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SEC en banc confirmed the rescission of the PreSubscription Agreement but reverted to classifying the
P70 million paid by the Ongs as premium on capital
and not as a loan or advance to FLADC, hence, not
entitled to earn interest.
On appeal, the Court of Appeals (CA) rendered a
decision on 5 October 1999, modifying the SEC order
of
11
September
1998.
Their
motions
for
reconsideration having been denied, both parties filed
separate petitions for review before the Supreme
Court.
On 1 February 2002, the Supreme Court promulgated
its Decision, affirming the assailed decision of the
Court of Appeals but with the modifications that the
P20 million loan extended by the Ongs to the Tius shall
earn interest at 12% per annum to be computed from
the time of judicial demand which is from 23 April
1996; that the P70 million advanced by the Ongs to
the FLADC shall earn interest at 10% per annum to be
computed from the date of the FLADC Board Resolution
which is 19 June 1996; and that the Tius shall be
credited with 49,800 shares in FLADC for their property
contribution, specifically, the 151 sq. m. parcel of land.
The Court affirmed the fact that both the Ongs and the
Tius violated their respective obligations under the PreSubscription Agreement. On 15 March 2002, the Tius
filed before the Court a Motion for Issuance of a Writ of
Execution. Aside from their opposition to the Tius'
Motion for Issuance of Writ of Execution, the Ongs filed
their own "Motion for Reconsideration; Alternatively,
Motion for Modification (of the February 1, 2002
Decision)" on 15 March 2002. Willie Ong filed a
separate "Motion for Partial Reconsideration" dated 8
HELD:
All
this
notwithstanding,
granting
but
not
conceding that the Tius possess the legal standing to
sue for rescission based on breach of contract, said
action will nevertheless still not prosper since
rescission will violate the Trust Fund Doctrine and
In the instant case, the rescission of the PreSubscription Agreement will effectively result in the
unauthorized distribution of the capital assets and
property of the corporation, thereby violating the Trust
Fund Doctrine and the Corporation Code, since
rescission of a subscription agreement is not one of the
instances when distribution of capital assets and
property of the corporation is allowed.
ISSUE:
WON a stockholder who was in active management of
the business of thecorporation and still has unpaid
subscriptions should be made liable for the debtsof the
corporation by piercing the veil of corporate fiction.
HELD:
YES! Such stockholder should be made liable up to the
extent of her unpaidsubscription.
RATIO:
It was found that at the time the obligation was
incurred, BMPI was under thecontrol of its stockholders
who know fully well that the corporation was not ina
position to pay its account (thinly capitalized).
And, that the stockholders personally benefited from
the operations of thecorporation even though they
never paid their subscriptions in full.The stockholders
ARGUMENTS:
Petitioners assert that Article VII of the Articles of
Incorporation of MCPI, which denied them voting
rights, is null and void for being contrary to Section 6
of the Corporation Code. They point out that Section 6
prohibits the deprivation of voting rights except as to
preferred and redeemable shares only. Hence, under
the present law on corporations, all shareholders,
regardless of classification, other than holders of
preferred or redeemable shares, are entitled to vote
and to be elected as corporate directors or officers.
Since the Class "B" shareholders are not classified as
holders of either preferred or redeemable shares, then
it necessarily follows that they are entitled to vote and
to be voted for as directors or officers.
The respondents, in turn, maintain that the grant of
exclusive voting rights to Class "A" shares is clearly
provided in the Articles of Incorporation and is in
accord with Section 5 9 of the Corporation Law (Act No.
1459), which was the prevailing law when MCPI was
incorporated in 1977. They likewise submit that as the
Articles of Incorporation of MCPI is in the nature of a
contract between the corporation and its shareholders
and Section 6 of the Corporation Code could not
retroactively apply to it without violating the nonimpairment clause 10 of the Constitution.
HELD:
ISSUE:
Whether or not holders of Class "B" shares of the MCPI
may be deprived of the right to vote and be voted for
as directors in MCPI. (NO)
FACTS:
Private respondent Robes Francisco Realty &
Development Corp. secured a loan from petitioner. As
part of the proceeds of the loan, preferred shares of
stocks were issued to private respondent corporation.
In other words, instead of giving the legal tender
totalling to the full amount of the loan, petitioner lent
such amount partially in the form of money and of
stock certificates. Said stock certificates were in the
name of private respondent Adalia Robes and Carlos
Robes, later on, subsequently endorsed his shares in
favor of Adalia Robes.
Said certificates of stock bear the following terms and
conditions: (1) the right to receive a quarterly dividend
of 1%, cumulative and participating; (2) that such
preferred shares may be redeemed, by the system of
drawing lots, at any time after 2 years from the date of
issue at the option of the corporation.
Private respondents proceeded against petitioner and
filed a complaint anchored on private respondents
alleged rights to collect dividends under the preferred
shares in question and to have petitioner redeem the
same under the terms and conditions of the stock
certificates. The trial court ordered the petitioner to
pay private respondents the face value of the stock
certificates as redemption price, plus 1% quarterly
interest. Hence this petition.
ISSUE:
HELD:
NO. While the stock certificate does allow redemption,
the option to do so was clearly vested in the bank. The
redemption therefore is clearly the type known as
"optional". Thus, except as otherwise provided in the
stock certificate, the redemption rests entirely with the
corporation and the stockholder is without right to
either compel or refuse the redemption of its stock.
Furthermore, the terms and conditions set forth therein
use the word "may". It is a settled doctrine in statutory
construction that the word "may" denotes discretion,
and cannot be construed as having a mandatory effect.
The redemption of said shares cannot be allowed. The
Central Bank made a finding that the Bank has been
suffering from chronic reserve deficiency, and that
such finding resulted in a directive to the President and
Acting Chairman of the Board of the bank prohibiting
the latter from redeeming any preferred share, on the
ground that said redemption would reduce the assets
of the Bank to the prejudice of its depositors and
creditors. Redemption of preferred shares was
prohibited for a just and valid reason. The directive
issued by the Central Bank Governor was obviously
meant to preserve the status quo, and to prevent the
financial ruin of a banking institution that would have
resulted in adverse repercussions, not only to its
depositors and creditors, but also to the banking
industry as a whole. The directive, in limiting the
8. COCOFED v. RP
178193; 180705)
(GR
Nos.
177857-58;
FACTS:
COCOFED seeks the Courts approval of the conversion
of Class A and Class B common shares of San
Miguel Corporation (SMC) registered in the names of
Coconut Industry Investment Fund and the so-called
14 Holding Companies (collectively known as CIIF
companies) into SMC Series 1 Preferred Shares.
COCOFED proposes to constitute a trust fund to be
known as the Coconut Industry Trust Fund (CITF) for
the Benefit of the Coconut Farmers, with respondent
Republic, acting through the Philippine Coconut
Authority (PCA), as trustee. Respondent Republic filed
its Comment questioning COCOFEDs personality to
seek the Courts approval of the desired conversion.
Respondent Republic also disputes COCOFEDs right to
impose and prescribe terms and conditions on the
proposed conversion, maintaining that the CIIF SMC
common shares are sequestered assets and are in
custodia legis under PCGGs administration. It
postulates that, owing to the sequestrated status of
the said common shares, only PCGG has the authority
to approve the proposed conversion and seek the
necessary Court approval.
ISSUE:
Conversion of Shares.
HELD:
10.
FACTS:
Petitioner Apocada was employed in respondent
corporation. On August 28, 1985, respondent Jose M.
Mirasol persuaded petitioner to subscribe to 1,500
shares of respondent corporation at P100.00 per share
or a total of P150,000.00. He made an initial payment
of P37,500.00. On September 1, 1975, petitioner was
appointed President and General Manager of the
respondent corporation. However, on January 2, 1986,
he resigned.
On December 19, 1986, petitioner instituted with the
NLRC a complaint against private respondents
(Apocada and Intrans Phils., Inc.) for the payment of
his unpaid wages, his cost of living allowance, the
balance of his gasoline and representation expenses
and his bonus compensation for 1986. Petitioner and
private respondents submitted their position papers to
the labor arbiter. Private respondents admitted that
there is due to petitioner the amount of P17,060.07 but
this was applied to the unpaid balance of Apocadas
subscription in the amount of P95,439.93. Petitioner
questioned the set-off alleging that there was no call or
notice for the payment of the unpaid subscription and
that, accordingly, the alleged obligation is not
enforceable.
Labor arbiter sustained the claim of petitioner for
P17,060.07 on the ground that the employer has no
11.
National Exchange v. Dexter 51 Phil.
601 (1928)
FACTS:
ISSUE:
Whether the stipulation contained in the subscription
to the effect that the subscription is payable from the
first dividends declared on the shares has the effect of
relieving the subscriber from personal liability in an
action to recover the value of the shares. (NO)
HELD:
In the absence of restrictions in its character, a
corporation, under its general power to contract, has
the power to accept subscriptions upon any special
terms not prohibited by positive law or contrary to
public policy, provided they are not such as to require
the performance of acts which are beyond the powers
conferred upon the corporation by its character, and
provided they do not constitute a fraud upon other
subscribers or stockholders, or upon persons who are
or may become creditors of the corporation.
A provision in the Corporation states: ". . . no
corporation shall issue stock or bonds except in
exchange for actual cash paid to the corporation or for
property actually received by it at a fair valuation
equal to the par value of the stock or bonds so issued."
Now, if it is unlawful to issue stock otherwise than as
stated it is self-evident that a stipulation such as that
now under consideration, in a stock subcription, is
12.
FACTS:
The Philippine Chemical Product Co. submitted a
resolution in a board meeting, in which they released
Infante, a stockholder, from his obligation of paying his
unpaid subscription in the amount of P1,500 and it is
conditioned upon his surrendering his
certificates of shares of stock. In the same resolution,
Poizat was obligated to shell out the amount of his
subscription valued at P1,500, and if he should refuse
to make payment, judicial proceedings against him
may be undertaken by the corporation through its
management.
Thereafter, the company underwent voluntary
insolvency proceedings. The assignee of the company,
Velasco, sought to recover the amount owed by Poizat.
Nevertheless, the latter
denied any accountability to pay the amount. Poizat
asserted the invalidity of making the call, and he
asserted that he was given the same rights as that
given to Infante. The CFI dismissed the complaint filed
by Velasco against Poizat. Thus, Velasco appealed to
the SC.
ISSUE:
Whether or not
subscription.
HELD:
Poizat
is
liable
for
his
unpaid
13.
Lingayen Gulf Electric v. Baltazar 93
Phil. 404 (1953)
FACTS:
The plaintiff, Lingayen Gulf Electric Power Company is
a domestic corporation with an authorized capital
stock of P300,000 divided into 3,000 shares with a par
value of P100 per
share. The defendant, Irineo Baltazar appears to have
subscribed for 600 shares on account of which he had
paid upon the organization of the corporation the sum
of P15,000. After incorporation, the defendant made
further payments on account of his subscription,
leaving a balance of P18,500 unpaid for, which
amount, the plaintiff now claims in this action.
On July 23, 1946, a majority of the stockholders of the
corporation, among them the herein defendant, held a
meeting and adopted stockholders' resolution No. 17.
By said resolution, it was agreed upon by the
stockholders present to call the balance of all unpaid
subscribed capital stock as of July 23, 1946, the first 50
per cent payable within 60 days beginning August 1,
1946, and the remaining 50 per cent payable within 60
days beginning October 1, 1946. The resolution also
provided, that all unpaid subscription after the due
dates of both calls would be subject to 12 per cent
interest per annum. Lastly, the resolution provided,
thatafter the expiration of 60 days' grace which would
be on December 1, 1946, for the first call, and on
February 1, 1947, for the second call, all subscribed
stocks remaining
corporation.
unpaid
would
revert
to
the
ISSUES:
1. Whether or not the call was valid
2. Whether or not the defendant was released from
the obligation of the unpaid balance of his
subscription by virtue of stockholders' resolution
Nos. 17 and 4
HELD:
1. No. The law requires that notice of any call for the
payment of unpaid subscription should be made not
only personally but also by publication. This is clear
from the provisions of Section 40 of the Corporation
Law, Act No. 1459, as amended, which reads as
follows:
SEC. 40. Notice of call for unpaid subscriptions must
be either personally served upon each stockholder
or deposited in the post office, postage prepaid,
addressed to him at his place of residence, if
known, and if not known, addressed to the place
where the principal office of the corporation is
situated. The notice must also be published once a
week for four successive weeks in some newspaper
of general circulation devoted to the publication of
general news published at the place where the
principal office of the corporation is established or
located, and posted in some prominent place at the
works of the corporation if any such there be. If
there be no newspaper published at the place
where the principal office of the corporation is
established or located, then such notice may be
published in any newspaper of general news in the
Philippines.
14.
FACTS:
De Silva subscribed to 650 shares and paid for 200.
The company notified him that his shares will be
declared delinquent and sold in a public auction if he
does not pay the balance. De Silva did not pay. The
company advertised a notice of delinquency sale. De
Silva sought an injunction because the by-laws
allegedly provide that unpaid subscriptions will be paid
from the dividends allotted to stockholders.
ISSUE:
WON De Silva is liable despite the provision in the bylaws regarding dividends as payment for unpaid
subscriptions.
HELD:
YES. Although, the by-laws provide that unpaid
subscriptions may be paid from such dividends The
defendant corporation, through its board of directors,
made use of its discretionary power, taking advantage
of the first of the two remedies: delinquency sale or
specific performance.
Settled is the rule that nothing in this act shall prevent
the directors from collecting, by action in any court of
proper jurisdiction, the amount due on any unpaid
15.
FACTS:
The appellant is a corporation duly organized under
the laws of the Philippine Islands with its central office
in the City of Manila. The plaintiff-appellee Bonifacio
Lumanlan, on July 31, 1922, subscribed for 300 shares
of stock of said corporation at a par value of P50 or a
total of P15,000. Julio Valenzuela, Pedro Santos and
Francisco Escoto, creditors of this corporation, filed suit
against it in the Court of First Instance of Manila, case
No. 37007, praying that a receiver be appointed, as it
appeared that the corporation at that time had no
assets except credits against those who had
subscribed for shares of stock. The court named Tayag
as receiver for the purpose of collecting, said
subscriptions. As Bonifacio Lumanlan had only paid
P1,500 of the P15,000, par value of the stock for which
he subscribed, the receiver on August 30, 1930, filed a
suit against him in the Court of First Instance of Manila,
civil case No. 37492, for the collection of P15,109,
P13,500 of which was the amount he owed for unpaid
stock and P1,609 for loans and advances by the
16.
China Banking Corp. v. CA GR 117604
(Mar. 26, 1997)
FACTS:
Galicano Calapatia, stockholder of Valley Golf and
Country Club Inc. (VGCCI), pledged his stock certificate
to petitioner as a security for the loan. Petitioner
requested VGCCI that the pledge agreement be
recorded in their books. Due to Calapatia failure to pay,
petitioner filed a petition for extrajudicial foreclosure of
pledged stock; notified and ordered VGCCI to transfer
the pledged stock in its name and in the corporate
books. VGCCI refused in view of Calapatias unsettled
accounts with the club.
Despite the refusal, the foreclosure ensued and
petitioner emerged the highest bidder and a certificate
of sale was issued. Meanwhile, VGCCI sent a notice of
demand to Calapatia for the full payment of his
overdue account. For failure to pay, the delinquent
stock was published and auctioned.
Petitioner advised VGCCI that it is the new owner of
Calapatias stock certificate and requested that a new
certificate of stock be issued in its name. VGCCI replied
that by reason of delinquency, Calapatias stock was
sold at public auction. Petitioner protested the sale and
filed a complaint for the nullification of auction made
by VGCCI in the RTC of Makati. The trial court
dismissed the complaint on the ground of intracorporate controversy.
ISSUE:
Unpaid Claim with regards to unpaid subscription.
HELD:
Sec. 63 of the Corporation Code which provides that
"no shares of stock against which the corporation holds
any unpaid claim shall be transferable in the books of
the corporation" cannot be utilized by VGCCI. The term
"unpaid claim" refers to "any unpaid claim arising from
unpaid subscription, and not to any indebtedness
which a subscriber or stockholder may owe the
corporation arising from any other transaction.
In the case at bar, the subscription for the share in
question has been fully paid as evidenced by the
issuance of Membership Certificate No. 1219. What
Calapatia owed the corporation were merely the
monthly dues. Hence, the aforequoted provision does
not apply.
17.
Fua Cun v. Summers, et al.44 Phil.
704 (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 at a par
value of P100 per share, paying the sum of P25,000,
one-half of the subscription price, in cash, for which a
receipt was issued.
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
18.
Baltazar v. Lingayen Gulf 14 SCRA
522 (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
19.
Nava v. Peers Mktg. Corp.76 SCRA 65
(1976)
FACTS:
ISSUE:
20.
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.
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. (YES)
HELD:
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.
A certificate of stock is the paper representative or
tangible evidence of the stock itself and of the various
interests therein. The certificate is not stock in the
21.
Nautica Canning Corp. Yumul GR
164588 (Oct. 19, 2005)
FACTS:
Yumul was appointed Chief Operating Officer/General
Manager of Nautica. First Dominion Prime Holdings,
Inc., Nauticas parent company, through its Chairman
Alvin Y. Dee, granted Yumul an Option to Purchase up
to 15% of the total stocks it subscribed from Nautica. A
Deed of Trust and Assignment was executed between
First Dominion Prime Holdings, Inc. and Yumul whereby
the former assigned 14,999 of its subscribed shares in
Nautica to the latter.
After Yumuls resignation from Nautica, he wrote a
letter to Dee requesting the latter to formalize his offer
to buy Yumuls 15% share in Nautica and demanding
the issuance of the corresponding certificate of shares
in his name should Dee refuse to buy the same. Dee
denied the request claiming that Yumul was not a
stockholder of Nautica. Yumul requested that the Deed
of Trust and Assignment be recorded in the Stock and
Transfer Book of Nautica, and that he, as a stockholder,
be allowed to inspect its books and records. Yumuls
requests were denied. Yumul filed a petition for
mandamus praying that the Deed of Trust and
Assignment be recorded in the Stock and Transfer Book
of Nautica and that the certificate of stocks
corresponding thereto be issued in his name.
ISSUE:
HELD:
YES. Indeed, it is possible for a business to be wholly
owned by one individual.
The validity of its
incorporation is not affected when such individual
gives nominal ownership of only one share of stock to
each of the other four incorporators. This is not
necessarily illegal. But, this is valid only between or
among the incorporators privy to the agreement. It
does bind the corporation which, at the time the
agreement is made, was non-existent.
Thus,
incorporators continue to be stockholders of a
corporation unless, subsequent to the incorporation,
they have validly transferred their subscriptions to the
real parties in interest.
A transfer of shares of stock not recorded in the stock
and transfer book of the corporation is non-existent as
far as the corporation is concerned. As between the
corporation on one hand, and its shareholders and
third persons on the other, the corporation looks only
to its books for the purpose of determining who its
shareholders are. It is only when the transfer has been
recorded in the stock and transfer book that a
corporation may rightfully regard the transferee as one
of its stockholders. From this time, the consequent
obligation on the part of the corporation to recognize
22.
FACTS:
Petitioners David and Jose Lao filed a petition with the
SEC against respondent Dionisio Lao, president of
Pacific Foundry Shop Corporation (PFSC). Petitioners
prayed for a declaration as stockholders and directors
of PFSC, issuance of certificates of shares in their name
and to be allowed to examine the corporate books of
PFSC.
Petitioners claimed that they are stockholders of PFSC
based on the General Information Sheet filed with the
SEC, in which they are named as stockholders and
directors of the corporation. David Lao acquired his
shares from his father and Jose Lao from respondent
himself. Respondent denied petitioners' claim. He also
claimed that petitioners did not acquire any shares in
PFSC by any of the modes recognized by law, namely
subscription, purchase, or transfer.
Meanwhile, R.A. 8799, otherwise known as the
Securities Regulation Code, was enacted, transferring
jurisdiction over all intra-corporate disputes from the
SEC to the RTC. RTC denied their petition on the ground
that they have no stock certificates in their names.
ISSUE:
Is the mere inclusion as shareholder in the General
Information Sheet of a corporation sufficient proof that
one is a shareholder in such corporation?
HELD:
NO. The mere inclusion as shareholder of petitioners in
the General Information Sheet of PFSC is insufficient
proof that they are shareholders of the company. The
information in the document will still have to be
correlated with the corporate books of PFSC.
A certificate of stock is the evidence of a holder's
interest and status in a corporation. It 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.
23.
Fleischer v. Botica Nolasco (1925) 47
Phil. 583
FACTS:
Manuel Gonzales made a written statement to the
respondent, requesting that 5 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 but later withdrew and cancelled
his written statement. However, the respondent
replied that his letter was of no effect, and that the
shares in question had been registered in the name of
the Botica Nolasco, Inc.
Fleischer filed an amended complaint against the
respondent, alleging that he became the owner of 5
shares of fully paid stock purchase by him from the
original owner, Manuel Gonzalez. Despite repeated
demands, respondent refused to register said shares in
his name in the books of the corporation. Respondents
defense is that it has preferential right to buy the
shares at the par value based on their Art. 12 of the
by-laws. Trial court favored petitioner and ordered the
shares be registered. Hence, this appeal.
ISSUE:
Is a by-law restricting a transfer of shares valid?
HELD:
24.
FACTS:
Petitioner was the EVP and later on the Management
Consultant of the private respondent, American
Chamber of Commerce in the Philippines (AmCham).
While petitioner was still working with private
respondent, his superior, Burridge, retired as
AmCham's President. Burridge 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. Upon his admission as a
new member of the MPC, petitioner paid the transfer
fee from his own funds; but private respondent
subsequently reimbursed this amount. Thereafter, MPC
issued
Proprietary
Membership
Certificate
but
petitioner failed to execute a document recognizing
private respondent's beneficial ownership over said
share.
When petitioner's contract of employment was up for
renewal, he notified private respondent that he would
no longer be available as EVP, but the latter insisted
that he stay for 6 months. Petitioner indicated his
acceptance of the consultancy arrangement with a
counter-proposal among others is the retention of the
Polo Club share. Private respondent rejected the
counter-proposal.
Pending
the
negotiation
for
consultancy
arrangement,
private
respondent
executed a release and quitclaim against petitioner.
ISSUE:
Restrictions on Transfer of Shares.
HELD:
The Manila Polo Club does not necessarily prohibit the
transfer of proprietary shares by its members. The
Club only restricts membership to deserving applicants
in accordance with its rules, when the amended
Articles of Incorporation states that: "No transfer shall
be valid except between the parties, and shall be
registered in the Membership Book unless made in
accordance with these Articles and the By-Laws". Thus,
as between parties herein, there is no question that a
transfer is feasible. Moreover, authority granted to a
corporation to regulate the transfer of its stock does
not empower it to restrict the right of a stockholder to
transfer his shares, but merely authorizes the adoption
25.
Rural Bank of Salinas, Inc. v. CA (210
SCRA 510)
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
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.
HELD:
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. Bylaws are intended merely for the protection of the
26.
FACTS:
Petitions centers on the ownership of 1,500 shares of
stock in E. Razon, Inc. covered by Stock Certificate No.
003 issued and registered under the name of Juan T.
Chuidian in the books of the corporation. The then
Court of First Instance of Manila, now Regional Trial
Court of Manila, declared that Enrique Razon, the
petitioner is the owner of the said shares of stock. The
then Intermediate Appellate Court, now Court of
Appeals, however, reversed the trial court's decision
and ruled that Juan T. Chuidian, the deceased father of
petitioner Vicente B. Chuidian is the owner of the
shares of stock. Both parties filed separate motions for
reconsideration. Enrique Razon wanted the appellate
court's decision reversed and the trial court's decision
affirmed while Vicente Chuidian asked that all cash and
stock dividends and all the pre-emptive rights accruing
to the 1,500 shares of stock be ordered delivered to
him. The appellate court denied both motions. Hence,
these petitions.
ISSUE:
When there is an effective transfer of shares of stock?
HELD:
The law is clear that in order for a transfer of stock
certificate to be effective, the certificate must be
27.
FACTS:
The late Manuel A. Torres, Jr. (Judge Torres for brevity)
was the majority stockholder of Tormil Realty &
Development Corporation while private respondents
who are the children of Judge Torres, deceased brother
Antonio
A.
Torres,
constituted
the
minority
stockholders.
The 1987 annual stockholders meeting and election of
directors of Tormil corporation was scheduled in
compliance with the provisions of its by-laws. Judge
Torres assigned from his own shares, one (1) share
each to petitioners Tobias, Jocson, Jurisprudencia,
Azura and Pabalan. These assigned shares were in the
nature of qualifying shares, for the sole purpose of
meeting the legal requirement to be able to elect them
(Tobias and company) to the Board of Directors as
Torres nominees.
The annual stockholders meeting was held as
scheduled. Two representatives of the SEC were
present in the meeting. Antonio Torres Jr. questioned
the presence of the SEC representatives holding that
the subject meeting is for the family corporation and
private firm. The SEC representatives explained that it
was merely in response to the request of Manuel
Torres, Jr. and that SEC has jurisdiction over all
registered corporations. The meeting resulted into
chaos which in effect ousted Manuel Torres and his
group but nevertheless were able to elect the officers.
28.
Rural Bank of Lipa v. CA (Sept. 28,
2001)
FACTS:
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 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
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 15 November
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. In such an event, should the proceeds of
the sale of said shares fail to satisfy in full the
obligation, the unpaid balance shall be secured by
other collateral sufficient therefor. When the Villanueva
spouses failed to settle their obligation to the Bank on
the due date, the Board sent them a letter 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.
29.
Rivera v. Florendo 144 SCRA 647
(1986)
FACTS:
Isamu Akasako, a Japanese national who was allegedly
the real owner of the shares of stock in the name of
one Aquilino Rivera, a registered stockholder of
Fujuyama Hotel and Restaurant, Inc., sold 2,550 shares
of the same to Milagros Tsuchiya along with the
assurance that Tsuchiya would be made President of
the corporation after the purchase. Rivera assured her
that he would sign the stock certificates because
Akasako was the real owner. However, after the sale
was consummated and the consideration paid, Rivera
refused to make the indorsement unless he is also
paid.
Tsuchiya, et al. attempted several times to have the
shares registered but were refused compliance by the
corp. They filed a special action for mandamus and
damages.
ISSUES:
1.) WON Rivera had the right to refuse the indorsement
of the shares of stock in question.
2.) WON the Corporation had the right to refuse the
registration of the respondents shares.
HELD:
30.
Lim Tay v. CA GR 126891 (Aug. 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".
takes place only when the old and the new obligations
are incompatible on every point.
31.
Ponce v. Alsons Cement GR 139802
( Dec. 10, 2002)
FACTS:
Vicente C. Ponce and Fausto Gaid, incorporator of
Victory Cement Corporation (VCC), executed a Deed
of
Undertaking
and
Indorsement
whereby Gaid acknowledges that Ponce is the owner of
the shares and he was therefore assigning/endorsing it
to Ponce. VCC was renamed Floro Cement Corporation
(FCC) and then to Alsons Cement Corporation (ACC).
Up to the present, no certificates of stock
corresponding to the 239,500 subscribed and fully paid
shares of Gaid were issued in the name of Fausto G.
Gaid and/or the plaintiff. Despite repeated demands,
the ACC refused to issue the certificates of stocks.
Ponce, filed a complaint with the SEC for mandamus
and damages against Alsons Cement Corporation and
its corporate secretary Francisco M. Giron, Jr. ACC and
Giron moved to dismiss. SEC Hearing Officer Enrique L.
Flores, Jr. granted the motion to dismiss. Ponce
appealed the Order of dismissal. The Commission En
Banc reversed the appealed Order and directed the
Hearing Officer to proceed with the case. In ruling that
a transfer or assignment of stocks need not be
registered first before it can take cognizance of the
case to enforce Ponce's rights as a stockholder, the
Commission En Banc cited the Supreme Court's ruling
in Abejo vs. De la Cruz. ACC and Giron appealed the
decision of the SEC En Banc to CA. The latter ruled that
of
stocks
of
Gaid
can
be
HELD:
NO. Pursuant to Section 63 of the Corporation Code, a
transfer of shares of stock not recorded in the stock
and transfer book of the corporation is non-existent as
far as the corporation is concerned. As between the
corporation on the one hand, and its shareholders and
third persons on the other, the corporation looks only
to its books for the purpose of determining who its
shareholders are. It is only when the transfer has been
recorded in the stock and transfer book that a
corporation may rightfully regard the transferee as one
of its stockholders. From this time, the consequent
obligation on the part of the corporation to recognize
such rights as it is mandated by law to recognize
arises. Hence, without such recording, the transferee
may not be regarded by the corporation as one among
its stockholders and the corporation may legally refuse
the issuance of stock certificates in the name of the
transferee even when there has been compliance with
the requirements of Section 64 of the Corporation
Code. The stock and transfer book is the basis for
ascertaining the persons entitled to the rights and
subject to the liabilities of a stockholder. Where a
transferee is not yet recognized as a stockholder, the
corporation is under no specific legal duty to issue
stock certificates in the transferee's name.
32.
Rural Bank of Salinas, Inc. v. CA (210
SCRA 510)
FACTS:
Clemente Guerrero, President of the petitioner-bank,
executed a SPA 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 his 473 shares of stock of the Bank
registered in his name. First deed of assignment was
made on the 472 out of 473 shares, in favor of private
respondents Luz Andico, Wilhelmina Rosales and
Francisco Guerrero, Jr. Months later, second deed of
assignment was executed for the remaining one share
of stock in favor of private respondent Francisco
Guerrero, Sr.
Subsequently, private respondent Melania Guerrero
presented to petitioner-bank the two Deeds of
Assignment for registration with a request for the
transfer in the Bank's stock and transfer book of the
shares of stock so assigned, the cancellation of stock
certificates 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.
Private respondent filed a mandamus against
petitioner-bank in the SEC. The latter alleged in their
answer that upon the death of Clemente Guerrero, his
shares of stock became the property of his estate, and
33.
FACTS:
Petitioner filed an original action to secure a writ of
mandamus against the respondent, to compel him, as
secretary of the Visayan Electric Company, to transfer
upon the books of the company certain shares of
stock. He based the urgency of his action on a
supposed agreement to sell the said shares to a Mr.
Levering. Furthermore, he also stated that the issuing
company holds no unpaid claims against the shares of
stock. However, on the books of the company, it turns
out that petitioner is not the registered owner of the
stock which he seeks to have transferred. His only
claim as owner is based on his averment that such
were indorsed to him on February 5 by the BryanLandon Company, in whose name it is registered on
the books of the Visayan Electric Company. There was
no allegation that the petitioner holds any power of
attorney from the Bryan-Landon Company authorizing
him to make demand on the secretary of the Visayan
Electric Company to make the transfer which petitioner
seeks to have made through the medium of the
mandamus of this court.
ISSUE:
WON a writ of mandamus will lie under the
circumstances of the case to allow the transfer of
shares as being requested by the petitioner.
34.
FACTS:
Bitong was the treasurer and member of the BOD of
Mr. & Mrs. Publishing Co. She filed a complaint with
the SEC to hold respondent spouses Apostol liable for
fraud, misrepresentation, disloyalty, evident bad faith,
conflict of interest and mismanagement in directing
the affairs of the corporation to the prejudice of the
stockholders. She alleges that certain transactions
entered into by the corporation were not supported by
any stockholders resolution.
The complaint sought to enjoin Apostol from further
acting as president-director of the corporation and
from disbursing any money or funds. Apostol contends
that Bitong was merely a holder-in-trust of the JAKA
shares of the corporation, hence, not entitled to the
relief she prays for. SEC Hearing Panel issued a writ
enjoining Apostol.
After hearing the evidence, SEC Hearing Panel
dissolved the writ and dismissed the complaint filed by
Bitong. Bitong appealed to the SEC en banc which the
latter reversed SEC Hearing Panel decision. Apostol
filed petition for review with the CA. CA reversed SEC
en banc ruling holding that Bitong was not the owner
of any share of stock in the corporation and therefore,
not a real party in interest to prosecute the complaint.
ISSUE:
HELD:
NO. Based on the evidence presented, it could be
gleaned that Bitong was not a bona fide stockholder of
the corporation. Several corporate documents disclose
that the true party in interest was JAKA.
Section 63 of the Corporation Code envisions a formal
certificate of stock which can be issued only upon
compliance with certain requisites. First, the
certificate must be signed by the president or vicepresident, countersigned by the secretary or assistant
secretary, and sealed with the seal of the corporation.
A mere typewritten statement advising a stockholder
of the extent of his ownership is a corporation without
qualification
and/or
authentication
cannot
be
considered as a formal certificate of stock. Second,
delivery of the certificate is an essential element of its
issuance. Hence, there is no issuance of a stock
certificate where it is never detached from the stock
books although blanks therein are properly filled up if
the person whose name is inserted therein has no
control over the books of the company. Third, the par
value, as to par value shares, or the full subscription as
to no par value shares, must first be fully paid. Fourth,
the original certificate must be surrendered where the
person requesting the issuance of a certificate is a
transferee from a stockholder.
35.
Abejo v. De la Cruz 149 SCRA 654
(1987)
FACTS:
Case involves a dispute between the principal
stockholders of the corporation Pocket Bell Philippines,
Inc. (Pocket Bell) namely spouses Abejos and the
purchaser, Telectronic Systems, Inc. (Telectronics) of
their minority shareholdings and of shares registered in
the name of spouses Bragas. With the said purchases,
Telectronics would become the majority stockholder,
holding 56% of the outstanding stock and voting power
of the corporation Pocket Bell.
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. The latter refused to
register the aforesaid transfer of shares in the
corporate books, asserting that the Bragas claim preemptive rights over the Abejo shares and that Virginia
Braga never transferred her 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. The Bragas
assert that the regular civil court has original and
exclusive jurisdiction as against the SEC, while the
36.
Lee v. Trocino, et al. GR 164648 (June
19, 2009)
37.
Santamaria vs. Hongkong 89 Phil. 780
(1951)
FACTS:
Mrs. Josefa T. Santamaria bought 10,000 shares of the
Batangas Minerals, Inc., through the offices of Woo, UyTioco & Naftaly, a stock brokerage firm and pay
therefore the sum of P8,041.20 as shown by receipt
Exh. B. The buyer received Stock Certificate No. 517
issued in the name of Woo, Uy-Tioco & Naftaly and
indorsed in bank by this firm.
On March 9, 1937, Mrs. Santamaria placed an order for
the purchase of 10,000 shares of the Crown Mines, Inc.
with R.J. Campos & Co., a brokerage firm, and delivered
Certificate No. 517 to the latter as security therefor
with the understanding that said certificate would be
returned to her upon payment of the 10,000 Crown
Mines, Inc. shares. Exh. D. is the receipt of the
certificate in question signed by one Mr. Cosculluela,
Manager of the R.J. Campos & Co., Inc. According to
certificate Exh. E, R. J. Campos & Co., Inc. bought for
Mrs. Josefa Santamaria 10,000 shares of the Crown
Mines, Inc. at .225 a share, or the total amount of
P2,250. Two days later, on March 11, Mrs. Santamaria
went to R.J. Campos & Co., Inc. to pay for her order of
10,000 Crown Mines shares and to get back Certificate
No. 517. Cosculluela then informed her that R.J.
Campos & Co., Inc. was no longer allowed to transact
business due to a prohibition order from Securities and
Exchange Commission. She was also inform that her
of
the
ISSUE:
Whether or not the obligation of the defendant Bank to
have inquired into the ownership of the certificate
when it received it from R.J. Campos & Co., Inc. and not
conclude that the Bank was negligent for not having
done so, contrary to the claim of the plaintiff that
defendant Bank acted negligently, if not in bad faith, in
accepting delivery of said certificate from RJ. Campos
& Co., Inc.
HELD:
YES. Certificate No. 517 came into the possession of
the defendant Bank because R.J. Campos & Co., Inc.
had opened an overdraft account with said Bank and to
this effect it had executed on April 16, 1946, a letter of
hypothecation by the terms of which R.J. Campos &
Co., Inc. pledged to the said Bank "all Stocks, Shares
and Securities which I/we may hereafter come into
their possession on my/our account and whether
originally deposited for safe custody only or for any
other purpose whatever or which may hereafter be
deposited by me/us in lieu of or in addition to the
Stocks, Shares, and Securities now deposited or for
any other purpose whatsoever."
It should be noted that the certificate of stock in
question was issued in the name of the brokerage firmWoo, Uy-Tioco & Naftaly and that it was duly indorsed
in blank by said firm, and that said indorsement was
38.
De los Santos vs. McGrath 96 Phil.
577 (1955)
FACTS:
De los Santos filed a claim with the Alien Property
Custodian for a number of shares of the Lepanto
Corporation. He contended that said shares were
bought from one Campos and Hess, both of them
dead. The Philippine Alien Property Administrator
rejected the claim. He instituted the present action to
establish title to the aforementioned shares of stock.
The US Attorney General, the successor of the Alien
Property Administrator, opposed the action on the
ground that the said shares of stock were bought by
one Madrigal, in trust for the true owner, Matsui, and
then delivered to the latter indorsed in blank.
ISSUE:
Had de los Santos in fact purchased the shares of
stock?
HELD:
De los Santos sole evidence that he purchased the
said shares was his own unverified testimony. The
alleged vendors of the shares of stock, who could have
verified the allegation, were already dead. Further, the
receipt that might have proven the sale was said to
39.
40.
Uson v. Diosomito (61 Phil. 535;
1935)
FACTS:
Toribia Uson filed a civil action for debt against Vicente
Diosomito. Upon institution of said action, an
attachment was duly issued and respondents property
was levied upon, including 75 shares of the North
Electric Co., which stood in his name on the books of
the company when the attachment was levied. The
sheriff sold said shares at a public auction with Uson
being the highest bidder. Jollye claims to be the owner
of said certificate of stock issued to him by the North
Electric Co.
There is no dispute that Diosomito was the original
owner of said shares, which he sold to Barcelon.
However, Barcelon did not present these certificates to
the corporation for registration until 19 months after
the delivery thereof by Barcelon, and 9 months after
the attachment and levy on said shares. The transfer
to Jollye was made 5 months after the issuance of a
certificate of stock in Barcelon's name.
ISSUE:
Is a bona fide transfer of the shares of corp., not
registered or noted on the books of the corp., valid as
against a subsequent lawful attachment of said shares,
regardless of whether the attaching creditor had actual
notice of said transfer or not?
HELD:
NO, it is not valid. The transfer of the 75 shares in the
North Electric Co., Inc made by the defendant
Diosomito as to the defendant Barcelon was not valid
as to the plaintiff. Toribia Uson, on 18 Jan. 1932, the
date on which she obtained her attachment lien on
said shares of stock will still stood in the name of
Diosomito on the books of the corp. Sec. 35 provides
that No transfer, however, is 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.
41.
Chua Guan vs. SamahangMagsasaka
62 Phil. 473
FACTS:
A certain Co Toco was the owner of 5,894 shares of
Samahang Magsasaka, Inc. which he mortgaged
to Chua Chiu to guarantee the payment of debt. The
corresponding certificates were delivered to Chua Chiu
and were duly registered in the office of the register of
deeds of Manila and in the office of the said
corporation. About five months after, Chua Chui
assigned all his rights and interest in said mortgage to
the plaintiff, Chua Gan which was also duly recorded.
Co Toco defaulted. The plaintiff foreclosed on the
mortgage. In the public auction he won as the highest
bidder. However, upon presenting the certificates to
the corporation for registration, the officers refused
because they and the plaintiff could not agree on the
noting of nine other attachments that had been issued,
served and noted on the books of the corporation
against the shares of Co Toco.
ISSUE:
WON the said mortgage takes priority over the already
noted writs of attachment.
HELD:
The Supreme Court ruled that the attaching creditors
are entitled to priority over the defectively registered
42.
Chemphil Export & Import v. CA (Dec.
12, 1995)
FACTS:
This case involved a consortium of banks which
obtained a writ of preliminary attachment in a civil
case ("consortium case") over shares of stock
belonging to Mr. Antonio Garcia in the Chemical
Industries of the Philippines ("Chemphil"). The
attachment, which was served on the secretary to the
President of Chemphil, was not registered in the stock
and transfer book of Chemphil. A few years thereafter,
Mr. Garcia sold the same shares of stock to the Ferro
Chemicals, Inc. ("FCI"). FCI subsequently assigned the
shares to the Chemphil Export and Import Corporation
("CEIC"). The shares were registered and recorded in
the corporate books of Chemphil in CEICs name and
the corresponding stock certificates were issued to it.
The consortium case was appealed to the CA. While
the appeal was pending, Mr. Garcia and the bank
consortium amicably settled the case. The CA rendered
a judgment by compromise. Unfortunately, Mr. Garcia
failed to comply with the compromise agreement. The
consortium of banks caused to be sold on execution
the shares of stock (earlier attached by them), which
were the same shares subsequently sold by Mr. Garcia
to CEIC. A certificate of sale covering the shares was
issued in the name of the bank consortium.
ISSUE:
HELD:
The Supreme Court ruled that the attachment lien
acquired by the bank consortium is valid and effective
even as against the buyer (FCI) and its assignee
(CEIC), notwithstanding the fact that said attachment
lien was not registered in the corporate books of
Chemphil. "Both the Revised Rules of Court and the
Corporation Code", according to the Court, "do not
require annotation in the corporations stock and
transfer book for the attachment of shares of stock to
be valid and binding on the corporation and third
party."
Consequently, when FCI purchased the shares of stock
from Mr. Garcia, it purchased them subject to the
attachment lien of the bank consortium. In this regard,
the High Court explained that a preliminary
attachment is a security for the satisfaction of
whatever judgment may be obtained by the attaching
creditor in a court action, which continues until the
judgment debt is fully satisfied.
COMPARISON of the abovementioned three cases:
Among the three cases mentioned, settled is the rule
that the attaching creditor enjoys priority to the shares
of stock as against a subsequent lawful buyer.
43.
Makati Sports Club, Inc. v. Cheng
(June 16, 2010)
FACTS:
On October 20, 1994, plaintiff Makati Sports Club,
Inc.s Board of Directors 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.
Defendant Cecile Cheng was a Treasurer and Director
of Makati Sports Club in 1985.
On July 7, 1995, Joseph L. Hodreal expressed his
interest to buy a share, for this purpose he sent the
letter in which he requested that his name be included
in the waiting list.
Sometime in November 1995, McFoods expressed
interest in acquiring a share of Makati Sports Club, and
one was acquired with the payment to the plaintiff by
McFoods of P1,800,000 through Urban Bank. On
December 15, 1995, the Deed of Absolute Sale was
executed by the plaintiff and McFoods; Stock
Certificate No. A 2243 was issued to McFoods on
January 5, 1996.
On December 27, 1995, McFoods sent a letter to
the plaintiff giving advice of its offer to resell
the share.
It appears that while the sale between the
plaintiff
and
McFoods
was
still
under
the
44.
Marcus v. RH Macy 74 N.E. 2d 228
(1947)
FACTS:
Hazel Marcus is the owner of 50 common shares of
stocks in R.H, Macy Co., Inc., which are stocks with
voting rights. On September 28, 1945, the corporation
gave a formal notice to its stockholders, including
Marcus, that in its upcoming annual meeting, there will
be a vote on a proposal to vest voting rights to holders
of preferred stocks. A day before the annual meeting,
Marcus sent by registered mail to the corporation its
written notice of objection to the proposal and
demanded to exercise her appraisal right. In the
meeting, Marcus voted against the proposal, however,
the proposal was approved.
Marcus, thereafter, instituted a proceeding to
determine the value of her stocks and be paid therefor.
However, her application for the appointment of
appraisers was denied on the ground that the vesting
of voting rights to shares of stock previously without
such right does not divest nor limit her right as a
common stockholder, citing the Kenny case, and in
considering that she only owns 50 shares out of 1.6
million shares of common stock. The Appellate Division
affirmed the said decision.
ISSUE:
45.
Turner v. Lorenzo Shipping GR
157479 Nov. 24, 2010