CEASE v. HONORABLE COURT OF APPEALS G.R. No. L-33172, October 18, 1979

CEASE v. HONORABLE COURT OF APPEALS

G.R. No. L-33172, October 18, 1979

Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Doctrine of Piercing the Veil of Corporate Fiction)

FACTS:

Sometime in June 1908, one Forrest L. Cease common predecessor in interest of the parties together with five (5) other American citizens organized the Tiaong Milling and Plantation Company and in the course of its corporate existence the company acquired various properties but at the same time all the other original incorporators were bought out by Forrest L. Cease together with his children namely Ernest, Cecilia, Teresita, Benjamin, Florence and one Bonifacia Tirante also considered a member of the family; the charter of the company lapsed in June 1958; but whether there were steps to liquidate it, the record is silent; on 13 August 1959, Forrest L. Cease died and by extrajudicial partition of his shares, among the children, this was disposed of on 19 October 1959; it was here where the trouble among them came to arise because it would appear that Benjamin and Florence wanted an actual division while the other children wanted reincorporation; and proceeding on that, these other children Ernesto, Teresita and Cecilia and aforementioned other stockholder Bonifacia Tirante proceeded to incorporate themselves into the F.L. Cease Plantation Company and registered it with the Securities and Exchange Commission on 9 December, 1959; apparently in view of that, Benjamin and Florence for their part initiated a Special Proceeding No. 3893 of the Court of First Instance of Tayabas for the settlement of the estate of Forest L. Cease on 21 April, 1960 and one month afterwards on 19 May 1960 they filed Civil Case No. 6326 against Ernesto, Teresita and Cecilia Cease together with Bonifacia Tirante asking that the Tiaong Milling and Plantation Corporation be declared Identical to F.L. Cease and that its properties be divided among his children as his intestate heirs; this Civil Case was resisted by aforestated defendants and notwithstanding efforts of the plaintiffs to have the properties placed under receivership, they were not able to succeed because defendants filed a bond to remain as they have remained in possession; after that and already, during the pendency of Civil Case No. 6326 specifically on 21 May, 1961 apparently on the eve of the expiry of the three (3) year period provided by the law for the liquidation of corporations, the board of liquidators of Tiaong Milling executed an assignment and conveyance of properties and trust agreement in favor of F.L. Cease Plantation Co. Inc. as trustee of the Tiaong Milling and Plantation Co.

ISSUE:

Whether or not "the company is only the business conduit and alter ego of the deceased Forrest L. Cease and the registered properties of Tiaong Milling are actually properties of Forrest L. Cease and should be divided equally, share and share alike among his six children?

HELD:

No.

The trial court acted in excess of jurisdiction or abuse of discretion amounting to lack of jurisdiction in deciding Civil Case No. 6326 as a case for partition when the defendant therein, Tiaong Milling and Plantation Company, Inc. as registered owner asserted ownership of the assets and properties involved in the litigation, which theory must necessarily be based on the assumption that said assets and properties of Tiaong Milling and Plantation Company, Inc. now appearing under the name of F. L. Cease Plantation Company as Trustee are distinct and separate from the estate of Forrest L. Cease to which petitioners and respondents as legal heirs of said Forrest L. Cease are equally entitled share and share alike, then that legal fiction of separate corporate personality shall have been used to delay and ultimately deprive and defraud the respondents of their successional rights to the estate of their deceased father. For Tiaong Milling and Plantation Company shall have been able to extend its corporate existence beyond the period of its charter which lapsed in June, 1958 under the guise and cover of F. L, Cease Plantation Company, Inc. as Trustee which would be against the law, and as Trustee shall have been able to use the assets and properties for the benefit of the petitioners, to the great prejudice and defraudation. of private respondents. Hence, it becomes necessary and imperative to pierce that corporate veil.