F CORPO CASE 1.pdf

7/21/2019 F CORPO CASE 1.pdf

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G.R. No. L-28120 November 25, 1976

RICARDO A. NAVA, petitioner-appellant.vs.PEERS AR!E"ING CORPORA"ION, RENA"O R. C#SI $%& APARO C#SI, respondents-appellees.

Rolando M. Medalla, for appellant.

Jose Y. Montalvo, for appellees.

A'#INO, J:

This is a mandamus case, Teofilo Po as an incorporator subscribed to eighty shares of PeersMarketing Corporation at one hundred pesos a share or a total par value of eight thousand pesos. Popaid two thousand pesos or twenty-five percent of the amount of his subscription. No certificate ofstock was issued to him or, for that matter, to any incorporator, subscriber or stockholder.

n !pril ", #$%% Po sold to &icardo !. Nava for two thousand pesos twenty of his eighty shares. 'n thedeed of sale Po represented that he was (the absolute and registered owner of twenty shares( ofPeers Marketing Corporation.

Nava re)uested the officers of the corporation to register the sale in the books of the corporation. There)uest was denied because Po has not paid fully the amount of his subscription. Nava was informedthat Po was delin)uent in the payment of the balance due on his subscription and that the corporationhad a claim on his entire subscription of eighty shares which included the twenty shares that had beensold to Nava.

n *ecember "#, #$%% Nava filed this mandamusaction in the Court of +irst 'nstance of Negrosccidental, acolod City ranch to compel the corporation and &enato &. Cusi and !mparo Cusi, itseecutive vice-president and secretary, respectively, to register the said twenty shares in Navas namein the corporations transfer book.

The respondents in their answer pleaded the defense that no shares of stock against which thecorporation holds an unpaid claim are transferable in the books of the corporation.

!fter hearing, the trial court dismissed the petition. Nava appealed on the ground that the decision (iscontrary to law (. /is sole assignment of error is that the trial court erred in applying the ruling in +uaCun vs. 0ummers and China anking Corporation, 11 Phil. 234 to 5ustify respondents refusal inregistering the twenty shares in Navas name in the books of the corporation.

The rule enunciated in the Fua Cuncase is that payment of one-half of the subscription does notentitle the subscriber to a certificate of stock for one-half of the number of shares subscribed.

!ppellant Nava contends that the Fua Cuncase was decided under section 6% of the Corporation 7awwhich provides that (no certificate of stock shall be issued to a subscriber as fully paid up until the fullpar value thereof has been paid by him to the corporation(. 0ection 6% was amended by !ct No. 64#8.'t is now section 62. 0ection 62 provides that (no certificate of stock shall be issued to a subscriber as

fully paid up until the full par valuethereof, or the full subscriptionin case of no par stock, has beenpaid by him to the corporation(.

The issue is whether the officers of Peers Marketing Corporation can be compelled by mandamus toenter in its stock and transfer book the sale made by Po to Nava of the twenty shares forming part ofPos subscription of eighty shares, with a total par value of P8,333 and for which Po had paid onlyP",333, it being admitted that the corporation has an unpaid claim of P%,333 as the balance due onPos subscription and that the twenty shares are not covered by any stock certificate.

!pparently, no provision of the by-laws of the corporation covers that situation. The parties did notbother to submit in evidence the by-laws nor invoke any of its provisions. The corporation can include


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in its by-laws rules, not inconsistent with law, governing the transfer of its shares of stock 90ec. #62 ,!ct No. #14$: +leischer vs. otica Nolasco Co., 12 Phil. 486, 48$;.


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! corporation cannot release an original subscriber from paying for his shares without a valuableconsideration 9Philippine National ank vs. itulok 0awmill, 'nc.,7-"1#22-84, Aune "$, #$%8, "6 0C&! #6%%; or without the unanimous consent of the stockholders97ingayen ?ulf >lectric Power Co., 'nc. vs. alta=ar, $6 Phil 131;.

nder the facts of this case, there is no clear legal duty on the part of the officers of the corporation toregister the twenty shares in Navas name, /ence, there is no cause of action for mandamus.

Nava argues that under section 62 a certificate of stock may be issued for shares the par value ofwhich have already been paid for although the entire subscription has not been fully paid. /e contendsthat Peers Marketing Corporation should issue a certificate of stock for the twenty shares,notwithstanding that Po had not paid fully his subscription for the eighty shares, because section 62re)uires full payment for the subscription, as a condition precedent for the issuance of the certificate ofstock, only in the case of no par stock.

Nava relies on alta=ar v 7ingayen ?ulf >lectric Power Co., 'nc., 7-#%"6%-68, Aune 63, #$%4, #10C&! 4"", where it was held that section 62 (re)uires as a condition before a shareholder can votehis shares that his full subscription be paid in the case of no par value stoc: and in case of stockcorporation with par value, the stockholder can vote the shares fully paid by him only, irrespective ofthe unpaid delin)uent shares(.

There is no parallelism between this case and the Balta!arcase. 't is noteworthy that inthe Balta!arcase the stockholder, an incorporator, was the holder of a certificate of stock for theshares the par value of which had been paid by him. The issue was whether the said shares hadvoting rights although the incorporator had not paid fully the total amount of his subscription. That isnot the issue in this case.

'n the Balta!arcase, it was held that where a stockholder subscribed to a certain number of shareswith par value and he made a partial payment and was issued a certificate for the shares covered byhis partial payment, he is entitled to vote the said shares, although he has not paid the balance of hissubscription and a call or demand had been made for the payment of the par value of the delin)uentshares.

!s already stressed, in this case no stock certificate was issued to Po.


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such shares on the basis merely of the contract of pledge. 0imilarly, the 0>C does not ac)uire5urisdiction over a dispute when a partys claim to being a shareholder is, on the face of the complaint,invalid or inade)uate or is otherwise negated by the very allegations of such complaint. Mandamus willnot issue to establish a right, but only to enforce one that is already established.

"tatement of the Case

There are the principles, used by this Court in resolving this Petition for &eview on Certioraribefore

us, assailing the ctober "1, #$$% *ecision 1of the Court of !ppeals 2in C!-?& 0P No. 1386", thedispositive portion of which readsD

'N T/> 7'?/T + !77 T/> +&>?'N?, the Petition at bench is *>N'>* *>C&0> and is hereby *'0M'00>*. change Commission 90>C; en bancD

&>+&>, in view of all the foregoing, 5udgment is hereby rendered dismissing theappeal on the ground that mandamus will only issue upon a clear showing of ownershipover the assailed shares of stock, EtFhe determination of which, on the basis of theforegoing facts, is within the 5urisdiction of the regular courts and not with the 0>C. 5

The 0>C en bancupheld the !ugust #%, #$$6 *ecision 6of 0>C /earing fficer &olando C.Malabonga, which dismissed the action for mandamus filed by petitioner.

#he Facts

!s found by the Court of !ppeals, the facts of the case are as followsD

. . . n Aanuary 8, #$83, &espondent-!ppellee 0y ?uiok secured a loan from theEpFetitioner in the amount of P13,333 payable within si 9%; months. To secure thepayment of the aforesaid loan and interest thereon, &espondent ?uiok eecuted aContract of Pledge in favor of the EpFetitioner whereby he pledged his three hundred9633; shares of stock in the ?o +ay @ Company 'nc., &espondent Corporation, forbrevitys sake. &espondent ?uiok obliged himself to pay interest on said loan at the rateof #3G per annum from the date of said contract of pledge. n the same date, !lfonso

0y 7im secured a loan from the EpFetitioner in the amount of P13,333 payable in si 9%;months. To secure the payment of his loan, 0y 7im eecuted a (Contract of Pledge(covering his three hundred 9633; shares of stock in &espondent Corporation. ndersaid contract, 0y 7im obliged himself to pay interest on his loan at the rate of #3G perannum from the date of the eecution of said contract.

nder said (Contracts of Pledge,( &espondentEsF ?uiok and 0y 7im covenanted, interalia, thatD

6. 'n the event of the failure of the P7>*?& to pay the amount within aperiod of si 9%; months from the date hereof, the P7>*?>> is herebyauthori=ed to foreclose the pledge upon the said shares of stock herebycreated by selling the same at public or private sale with or without notice

to the P7>*?&, at which sale the P7>*?>> may be the purchaser athis option: and the P7>*?>> is hereby authori=ed and empowered athis option to transfer the said shares of stock on the books of thecorporation to his own name and to hold the certificate issued in lieuthereof under the terms of this pledge, and to sell the said shares toissue to him and to apply the proceeds of the sale to the payment of thesaid sum and interest, in the manner hereinabove provided:

1. 'n the event of the foreclosure of this pledge and the sale of thepledged certificate, any surplus remaining in the hands of the P7>*?>>


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after the payment of the said sum and interest, and the epenses, if any,connected with the foreclosure sale, shall be paid by the P7>*?>> tothe P7>*?&:

4. pon payment of the said amount and interest in full, the P7>*?>>will, on demand of the P7>*?&, redeliver to him the said shares ofstock by surrendering the certificate delivered to him by the P7>*?& orby retransferring each share to the P7>*?&, in the event that theP7>*?>>, under the option hereby granted, shall have caused suchshares to be transferred to him upon the books of the issuingcompany.(9idem, supra;

&espondent ?uiok and 0y 7im endorsed their respective shares of stock in blank anddelivered the same to the EpFetitioner. 7

/owever, &espondent ?uiok and 0y 7im failed to pay their respective loans and theaccrued interests thereon to the EpFetitioner. 'n ctober, #$$3, the EpFetitioner filed a(Petition for Mandamus( against &espondent Corporation, with the 0>C entitled (7imTay versus ?o +ay @ Company. 'nc., 0>C Case No. 368$1(, praying thatD

P&!H>&

&>+&>, premises considered, it is respectfully prayed that anorder be issued directing the corporate secretary of E&Fespondent ?o +ay@ Co., 'nc. to register the stock transfers and issue new certificates infavor of 7im Tay. 't is likewise prayed that E&Fespondent ?o +ay @ Co.,'ncE.F be ordered to pay all dividends due and unclaimed on the saidcertificates to EPFlaintiff 7im Tay.

Plaintiff further prays for such other relief 5ust and e)uitable in thepremises. 9page $%,Rollo;

The EpFetitioner alleged, inter alia, in his Petition that the controversy between him asstockholder and the &espondent Corporation was intra-corporate in view of theobstinate refusal of the corporate secretary of &espondent Corporation to record the

transfer of the shares of stock of &espondent ?uiok and 0y 7im in favor of and underthe name of the EpFetitioner and to issue new certificates of stock to the EpFetitioner.

The &espondent Corporation filed its !nswer to the Complaint and alleged, as!ffirmative *efense, thatD

!++'&M!T'B> *>+>N0>

2. &espondent repleads and incorporates herein by reference theforegoing allegations.

8. The Complaint states no cause of action against ErFespondent.

$. Complainant is not a stockholder of ErFespondent. /ence, the/onorable Commission has no 5urisdiction to enter the presentcontroversy since their EsicF is no intracorporate relationship betweencomplainant and respondent.

#3. ?ranting arguendo that a pledge was constituted over theshareholdings of 0y ?uiok in favor of the complainant and that the formerdefaulted in the payment of his obligations to the latter, the same did notautomatically vest EiFn complainant ownership of the pledged shares.9pace $&, Rollo;

'n the interim, 0y 7im died. &espondents ?uiok and the 'ntestate >state of !lfonso 0y7im, represented by Conchita 7im, filed their !nswer-'n-'ntervention with the 0>C


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alleging, inter alia, thatD

6. *eny specifically the allegation under paragraph 4 of the Complaintthat, failure to pay the loan within the contract period automaticallyforeclosed the pledged shares of stocks and that the share of stocks areautomatically purchased by the plaintiff, for being false and distorted, the

truth being that pursuant to the EsicF paragraph 6 of the contract ofpledges, !nnees (!( and ((, it is clear that upon failure to pay theamount within the stipulated period, the pledgee is authori=ed toforeclose the pledge and thereafter, to sell the same to satisfy the loan.E/Fowever, to this point in time, plaintiff has not performed any operativeact of foreclosing the shares of stocks of EiFntervenors in accordance withthe Chattel Mortgage law, EnFeither was there any sale of stocks I byway of public or private auction I made after foreclosure in favor of theplaintiff to speak about, and therefore, the respondent company could notbe forceEdF to EsicF by way of mandamus, to transfer the sub5ect shares ofstocks from the name of your EiFntervenors to that of the plaintiff in theabsence of clear and legal basis for such:

1. *>NH specifically the allegations under paragraphs %, 2 and 8 of thecomplaint as to the eistence of the alleged intracorporate disputebetween plaintiff and company for being without proper and legal basis.'n the first place, plaintiff is not a stockholder of the respondentcorporation: there was no foreclosure of shares eecuted in accordancewith the Chattel Mortgage 7aw whatsoever: there were no salesconsummated that would transfer to the plaintiff the sub5ect shares ofstocks and therefore, any demand to transfer the shares of stocks to thename of the plaintiff has no legal basis. 'n the second place, EiFntervenorshad been in the past negotiating possible compromise and at the sametime, had tendered payment of the loan secured by the sub5ect pledgesbut plaintiff refused un5ustifiably to oblige and accept payment oErF even

agree on the computation of the principal amount of the loan andinterest on top of a substantial amount offered5ust to settle andcompromise the indebtedness of EiFntervenors:

''. "'(C)*+ *FF)RM*#)( -(F("("

'ntervenors replead by way of reference all the foregoing allegations toform part of the special affirmative defenses:

4. This /onorable Commission has no 5urisdiction over the person of therespondent and nature of the action, plaintiff having no personality at allto compel respondent by way of mandamus to perform certain corporatefunctionEsF:

%. The complaint states no cause of action:

2. That respondent is not EaF real party in interest:

8. The appropriation of the sub5ect shares of stocks by plaintiff, withoutcompliance with the formality of law, amounted to (EpFactumcommisEsForium( therefore, null and void:

$. ?ranting for the sake of argument only that there was a validforeclosure and sale of the sub5ect stEoFcks in favor of the plaintiff Iwhich EiFntervenors deny I still paragraph 4 of the contract allows


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redemption, for which intervenors are willing to redeem the share ofstocks pledged:

#3. >ven the Chattel Mortgage law allowed redemption of the EcFhattelforeclosed:

##. !s a matter of fact, on several occasions, EiFntervenors had maderepresentations with the plaintiff for the compromise and settlement of all

the obligations secured by the sub5ect pledges I even offering to paycompensation over and above the value of the obligations, interestEsF anddividends accruing to the share of stocks but, plaintiff un5ustly refused toaccept the offer of payment: 9pages $/0%1, Rollo;

The ErFespondents-EiFntervenors prayed the 0>C that 5udgment be rendered in theirfavor, as followsD

'B. 'R*Y(R

't is respectfully prayed to this /onorable Commission after due hearing,to dismiss the case for lack of merit, ordering plaintiff to accept paymentfor the loans secured by the sub5ect shares of stocks and to pay plaintiffD

#. The sum of P43,333.33, as moral damages:". the sum of P43,333.33, as attorneys fees: and,

6. costs of suit.

ther reliefs 5ust and e)uitable EareF likewise prayed for.9pages %10%$, Rollo;

!fter due proceedings, the EhFearing EoFfficer promulgated a *ecision dismissingEpFetitioners Complaint on the ground that although the 0>C had 5urisdiction over theaction, pursuant to the *ecision of the 0upreme Court in the case of (&ural ank of0alinas, et al. vs. Court of !ppeals, et al., "#3 0C&! 4#3(, he failed to prove the legalbasis for the secretary of the &espondent Corporation to be compelled to register stocktransfers in favor of the EpFetitioner and to issue new certificates of stock under hisname 9pages 2&0&&, Rollo;. The EpFetitioner appealed the *ecision of the EhFearingEoFfficer to the 0>C, but, on March 2, #$$%, the 0>C promulgated a *ecision,dismissing EpFetitioners appeal on the grounds thatD 9a; the issue between theEpFetitioner and the ErFespondents being one involving the ownership of the shares ofstock pledged by &espondent ?uiok and 0y 7im, the 0>C had no 5urisdiction over theaction filed by the EpFetitioner: 9b; the latter had no cause of action for mandamusagainst the &espondent Corporation, the right of ownership of the EpFetitioner over the633 shares of stock pledged by &espondent ?uiok and 0y 7im not having been as yet,established, preparatory to the institution of said Petition for Mandamus with the 0>C.

Ruling of the Court of *ppeals

n the issue of 5urisdiction, the Court of !ppeals ruledD

'n ascertaining whether or not the 0>C had eclusive 5urisdiction over EpFetitionersaction, the EaFppellate EcFourt must delve into and ascertainD 9a; whether or not there is aneed to enlist the epertise and technical know-how of the 0>C in resolving the issue ofthe ownership of the shares of stock: 9b; the status of the relationships of the parties:EandF 9c; the nature of the )uestion that is the sub5ect of the controversy. C, then the regularcourts have 5urisdiction over the action. 8Ecitations omittedF

n the issue of whether mandamus can be availed of by the petitioner, the Court of !ppeals agreed


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with the 0>C,vi!.D

. . . ETFhe EpFetitioner failed to establish a clear and legal right to the writ of mandamusprayed for by him. . . . Mandamus will not issue to enforce a right which is in substantialdispute or to which a substantial doubt eists . . . . The principal function of the writ ofmandamus is to command and epedite, and not to in)uire and ad5udicate and,therefore it is not the purpose of the writ to establish a legal right, but to enforce onewhich has already been established. 9Ecitations omittedF

The Court of !ppeals debunked petitioners claim that he had ac)uired ownership over the shares byvirtue of novation, holding that respondents indorsement and delivery of the shares were pursuant to

!rticles "3$6 and "3$4 of the Civil Code and that petitioners receipt of dividends was in compliancewith !rticle "#3" of the same Code. Petitioners claim that he had ac)uired ownership of the shares byvirtue of prescription was likewise dismissed by &espondent Court in this wiseD

The prescriptive period for the action of &espondentEsF ?uiok and 0y 7im to recover theshares of stock from the EpFetitioner accrued only from the time they paid their loans andthe interests thereon and EmadeF a demand for their return. 10

/ence, the petitioner brought before us this Petition for &eview on Certiorariin accordance with &ule14 of the &ules of Court. 11

*ssignment of (rrors

Petitioner submits, for the consideration of this Court, these issuesD 12

9a; change Commission had 5urisdiction over thecomplaint filed by the petitioner: and

9b; C, petitioner relies heavily on*be4o v. -e la Cru!, 1which upheld the 5urisdiction of the 0>C overa suit filed by an unregistered stockholder seeking to enforce his rights. /e also seeks supportfrom Rural Ban of "alinas, )nc. v. Court of *ppeals, 1which ruled that the right of a transferee or anassignee to have stocks transferred to his name was an inherent right flowing from his ownership of

the said stocks.The registration of shares in a stockholders name, the issuance of stock certificates, and the right toreceive dividends which pertain to the said shares are all rights that flow from ownership. Thedetermination of whether or not a shareholder is entitled to eercise the above-mentioned rights fallswithin the 5urisdiction of the 0>C. /owever, if ownership of the shares is not clearly established and isstill unresolved at the time the action for mandamus is filed, then 5urisdiction lies with the regularcourts.

0ec. 4 of Presidential *ecree No. $3"-! sets forth the 5urisdiction of the 0>C as followsD

0ec. 4. 'n addition to the regulatory and ad5udicative functions of the 0ecurities and


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>change Commission over corporations, partnerships and other forms of associationsregistered with it as epressly granted under eisting laws and decrees, it shall haveoriginal and eclusive 5urisdiction to hear and decide cases involvingD

9a; *evices or schemes employed by or any acts of the board of directors, businessassociates, its officers or partners, amounting to fraud and misrepresentation whichmay be detrimental to the interest of the public andJor of stockholders, partners,members of associations or organi=ations registered with the Commission:

9b; Controversies arising out of intra-corporate or partnership relations, between andamong stockholders, members, or associates: between any or all of them and thecorporation, partnership or association of which they are stockholders, members orassociates, respectively: and between such corporation, partnership or association andthe 0tate insofar as it concerns their individual franchise or right to eist as such entity:

9c; Controversies in the election or appointment of directors, trustees, officers ormanagers of such corporations, partnerships or associations.

9d; Petitions of corporations, partnerships or associations to be declared in the state ofsuspension of payments in cases where the corporation, partnership or associationpossesses property to cover all its debts but foresees the impossibility of meeting them

when they respectively fall due or in cases where the corporation, partnership orassociation has no sufficient assets to cover its liabilities, but is under the ManagementCommittee created pursuant to this decree. 15

Thus, a controversy (among stockholders, partners or associates themselves( 16is intra-corporate innature and falls within the 5urisdiction of the 0>C.

!s a general rule, the 5urisdiction of a court or tribunal over the sub5ect matter is determined by theallegations in the complaint. 17'n the present case, however, petitioners claim that he wasthe o5nerof the shares of stock in )uestion has noprima faciebasis.

'n his Complaint, petitioner alleged that, pursuant to the contracts of pledge, he became the owner ofthe shares when the term for the loans epired. The Complaint contained the following pertinentavermentsD

6. n EAFanuary 8, #$$3, under a Contract of Pledge, 7im Tay received three hundred9633; shares of stock of ?o +ay @ Co., 'nc., from 0y ?uiok as security for the paymentof a loan of EfForty EtFhousand EpFesos 9P13,333.33; Philippine currency, the sum ofwhich was payable within si 9%; months Ewith interestF at ten percentum 9#3G; perannum from the date of the eecution of the contract: a copy of this Contract of 'ledgeis attached as *nne6 (*( and made part hereof7

1. n the same date Aanuary 8, #$83, under a similar Contract of Pledge, 7im Tayreceived three hundred 9633; shares of stock of ?o Pay @ Co., 'nc. from !lfonso 0y 7imas security for the payment of a loan of EfForty EtFhousand EpFesos 9P13,333.33;Philippine currency, the sum of which was payable within si 9%; months Ewith interestFat ten percentum 9#3G; per annum from the date of the eecution of the contract: acopy of this Contract of 'ledge is attached as *nne6 (B( and made part hereof7

4. y the epress terms of the agreements, upon failure of the borrowers to pay thestated amounts within the contract period, the pledge is foreclosed and the shares ofstock are purchased by EpFlaintiff, who is epressly authori=ed and empowered totransfer the duly endorsed shares of stock on the books of the corporation to his ownname: . . . 189emphasis supplied;

/owever, the contracts of pledge, which were made integral parts of the Complaint, contain this


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common provisoD

6. 'n the event of the failure of the P7>*?& to pay the amount within a period of si9%; months from the date hereof, the P7>*?>> is hereby authori=ed to foreclose thepledge upon the said shares of stock hereby created by selling the same at public orprivate sale with or without notice to the P7>*?&, at which sale the P7>*?>> maybe the purchaser at his option: and the P7>*?>> is hereby authori=ed and empoweredat his option, to transfer the said shares of stock on the books of the corporation to hisown name and to hold the certificate issued in lieu thereof under the terms of thispledge, and to sell the said shares to issue to him and to apply the proceeds of the saleto the payment of the said sum and interest, in the manner hereinabove provided:

This contractual stipulation, which was part of the Complaint, shows that plaintiff wasmerely authori!ed to foreclosethe pledge upon maturity of the loans, not to own them. 0uchforeclosure is not automatic, for it must be done in a public or private sale. Nowhere did the Complaintmention that petitioner had in fact foreclosed the pledge and purchased the shares after suchforeclosure. /is status as a mere pledgee does not, under civil law, entitle him to ownership of thesub5ect shares. 't is also noteworthy that petitioners Complaint did not aver that said shares wereac)uired through etraordinary prescription, novation or laches. Moreover, petitioners claim,subse)uent to the filing of the Complaint, that he ac)uired ownership of the said shares through these

three modes is not indubitable and still has to be resolved. 'n fact, as will be shown, such allegation-has no merit. Manifestly, the Complaint by itself did not contain anyprima facieshowing that petitionerwas the owner of the shares of stocks. Kuite the contrary, it demonstrated that he was merely apledgee, not an owner. !ccordingly, it failed to lay down a sufficient basis for the 0>C to eercise

5urisdiction over the controversy. 'n fact, the very allegations of the Complaint and its annees negatedthe 5urisdiction of the 0>C.

Petitioners reliance on the doctrines set forth in*be4o v. -e la Cru!and Rural Ban of "alinas, )nc. v.Court of *ppealsis misplaced. 'n*be4o, he !be5o spouses sold to Telectronic 0ystems, 'nc. shares ofstock in Pocket ell Philippines, 'nc. 0ubse)uent to such contract of sale, the corporate secretary,Norberto raga, refused to record the transfer of the shares in the corporate books and instead askedfor the annulment of the sale, claiming that he and his wife had a preemptive right over some of theshares, and that his wifes shares were sold without consideration or consent.

!t the time the ragas )uestioned the validity of the sale, the contract had already been perfected,thereby demonstrating that Telectronic 0ystems, 'nc. was already theprima facieowner of the sharesand, conse)uently, a stockholder of Pocket ell Philippines, 'nc. >ven if the sale were to be annulledlater on, Telectronic 0ystems, 'nc. had, in the meantime, title over the shares from the time the salewas perfected until the time such sale was annulled. The effects of an annulment operateprospectively and do not, as a rule, retroact to the time the sale was made. Therefore, at the time theragas )uestioned the validity of the tranfers made by the !be5os, Telectronic 0ystems, 'nc. wasalready aprima facieshareholder of the corporation, thus making the dispute between the ragas andthe !be5os (intra-corporate( in nature. /ence, the Court held that (the issue is not on ownership ofshares but rather the non-performance by the corporate secretary of the ministerial duty of recordingtransfers of shares of stock of the corporation of which he is secretary.( 19

nlike*be4o, however, petitioners ownership over the shares in this case was not yet perfected whenthe Complaint was filed. The contract of pledge certainly does not make him the owner of the sharespledged. +urther, whether prescription effectively transferred ownership of the shares, whether therewas a novation of the contracts of pledge, and whether laches had set in were difficult legal issues,which were unpleaded and unresolved when herein petitioner asked the corporate secretary of ?o+ay to effect the transfer, in his favor, of the shares pledged to him.

'n Rural Ban of "alinas, Melenia ?uerrero eecuted deeds of assignment for the shares in favor ofthe respondents in that case.


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annulment of the deeds of assignment on the grounds that the same were fictitious and antedated,and that they were in fact donations because the considerations therefor were below the book value ofthe shares.

7ike the !be5o spouses, the respondents in Rural Ban of "alinaswere alreadyprimafacieshareholders when the deeds of assignment were )uestioned. 'f the said deeds were to beannulled later on, respondents would still be considered shareholders of the corporation from the timeof the assignment until the annulment of such contracts.

"econd )ssueD Mandamus 8ill ot)ssue to (stablish a Right

Petitioner prays for the issuance of a writ of mandamus, directing the corporate secretary ofrespondent corporation to have the shares transferred to his name in the corporate books, to issuenew certificates of stock and to deliver the corresponding dividends to him. 20

'n order that a writ of mandamus may issue, it is essential that the person petitioning for the same hasa clear legal right to the thing demanded and that it is the imperative duty of the respondent to performthe act re)uired. 't neither confers powers nor imposes duties and is never issued in doubtful cases. 'tis simply a command to eercise a power already possessed and to perform a duty alreadyimposed. 21

'n the present case, petitioner has failed to establish a clear legal right. Petitioners contention that heis the owner of the said shares is completely without merit. Kuite the contrary and as already shown,he does not have any ownership rights at all. !t the time petitioner instituted his suit at the 0>C, hisownership claim had noprima facie leg to stand on. !t best, his contention was disputable anduncertain Mandamus will not issue to establish a legal right, but only to enforce one that is alreadyclearly established.

8ithout Foreclosure and'urchase at *uction, 'ledgor)s ot the 95ner of 'ledged "hares

Petitioner initially argued that ownership of the shares pledged had passed to him, upon &espondents0y ?uiok and 0y 7ims failure to pay their respective loans. ut on appeal, petitioner claimed that

ownership over the shares had passed to him, not via the contracts of pledge, but by virtue ofprescription and by respondents subse)uent acts which amounted to a novation of the contracts ofpledge.


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corporation to his own name, and to hold the certificate issued in lieu thereof under theterms of this pledge, and to sell the said shares to issue to him and to apply theproceeds of the sale to the payment of the said sum and interest, in the mannerhereinaboveprovided: 22

There is no showing that petitioner made any attempt to foreclose or sell the shares through public orprivate auction, as stipulated in the contracts of pledge and as re)uired by !rticle "##" of the CivilCode. Therefore, ownership of the shares could not have passed to him. The pledgor remains theowner during the pendency of the pledge and prior to foreclosure and sale, as eplicitly provided by

!rticle "#36 of the same CodeD

nless the thing pledged is epropriated, the debtor continues to be the owner thereof.

Nevertheless, the creditor may bring the actions which pertain to the owner of the thingpledged in order to recover it from, or defend it against a third person.

o 95nershipby 'rescription

Petitioner did not ac)uire the shares by prescription either. The period of prescription of any cause ofaction is reckoned only from the date the cause of action accrued.

0ince a cause of action re)uires as an essential element not only a legal right of the plaintiff and acorrelative obligation of the defendant, but also an act or omission of the defendant in violation of saidlegal right, the cause of action does not accrue until the party obligated refuses, epressly or impliedly,to comply with its duty.( 2!ccordingly, a cause of action on a written contract accrues when a breachor violation thereof occurs.

nder the contracts of pledge, private respondents would have a right to ask for the redelivery of theircertificates of stock upon payment of their debts to petitioner, consonant with !rticle "#34 of the CivilCode, which readsD

The debtor cannot ask for the return of the thing pledged against the will of the creditor,unless and until he has paid the debt and its interest, with epenses in a proper

case. 2Thus, the right to recover the shares based on the written contract of pledge between petitioner andrespondents would arise only upon payment of their respective loans. Therefore, the prescriptiveperiod within which to demand the return of the thing pledged should begin to run only after thepayment of the loan and a demand for the thing has been made, because it is only then thatrespondents ac)uire a cause of action for the return of the thing pledged.

Prescription should not begin to run on the action to demand the return of the thing pledged while theloan still eists. This is because the right to ask for the return of the thing pledged will not arise so longas the loan subsists. 'n the present case, the prescriptive period did not begin to run when the loanbecame due. n the other hand, it is petitioners right to demand payment that maybe in danger ofprescription.

Petitioner contends that he can be deemed to have ac)uired ownership over the certificates of stockthrough etraordinary prescription, as provided for in !rticle ##6" of the Civil Code which statesD

!rt. ##6". The ownership of movables prescribes through uninterrupted possession forfour years in good faith.

The ownership of personal property also prescribes through uninterrupted possessionfor eight years, without need of any other condition. . . . .

Petitioners argument is untenable.


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into ownership by prescription. !s aptly pointed out by Austice Aose C. BitugD

!c)uisitive prescription is a mode of ac)uiring ownership by a possessor through there)uisite lapse of time. 'n order to ripen into ownership, possession must be in theconcept of an owner, public, peaceful and uninterrupted. Thus, possession with a

5uridical title, such as by a usufructory, a trustee, a lessee, agent or a pledgee, not beingin the concept of an owner, cannot ripen into ownership by ac)uisitive prescriptionunless the 5uridical relation is first epressly repudiated and such repudiation has beencommunicated to the other party. 25

Petitioner epressly repudiated the pledge, only when he filed his Complaint and claimed that he wasnot a mere pledgee, but that he was already the owner of the shares. ased on the foregoing,petitioner has not ac)uired the certificates of stock through etraordinary prescription.

o ovationin Favor of 'etitioner

Neither did petitioner ac)uire the shares by virtue of a novation of the contract of pledge. Novation isdefined as (the etinguishment of an obligation by a subse)uent one which terminates it, either bychanging its ob5ect or principal conditions, by substituting a new debtor in place of the old one, or bysubrogating a third person to the rights of the creditor.( 26 Novation of a contract must not be

presumed. ('n the absence of an epress agreement, novation takes place only when the old and thenew obligations are incompatible on every point.( 27

'n the present case, novation cannot be presumed by 9a; respondents indorsement and delivery of thecertificates of stock covering the %33 shares, 9b; petitioners receipt of dividends from #$83 to #$86,and 9c; the fact that respondents have not instituted any action to recover the shares since #$83.

&espondents indorsement and delivery of the certificates of stock were pursuant to paragraph " of thecontract of pledge which readsD

". The said certificates had been delivered by the P7>*?& endorsed in blank to beheld by the P7>*?>> under the pledge as security for the payment of theaforementioned sum and interest thereonaccruing. 28

This stipulation did not effect the transfer of ownership to petitioner. 't was merely in compliance with!rticle "3$6 of the Civil Code, 29which re)uires that the thing pledged be placed in the possession ofthe creditor or a third person of common agreement: and !rticle "3$4, 0which states that if the thingpledged are shares of stock, then the (instrument proving the right pledged( must be delivered to thecreditor.

Moreover, the fact that respondents allowed the petitioner to receive dividends pertaining to the shareswas not meant to relin)uish ownership thereof. !s stated by respondent corporation, the same wasdone pursuant to an agreement between the petitioner and &espondents 0y ?uiok and 0y 7im,following !rticle "#3" of the civil Code which providesD

't the pledge earns or produces fruits, income, dividends, or interests, the creditor shallcompensate what he receives with those which are owing him: but if none are owinghim, or insofar as the amount may eceed that which is due, he shall apply it to theprincipal. nless there is a stipulation to the contrary, the pledge shall etend to theinterest and the earnings of the right pledged.

Novation cannot be inferred from the mere fact that petitioner has not, since #$83, instituted anyaction to recover the shares. 0uch action is in fact premature, as the loan is still outstanding. esides,as already pointed out, novation is never presumed or inferred.

o -acion en 'agoin Favor of 'etitioner


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Neither can there be dacion en pago, in which the certificates of stock are deemed sold to petitioner,the consideration for which is the etinguishment of the loans and the accrued intereststhereon. -acion en pagois a form of novation in which a change takes place in the ob5ect involved inthe original contract. !bsent an eplicit agreement, petitioner cannot simply presume dacion en pago.

+aches ota Bar to 'etitioner

Petitioner submits that (the inaction of the individual respondents with respect to the recovery of theshares of stock serves to bar them from asserting rights over said shares on the basis of laches.( 1

7aches has been defined as (the failure or neglect, for an unreasonable length of time, to do thatwhich by eercising due diligence could or should have been done earlier: it is negligence or omissionto assert a right within a reasonable time, warranting a presumption that the party entitled to assert iteither has abandoned it or declined to assert it.( 2

'n this case, it is in fact petitioner who may be guilty of laches. Petitioner had all the time to demandpayment of the debt. More important, under the contracts of pledge, petitioner could have foreclosedthe pledges as soon as the loans became due. ut for still unknown or uneplained reasons, he failedto do so, preferring instead to pursue his baseless claim to ownership.

&>+&>, the petition is hereby *>N'>* and the assailed *ecision is !++'&M>*. Costs against

petitioner.

0 &*>&>*

G.R. No. 1255. Se3+ember 28, 20014

"E R#RAL /AN! O LIPA CI", INC., "E OICERS AND DIREC"ORS, /ERNARDO

/A#"IS"A, AIE C#S"ODIO, OC"AVIO !A"IG/A!, RANCISCO C#S"ODIO, $%ANI"A /A#"IS"A O "E R#RAL /AN! O LIPA CI", INC.,petitioners,vs.ONORA/LE CO#R" O APPEALS, ONORA/LE COISSION EN/ANC, SEC#RI"IES AND ECANGE COISSION, ONORA/LE ENRI'#E L.LORES, R., % * $3$+: $* e$r%) O;;er, RENALDO VILLAN#EVA, SR.,AVELINA . VILLAN#EVA, CA"ALINO VILLAN#EVA, ANDRES GON


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Private respondent &eynaldo Billanueva, 0r., a stockholder of the &ural ank of 7ipa City,eecuted a *eed of !ssignment,E#Fwherein he assigned his shares, as well as those of eight 98; othershareholders under his control with a total of #3,1%2 shares, in favor of the stockholders of the ankrepresented by its directors ernardo autista, Aaime Custodio and ctavio Latigbak. 0ometimethereafter, &eynaldo Billanueva, 0r. and his wife, !velina, eecuted an !greement E"Fwherein theyacknowledged their indebtedness to the ank in the amount of +our Million Pesos 9P1,333,333.33;,and stipulated that said debt will be paid out of the proceeds of the sale of their real property described

in the !greement.

!t a meeting of the oard of *irectors of the ank on November #4, #$$6, the Billanueva spousesassured the oard that their debt would be paid on or before *ecember 6# of that same year:otherwise, the ank would be entitled to li)uidate their shareholdings, including those under theircontrol. 'n such an event, should the proceeds of the sale of said shares fail to satisfy in full theobligation, the unpaid balance shall be secured by other collateral sufficient therefor.

dgardo &eyes, !le5andro Tonogan, and >lena si. Named respondents were thenewly-elected officers and directors of the &ural ank, namelyD ernardo autista, Aaime Custodio,ctavio Latigbak, +rancisco Custodio and Auanita autista.

The Billanuevas main contention was that the stockholders meeting and election of officers anddirectors held on Aanuary #4, #$$1 were invalid becauseD 9#; they were conducted in violation of theby-laws of the &ural ank: 9"; they were not given due notice of said meeting and electionnotwithstanding the fact that they had not waived their right to notice: 96; they were deprived of theirright to vote despite their being holders of common stock with corresponding voting rights: 91; theirnames were irregularly ecluded from the list of stockholders: and 94; the candidacy of petitioner

!velina Billanueva for directorship was arbitrarily disregarded by respondent ernardo autista andcompany during the said meeting.

n +ebruary #%, #$$1, the 0>C issued a temporary restraining order en5oining the respondents,petitioners herein, from acting as directors and officers of the ank, and from performing their dutiesand functions as such.E%F

'n their 5oint !nswer,E2Fthe respondents therein raised the following defensesD
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#; The petitioners have no legal capacity to sue:

"; The petition states no cause of action:

6; The complaint is insufficient:

1; The petitioners claims had already been paid, waived, abandoned, or otherwiseetinguished:

4; The petitioners are estopped from challenging the conversion of their shares.

Petitioners, respondents therein, thus moved for the lifting of the temporary restraining order andthe dismissal of the petition for lack of merit, and for the upholding of the validity of the stockholdersmeeting and election of directors and officers held on Aanuary #4, #$$1. y way of counterclaim,petitioners prayed for actual, moral and eemplary damages.

n !pril %, #$$1, the Billanuevas application for the issuance of a writ of preliminary in5unctionwas denied by the 0>C /earing fficer on the ground of lack of sufficient basis for the issuance

thereof. /owever, a motion for reconsiderationE8Fwas granted on *ecember #%, #$$1, upon findingthat since the Billanuevas have not disposed of their shares, whether voluntarily or involuntarily, theywere still stockholders entitled to notice of the annual stockholders meeting was sustained by the0>C. !ccordingly, a writ of preliminary in5unction was issued en5oining the petitioners from acting asdirectors and officers of the bank.E$F

Thereafter, petitioners filed an urgent motion to )uash the writ of preliminary in5unction,E#3Fchallenging the propriety of the said writ considering that they had not yet received a copy of theorder granting the application for the writ of preliminary in5unction.

C/earing fficer granted the mnibus Motion by issuing a temporary restraining order preventingpetitioners from holding the stockholders meeting and electing the board of directors and officers ofthe ank.E#"F

! petition for Certiorariand !nnulment with *amages was filed by the &ural ank, its directorsand officers before the 0>C en banc,E#6Fnaming as respondents therein 0>C /earing fficer >nri)ue7. +lores, Ar., and the Billanuevas, erstwhile petitioners in 0>C Case No. 3"-$1-1%86. The saidpetition alleged that the orders dated *ecember #%, #$$1 and Aanuary #6, #$$4, which allowed theissuance of the writ of preliminary in5unction and prevented the bank from holding its #$$4 annualstockholders meeting, respectively, were issued by the 0>C /earing fficer with grave abuse of

discretion amounting to lack or ecess of 5urisdiction. Corollarily, the ank, its directors and its officers)uestioned the 0>C /earing fficers right to restrain the stockholders meeting and election ofofficers and directors considering that the Billanueva spouses and the other petitioners in 0>C CaseNo. 3"-$1-1%86 were no longer stockholders with voting rights, having already assigned all theirshares to the ank.

'n their CommentJpposition, the Billanuevas and other private respondents argued that the filingof the petition for certiorari was premature and there was no grave abuse of discretion on the part ofthe 0>C /earing fficer, nor did he act without or in ecess of his 5urisdiction.
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n Aune 2, #$$4, the 0>C en bancdenied the petition for certiorariin an rder,E#1Fwhich statedD

'n the case now before us, petitioners could not show any proof of despotic or arbitrary eercise ofdiscretion committed by the hearing officer in issuing the assailed orders save and ecept theallegation that the private respondents have already transferred their stockholdings in favor of thestockholders of the ank. This, however, is the very issue of the controversy in the case a )uo andwhich, to our mind, should rightfully be litigated and proven before the hearing officer. This is sobecause of the undisputed fact the 9sic; private respondents are still in possession of the stockcertificates evidencing their stockholdings and as held by the 0upreme Court in (mbassy Farms, )nc.v. Court of *ppeals, et al., :;; "CR* %/1, citing ava v. 'eers Mareting Corp.,the non-delivery of thestock certificate does not make the transfer of the shares of stock effective. +or an effective transfer ofstock, the mode of transfer as prescribed by law must be followed.


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fficer were based on pertinent law and the facts of the case.

0ection %6 of the Corporation Code statesD 0hares of stock so issued are personal property andmay be transferred by delivery of the certificate or certificates indorsed by the owner . Notransfer, however, shall be valid, ecept as between the parties, until the transfer is recorded in thebooks of the corporation so as to show the names of the parties to the transaction, the date of thetransfer, the number of the certificate or certificates and the number of shares transferred.O

'n the case at bench, when private respondents eecuted a deed of assignment of their shares ofstocks in favor of the 0tockholders of the &ural ank of 7ipa City, represented by ernardo autista,Aaime Custodio and ctavio Latigbak, title to such shares will not be effective unless the dulyindorsed certificate of stock is delivered to them. +or an effective transfer of shares of stock, the modeand manner of transfer as prescribed by law should be followed. Private respondents are stillpresumed to be the owners of the shares and to be stockholders of the &ural ank.


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endorsed by the owner is the operative act of transfer of shares from the lawful owner to thetransferee.E"3FThus, title may be vested in the transferee only by delivery of the duly indorsedcertificate of stock.E"#F

C /earing fficer on Aanuary #6, #$$4 must belifted. /owever, private respondents shall be notified of the meeting and be allowed to eercise theirrights as stockholders thereat.

C. +or the +ourth Audicial &egion,specifically in the Province of atangas, the &TC of atangas City, ranch 6" is the designated court.E"%F

>EREORE, in view of all the foregoing, the instant petition for review on certiorari is*>N'>*. The *ecision and &esolution of the Court of !ppeals in C!-?.&. 0P No. 688%# are hereby

!++'&M>*. The case is ordered &>M!N*>* to the &egional Trial Court of atangas City, ranch6", for proper disposition. The temporary restraining order issued by the 0>C /earing fficer datedAanuary #6, #$$4 is ordered 7'+T>*.
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SO ORDERED.

VICEN"E C. PONCE,petitioner, vs. ALSONS CEEN" CORPORA"ION, $%& RANCISCO .GIRON, R.,respondents.

D E C I S I O N

'#IS#/ING, .=

This petition for review seeks to annul the decision14of the Court of !ppeals, in C!-?.&. 0P No.1%%$", which set aside the decision24of the 0ecurities and >change Commission 90>C; >n anc in0>C-!C No. 414 and reinstated the order4of the /earing fficer dismissing herein petitionerscomplaint. !lso assailed is the C!s resolution4of !ugust #3, #$$$, denying petitioners motion forreconsideration.

n Aanuary "4, #$$%, plaintiff 9now petitioner; Bicente C. Ponce, filed a complaint 54with the 0>Cfor mandamus and damages against defendants 9now respondents; !lsons Cement Corporation and

its corporate secretary +rancisco M. ?iron, Ar. 'n his complaint, petitioner alleged, among others, thatD

4. The late +austo ?. ?aid was an incorporator of Bictory Cement Corporation 9BCC;, havingsubscribed to and fully paid "6$,433 shares of said corporation.

%. n +ebruary 8, #$%8, plaintiff and +austo ?aid eecuted a *eed of ndertakingO and'ndorsementO whereby the latter acknowledges that the former is the owner of said shares and hewas therefore assigningJendorsing the same to the plaintiff. ! copy of the said deedJindorsement isattached as !nne !O.

2. n !pril #3, #$%8, BCC was renamed +loro Cement Corporation 9+CC for brevity;.

8. n ctober "", #$$3, +CC was renamed !lsons Cement Corporation 9!CC for brevity; as shownby the !mended !rticles of 'ncorporation of !CC, a copy of which is attached as !nne O.

$. +rom the time of incorporation of BCC up to the present, no certificates of stock corresponding tothe "6$,433 subscribed and fully paid shares of ?aid were issued in the name of +austo ?. ?aidandJor the plaintiff.

#3. *espite repeated demands, the defendants refused and continue to refuse without any 5ustifiablereason to issue to plaintiff the certificates of stocks corresponding to the "6$,433 shares of ?aid, inviolation of plaintiffs right to secure the corresponding certificate of stock in his name.64

!ttached to the complaint was the *eed of ndertaking and 'ndorsement74upon which petitionerbased his petition for mandamus. 0aid deed and indorsement read as followsD

*>>* + N*>&T!L'N?LN< !77 M>N H T/>0> P&>0>NT0D

', B'C>NT> C. PNC>, is the owner of the total subscription of +austo ?aid with Bictory CementCorporation in the total amount of T* T/'&TH N'N> T/0!N* +'B> /N*&>*9P"6$,433.33; P>00 and that +austo ?aid does not have any liability whatsoever on thesubscription agreement in favor of Bictory Cement Corporation.

90?*.; B'C>NT> C. PNC>

+ebruary 8, #$%8
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CN+&M>D

90?*.; +!0T ?!'*

'N*&0>M>NT

', +!0T ?!'* is indorsing the total amount of T* T/'&TH N'N> T/0!N* +'B>/N*&>* 9"6$,433.33; stocks of Bictory Cement Corporation to B'C>NT> C. PNC>.

90?*.; +!0T ?!'*


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recorded in the books of the defendant corporation, such recording being a prere)uisite to theissuance of a stock certificate in favor of the transferee.124

Petitioner appealed the rder of dismissal. n Aanuary %, #$$2, the Commission >n ancreversed the appealed rder and directed the /earing fficer to proceed with the case. 'n ruling thata transfer or assignment of stocks need not be registered first before it can take cogni=ance of thecase to enforce the petitioners rights as a stockholder, the Commission >n anc cited our ruling

in*be4o vs. -e la Cru!, #1$ 0C&! %41 9#$82; to the effect thatD

!s the 0>C maintains, There is no re)uirement that a stockholder of a corporation must be aregistered one in order that the 0ecurities and >change Commission may take cogni=ance of a suitseeking to enforce his rights as such stockholderO. This is because the 0>C by epress mandate hasabsolute 5urisdiction, supervision and control over all corporationsO and is called upon to enforce theprovisions of the Corporation Code, among which is the stock purchasers right to secure thecorresponding certificate in his name under the provisions of 0ection %6 of the Code. Needless to say,any problem encountered in securing the certificates of stock representing the investment made by thebuyer must be epeditiously dealt with through administrative mandamus proceedings with the 0>C,rather than through the usual tedious regular court procedure.

!pplying this principle in the case on hand, a transfer or assignment of stocks need not be registered

first before the Commission can take cogni=ance of the case to enforce his rights as astockholder. !lso, the problem encountered in securing the certificates of stock made by the buyermust be epeditiously taken up through the so-called administrative mandamus proceedings with the0>C than in the regular courts.14

The Commission >n anc also found that the /earing fficer erred in holding that petitioner is notthe real party in interest.

!s appearing in the allegations of the complaint, plaintiff-appellant is the transferee of the shares ofstock of ?aid and is therefore entitled to avail of the suit to obtain the proper remedy to make him therightful owner and holder of a stock certificate to be issued in his name. Moreover, defendant-

appellees failed to show that the transferor nor his heirs have refuted the ownership of thetransferee. !ssuming these allegations to be true, the corporation has a mere ministerial duty toregister in its stock and transfer book the shares of stock in the name of the plaintiff-appellant sub5ectto the determination of the validity of the deed of assignment in the proper tribunal. 14

Their motion for reconsideration having been denied, herein respondents appealed thedecision154of the 0>C >n anc and the resolution 164denying their motion for reconsideration to theCourt of !ppeals.

'n its decision, the Court of !ppeals held that in the absence of any allegation that the transfer ofthe shares between +austo ?aid and Bicente C. Ponce was registered in the stock and transfer bookof !70N0, Ponce failed to state a cause of action. Thus, said the C!, the complaint for mandamus

should be dismissed for failure to state a cause of action.O174petitioners motion for reconsiderationwas likewise denied in a resolution184dated !ugust #3, #$$$.

/ence, the instant petition for review on certiorari alleging thatD

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''. Q T/> /N&!7> C&T + !PP>!70 >&&>* 'N NT !PP7H'N? T/> C!0>0 +!>A B0. *> 7! C&RO, #1$ 0C&! %41 !N* &&!7 !NL + 0!7'N!0, 'NC., >T !7 B0.C&T + !PP>!70, >T !7.O, ?.&. N. $%%21, AN> "%, #$$".

'''. Q T/> /N&!7> C&T + !PP>!70 >&&>* 'N !PP7H'N? ! #$## C!0>, /!?>&B0. &H!NO, #$ P/'7. #68, T *'0M'00 T/> CMP7!'NT +& '00!NC> + ! C>&T'+'C!T> +0TCL.194

!t issue is whether the Court of !ppeals erred in holding that herein petitioner has no cause ofaction for a writ of mandamus.

Petitioner first contends that the act of recording the transfer of shares in the stock and transferbook and that of issuing a certificate of stock for the transferred shares involves only one continuousprocess. Thus, when a corporate secretary is presented with a document of transfer of fully paidshares, it is his duty to record the transfer in the stock and transfer book of the corporation, issue anew stock certificate in the name of the transferee, and cancel the old one. ! transferee who re)uestsfor the issuance of a stock certificate need not spell out each and every act that needs to be done bythe corporate secretary, as a re)uest for issuance of stock certificates necessarily includes a re)uestfor the recording of the transfer. >rgo, the failure to record the transfer does not mean that thetransferee cannot ask for the issuance of stock certificates.

0econdly, according to petitioner, there is no law, rule or regulation re)uiring a transferor of sharesof stock to first issue epress instructions or eecute a power of attorney for the transfer of said sharesbefore a certificate of stock is issued in the name of the transferee and the transfer registered in thebooks of the corporation. /e contends that Hager vs. Bryan, #$ Phil. #68 9#$##;, and Rivera vs.Florendo, #11 0C&! %16 9#$8%;, cited by respondents, do not apply to this case. These casescontemplate a situation where a certificate of stock has been issued by the company whereas in thiscase at bar, no stock certificates have been issued even in the name of the original stockholder,+austo ?aid.

+inally, petitioner maintains that since he is under no compulsion to register the transfer or to

secure stock certificates in his name, his cause of action is deemed not to have accrued untilrespondent !70N0 denied his re)uest.

&espondents, in their comment, maintain that the transfer of shares of stock not recorded in thestock and transfer book of the corporation is non-eistent insofar as the corporation is concerned andno certificate of stock can be issued in the name of the transferee. ntil the recording is made, thetransfer cannot be the basis of issuance of a certificate of stock. They add that petitioner is not thereal party in interest, the real party in interest being +austo ?aid since it is his name that appears inthe records of the corporation. They conclude that petitioners cause of action is barred byprescription and laches since "1 years elapsed before he made any demand upon !70N0.


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0>C. %6. Certificate of stoc and transfer of shares.The capital stock of stock corporations shall bedivided into shares for which certificates signed by the president or vice-president, countersigned bythe secretary or assistant secretary, and sealed with the seal of the corporation shall be issued inaccordance with the by-laws. 0hares of stock so issued are personal property and may be transferredby delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other personlegally authori=ed to make the transfer. No transfer, however, shall be valid, ecept as between theparties, until the transfer is recorded in the books of the corporation so as to show the names of the

parties to the transaction, the date of the transfer, the number of the certificate or certificates and thenumber of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be transferable in thebooks of the corporation.

Pursuant to the foregoing provision, a transfer of shares of stock not recorded in the stock andtransfer book of the corporation is non-eistent as far as the corporation is concerned.224!s betweenthe corporation on the one hand, and its shareholders and third persons on the other, the corporationlooks only to its books for the purpose of determining who its shareholders are.24't is only when thetransfer has been recorded in the stock and transfer book that a corporation may rightfully regard thetransferee as one of its stockholders. +rom this time, the conse)uent obligation on the part of thecorporation to recogni=e such rights as it is mandated by law to recogni=e arises.

/ence, without such recording, the transferee may not be regarded by the corporation as oneamong its stockholders and the corporation may legally refuse the issuance of stock certificates in thename of the transferee even when there has been compliance with the re)uirements of 0ection%124of the Corporation Code. This is the import of 0ection %6 which states that No transfer,however, shall be valid, ecept between the parties, until the transfer is recorded in the books of thecorporation showing the names of the parties to the transaction, the date of the transfer, the number ofthe certificate or certificates and the number of shares transferred.O The situation would be different ifthe petitioner was himself the registered owner of the stock which he sought to transfer to a third party,for then he would be entitled to the remedy of mandamus. 254

+rom the corporations point of view, the transfer is not effective until it is recorded. nless anduntil such recording is made the demand for the issuance of stock certificates to the alleged transfereehas no legal basis. !s between the corporation on the one hand, and its shareholders and thirdpersons on the other, the corporation looks only to its books for the purpose of determining who itsshareholders are.264 'n other words, the stock and transfer book is the basis for ascertaining thepersons entitled to the rights and sub5ect to the liabilities of a stockholder.


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transfer book, which duty is ministerial on its part, is to render nugatory and ineffectual the spirit andintent of 0ection %6 of the Corporation Code. Thus, respondent Court of !ppeals did not err inupholding the decision of respondent 0>C affirming the *ecision of its /earing fficer directing theregistration of the 126 shares in the stock and transfer book in the names of private respondents. !tall events, the registration is without pre5udice to the proceedings in court to determine the validity ofthe *eeds of !ssignment of the shares of stock in )uestion.

'n Rural Ban of "alinas, )nc., however, private respondent Melania ?uerrero had a 0pecialPower of !ttorney eecuted in her favor by Clemente ?uerrero, the registered stockholder. 't gave?uerrero full authority to sell or otherwise dispose of the 126 shares of stock registered in Clementesname and to eecute the proper documents therefor. Pursuant to the authority so given, Melaniaassigned the 126 shares of stock owned by ?uerrero and presented to the &ural ank of 0alinas thedeeds of assignment covering the assigned shares. Melania ?uerrero prayed for the transfer of thestocks in the stock and transfer book and the issuance of stock certificates in the name of the newowners thereof. ased on those circumstances, there was a clear duty on the part of the corporatesecretary to register the 126 shares in favor of the new owners, since the person who sought thetransfer of shares had epress instructions from and specific authority given by the registeredstockholder to cause the disposition of stocks registered in his name.

That cannot be said of this case. The deed of undertaking with indorsement presented bypetitioner does not establish, on its face, his right to demand for the registration of the transfer and theissuance of certificates of stocks. 'n Hager vs. Bryan, #$ Phil. #68 9#$##;, this Court held that apetition for mandamus fails to state a cause of action where it appears that the petitioner is not theregistered stockholder and there is no allegation that he holds any power of attorney from theregistered stockholder, from whom he obtained the stocks, to make the transfer, thusD

't appears, however, from the original as well as the amended petition, that this petitioner is not theregistered owner of the stock which he seeks to have transferred, and ecept in so far as he allegesthat he is the owner of the stock and that it was (indorsed( to him on +ebruary 4 by the ryan-7andonCompany, in whose name it is registered on the books of the Bisayan >lectric Company, there is noallegation that the petitioner holds any power of attorney from the ryan-7andon Company authori=inghim to make demand on the secretary of the Bisayan >lectric Company to make the transfer whichpetitioner seeks to have made through the medium of the mandamus of this court.

lectric Company, and in the absence of such allegation we are not able to say that there was such a

clear indisputable duty, such a clear legal obligation upon the respondent, as to 5ustify the issuance ofthe writ to compel him to perform it.

nder the provisions of our statute touching the transfer of stock 9secs. 64 and 6% of !ct No. #14$;,294the mere indorsement of stock certificates does not in itself give to the indorsee such a right tohave a transfer of the shares of stock on the books of the company as will entitle him to the writ ofmandamus to compel the company and its officers to make such transfer at his demand, because,under such circumstances the duty, the legal obligation, is not so clear and indisputable as to 5ustifythe issuance of the writ. !s a general rule and especially under the above-cited statute, as betweenthe corporation on the one hand, and its shareholders and third persons on the other, the corporation
http://sc.judiciary.gov.ph/jurisprudence/2002/dec2002/139802.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2002/dec2002/139802.htm#_ftn29http://sc.judiciary.gov.ph/jurisprudence/2002/dec2002/139802.htm#_ftn29


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looks only to its books for the purpose of determining who its shareholders are, so that a mereindorsee of a stock certificate, claiming to be the owner, will not necessarily be recogni=ed as such bythe corporation and its officers, in the absence of epress instructions of the registered owner to makesuch transfer to the indorsee, or a power of attorney authori=ing such transfer.04

'n Rivera vs. Florendo, #11 0C&! %16, %42 9#$8%;, we reiterated that a mere indorsement by thesupposed owners of the stock, in the absence of epress instructions from them, cannot be the basis

of an action for mandamus and that the rights of the parties have to be threshed out in an ordinaryaction. That Hager and Rivera involved petitions for mandamus to compel the registration of thetransfer, while this case is one for issuance of stock, is of no moment. 't has been made clear, thusfar, that before a transferee may ask for the issuance of stock certificates, he must first cause theregistration of the transfer and thereby en5oy the status of a stockholder insofar as the corporation isconcerned. ! corporate secretary may not be compelled to register transfers of shares on the basismerely of an indorsement of stock certificates.


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stockholder may opt not to be issued a certificate. 'n 8on vs. 8ac 8ac

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