Mac Duguiang Jr.

Mayor vs. Tiu

G.R. 203770, Nov 23, 2016

TOPIC: Doctrine of separate juridical personality

SUMMARY:
Rosario Casilan passed away and left a holographic will, wherein she named her sister, Remedios Tiu,
and her niece, Manuela Mayor, as executors. Immediately thereafter, Remedios and Manuela filed a
petition for the probate of Rosario's will. Damiana Marty, claiming to be the adopted daughter of
Rosario, filed an opposition. She prayed for the probate court to: 1) order an immediate inventory of
all the properties subject of the proceedings; 2) direct the tenants of the Primrose Development
Corporation located at Primrose Hotel, to deposit their rentals with the court. Remedios and Manuela
countered that the probate court had no jurisdiction over properties owned by third persons,
particularly by Primrose Corp., the latter having a separate and distinct personality from the
decedent's estate.

The probate court applied the doctrine of piercing the veil of corporate fiction and issued an order
directing deposit or consignment of all the rental payments from the properties and assets registered
in the name of Primrose. The probate court likewise ordered the inventory of the assets of Primrose.
Thus, Petitioners filed Motion for Issuance of Temporary Restraining Order and Writ of Preliminary
Injunction on the orders of the RTC

The Court granted the motion and held that the doctrine of piercing of corporate veil was
inapplicable. The decedent was not the absolute owner of Primrose but only an owner of shares
thereof. Mere ownership by a single stockholder or by another corporation of all or nearly all of the
capital stocks of a corporation is not of itself a sufficient reason for disregarding the fiction of separate
corporate personalities. No compelling evidence was ever presented to substantiate the position of
Marty that Rosario and Primrose were one and the same, justifying the inclusion of the latter's
properties in the inventory of the decedent's properties.

DOCTRINE:
This doctrine disregards the legal fiction that two juridical persons, at least one being a corporation,
are distinct entities and treat them as identical or as one and the same. It is applicable when
necessary to protect the rights of third parties from fraudulent and illegal schemes of those who use
the corporate personality as a shield for undertaking certain proscribed activities.

FACTS:
 Rosario Villasin passed away and left a holographic will, naming her sister Remedios Tiu, and her
niece, Manuela Mayos, herein Petitioners, as executors

 Remedios and Manuela filed a petition for the probate of Rosario's holographic will with prayer
for the issuance of letters testamentary
o The probate court found the petition as sufficient in form and substance and set the
case for hearing.

First motion
 Mac Duguiang Jr.

 Later, one Damiana Marty, Respondent herein, claiming to be the adopted daughter of Rosario,
filed a Verified Urgent Manifestation and Motion
o Respondent alleged that:
 The authenticity of the holographic will was dubious
 Remedios kept the decedent Rosario a virtual hostage for the past 10 years
 Remedios’ family was financially dependent on Rosario which led to the
wastage and disposal of the properties owned by her and her deceased husband
o Respondent prayed for the probate court to:
 order an immediate inventory of all the properties subject of the proceedings;
 direct the tenants of the estate, Mercury Drug and Chowking, located at
Primrose Hotel, to deposit their rentals with the court;
 direct Metrobank to freeze the accounts in the name of Rosario, Primrose
Development Corporation, or Remedios; and
 lock up the Primrose Hotel in order to preserve the property until final
disposition by the court.

 Remedios and Manuela filed their Comment/Opposition to the urgent manifestation averring
that:
o Marty was not an adopted child of the Villasins as no record of any adoption
proceedings involving Marty existed in the records of Office of the Clerk of Court of
Tacloban City
o the probate court had no jurisdiction over the properties because these properties were
actually owned by Primrose Corp., a duly organized corporation with separate
personality, thus, a third person to the case

 In her reply, Marty contended that:

o An order of CFI Leyte had already pierced the veil of corporate entity on the ground that
it was a closed family corporation founded on a fraudulent consideration, having been
done in contemplation of Primo's death.
o Thus, "piercing" was also proper in the case of Rosario's estate

 The RTC granted the motion of Marty

o It held that:
 The doctrine of piercing the corporate veil was applicable in the case
considering that Rosario had no other properties that comprised her estate
other than Primrose
o It ordered:
 The appointment of the OIC Clerk of Court as special administrator of the estate
 Mercury Drug and Chowking to deposit the rental income to the court
 Metrobank to freeze the bank accounts mentioned in the motion of Marty

 On certiorari, the CA reversed the RTC, holding that:

o Primrose had a personality separate and distinct from the estate of the decedent
 Mac Duguiang Jr.

o the probate court had no jurisdiction to apply the doctrine of piercing the corporate veil
as it would be tantamount to adjudicating with finality the ownership of the properties
in favor of the Estate.

Second motion
 10 months after this ruling, Marty filed an omnibus motion for the probate court to:
o order Remedios and Manuela to render an accounting of all the properties and assets
comprising the estate of the decedent;
o deposit or consign all rental payments or other passive income derived from the
properties comprising the estate; and
o prohibit the disbursement of funds comprising the estate of the decedent without
formal motion and approval by the probate court.

 The RTC granted Marty’s Omnibus Motion

o It found that:
 there was clear evidence of a significant decrease of Rosario's shares in the
outstanding capital stock of Primrose
o It ordered:
 Remedios and Manuela to render an accounting of all assets of the estate and
deposit or consign all its rental income
 And that no funds comprising the estate of the decedent shall be disbursed
without formal Motion therefor

 Remedios and Manuela filed a petition before the CA

 This was dismissed by the CA for various procedural infirmities (skipped coz long but
unimportant)

 Respondent Manuela filed before the SC a Motion for Issuance of Temporary Restraining Order
and Writ of Preliminary Injunction on the orders of the RTC, arguing that:
o Although an inventory of the assets of the decedent was proper, the probate court
ordered an inventory of the assets of Primrose, a separate and distinct entity

ISSUE:
W/N Primrose was a separate and distinct entity – YES

The estate and the corporation have separate personalities

 The law attributes the capacity of having rights and duties to artificial persons.
o The estate of the deceased person is a juridical person separate and distinct from the
person of the decedent.
o A corporation also has a separate personality distinct from its stockholders and from
other corporations to which it may be connected.

Doctrine of piercing the corporate veil not applicable

 The doctrine of piercing the corporate veil has no relevant application in this case.
 Mac Duguiang Jr.

 This doctrine disregards the legal fiction that two juridical persons are distinct entities and treat
them as identical or as one and the same
o It is applicable when necessary to protect the rights of third parties from fraudulent and
illegal schemes of those who use the corporate personality as a shield for undertaking
certain proscribed activities.

 In this case, the decedent was not the absolute owner of Primrose but only an owner of shares
thereof.
o Mere ownership by a single stockholder or by another corporation of all or nearly all of
the capital stocks of a corporation is not of itself a sufficient reason to apply this
doctrine

 Moreover, to disregard the separate juridical personality of a corporation, the wrongdoing must
be clearly and convincingly established.
o Such was lacking in this case

Probate court cannot decide on ownership

 It is a well-settled rule that a probate court, whether testate or intestate, cannot adjudicate or
determine title to properties claimed to be part of the estate but which are equally claimed to
belong to outside parties
o The probate court may pass upon question of title, but such determination is only
provisional, not conclusive, and is subject to the final decision in a separate action to
resolve title
o If there is no dispute, it can only determine whether they should, or should not, be
included in the inventory or list of properties to be overseen by the administrator
 The exception to this is when the claimant and all the other parties having legal interest in the
property consent to the submission of the question to the probate court, and the interests of
third persons are not thereby prejudiced

 In this case, Respondent Marty argues that the subject properties and the parcel of land on
which these were erected should be included in the inventory of Rosario's estate, thus the
rentals from these properties should be included in the inventory of Rosario’s estate.

 The Court held that the probate court exceeded its authority
o The Torrens title to the property is not in the decedent's names but in the name of the
corporation, a third person to the case

 The probate court should have recognized the incontestability accorded to the Torrens title as
due weight should be given to its presumptive conclusiveness
o Additionally, PD 1529 proscribes a collateral attack on a Torrens title
o It cannot be altered, modified or cancelled except in a direct proceeding in accordance
with law
 Mac Duguiang Jr.

 Thus, the probate court had no authority to deprive such third person of their possession and
ownership of the property.

Probate court has not acquired jurisdiction over Primrose

 The probate court in this case has not acquired jurisdiction over Primrose and its properties
 Piercing the veil of corporate entity applies to determination of liability
o It is not available to confer on the court a jurisdiction it has not acquired, in the first
place, over a party not impleaded in a case.
o It comes to play only during the trial of the case after the court has already acquired
jurisdiction over the corporation
o Hence, before this doctrine can be even applied, based on the evidence presented, it is
imperative that the court must first have jurisdiction over the corporation

 In the case at bench, the probate court applied the doctrine of piercing the corporate even
when Primrose was not impleaded.

Conlcusion
 Considering the above disquisition, the Court held that a permanent and final injunction is in
order
 Primrose stands to suffer an irreparable injury from the subject order of the probate court

RULING:
WHEREFORE, the petition is GRANTED. The Temporary Restraining Order, dated June 14, 2013, is hereby
made PERMANENT, effective immediately. The Regional Trial Court, Branch 6, Tacloban City, is
ENJOINED from enforcing and implementing its January 20, 2011 and June 10, 2011 Orders, insofar as
the corporate properties of Primrose Development Corporation are concerned, to avert irreparable
damage to a corporate entity, separate and distinct from the Estate of Rosario Guy-Juco Villasin Casilan