.com.ph

"That he does not have the right to oppose recognition to the person who does not have the
character of the heir of the person who did that." (Civil Jurisprudence, Volume 128, pages
1087 and 1088.)

In that case the court commented as follows: jgc: chanrobles.com.ph

"Considering that the power to challenge the legitimacy and recognition granted to children
who do not have the legal status of natural persons, recorded in articles 128 and 138 of the
Civil Code, clearly and precisely establishes and confers on those who are believe that they
have been prejudiced or really have been in their rights, and given that the actress
establishes the action exercised and bases its claim on the fact of being the carnal niece of
the late D. Anastasio Martin, it is sufficient to take into account this kinship, the primary
basis of this litis, to give as an undoubted consequence that, since Dona Manuela de Pablo
Martin was not the rightful heir of her uncle, the deceased testator, she is not entitled to
oppose it. (Civil Jurisprudence, Volume 128, pp. 1094, 1095.)

Article 806 of the Civil Code reads: "The legitim is that part of his property of which the
testator can not dispose because the law has reserved it for certain heirs, called, on that
account, force heirs." cralaw virtua1aw library
As stated above the appellants in this case are not forced heirs of the deceased and
therefore have no right to any part of the property left by the testator, eleven he had
disposed of the same by will. If any of them were forced heirs they would be entitled to
intervene in this case and protect their interest in so far as they have been prejudiced by
the will. It is evident therefore that they have not been injured or prejudiced in any manner
whatsoever. Only forced heirs whose rights have been prejudiced have a right to intervene
in a case of this character.

For the foregoing reasons, no error was committed by the lower court in the appealed
orders. Both orders are affirmed with costs against the appellants.

Malcolm, Villa-Real, Hull, and Imperial, JJ. , concur.

G.R. No. L-45978 April 24, 1939

In re Will of FRANCISCO ELEAZAR, deceased.


MIGUELA ELEAZAR, petitioner-appellee, vs. EUSEBIO
ELEAZAR, oppositor-appellant.

Azada and Veluz for appellant.


D. C. Mayor for appellee.

MORAN, J.: chanrobles virtual law library

The deceased, Francisco Eleazar, omitted in his last will


and testament his legitimate father, the appellant
Eusebio Eleazar, expressly disinherited his lawful wife,
Eulalia Nagar, and instituted the appellee herein, Miguela
Eleazar, as his universal heir. The lower court admitted
the will to probate and adjudged appellant and appellee
each entitled to one-half of the estate. chanroblesvirtualawlibrary chanrobles virtual law library

Appellant maintains in his appeal that the institution of


the appellee as universal heir should be annulled and that
he be declared entitled to all the estate of the
deceased. chanroblesvirtualawlibrary chanrobles virtual law library

The will, in so far as it deprives the appellant, as


legitimate father of the deceased, of his legal portion, is
null and void, but is valid with respect to the other half
which the testator could freely dispose of and which
should be considered as a legacy. (Escuin vs. Escuin, 11
Phil., 332; Arts. 814, 817, and 809, Civil Code.)chanrobles virtual law library

Judgment is affirmed, with costs against appellant.

Avance�a, C.J., Villa-Real, Imperial, Diaz, Laurel and


Concepcion, JJ., concur.

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