Cease vs CA

FACTS

 Sometime in 1908, Forrest Cease and 5 other American Citizens organized Tiaong Milling and
Plantation Company
 Forrest and his children then bought out the original incorporators
 The charter of the company lapsed in June 1958, but whether there were steps to liquidate it,
the record is silent
 Forrest Cease died on Aug 13, 1959 and there was extrajudicial partition of his shares among
his children
 Benjamin and Florence wanted an actual division, while the others wanted reincorporation
 Those that wanted reincorporation, Ernesto, Teresita, Cecila and stockholder Bonifacia Tirante
incorporated themselves into F.L. Cease Plantaton Company and registred with the SEC
 Benjamin and Florence then initiated a Special Proceeding with CFI Tayabas for the settlement
of Forrest’s estate
 They also filed a civil case against the Other children asking that Tiaong Milling and Plantation
Corporation be declared identical to F.L. Cease
o That F.L ‘s properties be divided among his children as his intestate heirs
 During the pendency of the case, the board of liquidators of Tiaong Milling executed an
assignment and conveyance of properties and trust agreement in favor of FL Cease as trustee
of the Tiaong Milling
 CFI: in favor of Benjamin and Florence; ordered the following
o The assets and properties of defunct Tiaong Milling now appearing under FL is
considered the estate of Forrest, and thus, they should be divided among his children
o The Resolution to Sell and the Transfer of Conveyance with Trust Agreement has an
illegal purpose, thus null and void
o That FL is removed as trustee for interest against the estate and ordered to deliver
and convey the properties of Tiaong to whoever is appointed as Receiver
 CA: dismissed petition of Ernesto etc

ISSUE: w/n the properties of Tiaong Milling are also properties of the deceased Forrest

HELD:

(1) Yes. The corporation is only a business conduit of his father and an extension of his personality.
They are one and the same

 CFI found strong support on the theory that Forrest Cease’s and Tiaong Milling were merged
as one personality or that the company is only the business conduit and alter ego of Forrest
 The registered properties of Tiaong Milling are actually properties of Forres and thus, should
be equally divided and shared among his children
 The CFI correct applied the exception to the general rule by disregarding the legal fiction of
distinct and separate corporate personality and thus regarding the corporation and Forrest one
and the same, for the following reasons:
o While the records show that the original incorporators were aliens or 3 rd parties, it
eventually developed into a close family corporation with the Board of Directors and
stockholders belonging to one family head
 The shares were distributed and named under his children and only the
members of the family benefitted from the Corporation
o The accounts and operation of the corporation as well as that of the family appears to
be indistinguishable and joint together
 The corporation never had any bank account under its own name, if any, it
was under the name of Mr. Forrest Cease
 The operation of the corporation is merged with the majority stockholders,
the stockholders using the corporation as his instrumentality and for the
exclusive benefit of his family
 Doctrine of Disregarding or Piercing the Veil of Corporate Fiction
o General Rule: a corporation is invested by law with a personality separate and distinct
from that of the persons composing it, as well as from that of any other legal entity to
which it may be related
 Thus, a corporation may not, generally, be made to answer for acts or
liabilities of its stockholders or those of the legal entities to which it may be
connected, and vice versa.
  This separate and distinct personality is, however, merely a fiction created by
law for convenience and to promote the ends of justice
o In any of the ff cases, the notion of corporate entity will be pierced, and the
corporation will be treated as a mere association of persons
 When used or invoked for ends subversive of the policy and purpose behind
its creation; or which could not have been intended by law to which it owes
its being
 When the fiction is used to defeat public convenience, justify wrong, protect
fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate
deception or otherwise circumvent the law
 When corporate entity is being used as an alter ego, adjunct, or business
conduit for the sole benefit of the stockholders or of another corporate entity
 Thus in this case, clearly, the corporation is largely, if not wholly, the personal venture of
Forrest.
o It cannot be even shown that his children purchased stocks of their own
o They were able to be nominal shareholders solely from Forrest’s gratitude