CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y.

2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

BENITO H. LOPEZ vs. THE COURT OF APPEALS and THE PHILIPPINE

AMERICAN GENERAL INSURANCE CO., INC.
G.R. No. L-33157 : June 29, 1982 : GUERRERO, J.

FACTS:
Benito H. Lopez obtained a loan in the amount of P20,000.00 from the Prudential Bank
and Trust Company. Also, he executed a promissory note for the same amount, in favor of the
said Bank, binding himself to repay the said sum one (1) year after the said date, with interest at
the rate of 10% per annum. In addition to said promissory note, he executed Surety Bond No.
14164 in which he, as principal, and Philippine American General Insurance Co., Inc.
(PHILAMGEN) as surety, bound themselves jointly and severally in favor of Prudential Bank for
the payment of the sum of P20,000.00.

On the same occasion, Lopez also executed in favor of Philamgen an indemnity

agreement whereby he agreed "to indemnify the Company and keep it indemnified and hold the
same harmless from and against any and all damages, losses, costs, stamps, taxes, penalties,
charges and expenses of whatever kind and nature which the Company shall or may at any time
sustain or incur in consequence of having become surety upon the bond." At the same time,
Lopez executed a deed of assignment of 4,000 shares of the Baguio Military Institution entitled
"Stock Assignment Separate from Certificate". With the execution of this deed of assignment,
Lopez endorsed the stock certificate and delivered it to Philamgen.

ISSUE:
Is the transaction a dation in payment or a pledge?

RULING:
Yes.
Considering the explicit terms of the deed denominated "Stock Assignment Separate
from Certificate", hereinbefore copied verbatim, Lopez sold, assigned and transferred unto
Philamgen the stocks involved "for and in consideration of the obligations undertaken" by
Philamgen "under the terms and conditions of the surety bond executed by it in favor of the
Prudential Bank" and "for value received". On its face, it is neither pledge nor dation in
payment. The document speaks of an outright sale as there is a complete and unconditional
divestiture of the incorporeal property consisting of stocks from Lopez to Philamgen. The
transfer appears to have been an absolute conveyance of the stocks to Philamgen whether or not
Lopez defaults in the payment of P20,000.00 to Prudential Bank. While it is a conveyance in
consideration of a contingent obligation, it is not itself a conditional conveyance.

It is true that if Lopez should "well and truly perform and fulfill all the undertakings,
covenants, terms, conditions, and agreements stipulated" in his promissory note to Prudential
Bank, the obligation of Philamgen under the surety bond would become null and void.
Corollarily, the stock assignment, which is predicated on the obligation of Philamgen under the
surety bond, would necessarily become null and void likewise, for want of cause or consideration
under Article 1352 of the New Civil Code. But this is not the case here because aside from the
obligations undertaken by Philamgen under the surety bond, the stock assignment had other
considerations referred to therein as "value received". Hence, based on the manifest terms
thereof, it is an absolute transfer.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

ENRIQUE MONSERRAT vs. CARLOS G. CERON, ET AL.,

G.R. No. 37078 : September 27, 1933 : VILLA-REAL, J.

FACTS:
Monserrat was the president and manager of Manila Yellow Taxicab Co., Inc., and the
owner of P1,200 common shares of stock thereof. Monserrat assigned to Ceron a usufruct of half
of the common shares of stock. Certificate of Stock No. 7 was then issued in the name of Ceron.
It was also recorded on the Stock and Transfer Book of the company. However, such assignment
only gave Ceron the right to enjoy, during his lifetime, the profits which might be derived from
the shares assigned him, prohibiting him from selling, mortgaging encumbering or otherwise
exercising any act implying absolute ownership of all the shares. Monserrat had reserved for
himself and his heirs the right to vote derived from said shares of stock and to recover the
ownership thereof at the termination of the usufruct.

Ceron mortgaged to Matute 600 common shares of stock. Ceron also endorsed to Matute
the Certificate of Stock. Ceron showed Matute the Stock and Transfer Book of the company.
Matute saw that the stocks were in the name of Ceron, free from any lien or encumbrance. When
Ceron mortgaged the stocks, he did not inform Matute of Monserrat’s reservation.

ISSUE:
Is the mortgage considered a transfer?

RULING:
Section 35 of the Corporation Law provides the following:

SEC. 35. The capital stock of stock corporations shall be divided into shares for which
certificates signed by the president or the vice-president, counter signed by the secretary or clerk
and sealed with the seal of the corporation, shall be issued in accordance with the by-laws.
Shares of stock so issued are personal property and may be transferred by delivery of the
certificate indorsed by the owner or his attorney in fact or other person legally authorized to
make the transfer. 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.

No share of stock against which the corporation hold, any unpaid claim shall be
transferable on the books of the corporation. The legal provision just quoted does not require
any entry except of transfers of shares of stock in order that such transfers may be valid as
against third persons. If, in accordance with said section 35 of the Corporation Law, only the
transfer or absolute conveyance of the ownership of the title to a share need be entered and
noted upon the books of the corporation in order that such transfer may ba valid, therefore,
inasmuch as a chattel mortgage of the aforesaid title is not a complete and absolute alienation of
the dominion and ownership thereof, its entry and notation upon the books of the corporation is
not necessary requisite to its validity.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

EUGENIO J. PUYAT, ERWIN L. CHIONGBIAN, EDGARDO P. REYES, ANTONIO G.

PUYAT, JAIME R. BLANCO, RAFAEL R. RECTO, and REYNALDO L. LARDIZABAL
vs. HON. SIXTO T. J. DE GUZMAN, JR., as Associate Commissioner of the
Securities & Exchange Commission, EUSTAQUIO T. C. ACERO, R.G. VILDZIUS,
ENRIQUE M. BELO, MANUEL G. ABELLO, SERVILLANO DOLINA, JUANITO
MERCADO, and ESTANISLAO A. FERNANDEZ
G.R. No. 51122 : March 25, 1982 : MELENCIO-HERRERA, J.

FACTS:
In an election for the eleven Directors of the International Pipe Industries Corporation
(IPI), the Puyat Group won six seats to gain control of the Board and of the management of the
company. The Acero Group which won only five seats, questioned the said election in a quo
warranto proceeding filed with the Securities and Exchange Commission (SEC) wherein they
claimed that the stockholders’ votes were not properly counted. In the said case, Assemblyman
Estanislao Fernandez, then member of the Interim Batasang Pambansa, orally entered his
appearance as counsel for respondent Acero to which the Puyat Group objected on
constitutional grounds, thus discouraging Assemblyman Fernandez from further appearing
therein as counsel. Subsequently, however, Assemblyman Fernandez acquired P200.00 worth of
stock in the subject company representing ten (10) shares out of 262,843 outstanding shares, on
the basis of which he filed an Urgent Motion for Intervention in the SEC Case alleging legal
interest therein. The respondent Associate Commissioner of the SEC granted leave to intervene
on the basis of Atty. Fernandez ownership of the said ten shares. Hence, this petition.

ISSUE:
May Assemblyman Fernandez, as a stockholder of IPI, intervene in the SEC case without
violating Sec. 11, Art. VIII (now Sec. 14, Art. VI) of the Constitution?

RULING:
Certain salient circumstances militate against the intervention of Assemblyman
Estanislao Fernandez in the quo warranto case filed before the Securities and Exchange
Commission (SEC). He had acquired a mere P200.00 worth of stock in the subject company,
representing ten (10) shares out of 262,843 outstanding shares. He acquired them "after the
fact," that is, on May 30, 1979, after the contested election of Directors on May 14, 1979, after
the quo warranto suit had been filed on May 25, 1979 before the SEC on May 31, 1979. And what
is more, before he moved to intervene, he had signified his intention to appear as counsel for
respondent Eustaquio T. C. Acero, but which was objected to by petitioners. Realizing perhaps,
the validity of the objection, he decided, instead, to "intervene" on the ground of legal interest in
the matter under litigation. And it may be noted that in the case filed before the Rizal Court of
First Instance (L-5l928), he appeared as counsel for defendant Excelsior, co-defendant of
respondent Acero therein. Under those facts and circumstances, we are constrained to find that
there has been an indirect "appearance as counsel before . . . any administrative body" and in
our opinion, that is a circumvention of the prohibition contained in Section 11, Article VIII of the
1973 Constitution. That which the Constitution directly prohibits may not be done by indirection
or by a general legislative act which is intended to accomplish the objects specifically or implied
prohibited.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

ENRIQUE RAZON vs. INTERMEDIATE APPELLATE COURT and VICENTE B.

CHUIDIAN, in his capacity as Administrator of the Estate of the Deceased JUAN T.
CHUIDIAN
G.R. No. 74306 : March 16, 1992 : GUTIERREZ, JR., J.

FACTS:
Vicente Chuidian (administrator of the estate of his deceased father) filed a complaint for
the delivery of the certificates of stocks representing the 1,500 share holdings of his deceased
father, Juan Chuidian, in the E. Razon, Inc. (organized for the purpose of bidding for the
arrastre services in South Harbor, Manila). In the answer, Razon alleged that he owned the
shares and the same remained in his possession. It was alleged that the late Juan Chuidan did
not pay any amount whatsoever for the 1,500 shares in question.

On April 23, 1966, stock certificate No. 003 for 1,5000 shares of stock of E. Razon Inc.,
was issued in the name of Juan Chuidian (Juan). Razon had not questioned (not until the
demand was made) Juan’s ownership of the shares and had not brought any action to have the
certificate of stock over the said shares cancelled.

As for Razon, he alleged that after organizing E. Razon, Inc., Razon distributed shares,
previously placed in the names of the withdrawing nominal incorporators, to some friends
including Juan. The shares of stock were registered in the name of Juan only as nominal
stockholder and with the agreement that the said shares were owned and held by the Razon (as
he was the one who paid for all the subscription). Juan was given the option to buy the same but
did not do so. CFI (RTC) declared that Enrique Razon is the owner of the said shares. IAC (CA)
reversed and ruled that Juan Chuidian is the owner.

ISSUE:
Who owns the Stock?

RULING:
There is no dispute that the questioned 1,500 shares of stock of E. Razon, Inc. are in the
name of the late Juan Chuidian in the books of the corporation. The records show that during
his lifetime Chuidian was elected member of the Board of Directors of the corporation which
clearly shows that he was a stockholder of the corporation. From the point of view of the
corporation, therefore, Chuidian was the owner of the 1,500 shares of stock.

Razon who claims ownership over the questioned shares of stock must show that the
same were transferred to him by proving that all the requirements for the effective transfer of
shares of stock in accordance with the corporation's by laws, if any, were followed or in
accordance with the provisions of law. Razon did not present any by-laws which could show that
the 1,500 shares of stock were effectively transferred to him. In the absence of the corporation's
by-laws or rules governing effective transfer of shares of stock, the provisions of the Corporation
Law are made applicable to the instant case.

The law is clear that in order for a transfer of stock certificate to be effective, the
certificate must be properly indorsed and that title to such certificate of stock is vested in the
transferee by the delivery of the duly indorsed certificate of stock. (Section 35, Corporation
Code). Since the certificate of stock covering the questioned 1,500 shares of stock registered in
the name of the late Juan Chuidian was never indorsed to the petitioner, the inevitable
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

conclusion is that the questioned shares of stock belong to Chuidian. Razon’s contention that he
did not require an endorsement of the certificate of stock in view of his intimate friendship with
the late Juan Chuidian cannot overcome the failure to follow the procedure required by law or
the proper conduct of business even among friends. Moreover, the preponderance of evidence
supports the appellate court's factual findings that the shares of stock were given to Juan T.
Chuidian for value. Juan T. Chuidian was the legal counsel who handled the legal affairs of the
corporation. We give credence to the testimony of the private respondent that the shares of
stock were given to Juan T. Chuidian in payment of his legal services to the corporation.
Petitioner Razon failed to overcome this testimony.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

AQUILINO RIVERA, ISAMU AKASAKO and FUJIYAMA HOTEL & RESTAURANT,

INC. vs. THE HON. ALFREDO C. FLORENDO, as Judge of the Court of First
Instance of Manila (Branch XXXVI), LOURDES JUREIDINI and MILAGROS
TSUCHIYA
G.R. No. L-57586 : October 8, 1986 : PARAS, J.

FACTS:
Fujiyama Hotel was organized and register under Philippine laws with a capital stock of
P1,000,000.00 divided into 10,000 shares of P100.00 par value each by the herein petitioner
Rivera and four (4) other incorporators. Sometime thereafter petitioner Rivera increased his
subscription from the original 1,250 to a total of 4899 shares.

Subsequently, Isamu Akasako, a Japanese national and co-petitioner who is allegedly the
real owner of the shares of stock in the name of petitioner Aquilino Rivera, sold 2550 shares of
the same to private respondent Milagros Tsuchiya for a consideration of P440,000.00 with the
assurance that Milagros Tsuchiya will be made the President and Lourdes Jureidini a director
after the purchase.

Aquilino Rivera who was in Japan also assured private respondents by overseas call that
he will sign the stock certificates because Isamu Akasako is the real owner. However, after the
sale was consummated and the consideration was paid with a receipt of payment therefor
shown, Aquilino Rivera refused to make the indorsement unless he is also paid.

ISSUE:
Will Mandamus lie in this case?

RULING:
As confirmed by this Court, "shares of stock may be transferred by delivery to the
transferee of the certificate properly indorsed.’ Title may be vested in the transferee by delivery
of the certificate with a written assignment or indorsement thereof’. There should be compliance
with the mode of transfer prescribed by law t is evident that mandamus will not lie in the instant
case where the shares of stock in question are not even indorsed by the registered owner Rivera
who is specifically resisting the registration thereof in the books of the corporation.

Under the above ruling, even the shares of stock which were purchased by private
respondents from the other incorporators cannot also be the subject of mandamus on the
strength of mere indorsement of the supposed owners of said shares in the absence of express
instructions from them. The rights of the parties will have to be threshed out in an ordinary
action.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

JOSEFA SANTAMARIA, assisted by her husband, FRANCISCO SANTAMARIA, Jr.

vs. THE HONGKONG AND SHANGHAI BANKING CORPORATION and R. W.
TAPLIN
G.R. No. L-2808 : August 31, 1951 : BAUTISTA ANGELO, J.

FACTS:
Josefa Santamaria owned 10,000 shares of Batangas Minerals Inc acquired thru Woo
stockbrokerage firm. The Stock Certificate no. 517 was issued in the name of the Wu firm which
was indorsed the stock in blank to Mrs. Santamaria. She then placed an order for 10,000 shares
of Crown Mines thru RJ Campos & Co stockbrokerage firm and delivered the certificate of stock
of her shares in Batangas Minerals as security. Her name was penciled on the certificate
shedelivered. The certificate then came into the possession of HSBC by virtue of a document of
hypothecation, wherein Campos pledged all shares and securities in its possession to HSBC
because of an overdraft account it had with the bank. The certificate was indorsed by Campos to
HSBC. HSBC then requested the Batangas Minerals to cancel the same and a new certificate
were issued in the name of HSBC’s nominee Robert Taplin. Mrs Santamaria then tendered
payment for the Crown Mine shares with Campos, but the latter was now prohibited from
transacting business due to its insolvency proceedings. She demanded that HSBC return her
certificate, but Taplin replied that the bank did not know anything about her transaction with
Campos. She sues HSBC.

Court held Santamaria was negligent because did not take any precaution to protect
herself against the possible misuse of shares. She could have asked Batangas Minerals to cancel
it and issue another in her name to apprise the holder that she was the owner of the certificate..
HSBC had no knowledge of the circumstances under which the certificate of stock was delivered
to Campos and had the perfect right to assume that Campos was in lawful possession, in view of
the fact that it was a street certificate, which is transferable by mere delivery. HSBC was not
obligated to look beyond the certificate to ascertain the ownership of the stock because it was
given pursuant to its contract of hypothecation. A stock certificate, indorsed in blank, is deemed
quasi-negotiable, and as such the transferee thereof is justified in believing that it belongs to the
holder and transferor. The fact that her name was penciled on the certificate cannot be
considered sufficient reason to indicate that she was the owner, considering that certificate was
indorsed in blank by her brokers and guaranteed by indorsement in blank by Campos.

ISSUE:
Is Santamaria chargeable with negligence in the transaction which gave rise to this case?

RULING:
A careful analysis of the facts seems to justify this contention. Certificate of stock No. 517
was made out in the name of Wo, Uy-Tioco & Naftaly, brokers, and was duly indorsed in bank by
said brokers. This certificate of stock was delivered by plaintiff to R.J. Campos & Co., Inc. to
comply with a requirement that she deposit something on account if she wanted to buy 10,000
shares of Crown Mines Inc. In making said deposit, plaintiff did not take any precaution to
protect herself against the possible misuse of the shares represented by the certificate of stock.
Plaintiff could have asked the corporation that had issued said certificate to cancel it and issue
another in lieu thereof in her name to apprise the holder that she was the owner of said
certificate. This she failed to do, and instead she delivered said certificate, as it was, to R.J.
Campos & Co., Inc., thereby clothing the latter with apparent title to the shares represented by
said certificate including apparent authority to negotiate it by delivering it to said company
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

while it was indorsed in blank by the person or firm appearing on its face as the owner thereof.
The defendant Bank had no knowledge of the circumstances under which the certificate of stock
was delivered to R.J. Campos & Co., Inc., and had a perfect right to assume that R.J. Campos &
Co., Inc. was lawfully in possession of the certificate in view of the fact that it was a street
certificate, and was in such form as would entitle any possessor thereof to a transfer of the stock
on the books of the corporation concerned. There is no question that, in this case, plaintiff made
the negotiation of the certificate of stock to other parties possible and the confidence she placed
in R.J. Campos & Co., Inc. made the wrong done possible. This was the proximate cause of the
damage suffered by her. She is, therefore, estopped from claiming further title to or interest
therein as against a bona fide pledge or transferee thereof, for it is a well-known rule that a bona
fide pledgee or transferee of a stock from the apparent owner is not chargeable with knowledge
of the limitations placed on it by the real owner, or of any secret agreement relating to the use
which might be made of the stock by the holder (Fletcher, Cyclopedia of Corporations, section
5562, Vol. 12, p. 521).

On the other hand, it appears that this certificate of stock, indorsed as it was in blank by
Woo, Uy-Tioco & Naftaly, stock brokers, was delivered to The Hongkong and Shanghai Banking
Corporation by R.J. Campos & Co., Inc., duly indorsed by the latter, pursuant to a letter of
hypothecation executed by R.J. Campos & Co., Inc., in favor of said Bank (Exhibit "1"). The said
certificate was delivered to the Bank in the ordinary course of business, together with many
other securities, and at the time it was delivered, the Bank had no Knowledge that the shares
represented by the certificate belonged to the plaintiff for, as already said, it was in the form of
street certificate which was transferable by mere delivery. The rule is "where one of two innocent
parties must suffer by reason of a wrongful or unauthorized act, the loss must fall on the one
who first trusted the wrong doer and put in his hands the means of inflicting such loss" (Fletcher
Cyclopedia of Corporations, supra).

It is therefore clear that plaintiff, in failing to take the necessary precautions upon
delivering the certificate of stock to her broker, was chargeable with negligence in the
transaction which resulted to her own prejudice, and as such, she is estopped from asserting title
to it as against the defendant Bank.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

MANUEL A. TORRES, JR., (Deceased), GRACIANO J. TOBIAS, RODOLFO L.

JOCSON, JR., MELVIN S. JURISPRUDENCIA, AUGUSTUS CESAR AZURA and
EDGARDO D. PABALAN vs. COURT OF APPEALS, SECURITIES AND EXCHANGE
COMMISSION, TORMIL REALTY & DEVELOPMENT CORPORATION, ANTONIO P.
TORRES, JR., MA. CRISTINA T. CARLOS, MA. LUISA T. MORALES and DANTE D.
MORALES
G.R. No. 120138 : September 5, 1997 : KAPUNAN, J.

FACTS:
The late Manuel A. Torres, Jr. was the major stockholder of Tormil Realty &
Development Corporation while private respondents who are the children of Judge Torres'
deceased brother Antonio. Torres, constituted the minority stockholders. In particular, their
respective shareholdings and positions in the corporation.

In 1984, Judge Torres, in order to make substantial savings in taxes, adopted an "estate
planning" scheme under which he assigned to Tormil Realty & Development Corporation
(Tormil for brevity) various real properties he owned and his shares of stock in other
corporations in exchange for 225,972 Tormil Realty shares. Hence, on various dates in July and
August of 1984, ten (10) deeds of assignment were executed by the late Judge
Torres.Consequently, the aforelisted properties were duly recorded in the inventory of assets of
Tormil Realty and the revenues generated by the said properties were correspondingly entered
in the corporation's books of account and financial records.

Due to the insufficient number of shares of stock issued to Judge Torres and the alleged
refusal of private respondents to approve the needed increase in the corporation's authorized
capital stock (to cover the shortage of 972 shares due to Judge Torres under the "estate
planning" scheme), on 11 September 1986, Judge Torres revoked the two (2) deeds of
assignment covering the properties in Makati and Pasay City.

ISSUE:
Can the deed of assignment executed be revoked?

RULING:
No.
The shortage of 972 shares would not be valid ground for respondent Torres to
unilaterally revoke the deeds of assignment he had executed on July 13, 1984 and July 24, 1984
wherein he voluntarily assigned to TORMIL real properties covered by TCT No. 374079
(Makati) and TCT No. 41527, 41528 and 41529 (Pasay) respectively. A comparison of the
number of shares that respondent Torres received from TORMIL by virtue of the "deeds of
assignment" and the stock certificates issued by the latter to the former readily shows that
TORMIL had substantially performed what was expected of it. In fact, the first two issuances
were in satisfaction to the properties being revoked by respondent Torres. Hence, the shortage
of 972 shares would never be a valid ground for the revocation of the deeds covering Pasay and
Quezon City properties.

Moreover, we agree with the contention of the Solicitor General that the shortage of
shares should not have affected the assignment of the Makati and Pasay City properties which
were executed in 13 and 24 July 1984 and the consideration for which have been duly paid or
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

fulfilled but should have been applied logically to the last assignment of property — Judge
Torres' Ayala Fund shares — which was executed on 29 August 1984.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

LEE E. WON alias RAMON LEE vs. WACK WACK GOLF & COUNTRY CLUB, INC.
G.R. No. L-23851 : March 26, 1976 : CASTRO, C.J.

FACTS:
The Wack Wack Golf and Country Cub a non-stock corporation) issued to Iwao
Teruyama Membership Certificate No. 201 which was assigned to M. T. Reyes on April 22, 1944.
Subsequently in the same year 1944, M. T. Reyes transferred and assigned said certificate to the
plaintiff. On April 26, 1955, the plaintiff filed an action in the Court of First Instance of Manila
against the defendant, alleging that shortly after the rehabilitation of the defendant after the
war, the plaintiff asked the defendant to register in its books the assignment in favor of the
plaintiff and to issue to the latter a new certificate, but that the defendant had refused and still
refuses to do so unlawfully; and praying that the plaintiff be declared the owner of one share of
stock of the defendant and that the latter be ordered to issue a correspondent new certificate. On
June 6, 1955, the defendant filed a motion to dismiss, alleging that from 1944, when the
plaintiff's right of action had accrued, to April 26, 1955, when the complaint was filed, eleven
years have elapsed, and that therefore the complaint was filed beyond the 5-year period fixed in
Article 1149 of the Civil Code. On July 30, 1955, the Court of First Instance of Manila issued an
order dismissing the complaint. As plaintiff's motion for reconsideration filed on August 27,
1955 and second motion for reconsideration filed on September 13, 1955, were both denied, the
plaintiff has taken the present appeal.

ISSUE:
Is Won entitled to the registration of the transferred share of stock?

RULING:
No.
The certificate in question contains a condition to the effect that no assignment thereof
"shall be effective with respect to the club until such assignment is registered in the books of the
club, as provided in the By-Laws." The decisive question that arises is whether the plaintiff was
bound, under said condition and By-Laws of the defendant or any statutory rule for that matter,
to present and register the certificate assigned to him in 1944 within any definite or fixed period.
The defendant has not made herein any pretense to that effect; but it contends that from the
moment the certificate was assigned to the plaintiff, the latter's right to have the assignment
registered commenced to exist. This contention is correct, but it would not follow that said right
should be exercised immediately or within a definite period. The existence of a right is one thing,
and the duration of said right is another.

On the other hand, it is stated in the appealed order of dismissal that the plaintiff sought
to register the assignment on April 13, 1955; whereas in plaintiff's brief it is alleged that it was
only in February, 1955, when the defendant refused to recognize the plaintiff. If, as already
observed, there is no fixed period for registering an assignment, how can the complaint be
considered as already barred by the Statute of Limitations when it was filed on April 26, 1955, or
barely a few days and two months. Plaintiff's right was violated only sometime in 1955, and it
could not accordingly have asserted any cause of action against the defendant before that.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

PHILEX MINING CORPORATION vs. HON. DOMINGO CORONEL REYES,

Presiding Judge, Court of First Instance of Albay, 10th Judicial District, Branch IV,
and RICHARD HUENEFELD
G.R. No. L-57707 : November 19, 1982 : MELENCIO-HERRERA, J.

FACTS:
Richard Huenefeld, is a stockholder of petitioner Philex Mining Corporation. He
originally owned 800,000 shares of stock. On February 6, 1980, First Asian wrote Huenefeld
informing him that the stock certificate had been delivered to him at his address at Michelle
Apartment, 2030 A. Mabini Street, Manila; and that if the certificate could not be located that
Huenefeld execute an Affidavit of Loss, with the notice of loss to be published once a week for
three (3) consecutive weeks in a newspaper of general circulation in accordance with the
procedure prescribed BY Republic Act No. 201.

Huenefeld, through counsel, replied that RA 201 is not applicable because the stock
certificate was not lost in the possession of the stockholder; that assuming it was, the expenses
of publication and premiums for the bond should be at Philex's expense; and demanded the
issuance of a replacement stock certificate. Huenefeld also submitted an Affidavit of Loss but did
not comply with the other requirements on publication.

Huenefeld sued Philex in the Court of First Instance for Specific Performance with
Damages to compel the issuance of the former’s lost stockholder’s certificate, plus damages.
Philex moved for dismissal of the complaint on the ground that the Court of First Instance has
no jurisdiction over the case, the issue being one of intra-corporate relationship between a
stockholder and a corporation which falls within the original and exclusive jurisdiction of the
Securities and Exchange Commission. Huenefeld filed an opposition claiming that the refusal of
petitioner Company to issue a replacement certificate resulted in actual damages to him, and
thus, it is no longer a case of intra-corporate conflict, but one which is civil or tortious in nature.
The Court of First Instance denied the motion to dismiss, as well as a reconsideration of such
denial. Hence, this petition.

ISSUE:
Does the Court of First Instance have jurisdiction over the present controversy, which
Philex contends is an intra-corporate one?

RULING:
No.
Evident from the foregoing is that an intra-corporate controversy is one which arises
between a stockholder and the corporation. There is no distinction, qualification, nor any
exemption whatsoever. The provision is broad and covers all kinds of controversies between
stockholders and corporations. The issue of whether or not a corporation is bound to replace a
stockholder's lost certificate of stock is a matter purely between a stockholder and the
corporation. It is a typical intra-corporate dispute. The question of damages raised is merely
incidental to that main issue.

Section 5 of Presidential Decree No. 902-A provides:

In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered
with it as expressly granted under existing laws and decrees; it shall have original and
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

exclusive jurisdiction to hear and decide cases involving: Controversies arising out of
intracorporate or partnership relations, between and among stockholders, members, or
associates; between any or all of them and the corporation, partnership or association of
which they are stockholders, members, or associates, respectively and between such
corporation, partnership or association and the state insofar as it concerns their
individual franchise or right to exist as such entity.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Capital Structure: Stocks and Stockholders. Transfer of Shares of Stock and Registration

GRACE BORGOÑA INSIGNE, DIOSDADO BORGOÑA, OSBOURNE BORGOÑA,

IMELDA BORGOÑA RIVERA, AND ARISTOTLE BORGOÑA vs. ABRA VALLEY
COLLEGES, INC. AND FRANCIS BORGOÑA
G.R. No. 204089 : July 29, 2015 : BERSAMIN, J.

FACTS:
Grace Borgoña Insigne, Diosdado Borgoña, Osbourne Borgoña,Imelda Borgoña Rivera,
Aristotle Borgoña are siblings of the full blood. Respondent Francis Borgoña (Francis) is their
older half-blood brother. The petitioners are the children of the late Pedro Borgoña (Pedro) by
his second wife, Teresita Valeros, while Francis was Pedro's son by his first wife, Humvelina
Avila. In his lifetime, Pedro was the founder, president and majority stockholder of respondent
Abra Valley, a stock corporation. After Pedro's death, Francis succeeded him as the president of
Abra Valley. On March 26, 2002, the petitioners, along with their brother Romulo Borgoña and
Elmer Reyes, filed a complaint and damages in the RTC against Abra Valley praying, among
others, that the RTC direct Abra Valleyto allow them to inspect its corporate books and records,
and the minutes of meetings, and to provide them with its financial statements.

Abra Valley contends that inasmuch as the originals of the above enumerated certificates
of stock are still in names of the original owners, it is the conclusion that the transfers or
transactions, if any, that may have transpired between said owners and plaintiffs are not yet
recorded and registered with the corporation issuing the same; If said transaction or transfer
was already registered, the stock certificates in the name of the assignor, transferor or indorses
should have been cancelled and replaced with stock certificates in the name of the assignee,
transferee or indorsee; The stocks certificate submitted by the plaintiffs are still not in their
respective names, but still in the name of the supposed assignors, transferors or indorsers. To
avail of the rights of stockholders, the plaintiffs must present stock certificates already in their
names, and not in the names of other persons.

Francis contends that from the Annexes of the amended complaint filed by plaintiffs,it
appears that not one of them is a stockholder of record of theAbra Valley Colleges, Inc.; be that
as it is, plaintiffs are not vested with the rights to vote, tonotice, to inspect, to call for an annual
meeting or demand the conduct of one, and such other rights and privileges inherent and
available only to stockholders of record; From the copies of Stock Certicate attached to the
amended complaint, some of the plaintiffs are mere assignees or indorsees, and that the other
plaintiffs are not even assignees or indorsee; And the right of an assignee or indorsee of a stock
certificate is limited only to the issuance of stock certificate in his or her name, after the
requirements and conditions are complied with.

ISSUE:
Can the petitioners demand for the review of the Stock and transfer book (STB)?

RULING:
Yes.
In Lanuza v. Court of Appeals, the Court has underscored that the STB is not the
exclusive evidence of the matters and things that ordinarily are or should be written therein, for
parol evidence may be admitted to supply omissions from the records, or to explain ambiguities,
or to contradict such records, to wit:
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

x x x [A] stock and transfer book is the book which records the names and addresses of all
stockholders arranged alphabetically, the instalments paid and unpaid on all stock for which
subscription has been made, and the date of payment thereof; a statement of every alienation,
sale or transfer of stock made, the date thereof and by and to whom made; and such other
entries as may be prescribed by law. A stock and transfer book is necessary as a measure of
precaution, expediency and convenience since it provides the only certain and accurate method
of establishing the various corporate acts and transactions and of showing the ownership of
stock and like matters. However, a stock and transfer book, like other corporate books and
records, is not in any sense a public record, and thus is not exclusive evidence of the matters and
things which ordinarily are or should be written therein. In fact, it is generally held that the
records and minutes of a corporation are not conclusive even against the corporation but are
prima facie evidence only, and may be impeached or even contradicted by other competent
evidence. Thus, parol evidence may be admitted to supply omissions in the records or explain
ambiguities, or to contradict such records.

Considering that Abra Valley’s STB was not in the possession of the petitioners, or at
their disposal, they could not be reasonably expected or justly compelled to prove that their
stock subscriptions and purchases were recorded therein. This, more than any other, was
precisely why they filed their Motion for Production/Inspection of Documents to compel the
respondents to produce the STB, but the RTC did not act on the motion.

The rules of discovery, including Section 1, Rule 27 of the Rules of Court governing the
production or inspection of any designated documents, papers, books, accounts, letters,
photographs, objects or tangible things not privileged, which contain or constitute evidence
material to any matter involved in the action and which are in the other party’s possession,
custody or control, are to be accorded broad and liberal interpretation.

In light of the foregoing, the RTC should have favorably acted on the petitioners’ Motion
for Production/Inspection of Documents in order to enable the petitioners, consistent with the
recognized privileges and disabilities, to enable them to obtain the fullest possible knowledge of
the issues and facts to be determined in Special Civil Action Case No. 2070, and thereby prevent
the trial from being carried on in the dark, at least from their side. Doing so would not have
caused any prejudice to the respondents, for, after all, even had the petitioners not filed the
Motion for Production/Inspection of Documents, the respondents would themselves also be
expected to produce the STB in court in order to substantiate their affirmative defense that the
petitioners were not stockholders-of-record of Abra Valley. Verily, that there was no entry or
record in the STB showing the petitioners to be stockholders of Abra Valley was no valid
justification for the respondents not to produce the same. Otherwise, the disputable
presumption under Section 3 (e) of Rule 131 of the Rules of Court that “evidence willfully
suppressed would be adverse if produced” could arise against them.