G.R. No.

189538 February 10, 2014

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
MERLINDA L. OLAYBAR, Respondent.

Facts:

Respondent requested from the National Statistics Office (NSO) a Certificate of No Marriage
(CENOMAR) . Upon receipt thereof, she discovered that she was already married to a certain Ye
Son Sune, a Korean National, on June 24, 2002, at the Office of the Municipal Trial Court in Cities
(MTCC), Palace of Justice. She denied having contracted said marriage and claimed that she did
not know the alleged husband; she did not appear before the solemnizing officer; and, that the
signature appearing in the marriage certificate is not hers.4 She, thus, filed a Petition for Cancellation
of Entries in the Marriage Contract, especially the entries in the wife portion thereof.5 Respondent
impleaded the Local Civil Registrar of Cebu City, as well as her alleged husband, as parties to the
case.

During trial, respondent testified on her behalf and explained that she could not have appeared
before Judge Mamerto Califlores, the supposed solemnizing officer, at the time the marriage was
allegedly celebrated, because she was then in Makati working as a medical distributor in Hansao
Pharma. She completely denied having known the supposed husband, but she revealed that she
recognized the named witnesses to the marriage as she had met them while she was working as a
receptionist in Tadels Pension House. She believed that her name was used by a certain Johnny
Singh, who owned a travel agency, whom she gave her personal circumstances in order for her to
obtain a passport. Respondent also presented as witness a certain Eufrocina Natinga, an employee
of MTCC, Branch 1, who confirmed that the marriage of Ye Son Sune was indeed celebrated in their
office, but claimed that the alleged wife who appeared was definitely not respondent. Lastly, a
document examiner testified that the signature appearing in the marriage contract was forged.

RTC decision: Petition is granted in favor of the petitioner, Merlinda L. Olaybar. The Local Civil
Registrar of Cebu City is directed to cancel all the entries in the WIFE portion of the alleged marriage
contract of the petitioner and respondent Ye Son Sune.Finding that the signature appearing in the
subject marriage contract was not that of respondent, the court found basis in granting the latter’s
prayer to straighten her record and rectify the terrible mistake.

Petitioner, however, moved for the reconsideration of the assailed Decision on the grounds that: (1)
there was no clerical spelling, typographical and other innocuous errors in the marriage contract for it
to fall within the provisions of Rule 108 of the Rules of Court; and (2) granting the cancellation of all
the entries in the wife portion of the alleged marriage contract is, in effect, declaring the marriage

ISSUE: WON THE PETITION INSTITUTED BY RESPONDENT CAN BE A SUBJECT TO RULES

OF SPECIAL PROCEEDINGS

HELD:

YES.
Rule 108 of the Rules of Court provides the procedure for cancellation or correction of entries in the
civil registry. The proceedings may either be summary or adversary. If the correction is clerical, then
the procedure to be adopted is summary. If the rectification affects the civil status, citizenship or
nationality of a party, it is deemed substantial, and the procedure to be adopted is adversary. Since
the promulgation of Republic v. Valencia19 in 1986, the Court has repeatedly ruled that "even
substantial errors in a civil registry may be corrected through a petition filed under Rule 108, with the
true facts established and the parties aggrieved by the error availing themselves of the appropriate
adversarial proceeding."20 An appropriate adversary suit or proceeding is one where the trial court
has conducted proceedings where all relevant facts have been fully and properly developed, where
opposing counsel have been given opportunity to demolish the opposite party’s case, and where the
evidence has been thoroughly weighed and considered.21

It is true that in special proceedings, formal pleadings and a hearing may be dispensed with, and the
remedy [is] granted upon mere application or motion. However, a special proceeding is not always
summary. The procedure laid down in Rule 108 is not a summary proceeding per se. It requires
publication of the petition; it mandates the inclusion as parties of all persons who may claim interest
which would be affected by the cancellation or correction; it also requires the civil registrar and any
person in interest to file their opposition, if any; and it states that although the court may make orders
expediting the proceedings, it is after hearing that the court shall either dismiss the petition or issue
an order granting the same. Thus, as long as the procedural requirements in Rule 108 are followed,
it is the appropriate adversary proceeding to effect substantial corrections and changes in entries of
the civil register.22

In this case, the entries made in the wife portion of the certificate of marriage are admittedly the
personal circumstances of respondent. The latter, however, claims that her signature was forged
and she was not the one who contracted marriage with the purported husband. In other words, she
claims that no such marriage was entered into or if there was, she was not the one who entered into
such contract. It must be recalled that when respondent tried to obtain a CENOMAR from the NSO,
it appeared that she was married to a certain Ye Son Sune. She then sought the cancellation of
entries in the wife portion of the marriage certificate.

In filing the petition for correction of entry under Rule 108, respondent made the Local Civil Registrar
of Cebu City, as well as her alleged husband Ye Son Sune, as parties-respondents. It is likewise
undisputed that the procedural requirements set forth in Rule 108 were complied with. The Office of
the Solicitor General was likewise notified of the petition which in turn authorized the Office of the
City Prosecutor to participate in the proceedings. More importantly, trial was conducted where
respondent herself, the stenographer of the court where the alleged marriage was conducted, as
well as a document examiner, testified. Several documents were also considered as evidence. With
the testimonies and other evidence presented, the trial court found that the signature appearing in
the subject marriage certificate was different from respondent’s signature appearing in some of her
government issued identification cards.23 The court thus made a categorical conclusion that
respondent’s signature in the marriage certificate was not hers and, therefore, was forged. Clearly, it
was established that, as she claimed in her petition, no such marriage was celebrated.

Indeed the Court made a pronouncement in the recent case of Minoru Fujiki v. Maria Paz Galela
Marinay, Shinichi Maekara, Local Civil Registrar of Quezon City, and the Administrator and Civil
Registrar General of the National Statistics Office24 that:

To be sure, a petition for correction or cancellation of an entry in the civil registry cannot substitute
for an action to invalidate a marriage. A direct action is necessary to prevent circumvention of the
substantive and procedural safeguards of marriage under the Family Code, A.M. No. 02-11-10-SC
and other related laws. Among these safeguards are the requirement of proving the limited grounds
for the dissolution of marriage, support pendente lite of the spouses and children, the liquidation,
partition and distribution of the properties of the spouses and the investigation of the public
prosecutor to determine collusion. A direct action for declaration of nullity or annulment of marriage
is also necessary to prevent circumvention of the jurisdiction of the Family Courts under the Family
Courts Act of 1997 (Republic Act No. 8369), as a petition for cancellation or correction of entries in
the civil registry may be filed in the Regional Trial Court where the corresponding civil registry is
located. In other words, a Filipino citizen cannot dissolve his marriage by the mere expedient of
changing his entry of marriage in the civil registry.

Aside from the certificate of marriage, no such evidence was presented to show the existence of
marriage. Rather, respondent showed by overwhelming evidence that no marriage was entered into
1âw phi 1

and that she was not even aware of such existence. The testimonial and documentary evidence
clearly established that the only "evidence" of marriage which is the marriage certificate was a
forgery. While we maintain that Rule 108 cannot be availed of to determine the validity of marriage,
we cannot nullify the proceedings before the trial court where all the parties had been given the
opportunity to contest the allegations of respondent; the procedures were followed, and all the
evidence of the parties had already been admitted and examined. Respondent indeed sought, not
the nullification of marriage as there was no marriage to speak of, but the correction of the record of
such marriage to reflect the truth as set forth by the evidence. Otherwise stated, in allowing the
correction of the subject certificate of marriage by cancelling the wife portion thereof, the trial court
did not, in any way, declare the marriage void as there was no marriage to speak of.

G.R. No. 170498 January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner,

vs.
ABSOLUTE MANAGEMENT CORPORATION, Respondent.

DECISION

BRION, J.:

We resolve petitioner Metropolitan Bank & Trust Company's (Metro bank's) petition for review on
certiorari1 seeking the reversal of the decision2 dated August 25, 2005 and the resolution3 dated
November 17, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 86336. The assailed decision
affirmed the order4 dated May 7, 2004 of the Regional Trial Court (RTC) of Quezon City, Branch 80.
The RTC had denied the admission of Metrobank's Fourth-Party Complaint5 against the Estate of
Jose L. Chua for being a money claim that falls under Section 5, Rule 86 of the Rules of Court; the
claim should have been filed in the pending judicial settlement of Chua’s estate before the RTC of
Pasay City. The CA affirmed the RTC’s order based on the same ground.

Factual Antecedents

On October 5, 2000, Sherwood Holdings Corporation, Inc. (SHCI) filed a complaint for sum of money
against Absolute Management Corporation (AMC). The complaint was docketed as Civil Case No.
Q-00-42105 and was assigned to the RTC of Quezon City, Branch 80.6

SHCI alleged in its complaint that it made advance payments to AMC for the purchase of 27,000
pieces of plywood and 16,500 plyboards in the sum of ₱12,277,500.00, covered by Metrobank
Check Nos. 1407668502, 140768507, 140768530, 140768531, 140768532, 140768533 and
140768534. These checks were all crossed, and were all made payable to AMC. They were given to
Chua, AMC’s General Manager, in 1998.7
Chua died in 1999, 8 and a special proceeding for the settlement of his estate was commenced
before the RTC of Pasay City. This proceeding was pending at the time AMC filed its answer with
counterclaims and third-party complaint.9

SHCI made demands on AMC, after Chua’s death, for allegedly undelivered items worth
₱8,331,700.00. According to AMC, these transactions could not be found in its records. Upon
investigation, AMC discovered that in 1998, Chua received from SHCI 18 Metrobank checks worth
₱31,807,500.00. These were all payable to AMC and were crossed or "for payee’s account only."10

In its answer with counterclaims and third-party complaint,11 AMC averred that it had no knowledge
of Chua’s transactions with SHCI and it did not receive any money from the latter. AMC also asked
the RTC to hold Metrobank liable for the subject checks in case it is adjudged liable to SHCI.

Metrobank filed a motion for bill of particulars,12 seeking to clarify certain ambiguous statements in
AMC’s answer. The RTC granted the motion but AMC failed to submit the required bill of particulars.
Hence, Metrobank filed a motion to strike out the third-party complaint.13

In the meantime, Metrobank filed a motion to dismiss14 against AMC on the ground that the latter
engaged in prohibited forum shopping. According to Metrobank, AMC’s claim against it is the same
claim that it raised against Chua’s estate in Special Proceedings No. 99-0023 before the RTC of
Pasay City, Branch 112. The RTC subsequently denied this motion.15

The RTC of Quezon City opted to defer consideration16 of Metrobank’s motion to strike out third-
party complaint17 and it instead granted AMC’s motion for leave to serve written interrogatories on
the third-party defendant.18 While Metrobank filed its answer to the written interrogatories, AMC was
again directed by the RTC, in an order19 dated August 13, 2003, to submit its bill of particulars.
Instead, AMC filed a motion for reconsideration20 which was denied in an order21 dated October 28,
2003. AMC still did not file its bill of particulars. The RTC, on the other hand, did not act on
Metrobank’s motion to strike out AMC’s third-party complaint.22

In its answer23 dated December 1, 2003, Metrobank admitted that it deposited the checks in question
to the account of Ayala Lumber and Hardware, a sole proprietorship Chua owned and managed.
The deposit was allegedly done with the knowledge and consent of AMC. According to

Metrobank, Chua then gave the assurance that the arrangement for the handling of the checks
carried AMC’s consent. Chua also submitted documents showing his position and interest in AMC.
These documents, as well as AMC’s admission in its answer that it allowed Chua to manage AMC
with a relative free hand, show that it knew of Chua’s arrangement with Metrobank. Further, Chua’s
records show that the proceeds of the checks were remitted to AMC which cannot therefore now
claim that it did not receive these proceeds.

Metrobank also raised the defense of estoppel. According to Metrobank, AMC had knowledge of its
arrangements with Chua for several years. Despite this arrangement, AMC did not object to nor did it
call the attention of Metrobank about Chua’s alleged lack of authority to deposit the checks in Ayala
Lumber and Hardware’s account. At this point, AMC is already estopped from questioning Chua’s
authority to deposit these checks in Ayala Lumber and Hardware’s account.

Lastly, Metrobank asserted that AMC gave Chua unbridled control in managing AMC’s affairs. This
measure of control amounted to gross negligence that was the proximate cause of the loss that AMC
must now bear.
Subsequently, Metrobank filed a motion for leave to admit fourth-party complaint24 against Chua’s
estate. It alleged that Chua’s estate should reimburse Metrobank in case it would be held liable in
the third-party complaint filed against it by AMC.

The RTC’s Ruling

In an order25 dated May 7, 2004, the RTC denied Metrobank’s motion. It likewise denied Metrobank’s
motion for reconsideration in an order26 dated July 7, 2004.

The RTC categorized Metrobank’s allegation in the fourth-party complaint as a "cobro de lo

indebido"27 – a kind of quasi-contract that mandates recovery of what has been improperly paid.
Quasi-contracts fall within the concept of implied contracts that must be included in the claims
required to be filed with the judicial settlement of the deceased’s estate under Section 5, Rule 86 of
the Rules of Court. As such claim, it should have been filed in Special Proceedings No. 99-0023, not
before the RTC as a fourth-party complaint. The RTC, acting in the exercise of its general
jurisdiction, does not have the authority to adjudicate the fourth-party complaint. As a trial court
hearing an ordinary action, it cannot resolve matters pertaining to special proceedings because the
latter is subject to specific rules.

Metrobank responded to the RTC ruling by filing a petition for certiorari28 under Rule 65 before the
CA.

The CA’s Ruling

The CA affirmed the RTC’s ruling that Metrobank’s fourth-party complaint should have been filed in
Special Proceedings No. 99-0023.29 According to the CA, the relief that Metrobank prayed for was
based on a quasi-contract and was a money claim categorized as an implied contract that should be
filed under Section 5, Rule 86 of the Rules of Court.

Based on the statutory construction principle of lex specialis derogat generali, the CA held that
Section 5, Rule 86 of the Rules of Court is a special provision that should prevail over the general
provisions of Section 11, Rule 6 of the Rules of Court. The latter applies to money claims in ordinary
actions while a money claim against a person already deceased falls under the settlement of his
estate that is governed by the rules on special proceedings. If at all, rules for ordinary actions only
apply suppletorily to special proceedings.

The Present Petition

In its present petition for review on certiorari,30 Metrobank asserts that it should be allowed to file a
fourth-party complaint against Chua’s estate in the proceedings before the RTC; its fourth-party
complaint was filed merely to enforce its right to be reimbursed by Chua’s estate in case Metrobank
is held liable to AMC. Hence, Section 11, Rule 6 of the Rules of Court should apply.

AMC, in its comment,31 maintains the line that the CA and the RTC rulings should be followed, i.e.,
that Metrobank’s claim is a quasi-contract that should be filed as a claim under Section 5, Rule 86 of
the Rules of Court.

AMC also challenges the form of Metrobank’s petition for failure to comply with Section 4, Rule 45 of
the Rules of Court. This provision requires petitions filed before the Supreme Court to be
accompanied by "such material portions of the record as would support the petition."
According to AMC, the petition’s annexes are mostly Metrobank’s pleadings and court issuances. It
did not append all relevant AMC pleadings before the RTC and the CA. For this reason, the petition
should have been dismissed outright.

Issues

The parties’ arguments, properly joined, present to us the following issues:

1) Whether the petition for review on certiorari filed by Metrobank before the Supreme Court
complies with Section 4, Rule 45 of the Rules of Court; and

2) Whether Metrobank’s fourth-party complaint against Chua’s estate should be allowed.

The Court’s Ruling

The Present Petition Complies With Section 4, Rule 45 of the Rules of Court

AMC posits that Metrobank’s failure to append relevant AMC pleadings submitted to the RTC and to
the CA violated Section 4, Rule 45 of the Rules of Court,32 and is a sufficient ground to dismiss the
petition under Section 5, Rule 45 of the Rules of Court.33

We disagree with AMC’s position.

In F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,34 Online Networks
International, Inc. similarly assailed F.A.T. Kee Computer Systems, Inc.’s failure to attach the
transcript of stenographic notes (TSN) of the RTC proceedings, and claimed this omission to be a
violation of Section 4, Rule 45 of the Rules of Court that warranted the petition’s dismissal. The
Court held that the defect was not fatal, as the TSN of the proceedings before the RTC forms part of
the records of the case. Thus, there was no incurable omission that warranted the outright dismissal
of the petition.

The Court significantly pointed out in F.A.T. Kee that the requirement in Section 4, Rule 45 of the
Rules of Court is not meant to be an absolute rule whose violation would automatically lead to the
petition’s dismissal.35 The Rules of Court has not been intended to be totally rigid. In fact, the Rules
of Court provides that the Supreme Court "may require or allow the filing of such pleadings, briefs,
memoranda or documents as it may deem necessary within such periods and under such conditions
as it may consider appropriate";36 and "[i]f the petition is given due course, the Supreme Court may
require the elevation of the complete record of the case or specified parts thereof within fifteen (15)
days from notice."37 These provisions are in keeping with the overriding standard that procedural
rules should be liberally construed to promote their objective and to assist the parties in obtaining a
just, speedy and inexpensive determination of every action or proceeding.38

Under this guiding principle, we do not see Metrobank’s omission to be a fatal one that should
warrant the petition’s outright dismissal. To be sure, the omission to submit the adverse party’s
pleadings in a petition before the Court is not a commendable practice as it may lead to an unduly
biased narration of facts and arguments that masks the real issues before the Court. Such skewed
presentation could lead to the waste of the Court’s time in sifting through the maze of the parties’
narrations of facts and arguments and is a danger the Rules of Court seeks to avoid.

Our examination of Metrobank’s petition shows that it contains AMC’s opposition to its motion to
admit fourth-party complaint among its annexes. The rest of the pleadings have been subsequently
submitted as attachments in Metrobank’s Reply. A reading of these pleadings shows that their
arguments are the same as those stated in the orders of the trial court and the Court of Appeals.
Thus, even if Metrobank’s petition did not contain some of AMC’s pleadings, the Court still had the
benefit of a clear narration of facts and arguments according to both parties’ perspectives. In this
broader view, the mischief that the Rules of Court seeks to avoid has not really been present. If at
all, the omission is not a grievous one that the spirit of liberality cannot address.

The Merits of the Main Issue

The main issue poses to us two essential points that must be addressed. First, are quasi-contracts
included in claims that should be filed pursuant to Rule 86, Section 5 of the Rules of Court? Second,
if so, is Metrobank’s claim against the Estate of Jose Chua based on a quasi-contract?

Quasi-contracts are included in

claims that should be filed under Rule
86, Section 5 of the Rules of Court

In Maclan v. Garcia,39 Gabriel Maclan filed a civil case to recover from Ruben Garcia the necessary
expenses he spent as possessor of a piece of land. Garcia acquired the land as an heir of its
previous owner. He set up the defense that this claim should have been filed in the special
proceedings to settle the estate of his predecessor. Maclan, on the other hand, contended that his
claim arises from law and not from contract, express or implied. Thus, it need not be filed in the
settlement of the estate of Garcia’s predecessor, as mandated by Section 5, Rule 87 of the Rules of
Court (now Section 5, Rule 86).

The Court held under these facts that a claim for necessary expenses spent as previous possessor
of the land is a kind of quasi-contract. Citing Leung Ben v. O’Brien,40 it explained that the term
"implied contracts," as used in our remedial law, originated from the common law where obligations
derived from quasi-contracts and from law are both considered as implied contracts. Thus, the term
quasi-contract is included in the concept "implied contracts" as used in the Rules of Court.
Accordingly, liabilities of the deceased arising from quasi-contracts should be filed as claims in the
settlement of his estate, as provided in Section 5, Rule 86 of the Rules of Court.41

Metrobank’s fourth-party complaint is

based on quasi-contract

Both the RTC and the CA described Metrobank’s claim against Chua’s estate as one based on
quasi-contract. A quasi-contract involves a juridical relation that the law creates on the basis of
certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment.42 The Civil Code
provides an enumeration of quasi-contracts,43 but the list is not exhaustive and merely provides
examples.44

According to the CA, Metrobank’s fourth-party complaint falls under the quasi-contracts enunciated
in Article 2154 of the Civil Code.45 Article 2154 embodies the concept "solutio indebiti" which arises
when something is delivered through mistake to a person who has no right to demand it. It obligates
the latter to return what has been received through mistake.46

Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites: first,
that something has been unduly delivered through mistake; and second, that something was
received when there was no right to demand it.47
In its fourth-party complaint, Metrobank claims that Chua’s estate should reimburse it if it becomes
liable on the checks that it deposited to Ayala Lumber and Hardware’s account upon Chua’s
instructions.

This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a mistake
when it deposited the AMC checks to Ayala Lumber and Hardware’s account; because of Chua’s
control over AMC’s operations, Metrobank assumed that the checks payable to AMC could be
deposited to Ayala Lumber and Hardware’s account. Second, Ayala Lumber and Hardware had no
right to demand and receive the checks that were deposited to its account; despite Chua’s control
over AMC and Ayala Lumber and Hardware, the two entities are distinct, and checks exclusively and
expressly payable to one cannot be deposited in the account of the other. This disjunct created an
obligation on the part of Ayala Lumber and Hardware, through its sole proprietor, Chua, to return the
amount of these checks to Metrobank.

The Court notes, however, that its description of Metrobank’s fourth-party complaint as a
claimclosely analogous to solutio indebiti is only to determine the validity of the lower courts’ orders
denying it. It is not an adjudication determining the liability of Chua’s estate against Metrobank. The
appropriate trial court should still determine whether Metrobank has a lawful claim against Chua’s
estate based on quasi-contract. 1âw phi1

Metrobank’s fourth-party complaint,

as a contingent claim, falls within the
claims that should be filed under
Section 5, Rule 86 of the Rules of
Court

A distinctive character of Metrobank’s fourth-party complaint is its contingent nature – the claim
depends on the possibility that Metrobank would be adjudged liable to AMC, a future event that may
or may not happen. This characteristic unmistakably marks the complaint as a contingent one that
must be included in the claims falling under the terms of Section 5, Rule 86 of the Rules of Court:

Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. – All claims for
money against the decedent, arising from contract, express or implied, whether the same be due,
not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the
decedent, and judgment for money against the decedent, must be filed within the time limited in the
notice. [italics ours]

Specific provisions of Section 5, Rule

86 of the Rules of Court prevail over
general provisions of Section 11, Rule
6 of the Rules of Court

Metrobank argues that Section 11, Rule 6 of the Rules of Court should apply because it impleaded
Chua’s estate for reimbursement in the same transaction upon which it has been sued by AMC. On
this point, the Court supports the conclusion of the CA, to wit:

Notably, a comparison of the respective provisions of Section 11, Rule 6 and Section 5, Rule 86 of
the Rules of Court readily shows that Section 11, Rule 6 applies to ordinary civil actions while
Section 5, Rule 86 specifically applies to money claims against the estate. The specific provisions of
Section 5, Rule 86 x x x must therefore prevail over the general provisions of Section 11, Rule 6.48
We read with approval the CA’s use of the statutory construction principle of lex specialis derogat
generali, leading to the conclusion that the specific provisions of Section 5, Rule 86 of the Rules of
Court should prevail over the general provisions of Section 11, Rule 6 of the Rules of Court; the
settlement of the estate of deceased persons (where claims against the deceased should be filed) is
primarily governed by the rules on special proceedings, while the rules provided for ordinary claims,
including Section 11, Rule 6 ofthe Rules of Court, merely apply suppletorily.49

In sum, on all counts in the considerations material to the issues posed, the resolution points to the
affirmation of the assailed CA decision and resolution. Metrobank's claim in its fourth-party complaint
against Chua's estate is based on quasi-contract. It is also a contingent claim that depends on
another event. Both belong to the category of claims against a deceased person that should be filed
under Section 5, Rule 86 of the Rules of Comi and, as such, should have been so filed in Special
Proceedings No. 99-0023.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The decision of
the Court of Appeals dated August 25, 2005, holding that the Regional Trial Court of Quezon City,
Branch 80, did not commit grave abuse of discretion in denying Metropolitan Bank & Trust
Company's motion for leave to admit fourth-party complaint Is

AFFIRMED. Costs against Metropolitan Bank & Trust Compa

.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.
1âw phi 1.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.
1860594 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
provision11 contemplates 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.

SO ORDERED.

.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 Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose estate is the subject of
probate proceedings in Special.. 1âw phi 1.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 petition5 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, Homes, Parañaque, Metro
Inc. Manila.

xxx xxx xxx

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

Auto Truck 2251 Roosevelt Avenue,

TBA Corp. Quezon 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 order10 , 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 administrator11 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
Narvasa23 :
 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. 1âw phi 1.nêt

SO ORDERED.

G.R. No. L-770 April 27, 1948

ANGEL T. LIMJOCO, petitioner,

vs.
INTESTATE ESTATE OF PEDRO O. FRAGRANTE, deceased, respondent.

Angel Limjoco, Jr. and Delfin L. Gonzales for petitioner.

Bienvenido A. Tan for respondent.

HILADO, J.:

Under date of May 21, 1946, the Public Service Commission, through Deputy Commissioner Fidel
Ibañez, rendered its decision in case No. 4572 of Pedro O. Fragante, as applicant for a certificate of
public convenience to install, maintain and operate an ice plant in San Juan, Rizal, whereby said
commission held that the evidence therein showed that the public interest and convenience will be
promoted in a proper and suitable manner "by authorizing the operation and maintenance of another
ice plant of two and one-half (2-½) tons in the municipality of San Juan; that the original applicant
Pedro O. Fragante was a Filipino Citizen at the time of his death; and that his intestate estate is
financially capable of maintaining the proposed service". The commission, therefore, overruled the
opposition filed in the case and ordered "that under the provisions of section 15 of Commonwealth
Act No. 146, as amended a certificate of public convenience be issued to the Intestate Estate of the
deceased Pedro Fragante, authorizing said Intestate Estate through its Special or Judicial
Administrator, appointed by the proper court of competent jurisdiction, to maintain and operate an
ice plant with a daily productive capacity of two and one-half (2-1/2) tons in the Municipality of San
Juan and to sell the ice produced from said plant in the said Municipality of San Juan and in the
Municipality of Mandaluyong, Rizal, and in Quezon City", subject to the conditions therein set forth in
detail (petitioner's brief, pp. 33-34).

Petitioner makes four assignments of error in his brief as follows:

1. The decision of the Public Service Commission is not in accordance with law.
 2. The decision of the Public Service Commission is not reasonably supported by evidence.

3. The Public Service Commission erred in not giving petitioner and the Ice and Cold Storage
Industries of the Philippines, Inc., as existing operators, a reasonable opportunity to meet the
increased demand.

4. The decision of the Public Service Commission is an unwarranted departure from its
announced policy with respect to the establishment and operation of ice plant. (Pp. 1-2,
petitioner's brief.)

In his argument petitioner contends that it was error on the part of the commission to allow the
substitution of the legal representative of the estate of Pedro O. Fragante for the latter as party
applicant in the case then pending before the commission, and in subsequently granting to said
estate the certificate applied for, which is said to be in contravention of law.

If Pedro O. Fragante had not died, there can be no question that he would have had the right to
prosecute his application before the commission to its final conclusion. No one would have denied
him that right. As declared by the commission in its decision, he had invested in the ice plant in
question P 35,000, and from what the commission said regarding his other properties and business,
he would certainly have been financially able to maintain and operate said plant had he not died. His
transportation business alone was netting him about P1,440 a month. He was a Filipino citizen and
continued to be such till his demise. The commission declared in its decision, in view of the evidence
before it, that his estate was financially able to maintain and operate the ice plant. The aforesaid
right of Pedro O. Fragante to prosecute said application to its conclusion was one which by its nature
did not lapse through his death. Hence, it constitutes a part of the assets of his estate, for which a
right was property despite the possibility that in the end the commission might have denied
application, although under the facts of the case, the commission granted the application in view of
the financial ability of the estate to maintain and operate the ice plant. Petitioner, in his memorandum
of March 19, 1947, admits (page 3) that the certificate of public convenience once granted "as a rule,
should descend to his estate as an asset". Such certificate would certainly be property, and the right
to acquire such a certificate, by complying with the requisites of the law, belonged to the decedent in
his lifetime, and survived to his estate and judicial administrator after his death.

If Pedro O. Fragrante had in his lifetime secured an option to buy a piece of land and during the life
of the option he died, if the option had been given him in the ordinary course of business and not out
of special consideration for his person, there would be no doubt that said option and the right to
exercise it would have survived to his estate and legal representatives. In such a case there would
also be the possibility of failure to acquire the property should he or his estate or legal representative
fail to comply with the conditions of the option. In the case at bar Pedro O. Fragrante's undoubted
right to apply for and acquire the desired certificate of public convenience — the evidence
established that the public needed the ice plant — was under the law conditioned only upon the
requisite citizenship and economic ability to maintain and operate the service. Of course, such right
to acquire or obtain such certificate of public convenience was subject to failure to secure its
objective through nonfulfillment of the legal conditions, but the situation here is no different from the
legal standpoint from that of the option in the illustration just given.

Rule 88, section 2, provides that the executor or administrator may bring or defend actions, among
other cases, for the protection of the property or rights of the deceased which survive, and it says
that such actions may be brought or defended "in the right of the deceased".
Rule 82, section 1, paragraph (a), mentions among the duties of the executor or administrator, the
making of an inventory of all goods, chattels, rights, credits, and estate of the deceased which shall
come to his possession or knowledge, or to the possession of any other person for him.

In his commentaries on the Rules of Court (Volume II, 2nd ed., pages 366, 367) the present chief
Justice of this Court draws the following conclusion from the decisions cited by him:

Therefore, unless otherwise expressly provided by law, any action affecting the property
or rights (emphasis supplied) of a deceased person which may be brought by or against him
if he were alive, may likewise be instituted and prosecuted by or against the administrator,
unless the action is for recovery of money, debt or interest thereon, or unless, by its very
nature, it cannot survive, because death extinguishes the right . . . .

It is true that a proceeding upon the application for a certificate of public convenience before the
Public Service Commission is not an "action". But the foregoing provisions and citations go to prove
that the decedent's rights which by their nature are not extinguished by death go to make up a part
and parcel of the assets of his estate which, being placed under the control and management of the
executor or administrator, can not be exercised but by him in representation of the estate for the
benefit of the creditors, devisees or legatees, if any, and the heirs of the decedent. And if the right
involved happens to consist in the prosecution of an unfinished proceeding upon an application for a
certificate of public convenience of the deceased before the Public Service Commission, it is but
logical that the legal representative be empowered and entitled in behalf of the estate to make the
right effective in that proceeding.

Manresa (Vol. III, 6th ed., p. 11) says that No. 10 of article 334 and article 336 of the Civil Code,
respectively, consider as immovable and movable things rights which are not material. The same
eminent commentator says in the cited volume (p. 45) that article 336 of the Civil Code has been
deficiently drafted in that it is not sufficiently expressive of all incorporeal rights which are
also property for juridical purposes.

Corpus Juris (Vol. 50, p. 737) states that in the broad sense of the term, property includes, among
other things, "an option", and "the certificate of the railroad commission permitting the operation of a
bus line", and on page 748 of the same volume we read:

However, these terms (real property, as estate or interest) have also been declared to
include every species of title, inchoate or complete, and embrace rights which lie in contract,
whether executory or executed. (Emphasis supplied.)

Another important question raised by petitioner is whether the estate of Pedro O. Fragrante is a
"person" within the meaning of the Public Service Act.

Words and Phrases, First Series, (Vol. 6, p, 5325), states the following doctrine in the jurisdiction of
the State of Indiana:

As the estate of the decedent is in law regarded as a person, a forgery committed after the
death of the man whose name purports to be signed to the instrument may be prosecuted as
with the intent to defraud the estate. Billings vs. State, 107 Ind., 54, 55, 6 N. E. 914, 7 N. E.
763, 57 Am. Rep. 77.

The Supreme Court of Indiana in the decision cited above had before it a case of forgery committed
after the death of one Morgan for the purpose of defrauding his estate. The objection was urged that
the information did not aver that the forgery was committed with the intent to defraud any person.
The Court, per Elliott, J., disposed of this objection as follows:

. . . The reason advanced in support of this proposition is that the law does not regard the
estate of a decedent as a person. This intention (contention) cannot prevail. The estate of
the decedent is a person in legal contemplation. "The word "person" says Mr. Abbot, "in its
legal signification, is a generic term, and includes artificial as well as natural persons," 2 Abb.
Dict. 271; Douglas vs. Pacific, etc. Co., 4 Cal. 304; Planters', etc., Bank vs. Andrews, 8 Port.
(Ala.) 404. It said in another work that 'persons are of two kinds: natural and artificial. A
natural person is a human being. Artificial persons include (1) a collection or succession of
natural persons forming a corporation; (2) a collection of property to which the law attributes
the capacity of having rights and duties. The latter class of artificial persons is recognized
only to a limited extent in our law. "Examples are the estate of a bankrupt or deceased
person." 2 Rapalje & L. Law Dict. 954. Our own cases inferentially recognize the correctness
of the definition given by the authors from whom we have quoted, for they declare that it is
sufficient, in pleading a claim against a decedent's estate, to designate the defendant as the
estate of the deceased person, naming him. Ginn vs. Collins, 43 Ind. 271. Unless we accept
this definition as correct, there would be a failure of justice in cases where, as here, the
forgery is committed after the death of a person whose name is forged; and this is a result to
be avoided if it can be done consistent with principle. We perceive no difficulty in avoiding
such a result; for, to our minds, it seems reasonable that the estate of a decedent should be
regarded as an artificial person. It is the creation of law for the purpose of enabling a
disposition of the assets to be properly made, and, although natural persons as heirs,
devises, or creditors, have an interest in the property, the artificial creature is a distinct legal
entity. The interest which natural persons have in it is not complete until there has been a
due administration; and one who forges the name of the decedent to an instrument
purporting to be a promissory note must be regarded as having intended to defraud the
estate of the decedent, and not the natural persons having diverse interests in it, since ha
cannot be presumed to have known who those persons were, or what was the nature of their
respective interest. The fraudulent intent is against the artificial person, — the estate — and
not the natural persons who have direct or contingent interest in it. (107 Ind. 54, 55, 6 N.E.
914-915.)

In the instant case there would also be a failure of justice unless the estate of Pedro O. Fragrante is
considered a "person", for quashing of the proceedings for no other reason than his death would
entail prejudicial results to his investment amounting to P35,000.00 as found by the commission, not
counting the expenses and disbursements which the proceeding can be presumed to have
occasioned him during his lifetime, let alone those defrayed by the estate thereafter. In this
jurisdiction there are ample precedents to show that the estate of a deceased person is also
considered as having legal personality independent of their heirs. Among the most recent cases may
be mentioned that of "Estate of Mota vs. Concepcion, 56 Phil., 712, 717, wherein the principal
plaintiff was the estate of the deceased Lazaro Mota, and this Court gave judgment in favor of said
estate along with the other plaintiffs in these words:

. . . the judgment appealed from must be affirmed so far as it holds that defendants
Concepcion and Whitaker are indebted to he plaintiffs in the amount of P245,804.69 . . . .

Under the regime of the Civil Code and before the enactment of the Code of Civil Procedure, the
heirs of a deceased person were considered in contemplation of law as the continuation of his
personality by virtue of the provision of article 661 of the first Code that the heirs succeed to all the
rights and obligations of the decedent by the mere fact of his death. It was so held by this Court
in Barrios vs. Dolor, 2 Phil., 44, 46. However, after the enactment of the Code of Civil Procedure,
article 661 of the Civil Code was abrogated, as held in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13,
22. In that case, as well as in many others decided by this Court after the innovations introduced by
the Code of Civil Procedure in the matter of estates of deceased persons, it has been the constant
doctrine that it is the estate or the mass of property, rights and assets left by the decedent, instead of
the heirs directly, that becomes vested and charged with his rights and obligations which survive
after his demise.

The heirs were formerly considered as the continuation of the decedent's personality simply by legal
fiction, for they might not have been flesh and blood — the reason was one in the nature of a legal
exigency derived from the principle that the heirs succeeded to the rights and obligations of the
decedent. Under the present legal system, such rights and obligations as survive after death have to
be exercised and fulfilled only by the estate of the deceased. And if the same legal fiction were not
indulged, there would be no juridical basis for the estate, represented by the executor or
administrator, to exercise those rights and to fulfill those obligations of the deceased. The reason
and purpose for indulging the fiction is identical and the same in both cases. This is why according to
the Supreme Court of Indiana in Billings vs. State, supra, citing 2 Rapalje & L. Dictionary, 954,
among the artificial persons recognized by law figures "a collection of property to which the law
attributes the capacity of having rights and duties", as for instance, the estate of a bankrupt or
deceased person.

Petitioner raises the decisive question of whether or not the estate of Pedro O. Fragrante can be
considered a "citizen of the Philippines" within the meaning of section 16 of the Public Service Act,
as amended, particularly the proviso thereof expressly and categorically limiting the power of the
commission to issue certificates of public convenience or certificates of public convenience and
necessity "only to citizens of the Philippines or of the United States or to corporations,
copartnerships, associations, or joint-stock companies constituted and organized under the laws of
the Philippines", and the further proviso that sixty per centum of the stock or paid-up capital of such
entities must belong entirely to citizens of the Philippines or of the United States.

Within the Philosophy of the present legal system, the underlying reason for the legal fiction by
which, for certain purposes, the estate of the deceased person is considered a "person" is the
avoidance of injustice or prejudice resulting from the impossibility of exercising such legal rights and
fulfilling such legal obligations of the decedent as survived after his death unless the fiction is
indulged. Substantially the same reason is assigned to support the same rule in the jurisdiction of
the State of Indiana, as announced in Billings vs. State, supra, when the Supreme Court of said
State said:

. . . It seems reasonable that the estate of a decedent should be regarded as an artificial

person. it is the creation of law for the purpose of enabling a disposition of the assets to be
properly made . . . .

Within the framework and principles of the constitution itself, to cite just one example, under the bill
of rights it seems clear that while the civil rights guaranteed therein in the majority of cases relate to
natural persons, the term "person" used in section 1 (1) and (2) must be deemed to include artificial
or juridical persons, for otherwise these latter would be without the constitutional guarantee against
being deprived of property without due process of law, or the immunity from unreasonable searches
and seizures. We take it that it was the intendment of the framers to include artificial or juridical, no
less than natural, persons in these constitutional immunities and in others of similar nature. Among
these artificial or juridical persons figure estates of deceased persons. Hence, we hold that within the
framework of the Constitution, the estate of Pedro O. Fragrante should be considered an artificial or
juridical person for the purposes of the settlement and distribution of his estate which, of course,
include the exercise during the judicial administration thereof of those rights and the fulfillment of
those obligations of his which survived after his death. One of those rights was the one involved in
his pending application before the Public Service Commission in the instant case, consisting in the
prosecution of said application to its final conclusion. As stated above, an injustice would ensue from
the opposite course.

How about the point of citizenship? If by legal fiction his personality is considered extended so that
any debts or obligations left by, and surviving, him may be paid, and any surviving rights may be
exercised for the benefit of his creditors and heirs, respectively, we find no sound and cogent reason
for denying the application of the same fiction to his citizenship, and for not considering it as likewise
extended for the purposes of the aforesaid unfinished proceeding before the Public Service
Commission. The outcome of said proceeding, if successful, would in the end inure to the benefit of
the same creditors and the heirs. Even in that event petitioner could not allege any prejudice in the
legal sense, any more than he could have done if Fragrante had lived longer and obtained the
desired certificate. The fiction of such extension of his citizenship is grounded upon the same
principle, and motivated by the same reason, as the fiction of the extension of personality. The fiction
is made necessary to avoid the injustice of subjecting his estate, creditors and heirs, solely by
reason of his death to the loss of the investment amounting to P35,000, which he has already made
in the ice plant, not counting the other expenses occasioned by the instant proceeding, from the
Public Service Commission of this Court.

We can perceive no valid reason for holding that within the intent of the constitution (Article IV), its
provisions on Philippine citizenship exclude the legal principle of extension above adverted to. If for
reasons already stated our law indulges the fiction of extension of personality, if for such reasons the
estate of Pedro O. Fragrante should be considered an artificial or juridical person herein, we can find
no justification for refusing to declare a like fiction as to the extension of his citizenship for the
purposes of this proceeding.

Pedro O. Fragrante was a Filipino citizen, and as such, if he had lived, in view of the evidence of
record, he would have obtained from the commission the certificate for which he was applying. The
situation has suffered but one change, and that is, his death. His estate was that of a Filipino citizen.
And its economic ability to appropriately and adequately operate and maintain the service of an ice
plant was the same that it received from the decedent himself. In the absence of a contrary showing,
which does not exist here, his heirs may be assumed to be also Filipino citizens; and if they are not,
there is the simple expedient of revoking the certificate or enjoining them from inheriting it.

Upon the whole, we are of the opinion that for the purposes of the prosecution of said case No. 4572
of the Public Service Commission to its final conclusion, both the personality and citizenship of
Pedro O. Fragrante must be deemed extended, within the meaning and intent of the Public Service
Act, as amended, in harmony with the constitution: it is so adjudged and decreed.

Decision affirmed, without costs. So ordered.

Moran, C.J., Pablo, Bengzon, Briones, Padilla and Tuason, JJ., concur.
Paras, J., I hereby certify that Mr. Justice Feria voted with the majority.

Separate Opinions

PERFECTO, J., dissenting:

Commonwealth Act No. 146 reserves to Filipino citizens the right to obtain a certificate of public
convenience to operate an ice plant in San Juan, Rizal. The limitation is in accordance with section 8
of Article XIV of the Constitution which provides

No franchise, certificate, or any other form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to corporations or other entities
organized under the laws of the Philippines, sixty per centum of the capital of which is owned
by citizens of the Philippines, nor such franchise, certificate or authorization be exclusive in
character or for a longer period than fifty years. No franchise granted to any individual, firm
or corporation, except under the condition that it shall be subject to amendment, alteration, or
repeal by Congress when the public interest so requires.

The main question in this case is whether the estate of Pedro O. Fragrante fulfills the citizenship
requirement. To our mind, the question can be restated by asking whether the heirs of Pedro O.
Fragrante fulfill the citizenship requirement of the law.

The estate is an abstract entity. As such, its legal value depends on what it represents. It is a device
by which the law gives a kind of personality and unity to undetermined tangible persons, the heirs.
They inherit and replace the deceased at the very moment of his death. As there are procedural
requisites for their identification and determination that need time for their compliance, a legal fiction
has been devised to represent them. That legal fiction is the estate, a liquid condition in process of
solidification.

The estate, therefore, has only a representative value. What the law calls estate is, a matter of fact,
intended to designate the heirs of the deceased. The question, therefore, in this case, boils down to
the citizenship of the heirs of Fragrante.

There is nothing in the record to show conclusively the citizenship of the heirs of Fragrante. If they
are Filipino citizens, the action taken by the Public Service Commission should be affirmed. If they
are not, it should be reversed.

Petitioner alleges that the estate is just a front or dummy for aliens to go around the citizenship
constitutional provision. It is alleged that Gaw Suy, the special administrator of the estate, is an alien.

We are of the opinion that the citizenship of the heirs of Fragrante should be determined by the
Commission upon evidence that the party should be present. It should also determine the dummy
question raised by the petitioner.

We are of opinion and so vote that the decision of the Public Service Commission of May 21, 1946,
be set aside and that the Commission be instructed to receive evidence of the above factual
questions and render a new decision accordingly.

G.R. No. 112625 March 7, 2002

CMH AGRICULTURAL CORPORATION, CARLOS M. HOJILLA, CESAR M. HOJILLA, CLAUDIO

M. HOJILLA, CORA M. HOJILLA AND CORNELIO M. HOJILLA, petitioners,
vs.
HON. COURT OF APPEALS AND CRISTOBAL M. HOJILLA, respondents.

DE LEON, JR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court which seeks to review
and set aside the Decision1 of the Court of Appeals in CA-G.R. SP No. 28893 promulgated on
October 25, 1993 holding that the Regional Trial Court (RTC) of Bacolod City, Branch 45, did not
commit grave abuse of discretion in reconsidering its Order dated November 22, 1991 dismissing
Civil Case No. 6256 for lack of jurisdiction.2

The antecedent facts show that the private respondent, Cristobal M. Hojilla, filed a complaint for
"Disregarding and Piercing the Veil of Corporate Fiction, Formal Declaration or Recognition of
Successional Rights and Recovery of Title with Damages"3 with the RTC of Bacolod City, Branch 45,
docketed as Civil Case No. 6256 against his siblings namely: Carlos M. Hojilla, Cesar M.
Hojilla,Cornelio M. Hojilla, Claudio M. Hojilla and Corazon M. Hojilla (with the latter two (2)
impleaded as unwilling co-plaintiffs), and CMH Agricultural Corporation (CMH for brevity). Cristobal
alleged in his complaint that CMH was a dummy corporation created to be the alter-ego of their
mother, the late Concepcion Montelibano-Hojilla, who purposely organized the same in 1975 to
shield her paraphernal properties from taxes by fictitiously assigning them to CMH, with her children
acting as dummy stockholders. Immediately upon its incorporation, the following properties of his
mother were assigned to CMH: Hacienda Manayosayao, Hacienda Nangka and a house and lots on
23rd Street, Bacolod City, consisting of Lot Nos. 240, 241, 242, 246, 247 and 248. After their
mother's death, Cristobal and his siblings extrajudicially partitioned the properties with Carlos, Cesar
and Cornelio taking Hacienda Nangka and the commercial lots of their late father, Mattias J. Hojilla,
situated in Silay City, while Corazon, Claudio and Cristobal were apportioned Hacienda
Manayaosayao, the house and lots on 23rd Street, Bacolod City, and some lots which were not
assigned to CMH. Thereafter, with the promise that the title over the property would be delivered to
them, Corazon, Claudio and Cristobal took possession of the subject house and lots. However,
Cristobal claimed that the title over the said property had not been turned over to them and on
several occasions Carlos, Cesar and Cornelio had, without his and his co-owners' knowledge,
mortgaged the said lots comprising the 23rd Street property in Bacolod City to several banking
institutions and even leased the same to Pilipinas Shell Petroleum Corporation, which, however, was
only curtailed by court action. Thus, Cristobal prayed that the veil of corporate fiction be pierced as
CMH was being used to deprive and defraud him of his successional rights over the house and lots
on 23rd Street, Bacolod City.

Carlos, Cesar, Cornelio, Claudio and Corazon, as defendants therein, countered, by way of special
and affirmative defenses:4 first, regular courts had no jurisdiction over the subject matter of the
complaint since it involved an intra-corporate controversy - the complaint being instituted by
Cristobal who is a stockholder and incorporator of CMH against his siblings, who are likewise
stockholders of the same corporation, and as such within the exclusive and original jurisdiction of the
Securities and Exchange Commission (SEC for brevity); second, the creation of CMH as an alleged
dummy corporation was a device or scheme amounting to fraud, thus falling under the original and
exclusive jurisdiction of the SEC; third, the claim of ownership over the house and lots by Cristobal
which was ventilated in the ejectment case filed by the said defendants against Cristobal in the
Municipal Trial Court in Cities (MTCC) of Bacolod City, Branch III and docketed therein as Civil Case
No. 17698, was resolved in favor of CMH; fourth, Cristobal committed forum-shopping since he had
previously filed a case against CMH, its incorporators and stockholders before the SEC, docketed as
SEC Case No. 03559; fifth, Cristobal had no cause of action since the power to sue and be sued
was vested alone in the board of directors of the corporation, CMH in particular, and not on a mere
stockholder.

Finding the arguments meritorious, the trial court issued on November 22, 1991, an
order5 dismissing the complaint in Civil Case No. 6256. However, upon filing by Cristobal of a motion
for reconsideration6 dated December 6, 1991, the court a quo in its order7 dated April 20, 1992
reversed itself and set aside its previous order dismissing the complaint. Thereafter, the defendant
filed a motion for reconsideration8 but it was denied in the order9 dated August 17, 1992 of the trial
court.

Carlos, Cesar, Cornelio, Claudio and Corazon elevated the case to the Court of Appeals through a
petition for certiorari10 alleging that the trial court committed grave abuse of discretion amounting to
lack of jurisdiction in taking cognizance of Cristobal's motion for reconsideration despite the absence
of notice of time and place of hearing in violation of procedural rules and in reconsidering its
extensive and exhaustive order dated November 22, 1991 with a minute resolution denying their
motion to dismiss. 1âwphi1.nêt

Finding no abuse of discretion on the part of the court a quo, the appellate court resolved on October
25, 1993 that the filing of the opposition to Cristobal's motion for reconsideration cured the defect of
lack of notice and hearing; and that the complaint in Civil Case No. 6256 did not involve an intra-
corporate controversy but Cristobal's successional rights which is within the jurisdiction of the court.11

Hence, the instant petition which is anchored on the following grounds:

THE HON. COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN

OBVIOUS DEFIANCE OF THE DECISION OF THE SUPREME COURT, IN NOT
DISMISSING A CASE WHICH IS PURELY AN INTRA-CORPORATE CONTROVERSY AND
THEREFORE, FALLS UNDER THE EXCLUSIVE JURISDICTION OF THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO P.D. 902-A;

II

THE HON. COURT OF APPEALS HAS AGAIN DECIDED A QUESTION OF SUBSTANCE,

CONTRARY TO THE DECISIONS OF THE SUPREME COURT, IN NOT DISMISSING THE
CASE FILED BY THE PRIVATE RESPONDENT WHO PURSUED SIMULTANEOUS
REMEDIES IN TWO (2) DIFFERENT FORA, AND IS THEREFORE GUILTY OF FORUM
SHOPPING;

III

THE HON. COURT OF APPEALS HAS DECIDED THE CASE NOT IN ACCORD WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT, IN NOT DISMISSING THE
COMPLAINT FILED BY THE PRIVATE RESPONDENT ON THE GROUND OF PENDENCY
OF ANOTHER ACTION;

IV

THE HON. COURT OF APPEALS HAS DECIDED THE CASE NOT IN ACCORD WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT, IN NOT DISMISSING THE
COMPLAINT OF A MERE STOCKHOLDER, WITHOUT BEING AUTHORIZED BY THE
BOARD OF DIRECTORS;

THE HON. COURT OF APPEALS HAS DECIDED THE CASE NOT IN ACCORD WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT, IN TAKING COGNIZANCE OF A
 "MERE SCRAP OF PAPER", A MOTION FOR RECONSIDERATION, WHICH DOES NOT
CONTAIN THE NOTICE OF TIME AND PLACE OF HEARING, IN VIOLATION OF THE
MANDATORY REQUIREMENTS OF THE RULES OF COURT.

At the outset, we note that the alleged errors attributed on the part of the Court of Appeals by the
petitioners are mere reiteration of those already raised in the court below but which we will
nonetheless consider to put an end to this dispute.

First, petitioners argue that the trial court has no jurisdiction over the complaint in Civil Case No.
6256 as it involves a suit filed by a stockholder against other stockholders and the corporation itself;
thus, it is an intra-corporate controversy within the jurisdiction of the SEC and not of the regular
courts. Likewise, petitioners argue that the allegation of fictitious creation of CMH as an alter-ego of
the late Concepcion M. Hojilla and the concomitant prayer to pierce the veil of corporate fiction falls
within the category of a device or scheme employed by corporate officers cognizable by the SEC
alone.

The relationship of the parties to a suit has formerly been the lone indicia for its classification either
as an intra-corporate controversy within the jurisdiction of the SEC or a civil dispute within the
jurisdiction of the regular courts. Thus, a dispute arising between a stockholder and the corporation,
without distinction, qualification or exemption, was previously considered an intra-corporate
controversy within the jurisdiction of the SEC and not of the regular courts. Recent jurisprudence,
however, has established that in determining which body has jurisdiction over a case, the better
policy would be to consider not only the status or relationship of the parties but also the nature of the
question that is the subject of the controversy.12

A reading of the complaint filed by private respondent shows that its primary objective is to protect
his successional rights as an heir of his late mother, Concepcion M. Hojilla, whose paraphernal
properties he claimed were fictitiously assigned to CMH to evade payment of taxes. He alleged
therein that the properties had already been the subject of extra-judicial partition between the heirs
with the house and lots on 23rd Street, Bacolod City, being bestowed upon him and his co-heirs
Corazon and Claudia. He claimed that the failure of his other siblings, Carlos, Cesar and Cornelio, to
turn over the title to him and his co-heirs allowed CMH to continue claiming the house and lots as its
own and even attempted to lease a few of the lots to other persons without the knowledge of private
respondent and his co-heirs. Thus, private respondent filed the complaint to consolidate his claim
over the subject properties and forestall any further intrusive act from the CMH which would place
his and his co-heirs/co-owners' rights over the properties in constant peril. Private respondent's
position as a stockholder of CMH and his relationship to the other stockholders, became incidental
only to the issue of ownership over the subject properties and did not convert the action into an intra-
corporate controversy within the exclusive jurisdiction of the SEC but remained a civil action
cognizable by the regular courts.

Neither does the allegation about CMH's formation as an alleged dummy corporation designed to be
the alter-ego of the late Concepcion M. Hojilla and the prayer for piercing the corporate veil convert
the action into an intra-corporate controversy as the former is merely cited as the ground relied upon
by private respondent to prove his claim of ownership over the said house and lots whereas through
the said prayer, he in effect exhorts the court to confirm his allegations and thus, protect his
successional rights.

Thus, in Cease v. CA13 this Court took cognizance of the civil case filed by respondents against their
siblings (petitioners therein) and the Tiaong Milling and Plantation Company, Inc. praying that the
corporation be declared identical to their deceased father, Forrest L. Cease, and that its properties
be divided among his children as his intestate heirs. The Court treated the case as an action for
partition and, applying the doctrine of piercing the corporate veil, disregarded the separate
personality of the corporation from that of its stockholders reasoning that if the legal fiction of
separate corporate personality were sustained, then it would be used to delay and ultimately deprive
and defraud respondents of their successional rights over the estate of their deceased father.

Second, petitioners argue that the appellate court erred in entertaining the complaint in Civil Case
No. 6256 despite the existence of a similar complaint filed by Cristobal before the SEC, docketed as
SEC Case No. 0355914 involving the same parties and the same issues raised in Civil Case No.
6256.

We do not agree. As properly resolved by the appellate court, the filing of SEC Case No. 03559
does not bar the subsequent filing of Civil Case No. 6256 because they refer to different causes of
action with distinct reliefs prayed for. The private respondent in the SEC case prayed for the
appointment of a receiver, dissolution and liquidation of CMH, and to enjoin petitioners from leasing
the house and lots at 23rd Street, Bacolod City. However, in Civil Case No. 6256, he sought to
preserve his successional rights as heir of his deceased mother by piercing the veil of corporate
fiction to recover the title of the house and lots on 23rd Street, Bacolod City, and claim payment of
damages for the injury he has suffered.

Neither does the resolution of SEC Case No. 03559 dismissing the petition of private respondent
during the pendency of Civil Case No. 6256 constitute res judicata on the matter since the cause of
action and issues raised and resolved in the former are different from those cited in the latter. The
requirements of res judicata are: (a) the former judgment must be final; (b) the court which rendered
it had jurisdiction over the subject matter and the parties; (c) it must be a judgment on the merits;
and (d) there must be, between the first and second actions, identity of parties, subject matter, and
causes of action.15 Notably, in the SEC case, the private respondent averred that petitioner
stockholders and CMH committed acts to defraud the public such as the lack of accounting, lack of
records, lack of proper notice of meetings, and prayed for the dissolution of the corporation;
whereas, in Civil Case No. 6256, the private respondent contended that CMH was a mere dummy
corporation and an alter-ego of his deceased mother and thus, sought the delivery of the title over
the house and lots in question as his share of inheritance from his deceased mother.

Third, petitioners argue that the MTCC's adverse decision in the ejectment case, Civil Case No.
17698, which they had filed against private respondent Cristobal M. Hojilla, is already final and
conclusive with regard to latter's claim of ownership over the house and lots in question. Hence,
petitioners contend that Civil Case No. 6256 of the RTC should have been dismissed as it allegedly
involves the same subject matter and the same issue.

The record shows that the MTCC rendered a decision in the ejectment case, Civil Case No. 17698,
ordering private respondent to vacate the premises; and that decision was affirmed by the Court of
Appeals. However, under Sec. 7, Rule 70 of the Rules of Court, the judgment rendered by a
municipal or metropolitan trial court in an action for forcible entry or detainer shall be effective with
respect to possession only and in no wise shall affect or bind the title of ownership of the land or
building. Such judgment shall not bar an action between the same parties respecting the title to the
land or building nor shall the facts found therein be held conclusive in another case between the
same parties upon a different cause of action not involving possession.16 Thus, the filing of Civil
Case No. 6256 in the RTC was not barred by the adverse decision of the MTCC in the ejectment
case, Civil Case No. 17698, inasmuch as the issue raised in the former was one regarding
ownership while the issue resolved in the ejectment case was priority of possession alone.17

Fourth, petitioners contend that the complaint should have been dismissed as it was filed by a mere
stockholder in behalf of the corporation without being authorized by its board of directors.
On the contrary, authorization from the board of directors of the CMH in the case at bar was not
necessary inasmuch as private respondent was not acting on behalf of the corporation but in his own
personal capacity; and precisely he was suing the corporation itself (CMH) to preserve his
successional rights.

Finally, petitioners point out that the lower court erred in granting the motion for reconsideration of
herein private respondent despite the lack of notice of time and place of hearing in violation of the
mandatory provision of the Rules of Court. However, as correctly ruled by the appellate court, the
requirement of notice of time and hearing in a party's pleading is necessary only to appraise the
other party of the actions of the former. Inasmuch as petitioners have timely filed their
Opposition18 on January 7, 1992 to private respondent's motion for reconsideration, any defect
regarding such notice had been cured. 1âwphi 1.nêt

In view of the foregoing, the Court of Appeals did not commit any reversible error in its challenged
decision.

WHEREFORE, the assailed Decision dated October 25, 1993 of the Court of Appeals in CA-G.R. SP
No. 28893 holding that the RTC of Bacolod City, Branch 45, did not commit grave abuse of
discretion in reconsidering its Order, dated November 22, 1991, in Civil Case No. 6256
is AFFIRMED. The Regional Trial Court of Bacolod City, Branch 45, is hereby ordered to resume
forthwith the trial of Civil Case No. 6256 and to resolve the same with utmost dispatch.