Cease v. Court of Appeals AUTHOR: Magsino, Patricia Marie C.

G.R. No. L-33172, Oct. 18, 1979] NOTES:

TOPIC: Close corporation
PONENTE: Guerrero, J.
FACTS:

This is an appeal by certiorari from a CA decision dismissing the petition for certiorari, mandamus, prohibition
filed by the petitioners
Forrest Cease and five (5) other American citizens formed Tiaong Milling and Plantation Company
Cease and his children then bought out the shares of the other original incorporators and the properties acquired by
the company, the companys charter then expired in June 1958, then Forrest Cease died in August 1959
There was no mention regarding the liquidation of the company, some of Ceases children wanted an actual
division while others wanted a reincorporation, two of his children (Benjamin and Florence) initiated Special
Proceeding No. 3893 with CFI of Tayabas asking that the Tiaong Milling and Plantation Corporation be declared
identical to Forrest Cease and that its properties be divided among his children as intestate heirs
The defendants opposed this but the CFI ruled in favor of the plaintiffs, declaring the properties of Tiaong Milling
is part of the estate of Cease, so the defendants filed a notice of appeal from the CFIs decision but this was
dismissed for being premature
The case was elevated to the SC but it was remanded to the Court of Appeals
The CA dismissed the petition, so present petition

ISSUE(S):

Did the Court of Appeals err in affirming the CFIs decision that the subject properties owned by the corporation
are also properties of the estate of Forrest Cease

HELD: NO. Judgment is AFFIRMED.

TIAONG MILLING AND PLANTATION COMPANY BECAME A CLOSE FAMILY CORPORATION. ALL
PROPERTIES BELONG TO CEASE FAMILY.

RATIO:
Quoted from the trial judge:
o While the records showed that originally its incorporators were aliens, friends or third-parties in relation
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.

o as his children increase or 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.

o 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.
Sec. 96. Definition and applicability of Title. - A close corporation, within the meaning of this Code, is one whose
articles of incorporation provide that:
(1) All the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by
not more than a specified number of persons, not exceeding twenty (20);
(2) all the issued stock of all classes shall be subject to one or more specified restrictions on transfer
 permitted by this Title; and
(3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of
any class. Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at
least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another corporation
which is not a close corporation within the meaning of this Code.
Any corporation may be incorporated as a close corporation, except mining or oil companies, stock
exchanges, banks, insurance companies, public utilities, educational institutions and corporations declared
to be vested with public interest in accordance with the provisions of this Code.
The provisions of this Title shall primarily govern close corporations: Provided, That the provisions of
other Titles of this Code shall apply suppletorily except insofar as this Title otherwise provides.

CASE LAW/ DOCTRINE:

DISSENTING/CONCURRING OPINION(S):