Ago Realty and Devt Corp v Ago G.R. No.

210906, Oct 16, 2019

Petitioner Ago Realty & Development Corporation (ARDC) is a close corporation. Its stockholders are
petitioners Emmanuel, et al. and and Emmanuel's sister, respondent Angelita F. Ago (Angelita). So, the
controversy arose when Angelita introduced improvements on a Lot which titled in the name of ARDC,
without the proper resolution from the corporation's Board of Directors and the improvements also
encroached on two other Lots which also belonged to ARDC. Consequently, ARDC and Emmanuel, et al.
filed a complaint before the RTC. They essentially alleged that Angelita, in connivance with Teresita,
Maribel, and certain local officials of Legazpi City, introduced unauthorized improvements on corporate
property. Teresita filed her answer and she denied all the material allegations and averred that her
restaurant was operating on a Lot, as stated in the complaint, but not ARDC's property. On the part of
Angelita, she admitted to introducing improvements on the subject lots. She narrated that sometime in
the year when Emmanuel and Corazon immigrated to the United States, they left the management of
ARDC's properties to her. So she took control of the corporation's properties and introduced
improvements thereon, she further claimed that the suit was brought because she refused to heed to
Emmanuel's demand that she buyout his shares in ARDC, as she did not agree, the petitioner now
accused her of introducing improvements on ARDC's property and allowing Teresita to operate a
restaurant business thereon, without to institute the case and can sign the certification against forum
shopping. RTC rendered a Decision dismissing the complaint since Emmanuel, et al. brought the case
without the proper resolution from the Board of Directors. CA affirmed the RTC's decision.

ISSUE:

Whether or not Emmanuel, et al. may sue on behalf of ARDC absent a resolution or any other grant of
authority from its Board of Directors sanctioning the institution of the case.

RULING:

The court ruled in the affirmative. The high court agreed with Emmmanuel, et al. that a board
resolution is not needed for the institution of a derivative suit. However, the court reiterated that the
corporate power to sue is exercised by the board of directors. For this purpose, the board may authorize
a representative of the corporation to perform all necessary physical acts, such as the signing of
documents. Such authority may be derived from the by-laws or from a specific act of the board of
directors, i.e., a board resolution. As per the court, the record reveals that the complaint a quo was filed
by Emmanuel, et al. While the caption states that ARDC was also one of the plaintiffs, there is nothing
showing that the corporation's Board of Directors had authorized the filing of the case. Thus, the case is
deemed as instituted by Emmanuel, et al. without ARDC's acquiescence. As again ruled by the court,
one of the powers expressly granted by law to corporations is the power to sue. As with other corporate
powers, the power to sue is lodged in the board of directors, acting as a collegial body. Thus, in the
absence of any clear authority from the board, charter, or by-laws, no suit may be maintained on behalf
of the corporation. A case instituted by a corporation without authority from its board of directors is
subject to dismissal on the ground of failure to state a cause of action. The court affirmed the decision
of CA. In certain instances, however, the stockholders may sue on behalf of the corporation as an
exception to the foregoing rule, jurisprudence has recognized certain instances when minority
stockholders may bring suits on behalf of corporations. Where the board of directors itself is a party
to the wrong, either because it is the author thereof or because it refuses to take remedial action,
equity permits individual stockholders to seek redress. These actions have come to be known as
derivative suits. In Chua v. Court of Appeals, the Court defined a derivative suit as "a suit by a
shareholder to enforce a corporate cause of action." In derivative suits, it is the corporation that is the
victim of the wrong. As such, it is the corporation that is properly regarded as the real party in interest,
while the relator-stockholder is merely a nominal party.75 The corporation must be impleaded so that
the benefits of the suit accrue to it and also because it must be barred from bringing a subsequent case
against the same defendants for the same cause of action.76 Stated otherwise, the judgment rendered
in the suit must constitute res judicata against the corporation, even though it refuses to sue through its
board of directors. That said, not every wrong suffered by a stockholder involving a corporation will vest
in him or her the standing to commence a derivative suit.78 In Cua, Jr., et al. v. Tan, et al., the Court
explained when such actions lie, viz.: Suits by stockholders or members of a corporation based on
wrongful or fraudulent acts of directors or other persons may be classified into individual suits, class
suits, and derivative suits. Where a stockholder or member is denied the right of inspection, his suit
would be individual because the wrong is done to him personally and not to the other stockholders or
the corporation. Where the wrong is done to a group of stockholders, as where preferred stockholders'
rights are violated, a class or representative suit will be proper for the protection of all stockholders
belonging to the same group. But where the acts complained of constitute a wrong to the corporation
itself, the cause of action belongs to the corporation and not to the individual stockholder or member.

However, in cases of mismanagement where the wrongful acts are committed by the directors or
trustees themselves, a stockholder or member may find that he has no redress because the former are
vested by law with the right to decide whether or not the corporation should sue, and they will never be
willing to sue themselves. It has been proven to be an effective remedy of the minority against the
abuses of management. Under Section 97 of the Corporation Code, a close corporation may task its
stockholders with the management of business, essentially designating them as directors. However,
the law is clear that a close corporation must do so through a provision to that effect contained in its
articles of incorporation.

. Tayag v Benguet Consolidated G.R. No. L-23145, Nov 29, 1968

FACTS:

Idonah Slade Perkins died in NYC, leaving 33,002 shares of Benguet Consolidated, a RP
Corporation. These were in possession of the Country Trust Company, domiciliary administrator.
Sanidad, later on substituted by Tayag, was the ancillary administrator of the deceased.

CFI Manila ruled that Tayag was entitled to possession. When County Trust refused to produce
the certificates, Tayag petitioned the court to issue an order declaring the certificates as lost.
Lower Court ordered as such.
It is necessary that there is more than one administration of an estate. the Court of First Instance
of Manila ordered the domiciliary administrator, County Trust Company, to "produce and
deposit" them with the ancillary administrator or with the Clerk of Court.

March 27, 1960: Idonah Slade Perkins died in New York City. August 12, 1960: Prospero
Sanidad instituted ancillary administration proceedings appointing ancillary
administrator Lazaro A. Marquez later on substituted by Renato D. Tayag
On January 27, 1964: CFI ordered domiciliary administrator County Trust Company of New
York to surrender to the ancillary administrator in the Philippines 33,002 shares of stock
certificates owned by her in a Philippine corporation, Benguet Consolidated, Inc., to satisfy
the legitimate claims of local creditors. When County Trust Company of New York  refused
the court ordered  Benguet Consolidated, Inc. to declare the stocks lost and required it to
issue new certificates in lieu thereof. Appeal was taken by Benguet Consolidated, Inc.
alleging the failure to comply with its by-laws setting forth the procedure to be followed in
case of a lost, stolen or destroyed so it cannot issue new stock certs.
ISSUE: W/N Benguet Consolidated, Inc. can ignore a court order because of its by-laws

HELD: NO. CFI Affirmed Fear of contigent liability - obedience to a lawful order = valid
defense
Benguet Consolidated, Inc. is a Philippine corporation owing full allegiance and subject to
the unrestricted jurisdiction of local courts. Assuming that a contrariety exists between the
above by-law and the command of a court decree, the latter is to be followed. corporation is
an artificial being created by operation of law...."It owes its life to the state, its birth being
purely dependent on its will.  Cannot ignore the source of its very existence

The Supreme Court Held that “a corporation is an artificial being created by operation of

law, it owes its life to the state, its birth being purely dependent on its will”. It is logically

inconceivable therefore that it will have rights and privileges of a higher priority than that of itscreator.
More than that, it cannot legitimately REFUSE to yield obedience to acts of its stateorgans, certainly not
excluding the JUDICIARY, whenever called. It is not immune to judicialcontrol in those instances, where a
duty under the law as ascertained in an appropriate legalproceeding is cast upon it

Torres vs. CA - GR 120138, Sept. 5, 1997;

Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty & Development
Corporation (TRDC). TRDC is a small family owned corporation and other stockholders thereof include
Judge Torres’ nieces and nephews. However, even though Judge Torres owns the majority of TRDC and
was also the president thereof, he is only entitled to one vote among the 9-seat Board of Directors,
hence, his vote can be easily overridden by minority stockholders. So in 1987, before the regular
election of TRDC officers, Judge Torres assigned one share (qualifying share) each to 5 “outsiders” for
the purpose of qualifying them to be elected as directors in the board and thereby strengthen Judge
Torres’ power over other family members. However, the said assignment of shares were not recorded
by the corporate secretary, Ma. Christina Carlos (niece) in the stock and transfer book of TRDC. When
the validity of said assignments were questioned, Judge Torres ratiocinated that it is impractical for him
to order Carlos to make the entries because Carlos is one of his opposition. So what Judge Torres did
was to make the entries himself because he was keeping the stock and transfer book. He further
ratiocinated that he can do what a mere secretary can do because in the first place, he is the president.
Since the other family members were against the inclusion of the five outsiders, they refused to take
part in the election. Judge Torres and his five assignees then decided to conduct the election among
themselves considering that the 6 of them constitute a quorum.

ISSUE: Whether or not the inclusion of the five outsiders are valid. Whether or not the subsequent
election is valid.

HELD: No. The assignment of the shares of stocks did not comply with procedural requirements. It did
not comply with the by laws of TRDC nor did it comply with Section 74 of the Corporation Code. Section
74 provides that the stock and transfer book should be kept at the principal office of the corporation.
Here, it was Judge Torres who was keeping it and was bringing it with him. Further, his excuse of not
ordering the secretary to make the entries is flimsy. The proper procedure is to order the secretary to
make the entry of said assignment in the book, and if she refuses, Judge Torres can come to court and
compel her to make the entry. There are judicial remedies for this. Needless to say, the subsequent
election is invalid because the assignment of shares is invalid by reason of procedural infirmity. The
Supreme Court also emphasized: all corporations, big or small, must abide by the provisions of the
Corporation Code. Being a simple family corporation is not an exemption. Such corporations cannot
have rules and practices other than those established by law.

Francisco Motors Corporation v CA G.R. No. 100812, Jun 25, 1999

Facts:

On 23 January 1985, Francisco Motors Corp. filed a complaint against Spouses Gregorioand Librada
Manuel to recover P3,412.06, representing the balance of the jeep body purchased by the Manuels from
Francisco Motors; an additional sum of P20,454.80 representing the unpaid balance on the cost of repair
of the vehicle; and P6,000.00 for cost of suit and attorney's fees. Tothe original balance on the price of
jeep body were added the costs of repair. In their answer, theManuel spouses interposed a
counterclaim for unpaid legal services by Gregorio Manuel in theamount of P50,000 which was not paid
by the incorporators, directors and officers of FranciscoMotors. The trial court decided the case on 26
June 1985, in favor of Francisco Motors in regardto its claim for money, but also allowed the counter-
claim of the Manuel spouses. Both partiesappealed. On 15 April 1991, the Court of Appeals sustained
the trial court's decision. Hence, thepresent petition for review on certiorari.

Issue:

Whether the Francisco Motors Corporation should be liable for the legal services ofGregorio Manuel
rendered in the intestate proceedings

over Benita Trinidad’s est

ate (of theFrancisco family).

Held

: Basic in corporation law is the principle that a corporation has a separate personalitydistinct from its
stockholders and from other corporations to which it may be connected.However, under the doctrine of
piercing the veil of corporate entity, the corporation's separate juridical personality may be disregarded,
for example, when the corporate identity is used todefeat public convenience, justify wrong, protect
fraud, or defend crime. Also, where thecorporation is a mere alter ego or business conduit of a person,
or where the corporation is soorganized and controlled and its affairs are so conducted as to make it
merely an instrumentality,agency, conduit or adjunct of another corporation, then its distinct
personality may be ignored.In these circumstances, the courts will treat the corporation as a mere
aggrupation of persons andthe liability will directly attach to them.The legal fiction of a separate
corporate personality in those cited instances, for reasons of publicpolicy and in the interest of justice,
will be justifiably set aside. Herein, however, given the factsand circumstances of this case, the doctrine
of piercing the corporate veil has no relevant application. The rationale behind piercing a corporation's
identity in a given case is to remove the barrier between the corporation from the persons comprising it
to thwart the fraudulent andillegal schemes of those who use the corporate personality as a shield for
undertaking certainproscribed activities. In the present case, instead of holding certain individuals or
personsresponsible for an alleged corporate act, the situation has been reversed. It is the Francisco
MotorsCorporation (FMC) as a corporation which is being ordered to answer for the personal liability
ofcertain individual directors, officers and incorporators concerned. Hence, the doctrine has beenturned
upside down because of its erroneous invocation. In fact, the services of Gregorio Manuel were solicited
as counsel for members of the Francisco family to represent them in the intestateproceedings over
Benita Trinidad's estate. These estate proceedings did not involve any businessof FMC. Manuel's move
to recover unpaid legal fees through a counterclaim against FMC, to offsetthe unpaid balance of the
purchase and repair of a jeep body could only result from an obviousmisapprehension that FMC's
corporate assets could be used to answer for the liabilities of itsindividual directors, officers, and
incorporators. Such result if permitted could easily prejudicethe corporation, its own creditors, and even
other stockholders; hence, clearly inequitous to FMC.Furthermore, considering the nature of the legal
services involved, whatever obligation saidincorporators, directors and officers of the corporation had
incurred, it was incurred in theirpersonal capacity. When directors and officers of a corporation are
unable to compensate a partyfor a personal obligation, it is far-fetched to allege that the corporation is
perpetuating fraud orpromoting injustice, and be thereby held liable therefor by piercing its corporate
veil. While thereare no hard and fast rules on disregarding separate corporate identity, we must always
be mindfulof its function and purpose. A court should be careful in assessing the milieu where the
doctrineof piercing the corporate veil may be applied. Otherwise an injustice, although unintended,
mayresult from its erroneous application. The personality of the corporation and those of
itsincorporators, directors and officers in their personal capacities ought to be kept separate in thiscase.
The claim for legal fees against the concerned individual incorporators, officers and directorscould not
be properly directed against the corporation without violating basic principlesgoverning corporations.
Moreover, every action

including a counterclaim

must be prosecutedor defended in the name of the real party in interest. It is plainly an error to lay the
claim for legalfees of private respondent Gregorio Manuel at the door of FMC rather than individual
membersof the Francisco family.

. Ma McLeod v NLRC G.R. No. 146667, Jan 23, 2007

FACTS

John F. McLeod filed a complaint for retirement benefits, vacation and sick leave benefits, non-payment
of unused airline tickets, holiday pay, underpayment of salary and 13th month pay, moral and
exemplary damages, attorney’s fees plus interest against Filipinas Synthetic Corporation (Filsyn), Far
Eastern Textile Mills, Inc., Sta. Rosa Textiles, Inc., Patricio Lim and Eric Hu.

complainant alleged that he is an expert in textile manufacturing process, was hired as the Assistant
Spinning Manager of Universal Textiles, Inc. (UTEX) ; that he was promoted to Senior Manager and
worked for UTEX till 1980 under its President, respondent Patricio Lim; that in 1978 Patricio Lim formed
Peggy Mills, Inc. with respondent Filsyn having controlling interest; that complainant was absorbed by
Peggy Mills as its Vice President and Plant Manager of the plant at Sta. Rosa, Laguna; that at the time of
his retirement complainant was receiving P60,000.00 monthly with vacation and sick leave benefits;
13th month pay, holiday pay and two round trip business class tickets on a Manila-London-Manila
itinerary every three years which is convertible to cas[h] if unused

complainant alleged that all respondents being one and the same entities are solidarily liable for all
salaries and benefits and complainant is entitled to; that all respondents have the same address, t their
counsel holds office in the same address; that all respondents have the same offices and key personnel
such as Patricio Lim and Eric Hu; that respondents’ Position Paper is verified by Marialen C. Corpuz who
knows all the corporate officers of all respondents; that the veil of corporate fiction may be pierced if it
is used as a shield to perpetuate fraud and confuse legitimate issues; that complainant never accepted
the change in his position from Vice-President and Plant Manger to consultant and it is incumbent upon
respondents to prove that he was only a consultant.

the Labor Arbiter rendered his decision holding that all respondents as jointly and solidarily liable for
complainant’s money claims
ISSUE

Whether the private respondents may avoid their financial obligations to the petitioner by invoking the
veil of corporate fiction

RULING

Gochan v Young G.R. No. 131889, Mar 12, 2001

Gochan Realty, was registered with the SEC on June, 1951, with Felix Gochan, Sr., Maria Pan Nuy Go
Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as its incorporators.

"Felix Gochan Sr.'s daughter, Alice, mother of [herein respondents], inherited 50 shares of stock in
Gochan Realty from the former. "Alice died in 1955, leaving the 50 shares to her husband, John Young,
Sr.

The RTC Cebu adjudicated 6/14 of these shares to her children, herein [respondents]. Having earned
dividends, these stocks numbered 179 by 20 September 1979. y, their father John Sr., requested Gochan
Realty to partition the shares of his late wife by cancelling the stock certificates in his name and issuing
in lieu thereof, new stock certificates in the names of [herein respondents].However, Gochan Realty
refused, citing as reason, the right of first refusal granted to the remaining stockholders by the Articles
of Incorporation.

Cecilia Gochan Uy and Miguel Uy filed a complaint with the SEC for issuance of shares of stock to the
rightful owners, nullification of shares of stock, reconveyance of property impressed with trust,
accounting, removal of officers and directors and damages against respondents. A Notice of Lis Pendens
was annotated as [sic] real properties of the corporation.

Petitioners argue that Spouses Cecilia and Miguel Uy had no capacity or legal standing to bring the suit
before the SEC on February 8, 1994, because the latter were no longer stockholders at the time.
Allegedly, the stocks had already been purchased by the corporation. Petitioners further assert that,
being allegedly a simple contract of sale cognizable by the regular courts, the purchase by Gochan Realty
of Cecilia Gochan Uy's 210 shares does not come within the purview of an intra-corporate controversy.

The Court of Appeals ruled that the SEC had no jurisdiction over the case as far as the heirs of Alice
Gochan were concerned, because they were not yet stockholders of the corporation. On the other hand,
it upheld the capacity of Respondents Cecilia Gochan Uy and her spouse, Miguel Uy. It also held that the
Intestate Estate of John Young Sr. was an indispensable party.
ISSUE

Whether or not the Spouses Uy have the personality to file an action before the SEC against Gochan
Realty Corporation.

RULING

As a general rule, the jurisdiction of a court or tribunal over the subject matter is determined by the
allegations in the complaint.8 For purposes of resolving a motion to dismiss, Cecilia Uy's averment in
the Complaint -that the purchase of her stocks by the corporation was null and void ab initio - is
deemed admitted. It is elementary that a void contract produces no effect either against or in favor of
anyone; it cannot create, modify or extinguish the juridical relation to which it refers.9 Thus, Cecilia
remains a stockholder of the corporation in view of the nullity of the Contract of Sale. Although she
was no longer registered as a stockholder in the corporate records as of the filing of the case before
the SEC, the admitted allegations in the Complaint made her still a bona fide stockholder of Felix
Gochan & Sons Realty Corporation (FGSRC), as between said parties.

PSE Inc. v CA G.R. No. 125469, Oct 27, 1997

FACTS

The Puerto Azul Land, Inc. (PALI) is a domestic real estate corporation that sought to offer its
shares to the public in order to raise funds allegedly to develop its properties and pay its loans with
several banking institutions. PALI was issued a Permit to Sell its shares to the public by the Securities and
Exchange Commission (SEC). To facilitate the trading of its shares among investors, PALI sought to
course the trading of its shares through the Philippine Stock Exchange, Inc. (PSE), for which purpose it
filed with the said stock exchange an application to list its shares, with supporting documents attached.
The Listing Committee of the PSE, upon a perusal of PALI's application, recommended to the PSE's Board
of Governors the approval of PALI's listing application. Before it could act upon PALI's application, the
Board of Governors of the PSE received a letter from the heirs of Ferdinand E. Marcos, claiming that the
late President Marcos was the legal and beneficial owner of certain assets of PALI which likewise
appears to have been held and continue to be held in trust by one Rebecco Panlilio for then President
Marcos. PALI wrote a letter to the SEC addressed to the then Acting Chairman, Perfecto R. Yasay, Jr.,
bringing to the SEC's attention the action taken by the PSE. SEC rendered its Order, reversing the PSE's
decision. SEC ordered to immediately cause the listing of the PALI shares in the Exchange.

The CA rendered the decision that SEC had both jurisdiction and authority to look into the
decision of the petitioner PSE, for the purpose of ensuring fair administration of the exchange. Both as a
corporation and as a stock exchange, the petitioner is subject to public respondent's jurisdiction,
regulation and control. PALI complied with all the requirements for public listing, affirming the SEC's
ruling.

ISSUE
whether or not PSE acted correctly in refusing the application of PALI

RULING

A corporation is but an association of individuals, allowed to transact under an assumed corporate

name, and with a distinct legal personality. In organizing itself as a collective body, it waives no
constitutional immunities and perquisites appropriate to such a body. 11 As to its corporate and
management decisions, therefore, the state will generally not interfere with the same. Questions of
policy and of management are left to the honest decision of the officers and directors of a corporation,
and the courts are without authority to substitute their judgment for the judgment of the board of
directors. The board is the business manager of the corporation, and so long as it acts in good faith, its
orders are not reviewable by the courts. 12

Thus, notwithstanding the regulatory power of the SEC over the PSE, and the resultant authority to
reverse the PSE's decision in matters of application for listing in the market, the SEC may exercise such
power only if the PSE's judgment is attended by bad faith. In Board of Liquidators vs. Kalaw,13 it was
held that bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose
or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through some
motive or interest of ill will, partaking of the nature of fraud.

As it is, the Court finds that the private respondent PALI, on at least two points (nos. 1 and 5) under Sec
9 of the Revised Securities Act has failed to support the propriety of the issue of its shares with unfailing
clarity, thereby lending support to the conclusion that the PSE acted correctly in refusing the listing of
PALI in its stock exchange. This does not discount the effectivity of whatever method the SEC, in the
exercise of its vested authority, chooses in setting the standard for public offerings of corporations
wishing to do so. However, the SEC must recognize and implement the mandate of the law, particularly
the Revised Securities Act, the provisions of which cannot be amended or supplanted by mere
administrative issuance.

In resume, the Court finds that the PSE has acted with justified circumspection, discounting, therefore,
any imputation of arbitrariness and whimsical animation on its part. Its action in refusing to allow the
listing of PALI in the stock exchange is justified by the law and by the circumstances attendant to this
case.

ACCORDINGLY, in view of the foregoing considerations, the Court hereby GRANTS the Petition for
Review on Certiorari. The Decisions of the Court of Appeals and the Securities and Exchange Commission
dated July 27, 1996 and April 24, 1996 respectively, are hereby REVERSED and SET ASIDE, and a new
Judgment is hereby ENTERED, affirming the decision of the Philippine Stock Exchange to deny the
application for listing of the private respondent Puerto Azul Land, Inc.

Cease v CA GR. No. 33172, Oct 18, 1979

FACTS

Forrest L. Cease 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 incorporates were bought out by Forrest L. Cease
together with his children. The charter of the company lapsed in June 1958; but whether there were
steps to liquidate it Forrest L. Cease died and by extrajudicial partition of his shares, among the
children. It appeared that Benjamin and Florence wanted an actual division while the other children
wanted reincorporation.

 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 FL Cease and that its properties be divided among his children as his intestate heirs. the
appellate court rendered a decision in favor of plaintiffs and against the defendants. defendants there
filed a notice of appeal  together with an appeal bond and a record on appeal but the plaintiffs moved to
dismiss the appeal on the ground that the judgment was in fact interlocutory and not appealable and
that the appeal interposed by plaintiffs is hereby dismissed as premature.

ISSUE

Whether or not the CA erred in affirming the lower court’s decision that the subject properties owned
by the Tiaong Milling are also properties of the estate of Forrest L. Cease

RULING

No.  In reposing ownership to the estate of Forrest L. Cease, the trial court indeed found strong support,
one that is based on a well-entrenched principle of law. In sustaining respondents’ theory of "merger of
Forrest L. Cease and the Tiaong Milling as one personality", or that "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, . . .", the trial court did aptly apply the familiar exception to the general rule by
disregarding the legal fiction of distinct and separate corporate personality and regarding the
corporation and the individual member one and the same.

While the records showed that originally its incorporates were aliens, friends or third-parties in relation
of one to another, in the course of its existence, it developed into a close family corporation. The Board
of Directors and stockholders belong to one family the head of which Forrest L. Cease always retained
the majority stocks and hence the control and management of its affairs. In fact, during the
reconstruction of its records in 1947 before the Security and Exchange Commission only 9 nominal
shares out of 300 appears in the name of his 3 eldest children then and another person close to them. It
is likewise noteworthy to observe that as his children increase or perhaps become of age, he continued
distributing his shares among them adding Florence, Teresa and Marion until at the time of his death
only 190 were left to his name. Definitely, only the members of his family benefited from the
Corporation.

The accounts of the corporation and therefore its operation, as well as that of the family appears to be
instinguisable and apparently joined together. the corporation ‘never’ had any account with any
banking institution or if any account was carried in a bank on its behalf, it was in the name of Mr. Forrest
L. Cease. In brief, the operation of the Corporation is merged with those of the majority stockholders,
the latter using the former as his instrumentality and for the exclusive benefits of all his family. From the
foregoing indication, therefore, there is truth in plaintiff’s allegation that the corporation is only a
business conduit of his father and an extension of his personality, they are one and the same thing.
Thus, the assets of the corporation are also the estate of Forrest L. Cease, the father of the parties
herein who are all legitimate children of full blood." A rich store of jurisprudence has established the
rule known as the doctrine of disregarding or piercing the veil of corporate fiction.