Case Summary (G.R. No. L-2724)
Trial Court Decision and Appealability
On December 27, 1969, the trial court:
- Declared Tiaong Mill’s assets under the trustee to be Forrest’s estate, to be equally divided among his six children.
- Set aside the trust agreement as illegal.
- Removed F.L. Cease Plantation Co., Inc. as trustee and ordered delivery of assets to a court-appointed receiver.
- Terminated Special Proceeding No. 3893, allowing Civil Case No. 6326 to proceed on damages and partition issues.
Defendants filed an appeal bond but the trial court (April 27, 1970) dismissed the appeal as premature, deeming the December 27 decision interlocutory. The Supreme Court remanded this ruling to the Court of Appeals, which (December 9, 1970) dismissed the petition for certiorari, mandamus, and prohibition, prompting the present appeal.
Dismissal of Administration Proceedings
Petitioners contended that the trial court improperly terminated Special Proceeding No. 3893 without resolving opposition to administration. The Court held that, in the absence of estate debts or creditors, judicial administration is unnecessary when partition is possible. Procedural rules favor direct partition to avoid costly and protracted administration. The parties had stipulated that the administration record be considered in the partition case, the same judge presided over both actions, and all issues overlapped. Dismissal of administration was therefore justified by substance over form.
Ownership and Partition Issues
Petitioners argued that Tiaong Mill’s corporate title, asserted early in the trial, precluded partition. The Court observed that upon its charter expiration, Tiaong Mill existed only for winding up and could not maintain adverse ownership. Its attempt to assert corporate title contradicted its status as trustee holding assets for distribution. Procedural doctrines permit partition when co-ownership is established or when corporate fiction must yield to equitable distribution.
Piercing the Corporate Veil
The trial court disregarded corporate personality, finding Tiaong Mill an alter ego of Forrest L. Cease. Evidence showed:
• Forrest retained majority shares and control throughout the corporation’s life.
• Corporate and personal finances were commingled; no distinct corporate bank accounts existed.
• Share distributions to children were gratuitous, serving family interests.
Established jurisprudence allows piercing the corporate veil to prevent fraud, defeat of rights, or improper extension of corporate existence. Here, maintaining separate corporate title would have delayed and frustrated rightful partition among Forrest’s heirs.
Finality and Appealability under Partition Rules
Petitioners claimed the December 1969 decision was final and appealable. Under pre-1987 Rules of Court, a judgment ordering partition was interlocutory until actual partition by commissioners, approval of their report, and final judgment. Subsequent jurisprudence (Miranda v. Court of Appeals, 1976) rec
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Facts and Antecedents
- In June 1908 Forrest L. Cease and five other American citizens organized the Tiaong Milling and Plantation Company, which acquired various properties over time.
- Forrest L. Cease gradually bought out all original incorporators and held the majority of shares alongside his children: Ernesto, Cecilia, Teresita, Benjamin, Florence, and Bonifacia Tirante.
- The corporate charter of Tiaong Milling lapsed in June 1958; no formal liquidation steps are recorded.
- Forrest L. Cease died on August 13, 1959. By extrajudicial partition on October 19, 1959, his shares were to be distributed among his children, but discord arose: Benjamin and Florence demanded an actual division, while the others favored reincorporation.
- On December 9, 1959 Ernesto, Teresita, Cecilia Cease and Bonifacia Tirante formed F.L. Cease Plantation Co., Inc., registered with the SEC, to succeed Tiaong Milling’s assets.
Procedural History
- April 21, 1960: Benjamin and Florence filed Special Proceeding No. 3893 for estate settlement of Forrest L. Cease.
- May 19, 1960: They filed Civil Case No. 6326 against Ernesto, Teresita, Cecilia Cease and Bonifacia Tirante, seeking declaration that Tiaong Milling’s properties were estate assets and partition among heirs.
- May 21, 1961: On the eve of the three-year liquidation period under Act No. 1459, Tiaong Milling’s board of liquidators assigned and conveyed all corporate properties in trust to F.L. Cease Plantation Co., Inc.
- December 27, 1969: The Court of First Instance of Quezon (Presiding Judge Manolo L. Maddela) rendered judgment in Civil Case No. 6326:
• Declared all assets of the defunct Tiaong Milling, held under F.L. Cease Plantation Co. as trustee, to belong to Forrest L. Cease’s estate and ordered partition among his six children.
• Set aside the October 12, 1959 trust agreement as null and void.
• Removed F.L. Cease Plantation Co. as trustee; appointed receiver for estate properties.
• Terminated and dismissed Special Proceeding No. 3893; reserved Civil Case No. 6326 to proceed on damages and partition mechanics. - April 27, 1970: The trial court dismissed defendants’ appeal from the December 1969 judgment as premature, deeming it interlocutory.
- May 20, 1970: Defendants sought mandamus, certiorari, and prohibition from the Supreme Court; the petition was remanded to the Court of Appeals.
- July 1, 1970: Court of Appeals dismissed the writ-of-mandamus prayer, held the December 1969 decision interlocutory, but allowed certiorari and prohibition to proceed.
- December 9, 1970: Court of Appeals dismissed the petition for certiorari and prohibition.
- October 18, 1979: The Supreme Court rendered the final decision on G.R. No. L-33172.
Issues for Resolution
- Whether the trial court and Court of Appeals erre