Mayor vs. Tiu

A probate court cannot pierce the corporate veil to acquire jurisdiction over a corporation not impleaded in the proceedings, nor may it order the corporation's tenants to remit rentals to the estate's administrator, where the decedent owned only shares of stock in the corporation and the corporate properties are registered under the Torrens system in the corporation's name.

Rosario Guy-Juco Villasin Casilan was the widow of the late Primo Villasin. Upon her death on May 25, 2008, she left a holographic will naming her sister Remedios Tiu and her niece Manuela Azucena Mayor as executors. Rosario's estate allegedly consisted principally of shares of stock in Primrose Development Corporation, a family corporation. Respondent Damiana Charito Marty claimed to be Rosario's adopted daughter and sought inclusion of Primrose's corporate properties in the estate's inventory, asserting that the corporation was merely an extension of Rosario's personality. Edwin Tiu, a son of Remedios, initially opposed the probate but later settled amicably with Manuela. The dispute centered on whether the probate court could treat Primrose's corporate assets as part of Rosario's estate.

Rosario Guy-Juco Villasin Casilan, the widow of the late Primo Villasin, passed away on May 25, 2008, leaving a holographic will in which she named her sister Remedios Tiu and her niece Manuela Azucena Mayor as executors. Immediately thereafter, Remedios and Manuela filed a petition for the probate of Rosario's holographic will before the Regional Trial Court, Branch 9, Tacloban City, docketed as Sp. Proc. No. 2008-05-30, alleging that Rosario left properties valued at approximately ₱2.5 million. On June 12, 2008, the RTC-Br. 9 found the petition sufficient in form and substance and set the case for hearing.

On May 29, 2008, respondent Damiana Charito Marty, claiming to be the adopted daughter of Rosario, filed a separate petition for letters of administration before RTC-Br. 34, but it was not given due course because of the pending probate proceedings. On June 23, 2008, Marty filed a Verified Urgent Manifestation and Motion before the probate court alleging that Remedios had kept Rosario a virtual hostage for ten years and that Remedios and her family were financially dependent on Rosario, leading to the wastage and disposal of the Villasins' properties. She prayed that the probate court order an immediate inventory of all estate properties, direct the tenants Mercury Drug and Chowking, located at Primrose Hotel, to deposit their rentals with the court, direct Metrobank to freeze accounts in the name of Rosario, Primrose Development Corporation, or Remedios, and lock up the Primrose Hotel to preserve the property. Remedios and Manuela opposed, arguing that Marty was not an adopted child of the Villasins and that the probate court had no jurisdiction over properties owned by Primrose, a corporation with a separate and distinct personality from the decedent's estate. Marty replied by citing a 1981 CFI Leyte order in SP No. 1239, claiming that the veil of corporate entity of Primrose had already been pierced as early as March 3, 1981, on the ground that it was a closed family corporation controlled by Rosario after Primo's death.

In its January 14, 2009 Order, the RTC-Br. 9 granted Marty's motion and appointed the OIC Clerk of Court as special administrator of the estate. The probate court ordered Mercury Drug and Chowking to deposit rental income with the court and Metrobank to freeze the bank accounts, applying the doctrine of piercing the corporate veil on the ground that Rosario had no other properties comprising her estate other than Primrose. Remedios and Manuela moved for reconsideration, arguing that Rosario's estate consisted only of shares of stock in Primrose and not the corporation itself, and that the probate court could not order the corporation's lessees to remit rentals to the estate. The motion was denied on March 27, 2009, and the presiding judge inhibited himself, leading to the re-raffle of the case to RTC-Br. 6.

Remedios and Manuela elevated the matter to the CA, which, in its October 16, 2009 Decision, reversed the RTC-Br. 9 orders, holding that Primrose had a personality separate and distinct from the estate and that the probate court had no jurisdiction to apply the doctrine of piercing the corporate veil. The CA noted that the probate court's application of the doctrine effectively adjudicated ownership of the properties in favor of the estate, which was beyond its limited jurisdiction. On November 17, 2009, the RTC-Br. 6 partially granted the motion to revoke the writ of execution, revoking the special administrator's power to oversee Primrose's day-to-day operations and the order with respect to Mercury Drug and Chowking, but upholding the conduct of inventory of estate properties.

On September 24, 2010, Marty filed an Omnibus Motion praying that the probate court direct Remedios and Manuela to render an accounting of all estate properties and assets, deposit or consign all rental payments or passive income derived from estate properties, and prohibit the disbursement of estate funds without court approval. In its January 20, 2011 Order, the RTC-Br. 6 granted the Omnibus Motion, directing Remedios and Manuela to render an accounting and deposit or consign all rental payments and other passive income from properties registered in Primrose's name, including income from Primrose Hotel and lease contracts with Mercury Drug and Chowking. The probate court reasoned that evidence showed a significant decrease of Rosario's shares in the outstanding capital stock of Primrose, warranting inquiry into the validity of the transfers. The partial motion for reconsideration was denied on June 10, 2011. Remedios and Manuela filed a petition for certiorari under Rule 65 with the CA, but it was dismissed on October 5, 2011 for procedural infirmities, and the motion for reconsideration was denied on September 24, 2012. Manuela then filed the present petition before the Supreme Court, Remedios having passed away in the interim. Edwin Tiu, a son of Remedios who had initially opposed the probate, manifested on May 29, 2013 that he and Manuela had settled amicably and withdrew from the case. The Court issued a temporary restraining order on October 14, 2013, restraining the probate court from implementing orders affecting Primrose's corporate properties.

• Proof of Service: Petitioner argued that there was actual compliance with Section 13, Rule 13 of the Rules of Court, the CA petition having been accompanied by a notarized affidavit of service and filing of registered mail, which was the best evidence of service at the time, and that the available registry return card was furnished the CA in the motion for reconsideration.
• Material Date Rule: Petitioner maintained that the failure to state material dates could be excused because the dates were evident from the records.
• Certified True Copy: Petitioner contended that she went to the RTC of Tacloban to secure certified true copies of the assailed orders, but only the stamped name of the Clerk of Court appeared thereon because the branch had no stamp pad with the certification phrase and no typewriter, inadequacies not attributable to the parties.
• Verification and Certification Against Forum Shopping: Petitioner argued that the lack of information pertaining to the notary public should not invalidate the verification and certification because it was not attributable to the parties.
• Technicalities vs. Substantive Rights: Petitioner insisted that technicalities should never be used to defeat the substantive rights of the parties.
• Meritorious Case on the Merits: Petitioner asserted that paragraph 1(b) of the dispositive portion of the January 20, 2011 Order should be reversed because it overturned the October 16, 2009 CA Decision, which had long become final and executory, holding that Primrose had a personality separate and distinct from the estate.

• Procedural Compliance: Respondent Marty insisted that petitioner failed to comply with the procedural requirements as stated by the CA, including the requirements on service of the petition, the material date rule, the attachment of certified true copies, and the verification and certification against forum shopping.
• Mootness: Respondent Marty argued that the petition had been rendered moot and academic because the probate court had declared her as the sole heir of Rosario and appointed her administrator of the estate.
• Risk of Injustice: Respondent Marty contended that an injunctive relief would work injustice to the estate because of the total assimilation by petitioner of the shareholdings of the decedent in Primrose and her share in the corporation's income.

• Piercing the Corporate Veil: Whether the probate court could apply the doctrine of piercing the corporate veil to treat Primrose's properties as part of Rosario's estate.
• Jurisdiction of Probate Court: Whether the probate court had jurisdiction over Primrose and its properties, given that Primrose was not impleaded in the proceedings.
• Torrens Title Protection: Whether the probate court could include properties registered under the Torrens system in the name of Primrose in the inventory of Rosario's estate.
• Procedural Dismissal by CA: Whether the CA properly dismissed the petition for certiorari on procedural grounds.

• Piercing the Corporate Veil: No. The doctrine of piercing the corporate veil has no relevant application where the decedent owned only shares of stock in the corporation, not the corporation itself, and mere ownership of all or nearly all capital stock is not a sufficient reason to disregard separate corporate personality.
• Jurisdiction of Probate Court: No. Piercing the corporate veil applies to the determination of liability, not to confer jurisdiction; a corporation not impleaded in a suit cannot be subject to the court's process of piercing, and any proceedings against it would infringe on its right to due process.
• Torrens Title Protection: No. The probate court should have recognized the incontestability accorded to the Torrens title of Primrose; a Torrens title may not be collaterally attacked in probate proceedings, and the holder should be considered the owner until the title is nullified in an appropriate ordinary action.
• Procedural Dismissal by CA: The Court did not rule on this issue, having resolved the case on the merits by granting the petition and issuing a permanent injunction.

• Piercing the Corporate Veil: The estate of a deceased person is a juridical person separate and distinct from the decedent and from any corporation, arising by operation of law. This is consonant with the basic tenet of corporation law that a corporation has a separate personality distinct from its stockholders. The purpose behind piercing a corporation's identity is to remove the barrier between the corporation and the persons comprising it to thwart fraudulent and illegal schemes. Here, the situation was reversed: instead of holding the decedent's interest in the corporation separately as a stockholder, the probate court ordered the corporation's lessees to remit rentals to the estate's administrator. The decedent was not the absolute owner of Primrose but only an owner of shares thereof. Mere ownership by a single stockholder of all or nearly all of the capital stock is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities. Moreover, wrongdoing cannot be presumed but must be clearly and convincingly established, and no compelling evidence was presented to substantiate that Rosario and Primrose were one and the same.

• Jurisdiction of Probate Court: The doctrine of piercing the veil of corporate fiction comes into play only during the trial of the case after the court has already acquired jurisdiction over the corporation. It is not available to confer jurisdiction the court has not acquired in the first place over a party not impleaded in the case. A corporation not impleaded in a suit cannot be subject to the court's process of piercing its corporate fiction. Any proceedings taken against the corporation and its properties would infringe on its right to due process. In this case, the probate court applied the doctrine of piercing the corporate veil on the rationale that Rosario had no other properties comprising her estate other than her shares in Primrose. Although the intention to protect the decedent's shares from dissipation was laudable, it was error to order the corporation's tenants to remit rental payments to the estate.

• Torrens Title Protection: A probate court exercises limited jurisdiction and has no power to adjudicate title to properties claimed by a third person adversely to the decedent, unless the claimant and all other parties having legal interest consent, or the interests of third persons are not thereby prejudiced. The probate court may provisionally pass upon title for inventory purposes, but such determination is not conclusive. Here, the subject land was registered under the Torrens system in the name of Primrose, a third person who would be prejudiced by the probate court's orders. The presumptive conclusiveness of a Torrens title should be given due weight, and in the absence of strong compelling evidence to the contrary, the holder should be considered the owner until the title is nullified in an appropriate ordinary action. P.D. No. 1529 proscribes collateral attack on a Torrens title. No compelling evidence was ever presented to substantiate that Rosario and Primrose were one and the same. At most, Rosario owned shares of stock in Primrose, underscoring that Primrose is a separate and distinct personality from the estate.

• Procedural Dismissal by CA: The Court resolved the case by issuing a permanent injunction on the merits, finding that Primrose stood to suffer irreparable injury from the probate court's orders. The Court did not expressly rule on the correctness of the CA's procedural dismissal, having found sufficient basis to grant the petition on substantive grounds.

• Separate Juridical Personality of an Estate — The estate of a deceased person is a juridical person separate and distinct from the person of the decedent and from any other corporation. This status arises by operation of law, in consonance with the basic tenet of corporation law that a corporation has a separate personality distinct from its stockholders and from other corporations. The Court applied this doctrine to hold that Primrose's properties could not be treated as part of Rosario's estate merely because Rosario held shares in Primrose.

• Doctrine of Piercing the Corporate Veil — The court looks at the corporation as a mere collection of individuals, disregarding the separate juridical personality to thwart fraudulent and illegal schemes. The purpose is to remove the barrier between the corporation and the persons comprising it. Mere ownership by a single stockholder of all or nearly all of the capital stock is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities. The wrongdoing cannot be presumed but must be clearly and convincingly established. The Court held that the doctrine has no application where the decedent owned only shares of stock, not the corporation itself, and that piercing cannot be used to confer jurisdiction over a corporation not impleaded in the case.

• Limited Jurisdiction of Probate Court — A probate court cannot adjudicate or determine title to properties claimed to be part of the estate but equally claimed to belong to outside parties. It may provisionally pass upon title for inventory purposes, but such determination is provisional, not conclusive, and subject to final decision in a separate action. If there is a dispute, the parties must resort to an ordinary action for final determination of conflicting claims of title. The Court applied this doctrine to hold that the probate court could not order Primrose's tenants to remit rentals to the estate, as the properties were owned by and titled in the name of Primrose.

• Incontestability of Torrens Title — The presumptive conclusiveness of a Torrens title should be given due weight, and in the absence of strong compelling evidence to the contrary, the holder should be considered the owner until the title is nullified in an appropriate ordinary action. A certificate of title is not subject to collateral attack and cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law (P.D. No. 1529, Section 48). The Court applied this doctrine to hold that the probate court should have recognized the incontestability of Primrose's Torrens title over Marty's arguments of possible dissipation.

• "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 a court a jurisdiction it has not acquired, in the first place, over a party not impleaded in a case." — This passage articulates the ratio decidendi on why the probate court could not pierce the corporate veil to acquire jurisdiction over Primrose, a corporation not impleaded in the proceedings.

• "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." — This formulation states the controlling rule on the insufficiency of mere stock ownership as a ground for piercing the corporate veil, frequently cited in subsequent jurisprudence.

• "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'" — This passage defines the weight accorded to Torrens titles in probate proceedings and explains why the probate court could not disregard Primrose's registered ownership.

• Pastor, Jr. vs. Court of Appeals, 207 Phil. 758 (1983) — Followed. Established that the question of ownership is an extraneous matter which the probate court cannot resolve with finality, and that its determination of title for inventory purposes is only provisional.
• Valera vs. Inserto, 233 Phil. 552 (1987) — Followed. Held that a probate court has no power to determine title to property claimed by a third person adversely to the decedent, unless the claimant and all other parties consent or the interests of third persons are not prejudiced.
• Cuizon vs. Ramolete, 214 Phil. 436 (1984) — Followed. Held that where property is in the possession of third parties and covered by a transfer certificate of title issued in their name, the probate court should exclude it from the estate inventory and has no authority to deprive such third persons of possession and ownership.
• Bolisay vs. Alcid, 174 Phil. 463 (1978) — Followed. Cited for the proposition that the presumptive conclusiveness of a Torrens title should be given due weight in probate proceedings.
• Traders Royal Bank vs. Court of Appeals, 336 Phil. 15 (1997) — Followed. Cited for the rule that mere ownership of all or nearly all capital stock is not itself a sufficient reason for disregarding separate corporate personalities.
• Kukan International Corporation vs. Hon. Amor Reyes, 646 Phil. 210 (2010) — Followed. Cited for the principle that piercing the veil of corporate entity applies to determination of liability, not jurisdiction, and is not available to confer jurisdiction over a party not impleaded.
• Concept Builder's Inc. vs. NLRC, 326 Phil. 955 (1996) — Cited for the basic tenet that a corporation has a separate personality distinct from its stockholders and from other corporations.

• Section 48, Presidential Decree No. 1529 (Property Registration Decree) — Provides that a certificate of title shall not be subject to collateral attack and cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. Applied to hold that Primrose's Torrens title could not be collaterally attacked in the probate proceedings.
• Section 9, Rule 58, Rules of Court — Provides that if after trial it appears that the applicant is entitled to have the acts complained of permanently enjoined, the court shall grant a final injunction. Applied as the basis for issuing the permanent injunction against the probate court.
• Section 13, Rule 13, Rules of Court — Governs proof of service by registered mail. Petitioner argued this was satisfied by the notarized affidavit of service, but the CA found non-compliance.

Antonio T. Carpio (Chairperson), Presbitero J. Velasco, Jr., Mariano C. Del Castillo, and Marvic M.V.F. Leonen concurred. No separate concurring opinions were written.