Mayor vs.

Tiu
810 SCRA 256, G.R. No. 203770 November 23, 2016

FACTS

 Rosario Villasin, the widow of Primo Villasin died with a holographic Last Will and Testament
wherein she named her sister Remedios Tiu and niece, Manuela Mayor as executors, who then
filed a petition for the probate will which was later found by the RTC as sufficient in form and
substance and was set for hearing.

 Damiana Marty, claiming to be an adopted child of Rosario, filed a Verified Urgent Manifestation
and Motion stating that Remedios kept Rosario a virtual hostage for the past 10 years, that her
family’s financial dependence on Rosario led to the wastage and disposal of the properties of the
spouses Villasin, and that until the will of Rosario could be probated and admitted, Remedios and
her 10 children had no standing to possess or control the properties of the Villasins.

 Remedios and Manuela averred that Marty was not an adopted child, and that the probate court
had no jurisdiction over the properties claimed by Marty as part of Rosario’s estate as the same
were actually owned by Primrose Development Corporation, which has a separate and distinct
personality from Rosario’s estate.

 Marty replied, citing an order of the CFI of Leyte claiming that the veil of corporate entity of
Primrose was pierced on the ground that the incorporation of Primrose was founded on a
fraudulent consideration, having been done in contemplation of Primo’s death.

 The RTC granted the motion of Marty, applying the doctrine of piercing the corporate veil,
considering that Rosario had no other properties that comprised her estate other than Primrose.

 Remedios and Manuela filed their Motion for Reconsideration, arguing that Rosario’s estate
consisted only of shares of stock in Primrose and not the corporation itself, which was denied for
lack of merit. The case was later reraffled after their motion for inhibition was granted.

 Aggrieved, Remedios and Manuela filed a petition for certiorari with the CA, which reversed the
orders of the RTC, and held that Primrose had a personality separate and distinct from the
estate of the decent and that the probate court had no jurisdiction to apply the doctrine of
piercing the corporate veil.

 Months after the order of the probate court was issued, Marty filed her Omnibus Motion praying
for the probate court to 1) order Remedios and Manuela to render an accounting of all the
properties and assets comprising the estate of the decedent; 2) deposit or consign all rental
payments or other passive income derived from the properties comprising the estate; and 3)
prohibit the disbursement of funds comprising the estate of the decedent without formal motion
and approval by the probate court, which was granted.

 After their motion for reconsideration was denied, Remedios and Manuela filed a petition for
certiorari with the CA, which dismissed the same based on certain infirmities, and denied the
motion for reconsideration. Hence this petition filed by Manuela only, as Remedios had passed
away.

ISSUES

(1) Whether or not the doctrine of piercing the corporate veil has application in this case
(2) Whether or not the probate court has acquired jurisdiction over Primrose and its properties
RULING

(1) No.

The doctrine of piercing the corporate veil has no relevant application in this case. Under this doctrine, the
court looks at the corporation as a mere collection of individuals or an aggregation of persons undertaking
business as a group, disregarding the separate juridical personality of the corporation unifying the group.
Another formulation of this doctrine is that when two business enterprises are owned, conducted and
controlled by the same parties, both law and equity will, when necessary to protect the rights of third
parties, disregard the legal fiction that two corporations are distinct entities and treat them as identical or
as one and the same. The purpose behind piercing a corporation’s identity is to remove the barrier
between the corporation and the persons comprising it to thwart the fraudulent and illegal schemes of
those who use the corporate personality as a shield for undertaking certain proscribed activities.

Here, instead of holding the decedent’s interest in the corporation separately as a stockholder, the
situation was reversed. Instead, the probate court ordered the lessees of the corporation to remit rentals
to the estate’s administrator without taking note of the fact that 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. Moreover, to disregard the separate juridical
personality of a corporation, the wrongdoing cannot be presumed, but must be clearly and convincingly
established.

(2) No.

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 not of jurisdiction; it is basically applied only to
determine established liability. 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. This is so because the doctrine of piercing the veil of
corporate fiction comes to play only during the trial of the case after the court has already acquired
jurisdiction over the corporation. 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.

Hence, a corporation not impleaded in a suit cannot be subject to the court’s process of piercing the veil
of its corporate fiction. Resultantly, any proceedings taken against the corporation and its properties
would infringe on its right to due process.

In the case at bench, the probate court applied the doctrine of piercing the corporate veil ratiocinating that
Rosario had no other properties that comprise her estate other than her shares in Primrose. Although the
probate court’s intention to protect the decedent’s shares of stock in Primrose from dissipation is
laudable, it is still an error to order the corporation’s tenants to remit their rental payments to the estate of
Rosario.

Considering the above disquisition, the Court holds that a permanent and final injunction is in order in
accordance with Section 9, Rule 58 of the Rules of Court which provides that  “[i]f after the trial of the
action it appears that the applicant is entitled to have the act or acts complained of permanently enjoined,
the court shall grant a final injunction perpetually restraining the party or person enjoined from the
commission or continuance of the act or acts or confirming the preliminary mandatory injunction.”
Undoubtedly, Primrose stands to suffer an irreparable injury from the subject order of the probate court.

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.