Edward Keller v.

COB Group Marketing

G.R. No. 68097
January 16, 1986

Facts:
Edward A. Keller & Co., Ltd. appointed COB Group Marketing, Inc. as exclusive
distributor of its household products (Brite and Nuvan) in Panay and Negros, as shown in the
sales agreement. Under that agreement Keller sold on credit its products to COB Group
Marketing. As security for COB Group Marketing's credit purchases up to the amount of P35K
Asuncion Manahan mortgaged her land to Keller. Manahan assumed solidarily with COB Group
Marketing the faithful performance of all the terms and conditions of the sales agreement. In
July, 1970 the parties executed a second sales agreement whereby COB Group Marketing's
territory was extended to Northern and Southern Luzon. As security for the credit purchases up
to P25K of COB Group Marketing for that area, Tomas C. Lorenzo, Jr. and his father Tomas, Sr.
executed a mortgage on their land in Nueva Ecija. Like Manahan, the Lorenzo’s were solidarily
liable with COB Group Marketing for its obligations under the sales agreement. The credit
purchases of COB Group Marketing started on October 15, 1969 and lasted up to January 22,
1971.

On May 8, the BOD of COB Group Marketing were apprised by Jose E. Bax, the firm's
president and general manager. He was authorized to negotiate with Keller for the settlement of
his firm's liability.

On the same day, Bax and R. Oefeli of Keller signed the conditions for the settlement of
COB Group Marketing's liability.

On May 20, COB Group Marketing, through Bax, executed two second chattel mortgages
over its 12 trucks (already mortgaged to Northern Motors, Inc.) as security for its obligation to
Keller amounting to P179,185.16. However, the second mortgages did not become effective
because the first mortgagee, Northern Motors, did not give its consent. 2 stockholders of COB
Group Marketing (Moises P. Adao and Tomas C. Lorenzo, Jr.) proposed to pay Keller P5K and
thereafter every 30th day of the month for 3 years until COB Group Marketing's mortgage
obligation had been fully satisfied. They also proposed to substitute the Manahan mortgage with
a mortgage on Adao's lot.
All the invoices, with delivery receipts, were presented in evidence by Keller. Victor A. Mayo,
Keller's finance manager, submitted a statement of account showing that COB Group Marketing
owed Keller P184,509.60.

On the other hand, Bax, although not an accountant, presented his own reconciliation
statements wherein he showed that COB Group Marketing overpaid Keller.
Keller sued COB Group Marketing, its stockholders and the mortgagors, Manahan and Lorenzo.
After trial, the lower court dismissed the complaint.

The Appellate Court affirmed said judgment except the award of P20,000 as moral
damages which it eliminated.
Issue:
Whether the stockholders of COB Group Marketing can be held personally liable for the
credit.

Ruling:
Yes.

The lower courts erred in nullifying the admissions of liability made by Bax as president
and general manager of COB Group Marketing and in giving credence to the alleged
overpayment computed by Bax.

It did not only allowed Bax to nullify his admissions as to the liability of COB Group
Marketing but they also erroneously rendered judgment in its favor in the amount of its supposed
overpayment in the sum of P100,596.72 in spite of the fact that COB Group Marketing was
declared in default and did not file any counterclaim for the supposed overpayment. Keller's
alleged failure to thresh out with representatives of COB Group Marketing their "diverse
statements of credits and payments" has no factual basis.

It is settled that a stockholder is personally liable for the financial obligations of a

corporation to the extent of his unpaid subscription.

COB Group Marketing, Inc. is ordered to pay Edward A. Keller & Co., Ltd. the sum of
P182,994.60 with 12% interest per annum from August 1, 1971 up to the date of payment plus
P20,000 as attorney's fees.

Asuncion Manahan and Tomas C. Lorenzo, Jr. are ordered to pay solidarily with COB
Group Marketing the sums of P35,000 and P25,000, respectively.

The respondents are solidarily liable with COB Group Marketing up to the amounts of
their unpaid subscription to be applied to the company's liability: Jose E. Bax, P36,000;
Francisco C. de Castro, P36,000; Johnny de la Fuente, P12,000; Sergio C. Ordoñez, P12,000;
Trinidad C. Ordoñez, P3,000; Magno C. Ordoñez, P3,000; Adoracion C. Ordoñez, P3,000;
Tomas C. Lorenzo, Jr., P3,000 and Luz M. Aguilar-Adao, P6,000.
 Valley Golf & Country Club, Inc. v. Caram,
G.R. No. 158805
April 16, 2009

Facts:
Valley Golf & Country Club (Valley Golf) is a duly constituted non-stock, non-profit
corporation which operates a golf course. The members and their guests are entitled to play golf
on the said course and otherwise avail of the facilities and privileges provided by Valley Golf.
The shareholders are likewise assessed monthly membership dues.

In 1961, the late Congressman Fermin Z. Caram, Jr. (Caram), the husband of the present
respondent, subscribed to purchased and paid for in full one share (Golf Share) in the capital
stock of Valley Golf. He was issued Stock Certificate No. 389 dated 26 January 1961 for the
Golf Share. The Stock Certificate likewise indicates a par value of P9,000.00.

Valley Golf would subsequently allege that beginning 25 January 1980, Caram stopped
paying his monthly dues, which were continually assessed until 31 June 1987. Valley Golf
claims to have sent five (5) letters to Caram concerning his delinquent account within the period
from 27 January 1986 until 3 May 1987, all forwarded to P.O. Box No. 1566, Makati
Commercial Center Post Office, the mailing address which Caram allegedly furnished Valley
Golf.

The Golf Share was sold at public auction on 11 June 1987 for P25,000.00 after the
Board of Directors had authorized the sale in a meeting on 11 April 1987, and the Notice of
Auction Sale was published in the 6 June 1987 edition of the Philippine Daily Inquirer.

Issue:
Whether or not a non-stock corporation seize and dispose of the membership share of a
fully-paid member on account of its unpaid debts to the corporation when it is authorized to do
so under the corporate by-laws but not by the Articles of Incorporation.

Ruling:
NO.
It may be conceded that the actions of Valley Golf were, technically speaking, in accord
with the provisions of its by-laws on termination of membership, vaguely defined as these are.
Yet especially since the termination of membership in Valley Golf is inextricably linked to the
deprivation of property rights over the Golf Share, the emergence of such adverse consequences
make legal and equitable standards come to fore.

The commentaries of Lopez advert to an SEC Opinion dated 29 September 1987 which
we can cite with approval. Lopez cites: In order that the action of a corporation in expelling a
member for cause may be valid, it is essential, in the absence of a waiver, that there shall be a
hearing or trial of the charge against him, with reasonable notice to him and a fair opportunity to
be heard in his defense. If the method of trial is not regulated by the by-laws of the association, it
should at least permit substantial justice. The hearing must be conducted fairly and openly and
the body of persons before whom it is heard or who are to decide the case must be unprejudiced.
 It is unmistakably wise public policy to require that the termination of membership in a
non-stock corporation be done in accordance with substantial justice. No matter how one may
precisely define such term, it is evident in this case that the termination of Caram‘s membership
betrayed the dictates of substantial justice.
 Calatagan Golf Club, Inc. v. Clemente Jr.
G.R. No. 165443
April 16, 2009

Facts:
Clemente applied to purchase one share of stock of Calatagan, indicating in his
application for membership his mailing address at "Phimco Industries, Inc. – P.O. Box 240,
MCC," complete residential address, office and residence telephone numbers, as well as the
company (Phimco) with which he was connected, Calatagan issued to him Certificate of Stock
No. A-01295 on 2 May 1990 after paying P120,000.00 for the share.

Calatagan charges monthly dues on its members to meet expenses for general operations,
as well as costs for upkeep and improvement of the grounds and facilities. The provision on
monthly dues is incorporated in Calatagan‘s Articles of Incorporation and By-Laws. It is also
reproduced at the back of each certificate of stock.

Calatagan declared Clemente delinquent for having failed to pay his monthly dues for
more than sixty (60) days, specifically P5,600.00 as of 31 October 1992. Calatagan also included
Clemente‘s name in the list of delinquent members posted on the club‘s bulletin board. On 1
December 1992, Calatagan‘s board of directors adopted a resolution authorizing the foreclosure
of shares of delinquent members, including Clemente‘s; and the public auction of these shares.

Issue:
Whether or not the action of Clemente had prescribed pursuant to Section 69 of the
Corporation Code, and that the requisite notices under both the law and the by-laws had been
rendered to Clemente.

Ruling:
YES.

There are fundamental differences that defy equivalence or even analogy between the
sale of delinquent stock under Section 68 and the sale that occurred in this case. At the root of
the sale of delinquent stock is the non-payment of the subscription price for the share of stock
itself. The stockholder or subscriber has yet to fully pay for the value of the share or shares
subscribed. In this case, Clemente had already fully paid for the share in Calatagan and no longer
had any outstanding obligation to deprive him of full title to his share. Perhaps the analogy could
have been made if Clemente had not yet fully paid for his share and the non-stock corporation,
pursuant to an article or by-law provision designed to address that situation, decided to sell such
share as a consequence. But that is not the case here, and there is no purpose for us to apply
Section 69 to the case at bar.

It is plain that Calatagan had endeavored to install a clear and comprehensive procedure
to govern the payment of monthly dues, the declaration of a member as delinquent, and the
constitution of a lien on the shares and its eventual public sale to answer for the member‘s debts.
Under Section 91 of the Corporation Code, membership in a non-stock corporation "shall be
terminated in the manner and for the causes provided in the articles of incorporation or the by-
laws." The By-law provisions are elaborate in explaining the manner and the causes for the
termination of membership in Calatagan, through the execution on the lien of the share. The
Court is satisfied that the By-Laws, as written, affords due protection to the member by assuring
that the member should be notified by the Secretary of the looming execution sale that would
terminate membership in the club. In addition, the By-Laws guarantees that after the execution
sale, the proceeds of the sale would be returned to the former member after deducting the
outstanding obligations. If followed to the letter, the termination of membership under this
procedure outlined in the By-Laws would accord with substantial justice.
 Guy v. Guy
G.R. No. 184068
19 April 2016

Facts:
Fifteen (15) days after the September 7, 2004 special stockholders’ meeting, Simny, a
stockholder of record and a member of the BOD of the Goodland Company Inc. (GCI), received
a notice about the said hearing electing respondents as new directors. Simny, for himself and on
behalf of GCI and Grace Cheu (Cheu), filed a Complaint against respondents before the RTC of
Manila for the Nullification of the said Meeting and Election of Directors with a prayer for TRO
and/or WPI. Simny avered that there was no previous notice to him and Cheu, that the meeting
was not called by the proper person and that the notices were not issued by the person who had
legal authority to do so.

Respondent Gilbert Guy (Gilbert) argued that the meeting was legally called and held,
that the notice of meeting was signed by an authorized officer (him, as Vice President) and sent
in accordance with the bylaws, and that Cheu was not a stockholder of record. The RTC
dismissed the complaint. The CA affirmed in toto the RTC ruling. Hence the petition before the
SC.

Issue:
Whether the assailed special stockholder’s meeting was void.

Ruling:
NO.
Notice of the stockholders’ meeting was properly sent in compliance with law and the by-
laws of the corporation. For a stockholders’ special meeting to be valid, certain requirements
must be met with respect to notice, quorum and place. In relation to Section 50 of B.P. 68, one of
the requirements is a previous written notice sent to all stockholders at least one (1) week prior to
the scheduled meeting, unless otherwise provided in the by-laws. Under the by-laws, the notice
shall be mailed not less than five (5) days prior to the date set for the special meeting. The
requirements under the bylaws were met when Gilbert Guy caused for the mailing of the notice
on September 2, 2004 calling for the assailed special stockholder’s meeting. Since the bylaws
were clear that only mailing was required, the courts must apply the law and must not add an
additional requirement of actual receipt of the notice prior to the date of meeting. It was proven
that notice to Simny was sent on Sept. 2, 2004 (5 days prior to the meeting).

The claim that the notice suffered fatal defects as it was not called by the proper person
was also without merit. Under the by-laws, special meetings may be called by order of the
President and must be called upon the request of stockholders representing (1/3) of the
outstanding stock provided that the VP, if qualified shall exercise all the functions of the
president in absence or disability of the latter. It was not disputed that the President suffered
Alzheimer’s; that Gilbert was the VP; and that he represented 79.99% (more than 1/3) of the
outstanding stock of GCI. Thus, the requirements under the bylaws were met. The records do
show that he is a stockholder, and he is neither also Secretary nor Treasurer. Hence, he is
qualified to act as President.

Cheu was not a stockholder of record and therefore not entitled to any notice of meeting.
Cheu alleged that she was considered a stockholder of record for being in possession of stock
certificate of Paulino and Benjamin. As a rule, however, a person who desires to be recognized
as a stockholder for the prupose of exercising stockholders’ right must secure standing by having
his ownership of share recorded on the stock and transfer book. Thus, only those whose
ownership of shares are duly registered in the stock and transfer book are considered
stockholders of record and are entitled to all rights of a stockholder. The requirements for
transfer, not having been met, Cheu is not a stockholder of record, and thus not entitled to notice.
 Fua Cun v. Summers
G.R. No. L-19441
March 27, 1923

Facts:
It appears from the evidence that on August 26, 1920, one Chua Soco subscribed for five
hundred shares of stock of the defendant Banking Corporation.

On May 18, 1921, Chua Soco executed a promissory note in favor of the plaintiff Fua
Cun for the sum of P25,000 payable in ninety days and drawing interest at the rate of 1 per cent
per month, securing the note with a chattel mortgage on the shares of stock subscribed for by
Chua Soco, who also endorsed the receipt above mentioned and delivered it to the mortgagee.
The plaintiff thereupon took the receipt to the manager of the defendant Bank and informed him
of the transaction with Chua Soco, but was told to await action upon the matter by the Board of
Directors.
In the meantime Chua Soco appears to have become indebted to the China Banking Corporation
in the sum of P37,731.68 for dishonored acceptances of commercial paper and in an action
brought against him to recover this amount, Chua Soco's interest in the five hundred shares
subscribed for was attached and the receipt seized by the sheriff. The attachment was levied after
the defendant bank had received notice of the facts that the receipt had been endorsed over to the
plaintiff. Fua Cun thereupon brought the present action maintaining that by virtue of the payment
of the one-half of the subscription price of five hundred shares Chua Soco in effect became the
owner of two hundred and fifty shares and praying that his, the plaintiff's, lien on said shares, by
virtue of the chattel mortgage, be declared to hold priority over the claim of the defendant
Banking Corporation; that the defendants be ordered to deliver the receipt in question to him;
and that he be awarded the sum of P5,000 in damages for wrongful attachment.

Issue:
Whether or not the interest held by Chua Soco was merely an equity which could not be
made the subject of a chattel mortgage.

Ruling:
No.

Though the courts have uniformly held that chattel mortgages on shares of stock and
other choses in action are valid as between the parties, there is still much to be said in favor of
the defendants' contention that the chattel mortgage here in question would not prevail over liens
of third parties without notice; an equity in shares of stock is of such an intangible character that
it is somewhat difficult to see how it can be treated as a chattel and mortgaged in such a manner
that the recording of the mortgage will furnish constructive notice to third parties.

In regard to a chattel mortgage of shares of stock: These certificates of stock are in the
pockets of the owner, and go with him where he may happen to locate, as choses in action, or
evidence of his right, without any means on the part of those with whom he proposes to deal on
the faith of such a security of ascertaining whether or not this stock is in pledge or mortgaged to
others. The chief office of the company may be at one place to-day and at another tomorrow.
The owner may have no fixed or permanent abode, and with his notes in one pocket and his
certificates of stock in the other.

But a determination of this question is not essential in the present case. There can be no
doubt that an equity in shares of stock may be assigned and that the assignment is valid as
between the parties and as to persons to whom notice is brought home. Such an assignment
exists here, though it was made for the purpose of securing a debt.
 Baltazar v. Lingayen Gulf Electric Power Co., Inc.
G.R. No. L-16236
June 30, 1965

Facts:
The Lingayen Gulf Electric Power Co., Inc., hereinafter referred to as Corporation, was
doing business in the Philippines, with principal offices at Lingayen, Pangasinan, and with an
authorized capital stock of P300.000.00 divided into 3,000 shares of voting stock at P100.00 par
value, per share. Plaintiffs Baltazar and Rose were among the incorporators, having subscribed to
600 and 400 shares of the capital stock, or a total par value of P60,000.00 and P40.000.00,
respectively. It is alleged that it has always been the practice and procedure of the Corporation to
issue certificates of stock to its individual subscribers for unpaid shares of stock. Of the 600
shares of capital stock subscribed by Baltazar, he had fully paid 535 shares of stock, and the
Corporation issued to him several fully paid up and non-assessable certificates of stock,
corresponding to the 535 shares. After having made transfers to third persons and acquired new
ones, Baltazar had to his credit, on the filing of the complaint 341 shares fully paid and non-
assessable.

The respondents Ungson, Estrada, Fernandez and Yuson were small stockholders of the
Corporation, all holding a total number of fully paid-up shares of stock, of not more than 100
shares, with a par value of P10,000.00 and the defendant Acena, was likewise an incorporator
and stockholder, holding 600 shares of stock, for which certificate of stock were issued to him
and as such, was the largest individual stockholder thereof. Defendants Ungson, Estrada,
Fernandez and Yuzon, constituted the majority of the holdover seven-member Board of
Directors of the Corporation, in 1955, two (2) of said defendants having been elected as
members of the Board in the annual stockholders' meeting held in May 1954, largely on the vote
of their co-defendant Acena, while the other two (2) were elected mainly on the vote of the
plaintiffs and their group of stockholders. Let the first group be called theUngson group and the
second, the Baltazar group.

Issue:
Whether or not a stockholder, in a stock corporation, subscribes to a certain number of
shares of stock, and he pays only partially, for which he is issued certificates of stock, is he
entitled to vote the latter, notwithstanding the fact that he has not paid the balance of his
subscription, which has been called for payment or declared delinquent.

Ruling:
Yes.

The cases at bar do not come under the aegis of the principle enunciated in the Fua Cun
v. Summers case, because it was the practice and procedure, since the inception of the
corporation, to issue certificates of stock to its individual subscribers for unpaid shares of stock
and gave voting power to shares of stock fully paid. And even though no agreement existed, the
ruling in said case does not now reflect the correct view on the matter, for better than an
agreement or practice, there is the law, which renders the said case of Fua Cun-Summers,
obsolescent.
 In the cases at bar, the defendant-corporation had chosen to apply payments by its
stockholders to definite shares of the capital stock of the corporation and had fully paid capital
stock shares certificates for said payments; its call for payment of unpaid subscription and its
declaration of delinquency for non-payment of said call affecting only the remaining number of
shares of its capital stock for which no fully paid capital stock shares certificates have been
issued, "and only these have been legally shorn of their voting rights by said declaration of
delinquency" (amended decision).
 Insigne v. Abra Valley
G.R. No. 204089
July 29, 2015

Facts:
Petitioners Grace Borgoña Insigne, Diosdado Borgoña, Osbourne Borgoña, Imelda
Borgoña Rivera, Aristotle Borgoña are siblings of the full blood. Francis Borgona is their half-
blood brother. The petitioners are the children of the late Pedro Borgona by his second wife,
Teresita Valeros, while Francis was Pedro’s son by his first wife. In his lifetime, Pedro was the
founder, president and majority stockholder of Abra Valley Colleges, Inc. (Abra Valley), a stock
corporation. After Pedro’s death, Francis succeeded him as the president of Abra Valley. The
petitioners, along with their brother Romulo Borgoña and Elmer Reyes, filed a complaint (with
application for preliminary injunction) and damages in the RTC against Abra Valley praying,
among others, that the RTC direct Abra Valley to allow them to inspect its corporate books and
records, and the minutes of meetings, and to provide them with its financial statements. The RTC
rendered judgment in favor of the petitioners.Abra Valley appealed to the CA, which
promulgated its decision ordering the RTC to admit Abra Valley’s answer despite its belated
filing; and remanding the case for further proceedings. The RTC ordered the petitioners to
present the stock certificates issued by Abra Valley under their names. The petitioners submitted
their Compliance and Manifestation.The petitioners filed a motion for production/inspection of
documents, asking that the RTC direct the respondents to produce Abra Valley’s Stock and
Transfer Book (STB); and that petitioners be allowed to inspect the same. The RTC dismissed
the action pursuant to Section 3, Rule 17 of the Rules of Court holding that the documents
presented are not Stock Certificates, hence, plaintiffs failed to comply with the order of the
Court. The CA affirmed the decision of the RTC.

Issue:
WON the presentation of a stock certificate is a condition sine qua non for proving one’s
shareholding in a corporation.

Ruling:
NO.
A stock certificate is prima facie evidence that the holder is a shareholder of the
corporation, but the possession of the certificate is not the sole determining factor of one’s stock
ownership. A certificate of stock is merely: x x x the paper representative or tangible evidence of
the stock itself and of the various interests therein. The certificate is not stock in the corporation
but is merely evidence of the holder’s interest and status in the corporation, his ownership of the
share represented thereby, but is not in law the equivalent of such ownership. It expresses the
contract between the corporation and the stockholder, but it is not essential to the existence of a
share in stock or the creation of the relation of shareholder to the corporation.
 Tan v. SEC
G.R. No. 95696
March 3, 1992

Facts:
Respondent corporation was registered on October 1, 1979. As incorporator, petitioner
had four hundred (400) shares of the capital stock standing in his name at the par value of
P100.00 per share, evidenced by Certificate of Stock No. 2. He was elected as President and
subsequently reelected, holding the position as such until 1982 but remained in the Board of
Directors until April 19, 1983 as director.

On January 31, 1981, while petitioner was still the president of the respondent
corporation, two other incorporators, namely, Antonia Y. Young and Teresita Y. Ong, assigned
to the corporation their shares, represented by certificate of stock No. 4 and 5 after which, they
were paid the corresponding 40% corporate stock-in-trade.

Petitioner's certificate of stock No. 2 was cancelled by the corporate secretary and
respondent Patricia Aguilar by virtue of Resolution No. 1981 (b), which was passed and
approved while petitioner was still a member of the Board of Directors of the respondent
corporation.
Due to the withdrawal of the aforesaid incorporators and in order to complete the membership of
the five (5) directors of the board, petitioner sold fifty (50) shares out of his 400 shares of capital
stock to his brother Angel S. Tan. Another incorporator, Alfredo B. Uy, also sold fifty (50) of his
400 shares of capital stock to Teodora S. Tan and both new stockholders attended the special
meeting, Angel Tan was elected director and on March 27, 1981, the minutes of said meeting
was filed with the SEC. These facts stand unchallenged.

Issue:
Whether or not the cancellation and transfer of petitioner's shares and Certificate of Stock
No. 2 as well as the issuance and cancellation of Certificate of Stock No. 8 was patently and
palpably unlawful, null and void, invalid and fraudulent.

Ruling:
YES.
Under the instant case, the fact of the matter is, the new holder, Angel S. Tan has already
exercised his rights and prerogatives as stockholder and was even elected as member of the
board of directors in the respondent corporation with the full knowledge and acquiescence of
petitioner. Due to the transfer of fifty (50) shares, Angel S. Tan was clothed with rights and
responsibilities in the board of the respondent corporation when he was elected as officer thereof.

Besides, in Philippine jurisprudence, a certificate of stock is not a negotiable instrument.

"Although it is sometime regarded as quasi-negotiable, in the sense that it may be transferred by
endorsement, coupled with delivery, it is well-settled that it is non-negotiable, because the holder
thereof takes it without prejudice to such rights or defenses as the registered owner/s or
transferor's creditor may have under the law, except insofar as such rights or defenses are subject
to the limitations imposed by the principles governing estoppel."
 To follow the argument put up by petitioner which was upheld by the Cebu SEC
Extension Office Hearing Officer, Felix Chan, that the cancellation of Stock Certificate Nos. 2
and 8 was null and void for lack of delivery of the cancelled "mother" Certificate No. 2 whose
endorsement was deliberately withheld by petitioner, is to prescribe certain restrictions on the
transfer of stock in violation of the corporation law itself as the only law governing transfer of
stocks. While Section 47(s) grants stock corporations the authority to determine in the by-laws
"the manner of issuing certificates" of shares of stock, however, the power to regulate is not the
power to prohibit, or to impose unreasonable restrictions of the right of stockholders to transfer
their shares.
Embassy Farms v. CA
G.R. No. 80682
August 13, 1990

Facts:
It appears on record that sometime on August 2, 1984, Alexander G. Asuncion (AGA for
short) and Eduardo B. Evangelists (EBE for short) entered into a Memorandum of Agreement
(Annex "A" of the petition). Under said agreement EBE obligated himself to transfer to AGA 19
parcels of agricultural land registered in his name with an aggregate area of 104,447 square
meters located in Loma de Gato, Marilao, Bulacan, together with the stocks, equipment and
facilities of a piggery farm owned by Embassy Farms, Inc., a registered corporation wherein
ninety (90) per cent of its shares of stock is owned by EBE. EBE also obligated himself to cede,
transfer and convey "in a manner absolute and irrevocable any and all of his shares of stocks" in
Embassy Farins Inc. to AGA or his nominees "until the total of said shares of stock so
transferred shall constitute 90% of the paid-in-equity of said corporation" within a reasonable
time from signing of the document. Likewise, EBE obligated to turnover to AGA the effective
control and management of the piggery upon the signing of the agreement.

On the other hand, AGA obligated himself, upon signing of the agreement to pay to EBE
the total sum of close to P8,630,000.00. Within reasonable time from signing of the agreement
AGA obligated himself to organize and register a new corporation with an authorized capital
stock of P10,000,000.00 which upon registration will take over all the rights and liabilities of
AGA.

Issue:
Whether or not there has been an effective transfer of shares of stock from AGA to other
persons.

Ruling:
NO.
There being no delivery of the indorsed shares of stock AGA cannot therefore effectively
transfer to other person or his nominees the undelivered shares of stock. For an effective transfer
of shares of stock the mode and manner of transfer as prescribed by law must be followed
(Navea v. Peers Marketing Corp., 74 SCRA 65). As provided under Section 3 of Batas Pambansa
Bilang 68, otherwise known as the Corporation Code of the Philippines, shares of stock may be
transferred by delivery to the transferree of the certificate properly indorsed. Title may be vested
in the transferree by the delivery of the duly indorsed certificate of stock (18 C.J.S. 928, cited in
Rivera v. Florendo, 144 SCRA 643). However, no transfer shall be valid, except as between the
parties until the transfer is properly recorded in the books of the corporation.

In the case at bar the indorsed certificate of stock was not actually delivered to AGA so
that EBE is still the controlling stockholder of Embassy Farms despite the execution of the
memorandum of agreement and the turn over of control and management of the Embassy Farms
to AGA on August 2, 1984.
 When AGA filed on April 10, 1986 an action for the rescission of contracts with damages
the Pasig Court merely restored and established the status quo prior to the execution of the
memorandum of agreement by the issuance of a restraining order on July 10, 1987 and the writ
of preliminary injunction on July 30, 1987. It would be unjust and unfair to allow AGA and his
nominees to control and manage the Embassy Farms despite the fact that AGA who is the source
of their supposed shares of stock in the corporation is not asking for the delivery of the indorsed
certificate of stock but for the rescission of the memorandum of agreement. Rescission would
result in mutual restitution (Magdalena Estate v. Myrick, 71 Phil. 344) so it is but proper to allow
EBE to manage the farm.
 F & S VELASCO COMPANY, INC. v MADRID
G.R. No. 208844,
November 10, 2015

Facts:
Angela Madrid held 70.82% shares and chairman of F&S Velasco Company. She died
intestate and without issue and was survived by her husband Dr. Rommel Madrid (Madrid).

Madrid executed his Affidavit of Self-Adjudication. He then filed a petition for letters of
administration regarding Angela's estate, RTC of Makati City. Through Orders dated December
29, 2010 and March 29, 2011, the RTC-Makati Br. 59 already recognized Madrid as Angela's
sole heir to the exclusion of others - i.e., Angela's purported biological sister, Lourdita J. Estevez
and, thus, appointed him as Special Administrator of Angela's estate. Estevez then belatedly
challenged such Orders of the RTC-Makati Br. 59 via a petition for annulment of judgment
before the CA, which was then dismissed. Undaunted, Estevez made a further appeal to the
Court, which was also denied.

Issue:
Who now owns the shares of Angela?

Ruling:
Such ruling of the Court had already attained finality. In view of the foregoing, the Court
is constrained to view that Madrid is indeed Angela's sole heir and her death caused the
immediate transfer of her properties, including her 70.82% ownership of FSVCI's shares of
stock, to Madrid. As such, Madrid may compel the issuance of certificates of stock in his favor,
as well as the registration of Angela's stocks in his name in FSVCI's Stock and Transfer Book.
 Forest Hills Golf v. Vertex Sales
G.R. No. 202205
March 06, 2013

Facts:

Petitioner Forest Hills... is a domestic non-profit stock corporation that operates and
maintains a golf and country club facility in Antipolo City. Forest Hills was created as a result of
a joint venture agreement between Kings

Properties Corporation (Kings) and Fil-Estate Golf and Development, Inc. (FEGDI).
Accordingly, Kings and FEGDI owned the shares of stock of Forest Hills, holding 40% and 60%
of the shares, respectively.

In August 1997, FEGDI sold to RS Asuncion Construction Corporation (RSACC) one (1)
Class "C" common share of Forest Hills for P1.1 million. Prior to the full payment of the
purchase price, RSACC transferred its interests over FEGDI's Class "C" common share to
respondent Vertex.

RSACC advised FEGDI of the transfer and FEGDI, in turn, requested Forest Hills to
recognize Vertex as a shareholder. Forest Hills acceded to the request, and Vertex was able to
enjoy membership... privileges in the golf and country club.

Despite the sale of FEGDI's Class "C" common share to Vertex, the share remained in the
name of FEGDI, prompting Vertex to demand for the issuance of a stock certificate in its name.
As its demand went unheeded, Vertex filed a... complaint for rescission with damages against
defendants Forest Hills, FEGDI, and Fil-Estate Land, Inc. (FELI) the developer of the Forest
Hills golf course. Vertex averred that the defendants defaulted in their obligation as sellers...
when they failed and refused to issue the stock certificate covering the Class "C" common share.
It prayed for the rescission of the sale and the return of the sums it paid; it also claimed payment
of actual damages for the defendants' unjustified refusal to issue the stock... certificate.

Forest Hills denied transacting business with Vertex and claimed that it was not a party to
the sale of the share; FELI claimed the same defense. While admitting that no stock certificate
was issued, FEGDI alleged that Vertex nonetheless was recognized as a stockholder of Forest

Hills and, as such, it exercised rights and privileges of one. FEGDI added that during the
pendency of Vertex's action for rescission, a stock certificate was issued in Vertex's name, but
Vertex refused to accept it.

In its March 1, 2007 decision, the... dismissed Vertex's complaint after finding that the
failure to issue a stock certificate did not constitute a violation of the essential terms of the
contract of sale that would warrant... its rescission. The RTC noted that the sale was already
consummated notwithstanding the non-issuance of the stock certificate. The issuance of a stock
certificate is a collateral matter in the consummated sale of the share; the stock certificate is not
essential to the creation... of the relation of a shareholder.
 Vertex appealed the RTC's dismissal of its complaint. In its February 22, 2012 decision,
the CA reversed the RTC. It declared that "in the sale of shares of stock, physical delivery of a
stock certificate is one of the essential requisites... for the transfer of ownership of the stocks
purchased."

Issues:

Does rescission should be allowed only for substantial breaches that would defeat the
very object of the parties making the agreement

Ruling:

At the outset, we declare that the question of rescission of the sale of the share is a settled
matter that the Court can no longer review in this petition. While Forest Hills questioned and
presented its arguments against the CA ruling rescinding the sale of the share in its... petition, it
is not the proper party to appeal this ruling.

As correctly pointed out by Forest Hills, it was not a party to the sale even though the
subject of the sale was its share of stock. The corporation whose shares of stock are the subject
of a transfer transaction (through sale, assignment, donation, or any other mode of... conveyance)
need not be a party to the transaction, as may be inferred from the terms of Section 63 of the
Corporation Code. However, to bind the corporation as well as third parties, it is necessary that
the transfer is recorded in the books of the corporation. In the present... case, the parties to the
sale of the share were FEGDI as the seller and Vertex as the buyer (after it succeeded RSACC).
As party to the sale, FEGDI is the one who may appeal the ruling rescinding the sale. The
remedy of appeal is available to a party who has "a present interest... in the subject matter of the
litigation and [is] aggrieved or prejudiced by the judgment. A party, in turn, is deemed aggrieved
or prejudiced when his interest, recognized by law in the subject matter of the lawsuit, is
injuriously affected by the judgment, order or... decree." The rescission of the sale does not in
any way prejudice Forest Hills in such a manner that its interest in the subject matter the share of
stock is injuriously affected. Thus, Forest Hills is in no position to appeal the ruling rescinding...
the sale of the share. Since FEGDI, as party to the sale, filed no appeal against its rescission, we
consider as final the CA's ruling on this matter.
 Makati Sports Club Inc v. Cheng
G.R. No. 178523
June 16, 2010

Facts:
October 20, 1994: Makati Sports Club Inc (MSCI) BOD adopted a resolution authorizing
the sale of 19 unissued shares at a floor price of P400,000 and P450,000 per share for Class A
and B, respectively. Cheng was a Treasurer and Director of Makati Sports Club in 1995
On July 7, 1995, Hodreal expressed his interest to buy a share, for this purpose he sent the letter
requesting to be wait listed. On November 1995, McFoods acquiried shares of Makati Sports
Club at P1,800,000 through Urban Bank. Thereafter, Cheng advised sale by McFoods to Hodreal
of the share evidenced by a certificate new certificate was issued. Investigation showed that
Cheng profited from the transaction because of her knowledge MSCI sought judgment that
would order respondents to pay the sum of P1,000,000.00, representing the amount allegedly
defrauded, together with interest and damages.

Issue:
Whether or not MSCI was defrauded by Cheng's collaboration with Mc Foods.

Ruling:
NO.

No evidence on record that the Membership Committee acted on Hodreal's letter. SEC.
29. (a) The Membership Committee shall process applications for membership; ascertain that the
requirements for stock ownership, including citizenship, are complied with; submit to the Board
its recommended on applicants for inclusion in the Waiting List; take charge of auction sales of
shares of stock; and exercise such other powers and perform such other functions as may be
authorized by the Board. Membership Committee failed to question the alleged irregularities
attending Mc Foods‘ purchase price of P1,800,000.00 is P1,400,000.00 more than the floor price
– it is not detrimental.

Upon payment and the execution of the Deed of Absolute Sale, it had the right to demand
the delivery of the stock certificate in its name. The right of a transferee to have stocks
transferred to its name is an inherent right flowing from its ownership of the stocks certificate of
stock paper representative or tangible evidence of the stock itself and of the various interests
therein not a stock in the corporation but is merely evidence of the holder‘s interest and status in
the corporation, his ownership of the share represented thereby MSCI failed to repurchase Mc
Foods‘ Class "A" share within the 30 day pre-emptive period and no proof that Cheng personally
profited.
Fleischer v. Botica Nolasco
G.R. No. L-23241
March 14, 1925

Facts:
Manuel Gonzalez was the original owner of the five shares of stock in question, Nos. 16,
17, 18, 19 and 20 of the Botica Nolasco, Inc.; that on March 11, 1923, he assigned and delivered
said five shares to the plaintiff, Henry Fleischer, by accomplishing the form of endorsement
provided on the back thereof, together with other credits, in consideration of a large sum of
money owed by Gonzalez to Fleischer; that on March 13, 1923, Dr. Eduardo Miciano, who was
the secretary-treasurer of said corporation, offered to buy from Henry Fleischer, on behalf of the
corporation, said shares of stock, at their par value of P100 a share, for P500; that by virtue of
article 12 of the by-laws of Botica Nolasco, Inc., said corporation had the preferential right to
buy from Manuel Gonzalez said shares; that the plaintiff refused to sell them to the defendant;
that the plaintiff requested Doctor Miciano to register said shares in his name; that Doctor
Miciano refused to do so, saying that it would be in contravention of the by-laws of the
corporation.

It also appears from the record that on the 13th day of March, 1923, two days after the
assignment of the shares to the plaintiff, Manuel Gonzales made a written statement to the Botica
Nolasco, Inc., requesting that the five shares of stock sold by him to Henry Fleischer be noted
transferred to Fleischer's name. He also acknowledged in said written statement the preferential
right of the corporation to buy said five shares.

Issue:
Whether or not article 12 of the by-laws of the Botica Nolasco, Inc., is in conflict with the
provisions of the Corporation Law (Act No. 1459).

Ruling:
NO.
It does not suggest that any discrimination may be created by the corporation in favor or
against a certain purchaser. The holder of shares, as owner of personal property, is at liberty,
under said section, to dispose of them in favor of whomsoever he pleases, without any other
limitation in this respect, than the general provisions of law. Therefore, a stock corporation in
adopting a by-law governing transfer of shares of stock should take into consideration the
specific provisions of section 35 of Act No. 1459, and said by-law should be made to harmonize
with said provisions. It should not be inconsistent therewith.

The only restraint imposed by the Corporation Law upon transfer of shares is found in
section 35 of Act No. 1459, quoted above, as follows: "No transfer, however, shall be valid,
except as between the parties, until the transfer is entered and noted upon 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, and the number of shares transferred." This restriction is necessary in
order that the officers of the corporation may know who are the stockholders, which is essential
in conducting elections of officers, in calling meeting of stockholders, and for other purposes.
but any restriction of the nature of that imposed in the by-law now in question, is ultra vires,
violative of the property rights of shareholders, and in restraint of trade.
And moreover, the by-laws now in question cannot have any effect on the appellee. He
had no knowledge of such by-law when the shares were assigned to him. He obtained them in
good faith and for a valuable consideration. He was not a privy to the contract created by said
by-law between the shareholder Manuel Gonzalez and the Botica Nolasco, Inc. Said by-law
cannot operate to defeat his rights as a purchaser.
 Cyrus Padgett v. Babcock & Templeton,
G.R. No. L-38684
December 21, 1933

Facts:
The appellee was an employee of the Appellant Corporation and rendered services as
such from January 1, 1923, to April 15, 1929. During that period he bought 35 shares thereof at
P100 a share at the suggestion of the president of said corporation. He was also the recipient of 9
shares by way of bonus during Christmas seasons. In this way the said appellee became the
owner of 44 shares for which the 12 certificates, Exhibits F to F-11, were issued in his favor. The
word "nontransferable" appears on each and every one of these certificates. Before severing his
connections with the said corporation, the appellee proposed to the president that the said
corporation buy his 44 shares at par value plus the interest thereon, or that he be authorized to
sell them to other persons. The corporation bought similar shares belonging to other employees,
at par value. Sometime later, the said president offered to buy the appellee's shares first at P85
each and then at P80. The appellee did not agree thereto.

Issue:
Whether or not the defendant obliged to buy his shares of stock at par value.

Ruling:
NO.
A restriction imposed upon a certificate of shares, similar to the ones under consideration,
is null and void on the ground that it constitutes and unreasonable limitation of the right of
ownership and is in restraint of trade.
Shares of corporate stock being regarded as property, the owner of such shares may, as a general
rule, dispose of them as he sees fit, unless the corporation has been dissolved, or unless the right
to do so is properly restricted, or the owner's privilege of disposing of his shares has been
hampered by his own action.

Any restriction on a stockholder's right to dispose of his shares must be construed strictly;
and any attempt to restrain a transfer of shares is regarded as being in restraint of trade, in the
absence of a valid lien upon its shares, and except to the extent that valid restrictive regulations
and agreements exist and are applicable. Subject only to such restrictions, a stockholder cannot
be controlled in or restrained from exercising his right to transfer by the corporation or its
officers or by other stockholders, even though the sale is to a competitor of the company, or to an
insolvent person, or even though a controlling interest is sold to one purchaser.
 Rural Bank of Salinas vs CA
G.R. No. 96674
June 26, 1992

Facts:

Clemente G. Guerrero, President of the Rural Bank of Salinas, Inc., executed a Special
Power of Attorney in favor of his wife, private respondent Melania Guerrero, giving and granting
the latter full power and authority to sell or otherwise dispose of and/or mortgage 473 shares of
stock of the Bank registered in his name (represented by the Bank's stock certificates nos. 26, 49
and 65), to execute the proper documents therefor, and to receive and sign receipts for the
dispositions. On February 27, 1980, and pursuant to said Special Power of Attorney, private
respondent Melania Guerrero, as Attorney-in-Fact, executed a Deed of Assignment for 472 shares
out of the 473 shares, in favor of private respondents Luz Andico (457 shares), Wilhelmina
Rosales (10 shares) and Francisco Guerrero, Jr. (5 shares).Almost four months later, or two (2)
days before the death of Clemente Guerrero on June 24, 1980, private respondent Melania
Guerrero, pursuant to the same Special Power of Attorney, executed a Deed of Assignmentfor the
remaining one (1) share of stock in favor of private respondent Francisco Guerrero, Sr.

Subsequently, private respondent Melania Guerrero presented to petitioner Rural Bank of

Salinas the two (2) Deeds of Assignment for registration with a request for the transfer in the
Bank's stock and transfer book of the 473 shares of stock so assigned, the cancellation of stock
certificates in the name of Clemente G. Guerrero, and the issuance of new stock certificates
covering the transferred shares of stocks in the name of the new owners thereof. However,
petitioner Bank denied the request of respondent Melania Guerrero.

Issue:
Whether or not a Mandamus lie against the Rural Bank of Salinas to register in its stock
and transfer book the transfer of 473 shares of stock to private respondents.

Ruling:
YES.
Section 5 (b) of P.D. No. 902-A grants to the SEC the original and exclusive jurisdiction
to hear and decide cases involving intracorporate controversies. An intra-corporate controversy
has been defined as one which arises between a stockholder and the corporation. There is neither
distinction, qualification, nor any exception whatsoever. The case at bar involves shares of stock,
their registration, cancellation and issuances thereof by petitioner Rural Bank of Salinas. It is
therefore within the power of respondent SEC to adjudicate.

A corporation, either by its board, its by-laws, or the act of its officers, cannot create
restrictions in stock transfers, because: Restrictions in the traffic of stock must have their source
in legislative enactment, as the corporation itself cannot create such impediment. By-laws are
intended merely for the protection of the corporation, and prescribe regulation, not restriction;
they are always subject to the charter of the corporation. The corporation, in the absence of such
power, cannot ordinarily inquire into or pass upon the legality of the transactions by which its
stock passes from one person to another, nor can it question the consideration upon which a sale
is based.
Whenever a corporation refuses to transfer and register stock in cases like the present,
mandamus will lie to compel the officers of the corporation to transfer said stock in the books of
the corporation.
 Thomson v. CA
G.R. No. 116631
October 28, 1998

Facts:
A. Lewis Burridge, retired as AmCham's President while petitioner was still working
with private respondent, his superior,. Before Burridge decided to return to his home country, he
wanted to transfer his proprietary share in the Manila Polo Club (MPC) to petitioner. However,
through the intercession of Burridge, private respondent paid for the share but had it listed in
petitioner's name. This was made clear in an employment advice dated January 13, 1986,
wherein petitioner was informed by private respondent.

Burridge transferred said proprietary share to petitioner, as confirmed in a letter of

notification to the Manila Polo Club. Upon his admission as a new member of the MPC,
petitioner paid the transfer fee of P40,000.00 from his own funds; but private respondent
subsequently reimbursed this amount.

MPC issued Proprietary Membership Certificate Number 3398 in favor of petitioner. But
petitioner, however, failed to execute a document recognizing private respondent's beneficial
ownership over said share.

When petitioner's contract of employment was up for renewal in 1989, he notified private
respondent that he would no longer be available as Executive Vice President after September 30,
1989. Still, the private respondent asked the petitioner to stay on for another six (6) months.

Issue:
Whether or not private respondent the beneficial owner of the disputed share.

Ruling:
YES.
In the present case, as the Executive Vice-President of AMCHAM, petitioner occupied a
fiduciary position in the business of AMCHAM. It released the funds to acquire a share in the
Club for the use of petitioner but obliged him to "execute such document as necessary to
acknowledge beneficial ownership thereof by the Chamber". A trust relationship is, therefore,
manifestly indicated.

The beneficiary of a trust has beneficial interest in the trust property, while a creditor has
merely a personal claim against the debtor. In trust, there is a fiduciary relation between a trustee
and a beneficiary, but there is no such relation between a debtor and creditor. While a debt
implies merely an obligation to pay a certain sum of money, a trust refers to a duty to deal with a
specific property for the benefit of another. If a creditor-debtor relationship exists, but not a
fiduciary relationship between the parties, there is no express trust. However, it is understood
that when the purported trustee of funds is entitled to use them as his or her own (and commingle
them with his or her own money), a debtor-creditor relationship exists, not a trust.
 Moreover, petitioner failed to present evidence to support his allegation of being merely a
debtor when the private respondent paid the purchase price of the MPC share. Applicable here is
the rule that a trust arises in favor of one who pays the purchase money of property in the name
of another, because of the presumption that he who pays for a thing intends a beneficial interest
therein for himself.
 Yuchengco v. Velayo
G.R. No. L-50439
July 20, 1982

Facts:
Conrado M. Velayo offered to sell to the plaintiffs-appellees 2,265 shares of common
stock of the RIC Tours Philippines, Inc. ("Ric Tours Phil., for short) a Philippine Corporation
then duly licensed as a tourist operator, constituting 70% of the subscribed and outstanding
capital stock of the said corporation. Appellees paid the entire purchase price of P367,500.00 to
appellant Velayo, and the latter, on his part, delivered to the former all the 2,265 shares of stock
of Ric Tours Phil.
Appellant claims that the shares of stock of Ric Tours Phil. were sold to another group without
previous clearance from the Department of Tourism because he really was not aware of the rule
requiring prior approval by the Department of Tourism for the validity of transfers of shares of
local tour operators.

On September 3, 1974, appellees wrote a letter to appellant demanding rescission of the

contract, the restitution of a sum of money.

Issue:
Whether or not the "Stock Purchase Agreement" entered into by the appellees and
appellant Velayo annulled, or in the alternative, declared void ab initio.

Ruling:
NO.
The provision governing the Agreement sought to be annuled is Sec 4, Part IV of the
Rules and Regulations Governing the Business of Tour Operators and Tour Guides, which
recites as follows: Sec. 4. No transfer of rights to a license of a tour operator or ownership of
shares or interests in the agency shall be valid unless made with the prior approval of the
Department.

The above-quoted rule is clear and mandatory. It requires the prior approval of the
Department of Tourism for the validity of any transfer of rights to a license of a tour operator or
ownership of shares or interests in any tour agency. In the case at bar, it was admitted by both
parties, that the Stock Purchase Agreement was made without the prior approval of the
Department of Tourism. Pursuant to paragraph 7, article 1409 of the New Civil Code, such
agreement would be inexistent and null and void from the beginning. For it is well-settled that
any contract entered into must be in accordance with, and not repugnant to, an applicable statute
whose terms are deemed embodied therein and without the need for the parties of expressly
making reference to it. Inasmuch as the agreement between the parties is null and void from the
beginning, it produces no legal effect. No valid transfer of ownership of Ric Tours Phil., to the
appellees, therefore, took place upon delivery to them by the appellant of the shares of stock of
said corporation as to make them suffer the consequence of the subsequent revocation by the
Department of Tourism of the license of Ric Tours Phil., as they would indeed suffer much loss
after parting with their money for which they would receive nothing. The doctrine of res suo
domino perit advanced by the defendant cannot, therefore, be applied.
 Lim Tay v. CA
G.R. No. 126891
August 5, 1998

Facts:
On January 8, 1980, Respondent-Appellee Sy Guiok secured a loan from the petitioner in
the amount of P40,000 payable within six (6) months. To secure the payment of the aforesaid
loan and interest thereon, Respondent Guiok executed a Contract of Pledge in favor of the
[p]etitioner whereby he pledged his three hundred (300) shares of stock in the Go Fay &
Company Inc., Respondent Corporation, for brevity's sake. Respondent Guiok obliged himself to
pay interest on said loan at the rate of 10% per annum from the date of said contract of pledge.
On the same date, Alfonso Sy Lim secured a loan from the [p]etitioner in the amount of P40,000
payable in six (6) months. To secure the payment of his loan, Sy Lim executed a "Contract of
Pledge" covering his three hundred (300) shares of stock in Respondent Corporation. Under said
contract, Sy Lim obliged himself to pay interest on his loan at the rate of 10% per annum from
the date of the execution of said contract.

However, Respondent Guiok and Sy Lim failed to pay their respective loans and the
accrued interests thereon to the [p]etitioner. In October, 1990, the petitioner filed a "Petition for
Mandamus" against Respondent Corporation, with the SEC entitled "Lim Tay versus Go Fay &
Company. Inc., SEC Case No. 03894".

Issue:
Whether or not there is there dacion en pago.

Ruling:
NO.
At the outset, it must be underscored that petitioner did not acquire ownership of the
shares by virtue of the contracts of pledge. Article 2112 of the Civil Code states: The creditor to
whom the credit has not been satisfied in due time, may proceed before a Notary Public to the
sale of the thing pledged. This sale shall be made at a public auction and with notification to the
debtor and the owner of the thing pledged in a proper case, stating the amount for which the
public sale is to be held. If at the first auction the thing is not sold, a second one with the same
formalities shall be held; and if at the second auction there is no sale either, the creditor may
appropriate the thing pledged. In this case he shall be obliged to give an acquaintance for his
entire claim.

There is no showing that petitioner made any attempt to foreclose or sell the shares
through public or private auction, as stipulated in the contracts of pledge and as required by
Article 2112 of the Civil Code. Therefore, ownership of the shares could not have passed to him.
The pledgor remains the owner during the pendency of the pledge and prior to foreclosure and
sale, as explicitly provided by Article 2103 of the same Code: Unless the thing pledged is
expropriated, the debtor continues to be the owner thereof.

Neither did petitioner acquire the shares by virtue of a novation of the contract of pledge.
Novation is defined as "the extinguishment of an obligation by a subsequent one which
terminates it, either by changing its object or principal conditions, by substituting a new debtor in
place of the old one, or by subrogating a third person to the rights of the creditor." Novation of a
contract must not be presumed. "In the absence of an express agreement, novation takes place
only when the old and the new obligations are incompatible on every point.
 Teng v. SEC
G.R. No. 184332
February 17, 2016

Facts:
This case originated from the case of TCL Sales Corporation and Anna Teng v. Hon.
Court of Appeals and Ting Ping Lay. Respondent Ting Ping purchased 480 shares of TCL Sales
Corporation (TCL) from Chiu; 1,400 shares from his brother Teng Ching Lay (Teng Ching), who
was also the president and operations manager of TCL; and 1,440 shares from Maluto. Upon
Teng Ching's death, his son Henry Teng (Henry) took over the management of TCL. Respondent
Ting Ping, to protect his shareholdings with TCL, requested petitioner Teng, TCL's Corporate
Secretary, to enter the transfer in the Stock and Transfer Book of TCL for the proper recording of
his acquisition. He also demanded the issuance of new certificates of stock in his favor. TCL and
Teng refused despite repeated demands.

Ting Ping filed a petition for mandamus with the SEC which was granted → SEC en
banc affirmed the Petition for review with the CA but was denied → petition for review on
certiorari with the SC under Rule 45 but was denied. Thereafter SEC issued a writ of execution.
Teng filed a complaint for interpleader with the RTC of Manila to compel Henry and Ting Ping
to interplead and settle the issue of ownership over the 1,400 shares, which were previously
owned by Teng Ching.

RTC found Henry to have a better right to the shares of stock formerly owned by Teng
Ching, except as to those covered by Stock Certificate No. 011 covering 262.5 shares, among
others. Ting Ping filed an Ex Parte Motion for the Issuance of Alias Writ of Execution for the
partial satisfaction of SEC en banc Order directing TCL and Teng to record the shares he
acquired from Chiu and Maluto, and for payment of the damages. Teng and TCL filed their
respective motions to quash, which was opposed by Ting Ping, who also expressed his
willingness to surrender the original stock certificates of Chiu and Maluto to facilitate and
expedite the transfer of the shares in his favor.

Prior to registration of stocks in the corporate books, it is mandatory that the stock
certificates are first surrendered because a corporation will be liable to a bona fide holder of the
old certificate if, without demanding the said certificate, it issues a new one.The annexes in Ting
Ping's opposition did not include the subject certificates of stock, surmising that they could have
been lost or destroyed. There is a discrepancy between the total shares of Maluto based on the
annexes, which is only 1305 shares, as against the 1440 shares acquired by Ting Ping based on
the SEC Order

On the other hand, Section 63 of the Corporation Code does not require the surrender of the
stock certificate to the corporation, nor make such surrender an indispensable condition before
any transfer of shares can be registered in the books of the corporation. The only limitation
imposed by Section 63 is when the corporation holds any unpaid claim against the shares
intended to be transferred.

SEC denied the motions to quash. Teng filed a petition for certiorari and prohibition
under Rule 65 with the CA which was denied. Hence, the present petition.

Issue:
Whether or not the surrender of the certificates of stock is a requisite before registration
of the transfer may be made in the corporate books and for the issuance of new certificates in its
stead

Ruling:
NO.
To compel Ting Ping to deliver to the corporation the certificates as a condition for the
registration of the transfer would amount to a restriction on the right of Ting Ping to have the
stocks transferred to his name, which is not sanctioned by law. The right of a transferee/assignee
to have stocks transferred to his name is an inherent right flowing from his ownership of the
stocks. The only limitation imposed by Section 63 is when the corporation holds any unpaid
claim against the shares intended to be transferred.

A certificate of stock is a written instrument signed by the proper officer of a corporation

stating or acknowledging that the person named in the document is the owner of a designated
number of shares of its stock. It is prima facie evidence that the holder is a shareholder of a
corporation. A certificate, however, is merely a tangible evidence of ownership of shares of
stock. It is not a stock in the corporation and merely expresses the contract between the
corporation and the stockholder. The shares of stock evidenced by said certificates, meanwhile,
are regarded as property and the owner of such shares may, as a general rule, dispose of them as
he sees fit, unless the corporation has been dissolved, or unless the right to do so is properly
restricted, or the owner's privilege of disposing of his shares has been hampered by his own
action.

On the Registration of Transfer, Section 63 of the Corporation Code prescribes the manner by
which a share of stock may be transferred. Certain minimum requisites must be complied with
for there to be a valid transfer of stocks, to wit: (a) there must be delivery of the stock certificate;
(b) the certificate must be endorsed by the owner or his attorney-in-fact or other persons legally
authorized to make the transfer; and (c) to be valid against third parties, the transfer must be
recorded in the books of the corporation. It is the delivery of the certificate, coupled with the
endorsement by the owner or his duly authorized representative that is the operative act of
transfer of shares from the original owner to the transferee. The delivery contemplated in
Section 63, however, pertains to the delivery of the certificate of shares by the transferor to the
transferee, that is, from the original stockholder named in the certificate to the person or entity
the stockholder was transferring the shares to, whether by sale or some other valid form of
absolute conveyance of ownership.
 The delivery or surrender adverted to by Teng, i.e., from Ting Ping to TCL, is not a
requisite before the conveyance may be recorded in its books. To compel Ting Ping to deliver to
the corporation the certificates as a condition for the registration of the transfer would amount to
a restriction on the right of Ting Ping to have the stocks transferred to his name, which is not
sanctioned by law. The only limitation imposed by Section 63 is when the corporation holds any
unpaid claim against the shares intended to be transferred. The right of a transferee/assignee to
have stocks transferred to his name is an inherent right flowing from his ownership of the stocks.

A corporation, either by its board, its by-laws, or the act of its officers, cannot create
restrictions in stock transfers. In transferring stock, the secretary of a corporation acts in purely
ministerial capacity, and does not try to decide the question of ownership.If a corporation refuses
to make such transfer without good cause, it may, in fact, even be compelled to do so by
mandamus.

Ting Ping's definite and uncontested titles to the subject shares were already determined
in the case of TCL Sales Corp v. CA Ting Ping Lay was able to establish prima facie ownership
over the shares of stocks in question, through deeds of transfer of shares of stock of TCL
Corporation. Hence, the transfer of shares to him must be recorded on the corporation's stock and
transfer book.
Moreover, Teng cannot refuse registration of the transfer on the pretext that the photocopies of
Maluto's certificates of stock submitted by Ting Ping covered only 1,305 shares and not 1,440.

As earlier stated, the respective duties of the corporation and its secretary to transfer
stock are purely ministerial The discrepancy was also not attended with fraud but a mere product
of the failure of the corporation to register with the [SEC] the increase in the subscribed capital
stock by 4000 shares. Nevertheless, to be valid against third parties and the corporation, the
transfer must be recorded or registered in the books of corporation.

Upon registration of the transfer in the books of the corporation, the transferee may now
then exercise all the rights of a stockholder, which include the right to have stocks transferred to
his name.

On the Issuance of a New Certificate, the surrender of the original certificate of stock is
necessary before the issuance of a new one so that the old certificate may be cancelled.

A corporation is not bound and cannot be required to issue a new certificate unless the
original certificate is produced and surrendered.

Surrender and cancellation of the old certificates serve to protect not only the corporation
but the legitimate shareholder and the public as well, as it ensures that there is only one
document covering a particular share of stock.
 In the present case, Ting Ping manifested from the start his intention to surrender the
subject certificates of stock to facilitate the registration of the transfer and for the issuance of
new certificates in his name.

It would be sacrificing substantial justice if the Court were to grant the petition simply
because Ting Ping is yet to surrender the subject certificates for cancellation instead of ordering
in this case such surrender and cancellation, and the issuance of new ones in his name.
 Ferro Chemicals v. Garcia
G.R. No. 168134
October 05, 2016

Facts:
Ferro Chemicals Incorporated (Ferro) is a domestic corporation duly authorized by
existing law to engage in business in the Philippines. It is represented in this action by its
President, Ramon M. Garcia. Chemical Industries of the Philippines Inc. (Chemical), on the
other hand, is also a domestic corporation duly organized and existing by virtue of Philippine
laws. Antonio Garcia, one of the parties in the instant case, is the Chairman of the Board of
Directors (BOD) of Chemical and a brother of Ferro Chemical's President, Ramon Garcia.
Antonio Garcia entered into a contract with Ferro for the purchase of the latter of 1,717,678
shares of the latter in Chemical. Antonio, being the judgment creditor of various banks
(consortium), entered into a compromise agreement with the consortium involving said shares of
stocks.

The consortium was then awarded through a judgment of the court of a notice of
garnishment for said shares of stocks which led to Antonio and Ferro to enter another agreement
for the former to have the right to repurchase the said shares of stocks from the latter. Antonio
sent written notices to Ferro for him to exercise his right of repurchase of the said shares of
stocks; the shares were however already transferred to Chemphil Export, Inc. Subsequently,
Antonio was able to recover the shares through an action of Specific Performance against Ferro.
The consortium was then able to garnish 1,000,000 of the said shares for partial satisfaction of
Antonio’s obligation with them. Chemphil, feeling aggrieved then filed a collection suit against
Ferro for the value of the garnished shares. Ferro then filed an action for recovery of sum of
money and damages for the amount of the 1,000,000 shares.

The lower courts then found Chemical and Antonio, solidarily liable for the amount of
the 1,000,000 shares in favor of Ferro.

Issue:
Whether or not Antonio and Chemical should be held solidarily liable for the award of
the court in favor of Ferro for damages

Held:
A corporation, upon coming to existence, is invested by law with a personality separate
and distinct from those of the persons composing it. Ownership by a single or a small group of
stockholders of nearly all of the capital stock of the corroration is not, without more, sufficient to
disregard the fiction of separate corporate personality. Thus, obligations incurred by corporate
officers, acting as corporate agents, are not theirs, but direct accountabilities of the corporation
they represent. Solidary liability on the part of corporate officers may at times attach, but only
under exceptional circumstances, such as when they act with malice or in bad faith. Also, in
appropriate cases, the veil of corporate fiction shall be disregarded when the separate juridical
personality of a corporation is abused or used to commit fraud and perpetrate a social injustice,
or used as a vehicle to evade obligations. It must be stressed at the onset that the sale contract
was entered by Antonio Garcia in his personal capacity and not as the President of Chemical
Industries. The imputation of liability Chemical Industries for the acts of its corporate officer and
the consequent shedding of corporate shroud cannot rest on flimsy grounds. The application of
the doctrine of piercing the veil of corporate fiction is frowned upon. 66 It can only be done if it
has been clearly established that the separate and distinct personality of the corporation is used to
justify a wrong, protect fraud, or perpetrate a deception. In the case at bar, Ferro Chemicals
failed to adduce satisfactory evidence to prove that Chemical Industries' separate corporate
personality was being used by Antonio Garcia to protect fraud or perpetrate deception warranting
the shedding of its veil and the consequent imposition of solidary liability upon it.

Antonio Garcia was selling his shares of stocks in the Chemical Industries, the
corporation was neither made a party to the contract nor did the sale redound to its benefit. As a
matter of fact, the subject of the purchase agreement was not limited to Antonio Garcia's shares
in Chemical Industries, but likewise included his shares in Vision Insurance Consultants, Inc.,
Alabang Country Club, Inc. and Manila Polo Club, Inc.64 His shares of capital stocks with
Chemical lndustries became the subject of controversy because of the allegation that he
intentionally withheld the information from Ferro Chemicals that these shares were subject of the
Consortium Banks' claim. Notably, the purported misrepresentation was: not alleged to have
been authorized or abetted by the corporation. It was a purely personal act of the seller desirous
to dispose conveniently his shares in the corporation.
 F & S VELASCO COMPANY, INC. v MADRID
G.R. No. 208844,
November 10, 2015

Facts:
Angela Madrid held 70.82% shares and chairman of F&S Velasco Company. She died
intestate and without issue and was survived by her husband Dr. Rommel Madrid (Madrid).

Madrid executed his Affidavit of Self-Adjudication. He then filed a petition for letters of
administration regarding Angela's estate, RTC of Makati City. Through Orders dated December
29, 2010 and March 29, 2011, the RTC-Makati Br. 59 already recognized Madrid as Angela's
sole heir to the exclusion of others - i.e., Angela's purported biological sister, Lourdita J. Estevez
and, thus, appointed him as Special Administrator of Angela's estate. Estevez then belatedly
challenged such Orders of the RTC-Makati Br. 59 via a petition for annulment of judgment
before the CA, which was then dismissed. Undaunted, Estevez made a further appeal to the
Court, which was also denied.

Issue:
Who now owns the shares of Angela?

Ruling:
Such ruling of the Court had already attained finality. In view of the foregoing, the Court
is constrained to view that Madrid is indeed Angela's sole heir and her death caused the
immediate transfer of her properties, including her 70.82% ownership of FSVCI's shares of
stock, to Madrid. As such, Madrid may compel the issuance of certificates of stock in his favor,
as well as the registration of Angela's stocks in his name in FSVCI's Stock and Transfer Book.
 Munsi Puno v. Puno Enterprises
G.R. No. 177066
September 11, 2009

Facts:
Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno
Enterprises, Inc. On March 14, 2003, petitioner Joselito Musni Puno, claiming to be an heir of
Carlos L. Puno, initiated a complaint for specific performance against respondent. Petitioner
averred that he is the son of the deceased with the latter‘s common-law wife, Amelia Puno. As
surviving heir, he claimed entitlement to the rights and privileges of his late father as stockholder
of respondent. The complaint thus prayed that respondent allow petitioner to inspect its corporate
book, render an accounting of all the transactions it entered into from 1962, and give petitioner
all the profits, earnings, dividends, or income pertaining to the shares of Carlos L. Puno.

Respondent filed a motion to dismiss on the ground that petitioner did not have the legal
personality to sue because his birth certificate names him as "Joselito Musni Muno." Apropos,
there was yet a need for a judicial declaration that "Joselito Musni Puno" and "Joselito Musni
Muno" were one and the same.

Issue:
Whether or not there was an automatic transfer of shares of stock.

Ruling:
NO.
Upon the death of a shareholder, the heirs do not automatically become stockholders of
the corporation and acquire the rights and privileges of the deceased as shareholder of the
corporation. The stocks must be distributed first to the heirs in estate proceedings, and the
transfer of the stocks must be recorded in the books of the corporation. Section 63 of the
Corporation Code provides that no transfer shall be valid, except as between the parties, until the
transfer is recorded in the books of the corporation.16 During such interim period, the heirs stand
as the equitable owners of the stocks, the executor or administrator duly appointed by the court
being vested with the legal title to the stock.17 Until a settlement and division of the estate is
effected, the stocks of the decedent are held by the administrator or executor. Consequently,
during such time, it is the administrator or executor who is entitled to exercise the rights of the
deceased as stockholder.

Thus, even if petitioner presents sufficient evidence in this case to establish that he is the
son of Carlos L. Puno, he would still not be allowed to inspect respondent‘s books and be
entitled to receive dividends from respondent, absent any showing in its transfer book that some
of the shares owned by Carlos L. Puno were transferred to him. This would only be possible if
petitioner has been recognized as an heir and has participated in the settlement of the estate of
the deceased.
Corollary to this is the doctrine that a determination of whether a person, claiming proprietary
rights over the estate of a deceased person, is an heir of the deceased must be ventilated in a
special proceeding instituted precisely for the purpose of settling the estate of the latter. The
status of an illegitimate child who claims to be an heir to a decedent‘s estate cannot be
adjudicated in an ordinary civil action, as in a case for the recovery of property. The doctrine
applies to the instant case, which is one for specific performance — to direct Respondent
Corporation to allow petitioner to exercise rights that pertain only to the deceased and his
representatives.
Cojuanco et.al v. Sandiganbayan
G.R. No. 183278
April 24, 2009

Facts:
The Republic of the Philippines (Republic) filed before the Sandiganbayan a "Complaint
for Reconveyance, Reversion, Accounting, Restitution and Damages," docketed as Civil Case
0002, praying for the recovery of alleged ill-gotten wealth from the late President Marcos and
former First Lady Imelda Marcos and their cronies, including some 2.4 million shares of stock in
the Philippine Long Distance Telephone Company (PLDT).

The complaint, which was later amended to implead herein petitioners Ramon and
Imelda Cojuangco (the Cojuangcos), alleged that the Marcoses‘ ill-gotten wealth included shares
in the PLDT covered by shares of stock in the Philippine Telecommunications Investment
Corporation (PTIC), registered in the name of Prime Holdings, Inc. (Prime Holdings).

Issue:
Whether or not the Republic entitled to the dividends, interests, and earnings thereof.

Ruling:
YES.
It would be absurd to award the shares to the Republic as their owner and not include the
dividends and interests accruing thereto. An owner who cannot exercise the "juses" or attributes
of ownership -- the right to possess, to use and enjoy, to abuse or consume, to accessories, to
dispose or alienate, to recover or vindicate, and to the fruits - is a crippled owner.

This Court, in directing the reconveyance to the Republic of the 111,415 shares of PLDT
stock owned by PTIC in the name of Prime Holdings, declared the Republic as the owner of said
shares and, necessarily, the dividends and interests accruing thereto.

Ownership is a relation in law by virtue of which a thing pertaining to one person is

completely subjected to his will in everything not prohibited by law or the concurrence with the
rights of another. Its traditional elements or attributes include jus utendi or the right to receive
from the thing what it produces.
Republic of The Philippines v. Sandiganbayan
G.R. No. 129406
March 6, 2006

Facts:
The case is one of several suits involving ill-gotten or unexplained wealth that petitioner
Republic, through the PCGG, filed with the Sandiganbayan against private respondent Roberto
S. Benedicto and others pursuant to Executive Order (EO) No. 14, series of 1986. Pursuant to its
mandate under EO No. 1, series of 1986, the PCGG issued writs placing under sequestration all
business enterprises, entities and other properties, real and personal, owned or registered in the
name of private respondent Benedicto, or of corporations in which he appeared to have
controlling or majority interest. Among the properties thus sequestered and taken over by PCGG
fiscal agents were the 227 shares in NOGCCI owned by private respondent Benedicto and
registered in his name or under the names of corporations he owned or controlled.Following the
sequestration process, PCGG representatives sat as members of the Board of Directors of
NOGCCI, which passed, sometime in October 1986, a resolution effecting a corporate policy
change. The change consisted of assessing a monthly membership due of P150.00 for each
NOGCCI share. Prior to this resolution, an investor purchasing more than one NOGCCI share
was exempt from paying monthly membership due for the second and subsequent shares that
he/she owned.

As sequestrator of the 227 shares of stock in question, PCGG did not pay the
corresponding monthly membership due thereon totalingP2,959,471.00. On account thereof, the
227 sequestered shares were declared delinquent to be disposed of in an auction sale.

Issue:
Whether or not the Sandiganbayan, Second Division, gravely abuse its discretion in
holding that the PCGG is at fault for not paying the membership dues on the 227 sequestered
NOGCCI shares of stock, a failing which eventually led to the foreclosure sale thereof.

Ruling:
NO.
The PCGG‘s posture that to the owner of the sequestered shares rests the burden of
paying the membership dues is untenable. For one, it lost sight of the reality that such dues are
basically obligations attached to the shares, which, in the final analysis, shall be made liable, thru
delinquency sale in case of default in payment of the dues. For another, the PCGG as
sequestrator-receiver of such shares is, as stressed earlier, duty bound to preserve the value of
such shares. Needless to state, adopting timely measures to obviate the loss of those shares forms
part of such duty and due diligence.

Given the circumstances leading to the auction sale of the subject NOGCCI shares,
PCGG‘s lament about public respondent Sandiganbayan having erred or, worse still, having
gravely abused its discretion in its determination as to who is at fault for the loss of the shares in
question can hardly be given cogency
Rural Bank of Lipa v. CA
G.R. No. 124535
September 28, 2001

Facts:
Private respondent Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of Lipa
City, executed a Deed of Assignment, wherein he assigned his shares, as well as those of eight
(8) other shareholders under his control with a total of 10,467 shares, in favor of the stockholders
of the Bank represented by its directors Bernardo Bautista, Jaime Custodio and Octavio
Katigbak. Sometime thereafter, Reynaldo Villanueva, Sr. and his wife, Avelina, executed an
Agreement wherein they acknowledged their indebtedness to the Bank in the amount of Four
Million Pesos (P4,000,000.00), and stipulated that said debt will be paid out of the proceeds of
the sale of their real property described in the Agreement. At a meeting of the Board of Directors
of the Bank on November 15, 1993, the Villanueva spouses assured the Board that their debt
would be paid on or before December 31 of that same year; otherwise, the Bank would be
entitled to liquidate their shareholdings, including those under their control.

When the Villanueva spouses failed to settle their obligation to the Bank on the due date,
the Board sent them a letter3 demanding: (1) the surrender of all the stock certificates issued to
them; and (2) the delivery of sufficient collateral to secure the balance of their debt amounting to
P3,346,898.54.

Issue:
Whether or not the transfer of title to such shares is ineffective until and unless the duly
indorsed certificate of stock is delivered to them notwithstanding the execution of the deed of
assignment in favor of the petitioners.

Ruling:
NO.
The rule is that the delivery of the stock certificate duly endorsed by the owner is the
operative act of transfer of shares from the lawful owner to the transferee. Thus, title may be
vested in the transferee only by delivery of the duly indorsed certificate of stock.

We have uniformly held that for a valid transfer of stocks, there must be strict compliance
with the mode of transfer prescribed by law. The requirements are: (a) There must be delivery of
the stock certificate: (b) The certificate must be endorsed by the owner or his attorney-in-fact or
other persons legally authorized to make the transfer; and (c) To be valid against third parties,
the transfer must be recorded in the books of the corporation. As it is, compliance with any of
these requisites has not been clearly and sufficiently shown.

It may be argued that despite non-compliance with the requisite endorsement and
delivery, the assignment was valid between the parties, meaning the private respondents as
assignors and the petitioners as assignees. While the assignment may be valid and binding on the
petitioners and private respondents, it does not necessarily make the transfer effective.
Consequently, the petitioners, as mere assignees, cannot enjoy the status of a stockholder, cannot
vote nor be voted for, and will not be entitled to dividends, insofar as the assigned shares are
concerned. Parenthetically, the private respondents cannot, as yet, be deprived of their rights as
stockholders, until and unless the issue of ownership and transfer of the shares in question is
resolved with finality.
 BLTB v. Bitanga
G.R. No. 137934
August 10, 2001

Facts:
Dolores A. Potenciano, Max Joseph A. Potenciano, Mercedelin A. Potenciano, Delfin C.
Yorro, and Maya Industries, Inc., entered into a Sale and Purchase Agreement, whereby they
sold to BMB Property Holdings, Inc., represented by its President, Benjamin Bitanga, their
21,071,114 shares of stock in BLTB. The said shares represented 47.98% of the total outstanding
capital stock of BLTB. The contracting parties stipulated that the downpayment was conditioned
upon receipt by the buyer of certain documents upon signing of the Agreement, namely, the
Secretary's Certificate stating that the Board of Directors of Maya Industries, Inc. authorized the
sale of its shares in BLTB and the execution of the Agreement, and designating Dolores A.
Potenciano as its Attorney-in-Fact; the Special Power of Attorney executed by each of the sellers
in favor of Dolores A. Potenciano for purposes of the Agreement; the undated written resignation
letters of the Directors of BLTB, except Henry John A. Potenciano, Michael A. Potericiano and
Candido A. Potenciano); a revocable proxy to vote the subject shares made by the sellers in favor
of the buyer; a Declaration of Trust made by the sellers in favor of the buyer acknowledging that
the subject shares shall be held in trust by the sellers for the buyer pending their transfer to the
latter's name; and the duly executed capital gains tax return forms covering the sale, indicating
no taxable gain on the same.

Issue:
Whether or not the Bitanga group vote or be voted upon.

Ruling:
NO.
We are in full accord with the SEC En Banc on this matter. Indeed, until registration is
accomplished, the transfer, though valid between the parties, cannot be effective as against the
corporation. Thus, the unrecorded transferee, the Bitanga group in this case, cannot vote nor be
voted for. The purpose of registration, therefore, is two-fold: to enable the transferee to exercise
all the rights of a stockholder, including the right to vote and to be voted for, and to inform the
corporation of any change in share ownership so that it can ascertain the persons entitled to the
rights and subject to the liabilities of a stockholder. Until challenged in a proper proceeding, a
stockholder of record has a right to participate in any meeting; his vote can be properly counted
to determine whether a stockholders' resolution was approved, despite the claim of the alleged
transferee. On the other hand, a person who has purchased stock, and who desires to be
recognized as a stockholder for the purpose of voting, must secure such a standing by having the
transfer recorded on the corporate books. Until the transfer is registered, the transferee is not a
stockholder but an outsider.

The Court finds no error either in jurisdiction or judgment on the part of the SEC En
Banc, since its conclusions of law were anchored on established principles and jurisprudence.
The petition is denied.
Abejo v. Dela Cruz
G.R. No. L-63558
May 19, 1987

Facts:
This case involves a question of who, between the Regional Trial Court and the
Securities and Exchange Commission (SEC), has original and exclusive jurisdiction over the
dispute between the principal stockholders of the corporation Pocket Bell Philippines, Inc.
(Pocket Bell), a "tone and voice paging corporation," namely, the spouses Jose Abejo and Aurora
Abejo (hereinafter referred to as the Abejos) and the purchaser, Telectronic Systems, Inc.
(hereinafter referred to as Telectronics) of their 133,000 minority shareholdings (for P5 million)
and of 63,000 shares registered in the name of Virginia Braga and covered by five stock
certificates endorsed in blank by her (for P1,674,450.00), and the spouses Agapito Braga and
Virginia Braga (hereinafter referred to as the Bragas), erstwhile majority stockholders. With the
said purchases, Telectronics would become the majority stockholder, holding 56% of the
outstanding stock and voting power of the corporation Pocket Bell.

With the said purchases in 1982, Telectronics requested the corporate secretary of the
corporation, Norberto Braga, to register and transfer to its name, and those of its nominees the
total 196,000 Pocket Bell shares in the corporation's transfer book, cancel the surrendered
certificates of stock and issue the corresponding new certificates of stock in its name and those of
its nominees. Norberto Braga, the corporate secretary and son of the Bragas, refused to register
the aforesaid transfer of shares in t e corporate oo s, asserting that the Bragas claim preemptive
rights over the 133,000 Abejo shares and that Virginia Braga never transferred her 63,000 shares
to Telectronics but had lost the five stock certificates representing those shares. This triggered
off the series of intertwined actions between the protagonists, all centered on the question of
jurisdiction over the dispute, which were to culminate in the filing of the two cases at bar.

Issue:
Whether or not the trial court have jurisdiction over aforesaid case.

Ruling:
YES.

The very complaint of the Bragas for annulment of the sales and transfers as filed by
them in the regular court questions the validity of the transfer and endorsement of the certificates
of stock, claiming alleged pre-emptive rights in the case of the Abejos' shares and alleged loss of
thio certificates and lack of consent and consideration in the case of Virginia Braga's shares.
Such dispute c learly involve's controversies "between and among stockholders, " as to the Abej
os' right to sell and dispose of their shares to Telectronics, the validity of the latter's acquisition
of Virginia Braga's shares, who between the Bragas and the Abejos' transferee should be
recognized as the controlling shareholders of the corporation, with the right to elect the corporate
officers and the management and control of its operations. Such a dispute and case clearly fag
within the original and exclusive jurisdiction of the SEC to decide, under Section 5 of P.D. 902-
A, above-quoted. The restraining order issued by the Regional Trial Court restraining
Telectronics agents and representatives from enforcing their resolution constituting themselves
as the new set of officers of Pocket Bell and from assuming control of the corporation and
discharging their functions patently encroached upon the SEC's exclusive jurisdiction over such
specialized corporate controversies calling for its special competence.
 Batong Buhay Gold Mines v. CA
G.R. No. L-45048
January 7, 1987

Facts :
The defendant Batong Buhay Gold Mines, Inc. issued Stock Certificate No. 16807
covering 62,495 shares with a par value of P0.01 per share to Francisco Aguac who was then
legally married to Paula G. Aguac, but the said spouses had lived separately for more than
fourteen (14) years prior to the said date.

Later, Francisco Aguac sold his shares covered by Stock Certificate No. 16807 for the
sum of P9,374.70 in favor of the plaintiff, the said transaction being evidenced by a deed of sale
(Exhibit D). The said sale was made by Francisco Aguac without the knowledge or consent of
his wife Paula G. Aguac.

On the same date of the sale, Paula G. Aguac wrote a letter to the president of defendant
Batong Buhay Gold Mines, Inc. asking that the transfer of the shares sold by her husband be
withheld, inasmuch as the same constituted conjugal property and her share of proceeds of the
sale was not given to her.

Issue:
Whether or not the Court of Appeals may award damages by way of unrealized profits
despite the absence of supporting evidence, or merely on the basis of pure assumption,
speculation or conjecture; or can the respondent recover damages by way of unrealized profits
when it has not shown that it was damaged in any manner by the act of petitioner.

Ruling:
NO.
The stipulation of facts of the parties does not at all show that private respondent
intended to sell, or would sell or would have sold the stocks in question on specified dates. While
it is true that shares of stock may go up or down in value (as in fact the concerned shares here
really rose from fifteen (15) centavos to twenty three or twenty four (23/24) centavos per share
and then fell to about two (2) centavos per share, still whatever profits could have been made are
purely SPECULATIVE, for it was difficult to predict with any decree of certainty the rise and
fall in the value of the shares. Thus this Court has ruled that speculative damages cannot be
recovered.

It is easy to say now that had private respondent gained legal title to the shares, it could
have sold the same and reaped a profit of P5,624.95 but it could not do so because of petitioner's
refusal to transfer the stocks in the former's name at the time demand was made, but then it is
also true that human nature, being what it is, private respondent's officials could also have
refused to sell and instead wait for expected further increases in value.
 Chemphil Export and Import Corporation v. CA
G.R. No. 97217
April 10, 1992

Facts:
Dynetics, Inc. and Antonio M. Garcia filed a complaint for declaratory relief and/or
injunction against the PISO, BPI, LBP, PCIB and RCBC or the consortium with the Regional
Trial Court of Makati, Branch 45 (Civil Case No. 8527), seeking judicial declaration,
construction and interpretation of the validity of the surety agreement that Dynetics and Garcia
had entered into with the consortium and to perpetually enjoin the latter from claiming,
collecting and enforcing any purported obligations which Dynetics and Garcia might have
undertaken in said agreement.
The consortium filed their respective answers with counterclaims alleging that the surety
agreement in question was valid and binding and that Dynetics and Garcia were liable under the
terms of the said agreement. It likewise applied for the issuance of a writ of preliminary
attachment against Dynetics and Garcia.

Issue:
Whether or not the attachment of shares of stock, in order to bind third persons, must be
recorded in the stock and transfer book of the corporation.

Ruling:
NO.
Section 7(d), Rule 57 of the Rules of Court was complied with by the consortium
(through the Sheriff of the trial court) when the notice of garnishment over the Chemphil shares
of Garcia was served on the president of Chemphil on July 19, 1985. Indeed, to bind third
persons, no law requires that an attachment of shares of stock be recorded in the stock and
transfer book of a corporation. The statement attributed by the Regional Trial Court to the
Supreme Court in Samahang Magsasaka, Inc. vs. Gonzalo Chua Guan, G.R. No. L-7252,
February 25, 1955 (unreported), to the effect that "as between two attaching creditors, the one
whose claim was registered first on the books of the corporation enjoys priority," is an obiter
dictum that does not modify the procedure laid down in Section 7(d), Rule 57 of the Rules of
Court.

Therefore, ruled the Court of Appeals, the attachment made over the Chemphil shares in
the name of Garcia on July 19, 1985 was made in accordance with law and the lien created
thereby remained valid and subsisting at the time Garcia sold those shares to FCI (predecessor-
in-interest of appellee CEIC) in 1988.