Lim Tay vs.
Court of Appeals
March 25, 2016
FACTS
Sy Guiok and Sy Lim secured a loan from Lim Tay in the amount of
P40,000. This was secured by a contract of pledge whereby the
former pledged their 300 shares of stock each in Go Fay & Company
to the latter. However, they failed to pay their respective loans.
Hence, Lim Tay filed a petition for mandamus against Go Fay &
Company with the SEC praying that an order be issued directing the
corporate secretary of the said corporation to register the stock
transfers and issue new certificates in favor of Lim Tay.
Go Fay & Company filed its answer contending that SEC had no
jurisdiction to entertain the complaint on the ground that since Lim
Tay was not a stockholder of the company, no intra corporate
controversy took place; and furthermore, that the default of
payment of Sy Guiok and Sy Lim did not automatically vest in Lim Tay
the ownership of the pledged shares.
SEC dismissed the complaint. On appeal to the CA, it affirmed SECs
decision. Hence, this petition for certiorari with the SC.
ISSUE
Whether or not SEC had jurisdiction.
HELD
No. The registration of shares in a stockholders name, the issuance
of stock certificates, and the right to receive dividends which pertain
to the said shares are all rights that flow from ownership. The
determination of whether or not a shareholder is entitled to exercise
the above mentioned rights falls within the jurisdiction of the SEC.
However, if ownership of the shares is not clearly established and is
still unresolved at the time the action for mandamus is filed, then
jurisdiction lies with the regular courts.
In the case at bar, reading into the contract of pledge, the stipulation
shows that Lim Tay was merely authorized to foreclose the pledge
upon maturity of the loans, not to own them. Such foreclosure was
not automatic, for it must be done in a public or private sale.
Nowhere was it mentioned that he exercised his right of foreclosure.
Hence, his status was still a mere pledgee, and under civil law, this
does not entitle him to ownership of the shares of stock in question.
G.R. No. 93695 February 4, 1992
Lessons Applicable: Voting Trust Agreements (Corporate Law)
FACTS:
November 15, 1985: a complaint for a sum of money was
filed by the International Corporate Bank, Inc. (ICB) against the
private respondents
March 17, 1986: private respondents, in turn, filed a 3rd-
party complaint against ALFA and ICB
September 17, 1987: petitioners filed a motion to dismiss
the third party complaint - denied
July 12, 1988: trial court issued an order requiring the
issuance of an alias summons upon ALFA through the DBP
consequence of the petitioner's letter that
ALFA management was transferred to DBP
July 22, 1988: DBP claimed that it was not authorized to
receive summons on behalf of ALFA
August 4, 1988: trial court issued an order advising the
private respondents to take the appropriate steps to serve the
summons to ALFA
September 12, 1988: petitioners filed a motion for
reconsideration submitting that Rule 14, section 13 of the
Revised Rules of Court is not applicable since they were no
longer officers of ALFA and that the private respondents should
have availed of another mode of service under Rule 14, Section
16 of the said Rules, i.e., through publication to effect proper
service upon ALFA - denied
January 19, 1989: 2nd motion for reconsideration was filed
by the petitioners reiterating their stand that by virtue of the
voting trust agreement they ceased to be officers and directors
of ALFA
attached a copy of the voting trust agreement
between all the stockholders of ALFA and the DBP whereby the
management and control of ALFA became vested upon the DBP
April 25, 1989: trial court reversed itself by setting aside its
previous Order dated January 2, 1989 and declared that service
upon the petitioners who were no longer corporate officers of
ALFA cannot be considered as proper service of summons on
ALFA
October 17, 1989: trial court (NOT notified of the petition
for certiorari) declared final its decision on April 25, 1989
ISSUE: W/N the voting trust agreement is valid despite being
contrary to the general principle that a corporation can only be
bound by such acts which are within the scope of its officers' or
agents' authority
HELD:
voting trust
trust created by an agreement between a group
of the stockholders of a corporation and the trustee or by a
group of identical agreements between individual stockholders
and a common trustee, whereby it is provided that for a term of
years, or for a period contingent upon a certain event, or until
the agreement is terminated, control over the stock owned by
such stockholders, either for certain purposes or for all
purposes, is to be lodged in the trustee, either with or without
a reservation to the owners, or persons designated by them, of
the power to direct how such control shall be used (Ballentine's
Law Dictionary)
Sec. 59. Voting Trusts One or more
stockholders of a stock corporation may create a voting trust for
the purpose of conferring upon a trustee or trustees the right
to vote and other rights pertaining to the share for a period
rights pertaining to the shares for a period not exceeding 5
years at any one time: Provided, that in the case of a voting
trust specifically required as a condition in a loan agreement,
said voting trust may be for a period exceeding 5 years but shall
automatically expire upon full payment of the loan. A voting
trust agreement must be in writing and notarized, and shall
specify the terms and conditions thereof. A certified copy of
such agreement shall be filed with the corporation and with the
Securities and Exchange Commission; otherwise, said
agreement is ineffective and unenforceable. The certificate or
certificates of stock covered by the voting trust agreement shall
be cancelled and new ones shall be issued in the name of the
trustee or trustees stating that they are issued pursuant to said
agreement. In the books of the corporation, it shall be noted
that the transfer in the name of the trustee or trustees is made
pursuant to said voting trust agreement.
Bayla v Silang Traffic
Facts: 8 Years after the Silang Traffic Co. was organized, it entered
into an agreement for the sale on installment of its shares of stock
with various individuals, including the petitioners. After the latter
had paid several installments for the purchase price of said shares of
stock, the petitioners defaulted in the payment of the subsequent
installments. Thus, the Board of directors passed a resolution
authorizing for the refund of the amounts paid and the reversion of
the shares of stock to the corporation. Despite the said Board
resolution, the amounts paid by petitioners were not returned to
them. Thus, they instituted an action in the CFI to recover the sums
of money paid. The respondent corporation contends that the
resolution does not apply to petitioners as at the time the resolution
was passed, the shares had already automatically been reverted
back to the corporation, and that the resolution was no longer
effective as it was cancelled by a subsequent resolution passed by
the Board. The CFI declared that the shares of stock had already
been forfeited and absolved the respondent from the complaint.
Issues: Whether the contract herein involved is a subscription, and
whether failure to pay any installment of the purchase price of the
shares of stock would result in its automatic forfeiture in favor of the
corporation.
Held: The contract herein involved is one of sale and not of
subscription as it is an independent agreement between the
individual purchaser and corporation to buy the shares of stock at a
stipulated price. It does not involve a mutual agreement of the
subscribers to take and pay for the stock of the corporation.
Whether a particular contract is a purchase or a subscription of
shares of stock is a matter of construction and depends upon its
terms and the intention of the parties. It has been held that a
subscription to stock in an existing corporation is, as between the
subscriber and the corporation, simply a contract of purchase and
sale. As to forfeiture, the contract did not expressly provide that the
failure of the purchaser to pay any installment would give rise to the
forfeiture and cancellation without the necessity of any demand
from the seller. However, being a contract of sale, it may be
rescinded by mutual agreement of the parties. In the subsequent
Board resolution, it was stated that the contracts were rescinded for
the good of the corporation and in order to terminate a pending civil
case involving the validity of such sales of the shares. To such
rescission, petitioners apparently agreed, as shown by their demand
for the refund of the amount they had already paid to the
corporation.
LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now
JARDINE-CMG LIFE INSURANCE CO. INC.) v. COURT OF
APPEALS and COMMISSIONER OF INTERNAL REVENUE. G.R.
No. 118043. July 23, 1998. 249 SCRA 92
FACTS:
Jardine-CMG Life Insurance Company, Inc., is a domestic corporation
engaged in the life insurance business. It issued 50,000 shares of
stock as stock dividends, with a par value of P100 or a total of P5
million. Petitioner paid documentary stamp taxes on each certificate
on the basis of its par value.
The CIR decided that the book value of the shares should be used as
a basis for determining the amount of the documentary stamp tax.
The CIR issued a deficiency documentary stamp tax assessment of
P78,991.25 in excess of the par value of the stock dividends.
Petitioner appealed to the CTA which held that the amount of the
documentary stamp tax should be based on the par value stated on
each certificate of stock reversing the CIR's decision. The CIR
appealed with the CA and again held in favor of the CIR.
ISSUE: Whether the amount to be paid for stock dividends as
documentary stamp tax, is the par value or the book value of the
shares.
RULING:
The par value. The Court reaffirmed the CTA's decision.
Petitioner is correct in basing the assessment on the book value
thereof rejecting the principles enunciated in Commissioner of
Internal Revenue vs. Heald Lumber Co. as the said case refers to
purchases of no-par certificates of stocks and not to stock dividends.
The documentary stamp tax is not levied upon the shares of stock
per se but rather on the privilege of issuing certificates of stock.
It is clear that stock dividends are shares of stock and not certificates
of stock which merely represent them. There is no reason for
determining the actual value of such dividends for purposes of the
documentary stamp tax if the certificates representing them indicate
a par value.
BITONG V. CA (G.R. NO. 123553)
Facts:
Petitioner Bitong allegedly acting for the benefit of Mr. & Ms. Co.
filed a derivative suit before the SEC against respondent spouses
Apostol, who were officers in said corporation, to hold them liable
for fraud and mismanagement in directing its affairs. Respondent
spouses moved to dismiss on the ground that petitioner had no legal
standing to bring the suit as she was merely a holder-in-trust of
shares of JAKA Investments which continued to be the true
stockholder of Mr. & Ms. Petitioner contends that she was a holder
of proper stock certificates and that the transfer was recorded. She
further contends that even in the absence of the actual certificate,
mere recording will suffice for her to exercise all stockholder rights,
including the right to file a derivative suit in the name of the
corporation. The SEC Hearing Panel dismissed the suit. On appeal,
the SEC En Banc found for petitioner. CA reversed the SEC En Banc
decision.
Issue:
Whether or not petitioner is the true holder of stock certificates to
be able institute a derivative suit.
Ruling: NO.
Sec 63 of the Corporation Code envisions a formal certificate of stock
which can be issued only upon compliance with certain
requisites. First, the certificates must be signed by the president or
vice-president, 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 in 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.
The certificate of stock itself once issued is a continuing affirmation
or representation that the stock described therein is valid and
genuine and is at least prima facie evidence that it was legally issued
in the absence of evidence to the contrary. However, this
presumption may be rebutted. Aside from petitioners own
admissions, several corporate documents disclose that the true
party-in-interest is not petitioner but JAKA. It should be emphasized
that JAKA executed, a deed of sale over 1,000 Mr. & Ms. shares in
favor of respondent Eugenio D. Apostol. On the same day,
respondent Apostol signed a declaration of trust stating that she was
the registered owner of 1,000 Mr. & Ms. shares covered by a
Certificate of Stock. And, there is nothing in the records which shows
that JAKA had revoked the trust it reposed on respondent Eugenia D.
Apostol. Neither was there any evidence that the principal had
requested her to assign and transfer the shares of stock to petitioner.
In fine, the records are unclear on how petitioner allegedly acquired
the shares of stock of JAKA.
Thus, for a valid transfer of stocks, the requirements are as follows:
(a) There must be delivery of the stock certificate; (b) The certificate
must be endorsed by the owner or his attorney-in-fact or other
persons legally authorized to make the transfer; and, (c) to be valid
against third parties, the transfer must be recorded in the books of
the corporation. At most, in the instant case, petitioner has satisfied
only the third requirement. Compliance with the first two requisites
has not been clearly and sufficiently shown.
*The basis of a stockholders suit is always one in equity. However,
it cannot prosper without first complying with the legal requisites
for its institution. The most important of these is the bona fide
ownership by a stockholder of a stock in his own right at the time stockholders' meeting only 9 days away, the Villanuevas filed an
of the transaction complained of which invests him with standing Omnibus Motion praying that the said meeting and election of
to institute a derivative action for the benefit of the corporation. officers scheduled on 14 January 1995 be suspended or held in
abeyance, and that the 1993 Board of Directors be allowed, in the
Rural Bank of Lipa City vs CA Case Digest
meantime, to act as such. 1 day before the scheduled stockholders
The Rural Bank of Lipa City Inc., etc. vs. Court of Appeals
meeting, the SEC Hearing Officer granted the Omnibus Motion by
[GR 124535, 28 September 2001]
issuing a temporary restraining order preventing Bautista, et al. from
holding the stockholders meeting and electing the board of directors
Facts: Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of
and officers of the Bank. A petition for Certiorari and Annulment
Lipa City, executed a Deed of Assignment, wherein he assigned his
with Damages was filed by the Rural Bank, its directors and officers
shares, as well as those of 8 other shareholders under his control
before the SEC en banc. On 7 June 1995, the SEC en banc denied the
with a total of 10,467 shares, in favor of the stockholders of the Bank
petition for certiorari. A subsequent motion for reconsideration was
represented by its directors Bernardo Bautista, Jaime Custodio and
likewise denied by the SEC en banc in a Resolution dated 29
Octavio Katigbak. Sometime thereafter, Reynaldo Villanueva, Sr. and
September 1995. A petition for review was filed before the Court of
his wife, Avelina, executed an Agreement wherein they
Appeals (CA-GR SP 38861), assailing the Order dated 7 June 1995
acknowledged their indebtedness to the Bank in the amount of
and the Resolution dated 29 September 1995 of the SEC en banc in
P4,000,000.00, and stipulated that said debt will be paid out of the
SEC EB 440. The appellate court upheld the ruling of the SEC.
proceeds of the sale of their real property described in the
Bautista, et al.'s motion for reconsideration was likewise denied by
Agreement. At a meeting of the Board of Directors of the Bank on 15
the Court of Appeals in an Order dated 29 March 1996. The bank,
November 1993, the Villanueva spouses assured the Board that their
Bautista, et al. filed the instant petition for review.
debt would be paid on or before December 31 of that same year;
otherwise, the Bank would be entitled to liquidate their
Issue: Whether there was valid transfer of the shares to the Bank.
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
Held: For a valid transfer of stocks, there must be strict compliance
obligation, the unpaid balance shall be secured by other collateral
with the mode of transfer prescribed by law. The requirements are:
sufficient therefor. When the Villanueva spouses failed to settle their
(a) There must be delivery of the stock certificate: (b) The certificate
obligation to the Bank on the due date, the Board sent them a letter
must be endorsed by the owner or his attorney-in-fact or other
demanding: (1) the surrender of all the stock certificates issued to
persons legally authorized to make the transfer; and (c) To be valid
them; and (2) the delivery of sufficient collateral to secure the
against third parties, the transfer must be recorded in the books of
balance of their debt amounting to P3,346,898.54.
the corporation. As it is, compliance with any of these requisites has
not been clearly and sufficiently shown. Still, while the assignment
The Villanuevas ignored the bank's demands, whereupon their
may be valid and binding on the bank, et al. and the Villanuevas, it
shares of stock were converted into Treasury Stocks. Later, the
does not necessarily make the transfer effective. Consequently, the
Villanuevas, through their counsel, questioned the legality of the
bank et al., as mere assignees, cannot enjoy the status of a
conversion of their shares. On 15 January 1994, the stockholders of
stockholder, cannot vote nor be voted for, and will not be entitled to
the Bank met to elect the new directors and set of officers for the
dividends, insofar as the assigned shares are concerned.
year 1994. The Villanuevas were not notified of said meeting. In a
Parenthetically, the Villanuevas cannot, as yet, be deprived of their
letter dated 19 January 1994, Atty. Amado Ignacio, counsel for the
rights as stockholders, until and unless the issue of ownership and
Villanueva spouses, questioned the legality of the said stockholders'
transfer of the shares in question is resolved with finality.
meeting and the validity of all the proceedings therein. In reply, the
new set of officers of the Bank informed Atty. Ignacio that the
Villanuevas were no longer entitled to notice of the said meeting
since they had relinquished their rights as stockholders in favor of
the Bank. Consequently, the Villanueva spouses filed with the
Securities and Exchange Commission (SEC), a petition for annulment
of the stockholders' meeting and election of directors and officers on
15 January 1994, with damages and prayer for preliminary injunction
(SEC Case 02-94-4683_. Joining them as co-petitioners were Catalino
Villanueva, Andres Gonzales, Aurora Lacerna, Celso Laygo, Edgardo
Reyes, Alejandro Tonogan, and Elena Usi. Named respondents were
the newly-elected officers and directors of the Rural Bank, namely:
Bernardo Bautista, Jaime Custodio, Octavio Katigbak, Francisco
Custodio and Juanita Bautista. On 6 April 1994, the Villanuevas'
application for the issuance of a writ of preliminary injunction was
denied by the SEC Hearing Officer on the ground of lack of sufficient
basis for the issuance thereof.

However, a motion for reconsideration was granted on 16 December

1994, upon finding that since the Villanuevas' have not disposed of
their shares, whether voluntarily or involuntarily, they were still
stockholders entitled to notice of the annual stockholders' meeting
was sustained by the SEC. Accordingly, a writ of preliminary
injunction was issued enjoining Bautista, et. al. from acting as
directors and officers of the bank. Thereafter, Bautista, et al. filed an
urgent motion to quash the writ of preliminary injunction,
challenging the propriety of the said writ considering that they had
not yet received a copy of the order granting the application for the
writ of preliminary injunction. With the impending 1995 annual

Neugene Marketing Inc. vs. CA [303 SCRA 295 (Feb 18 1999)]
Ownership of Corporate Share/Stock Certificates
Facts: Neugene was duly registered with SEC to engage in trading
business. Private Respondents Sy, Yang, and Suen, holders of 5250
shares or 2/3 of the outstanding capital stock sent notice to the BoD
for a board meeting. In this meeting, they approved a resolution
dissolving Neugene.
SEC thus issued a Certificate of Dissolution of Neugene. Petitioners
Tan, Martin, Moreno and Lee brought an action to annul said SEC
Certification contending that they were the majority stockholders of
the corporation, and that prior to the board meeting, the private
respondents had already divested themselves of their stockholdings
by endorsing them in blank and delivering them to the Uy family.
The latter in turn awarded said stock certificates to Johnny Uy, who
in turn sold the same to petitioners. Hence, private respondents
could no longer validly vote for the dissolution of Neugene at the
time of the board meeting.
Private respondents contend that the assignment of shares were
simulated and fraudulently effected since the endorsement in blank
by them of the stock certificates to the Uy family was only for
safekeeping when they were stolen from a vault by Johnny Uy.
SEC nullified the Certificate of Dissolution. CA, on the other hand,
upheld Neugenes dissolution. Hence, this petition with the SC.
Issue: Whether or not private respondents divested themselves of
their stockholdings when they voted for the resolution dissolving
Neugene.
Held: No. Entries in the Stock and Transfer Book show that at the
time of dissolution of Neugene, the private respondents owned at
least 2/3 of the outstanding capital stock, in sufficient compliance
with Sec. 118 of the Corporation Code of the Philippines.
Petitioners submitted the same Stock and Transfer Book to show that
the certificates of private respondents were cancelled. But after a
careful examination of the evidence on record, SC found that the
stock certificates of private respondents were stolen and therefore
not validly transfered, and the transfers of stock relied upon by
petitioners were fraudulently recorded in the Stock and Transfer
Book of Neugene.
The true relationship between stockholders of Neugene and that of
the Uy family was that they had an understanding that the beneficial
ownership of Neugene would remain with the Uy family, such that
the shares of stock were endorsed in blank, upon issuance, by the
shareholders and entrusted to the Uy family for safekeeping. Such
beneficial ownership has been admitted through the testimonies not
only of private respondents but also of petitioners.
Corporate Law Case Digest: Tan V. SEC (1992)
G.R. No. 95696 March 3, 1992
Lessons Applicable:
Nature of Certificate of Stock (Corporate Law)
Rights to Certificate of Stock for Fully Paid
Shares (Corporate Law)
FACTS:
October 1, 1979: Visayan Educational Supply Corp.
As incorporator, Alfonso S. Tan had 400 shares of the
capital stock at the par value of P100/share, evidenced by
Certificate of Stock No. 2
elected as President until 1982
Board of Directors as director until April 19,
1983
January 31, 1981: incorporators Antonia Y. Young and
Teresita Y. Ong, withdrew by assigning to the corp. their shares,
represented by certificate of stock No. 4 and 5, they were paid
40% corporate stock-in-trade
Certificate of stock No. 2 was cancelled by the corporate
secretary and Patricia Aguilar by virtue of Resolution No.
1981 which was passed and approved while he was still a
member of the BOD
Due to the withdrawal of the 2 incorporators and in order
to complete the membership of the 5 directors of the board, he
sold 50 shares out of his 400 shares of capital stock to his
brother Angel S. Tan
Another incorporator, Alfredo B. Uy, also sold 50 of his 400
shares of capital stock to Teodora S. Tan
March 27, 1981: Angel Tan was elected director and on
March 27, 1981
Certificate of Stock No. 2 was cancelled and the
Certificates Nos. 6 in the name of Angel S. Tan and 8 in the
name of Alfonso S. Tan, Mr. Buzon were issued and delivered
(stock split), signed by the newly elected fifth member of the
Board, Angel S. Tan as VP, upon instruction of Alfonso S. Tan
who was then the president
Alfonso S. Tan was given back Stock Certificate
No. 2 for him to endorse and he deliberately withheld it for
reasons of his own - so as if no delivery
Certificate of Stock No. 8 was delivered to Tan Su Ching
January 29, 1983: Tan Su Ching was elected as President,
Tan as VP but did not sign the minutes
February 27, 1983: dislodged from his position as
president, he withdrew from the corporation paid with stock-in-
trade corresponding to 33.3% par value of P35,000.00
April 19, 1983: Board meeting cancelled Stock Certificate
Nos. 2 and 8 and minutes submitted to SEC
December 3, 1983: Alfonso S. Tan filed the SEC
case questioning for the first time, the cancellation of Stock
Certificates Nos. 2 and 8
No transfer, however, shall be valid, except as
between the parties, until the transfer is recorded to the books
of the corporation so as to show the names of the parties to
the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred.
SEC. 63. Certificate of stock and transfer of shares. The
capital stock and stock and corporations shall be divided into
shares for which certificates signed by the president and vice
president, countersigned by the secretary or assistant secretary,
and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stocks so issued are
personal property and may be transferred by delivery of the
certificate or certificates 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 recorded in the books of the
corporation so as to show the names of the parties to the
transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred.
No shares of stocks against which the corporation holds any
unpaid claim shall be transferable in the
books of the corporations.
SEC: held cancellation of the shares of stock - void
SEC en banc: overturned - nullity of the sale of 350 shares
represented under stock certification No. 8, pursuant to the "in
pari delicto" doctrine.
ISSUE: W/N transfer is valid w/o delivery
HELD: YES. Affirmed.
Alfonso S. Tan devised the scheme of not returning the
cancelled Stock Certificate No. 2 which was returned to him for
his endorsement, to skim off the largesse of the corporation as
shown by the trading of his Stock Certificate No. 8 for goods of
the corporation valued at P2M when the par value of the same
was only worth P35K
He also used this scheme to renege on his
indebtedness to respondent Tan Su Ching in the amount of P1
million
valid transfer even if no delivery
certificate of stock is not a negotiable instrument
Although it is sometimes regarded as
quasi-negotiable, in the sense that it may be transferred by
endorsement, coupled with delivery, it is well-settled that it is
non-negotiable, because the holder thereof takes it without
prejudice to such rights or defenses as the registered owner/s
or transferror's creditor may have under the law, except insofar
as such rights or defenses are subject to the limitations
imposed by the principles governing estoppel.
negotiable instrument
 either indorsement + old position, and if not, he be given an equivalent
delivery or delivery = holder in due course = better right than
real owner
certificate of stock = owner better right
transfer
valid between
parties
recorded in the
books - to bind others including the corporation
NOTE:
Although there are 4 types of transactions, only transfer is
recorded in the stocks and transfer books.
paper representative or
tangible evidence of the stock itself and of the various interests
therein
not necessary to
render one a stockholder in corporation
since stocks were already cancelled and reported to the
respondent Commission, there was no necessity to endorse
All the acts required for the transferee to exercise its rights
over the acquired stocks were attendant and even the
corporation was protected from other parties, considering that
said transfer was earlier recorded or registered in the corporate
stock and transfer book
Union of Supervisors v. Sec. of Labor
facts of the case
This case is a resolution of the previous decision made (Nov.
1981) finding that "Luna's discharge was discriminatory and
constituted unfair labor practice. He is therefore entitled to
reinstatement with back wages." and accordingly ordered
respondent Republic Bank (now Republic Planters Bank) to
immediately reinstate complainant and without loss of seniority
rights + backwages.
On the same month, after receipt of a copy of the said decision,
Luna went to RB for reinstatement but the latter refused, stating that
their counsel still needs to study the said decision.
On Jan 1982, it submitted an MR, alleging the following:
-The complaint for unfair labor practice was filed as early as 1974.
The issues and personality involved were former employees and
officers of the old management team of the defunct Republic Bank.
Some have either resigned, retired and/or terminated when the new
management of respondent Bank took over its helm in 1978
- The findings that RB is guilty of ULP refers to the old defunct RB and
has nothing to do with the RPB
-The new RPB was made in lieu of Phil. Sugar Commissions purchase
of a substantial portion of the banks equity in order to bail the bank
out from financial collapse and ruin
-The new goal of RPB is to act as PHILSUCOMs financing arm vis--
vis crop loans granted to sugar planters of the country and its
financial exposure thereto, ultimately to save the sugar industry
-As a necessary consequence of change of corporate personality, RPB
had to do restructuring and reorganization of its management team
to give itself a new image
-The instant case came to surface only when the present
management of RPB was furnished a copy of the decision of this
Honorable Court. The old management did not advise the present
management of the pendency of the case. If it were accordingly
advised the new management of Republic Planters Bank could have
filed the necessary pleadings and manifestations to advise the
Honorable Court of the foregoing changes in the corporate and
management structure of the defunct Republic Bank
The following grounds were also interposed:
-Even if argued that the corporate life of RB still continued, RPB
cannot be forced to suffer the consequences of the ULP made by the
old management to Luna
- Since they have already hired new personalities (esp. for the bank
manager position in San Juan position Luna is asking for
reinstatement) enjoying its trust and confidence, substituting Luna
will cause an undue disturbance in the chain of command vis--vis
branch operations. Also, a new form of injustice and violation of
security of tenure will thus be committed by RPB on the new
employee
- RPB respectfully submits that subject order be
qualified by allowing respondent Republic Planters
Bank to reinstate Norberto Luna if still possible to his
position
issue
WON RPB may choose to reinstate Luna in to an equivalent position
only. YES.
ratio
The court first laid out the general rules in Reinstatement:
Reinstatement is a restoration to a state from which one has
been removed or separated. It is the return to the position from
which he was removed and assuming again the functions of the
office already held. It pre-supposes that the previous position from
which one had been removed still exists, or that there is an unfilled
position more or less of a similar nature as the one previously
occupied by the employee.
In this regard, Luna may indeed be reinstated in the same
position. Even though there was a reorganization and a change in
management, the same position Luna held before still exists,
therefore giving him a right to such position. But RPBs contention
that the position of a Branch Manager relates to one of trust and
confidence and therefore the incumbent manager of San Juan
Branch who has won the trust and confidence of the management by
reason of his capability and probity should not be dismissed in favor
of one whose competence and integrity the management has not
tested must be given merit.
Carving out the exception for the Economic Business Condition
As the facts of the case provide (previous ruling), Luna has
served RB for 22 years. But even though Luna has served for this
long, it does not prove that he has the trust and confidence of RPB.
Plus, it must be noted that at that time of economic crisis of the
respondent Bank, the herein petitioner was the manager of the San
Juan Branch. It cannot be said that he did not contribute, directly or
indirectly, to the downhill economy of the respondent Bank.
Clearly, the respondent Bank, after surviving said crisis, and
emerging therefrom as Republic Planters Bank, should be given the
best managers. Managers who can contribute to its struggle to
survive. Managers who have not only the capacity and efficiency
but likewise they must also have the "proven" skill that is essential
for the respondent Republic Planters Bank to go on and weather
these times of economic difficulties.
Considering these "economic-business conditions" together
with the economic crisis we are in now, it is inevitable that these be
reflected in the desire for efficient and productive management. This
honest intention can only be effectuated if the complainant
Norberto Luna is reinstated to a substantially equivalent position
without loss of seniority rights and the incumbent manager who is
now holding the position formerly held by herein complainant be
allowed to continue with his "tested" competence and integrity in
the management of the San Juan Branch of the Republic Planters
Bank.
WRT failure of Luna to assert his rights to RPB
Luna shouldve informed RPB of the pending case, given that he
is an active and militant employee in the defense of union rights. His
failure to do so deserves consequences he must face
WRT increases and benefits
The contention by RPB that such benefits should not
automatically attach to the length of service, but must be earned
deserves credence.
Although backwages are compensation to which an employee is
entitled, by reason of his continued status as an employee since an
illegally dismissed employee is considered as not having left his,
mere continuance as an employee does not qualify him for benefits
and increases. Benefits and increases are allowed because of
outstanding performance of duties and not solely because of length
of service.
However, the Court cannot allow the Republic Planters Bank to
make deductions from the 3 year back-wages it has already paid to
the complainant Norberto Luna. Equity must operate in favor of the
employee equally as it favors the employer.
Associated Bank vs. Court of Appeals
CASE DIGEST: G. R. No. 123793, June 29, 1998
FACTS:
Associated Banking Corporation and Citizens Bank and Trust
Company (CBTC) merged to form just one banking corporation
known as Associated Citizens Bank (later renamed Associated Bank),
the surviving bank. After the merger agreement had been signed,
but before a certificate of merger was issued, respondent Lorenzo
Sarmiento, Jr. executed in favor of Associated Bank a promissory
note, promising to pay the bank P2.5 million on or before due date
at 14% interest per annum, among other accessory dues. For failure
to pay the amount due, Sarmiento was sued by Associated Bank.
Respondent argued that the plaintiff is not the proper party in
interest because the promissory note was executed in favor of CBTC.
Also, while respondent executed the promissory note in favor of
CBTC, said note was a contract pour autrui, one in favor of a third
person who may demand its fulfillment. Also, respondent claimed
that he received no consideration for the promissory note and, in
support thereof, cites petitioner's failure to submit any proof of his
loan application and of his actual receipt of the amount loaned.
ISSUE:
1.) Whether or not Associated Bank, the surviving corporation, may
enforce the promissory note made by private respondent in favor of
CBTC, the absorbed company, after the merger agreement had been
signed, but before a certificate of merger was issued?
2.) Whether or not the promissory note was a contract pour autrui
and was issued without consideration?
HELD:
The petition is impressed with merit.
Associated Bank assumed all the rights of CBTC. Although absorbed
corporations are dissolved, there is no winding up of their affairs or
liquidation of their assets, because the surviving corporation
automatically acquires all their rights, privileges and powers, as well
as their liabilities. The merger, however, does not become effective
upon the mere agreement of the constituent corporations. The
Securities and Exchange Commission (SEC) and majority of the
respective stockholders of the constituent corporations must have
approved the merger. (Section 79, Corporation Code) It will be
effective only upon the issuance by the SEC of a certificate of merger.
Records do not show when the SEC approved the merger.
But assuming that the effectivity date of the merger was the date of
its execution, we still cannot agree that petitioner no longer has any
interest in the promissory note. The agreement itself clearly provides
that all contracts irrespective of the date of execution entered
into in the name of CBTC shall be understood as pertaining to the
surviving bank, herein petitioner. Such must have been deliberately
included in the agreement in order to avoid giving the merger
agreement a farcical interpretation aimed at evading fulfillment of a
due obligation. Thus, although the subject promissory note names
CBTC as the payee, the reference to CBTC in the note shall be
construed, under the very provisions of the merger agreement, as a
reference to petitioner bank.
On the issue that the promissory note was a contract pour autrui
and was issued without consideration, the Supreme Court held it
was not. In a contract pour autrui, an incidental benefit or interest,
which another person gains, is not sufficient. The contracting parties
must have clearly and deliberately conferred a favor upon a third
person. The "fairest test" in determining whether the third person's
interest in a contract is a stipulation pour autrui or merely an
incidental interest is to examine the intention of the parties as
disclosed by their contract. It did not indicate that a benefit or
interest was created in favor of a third person. The instrument itself
says nothing on the purpose of the loan, only the terms of payment
and the penalties in case of failure to pay.
Private respondent also claims that he received no consideration for
the promissory note, citing petitioner's failure to submit any proof of
his loan application and of his actual receipt of the amount loaned.
These arguments deserve no merit. Res ipsa loquitur. The
instrument, bearing the signature of private respondent, speaks for
itself. Respondent Sarmiento has not questioned the genuineness
and due execution thereof. That he partially paid his obligation is
itself an express acknowledgment of his obligation.
WHEREFORE, the petition is GRANTED.
Babst v CA (G.R. No. 99398 & 104625, January 26, 2001)
(Section 80: Merger and Consolidation)
Petitioners (consolidated): Chester Babst, and Elizalde Steel
Consolidated Inc. (ELISCON)
Respondents (consolidated): CA, BPI, Elizalde Steel, Pacific Multi-
Commercial Corporation (MULTI), Chester Babst
Ynares-Santiago, J.
Facts of the Case
ELISCON obtained a loan from Commercial Bank and Trust Company
(CBTC) with an interest of 14% per annum, as evidenced by a
promissory note. When ELISCON defaulted in payments, it opened
letters of credit from CBTC using the credit facilities of MULTI with
the said bank. Subsequently, Antonio Roxas Chua and Babst executed
a Continuing Suretyship, binding themselves solidarily liable to pay
any existing indebtedness of MULTI to CBTC to the extend of P8M
each. Later on, BPI and CBTC entered into a merger, wherein BPI, as
the surviving corporation, acquired all the assets and assumed all
liabilities of CBTC. Subsequently, by virtue of cession, Development
Bank of the Philippines (DBP) took over the assets of ELISCON to
answer for the latters indebtedness to the former. DBP submitted
formulas to settle the liabilities of ELISCON to its creditors which
included BPI that rejected the same. BPI, as successor-in-interest of
CBTC, sued ELISCON, MULTI, and Babst for collection of sum of
money. The trial court ruled in favor of BPI, and the same was
affirmed by the Court of Appeals. Hence the instant petition.
Issue
Whether BPI can rightfully collect the amounts due of CBTC from its
debtors
Ruling
Yes. There was no question that there was a valid merger between
BPI and CBTC. It is settled that in the merger of two existing
corporations, one of the corporations survives and continues the
business, while the latter is dissolved and all its rights, properties,
and liabilities are acquired by the surviving corporation. Hence, BPI
had the right to institute the collection case. Nonetheless, Babst
could not be made liable for as a surety, he was an insurer of the
debt, and promised only to pay the principals debt if the principal
will not pay. In the present case, there was no indication that DBP,
which took over ELISCON, would fail or default in payment of the
debt incurred.
Philpotts vs. Philippine Manufacturing Co. and Berry W.G. Philpotts
(Petitioner) , a stockholder in Philippine Manufacturing Company
sought to compel respondents to permit plaintiff, a person or by
some authorized agent or attorney to inspect and examine the
records of the business transacted by said company since January 1,
1918. Respondent corporation or any of its officials has refused to
allow the petitioner himself to examine anything relating to the
affairs of the company, and the petitioner prays for an order
commanding respondents to place records of all business
transactions of the company, during a specific period, at the disposal
of the plaintiff or his duly authorized agent or attorney. Petitioner
desires to exercise said right through agent or attorney. Petition is
filed originally in the Supreme Court under authority of Section 515
of Code of Civil Procedure, which gives SC concurrent jurisdiction
with then Court of First Instance in cases where any corporation or
person unlawfully excludes the plaintiff from use and enjoyment and
some right he is entitled. ISSUE: Whether the right which the law
concedes to a stockholder to inspect the records can be exercised by
a proper agent or attorney of the stockholder as well as by
stockholder in person HELD: Yes. Right of inspection of records can
be exercised by proper agent or attorney of the stockholder as well
as by stockholder in person. The right of inspection / examination
into corporate affairs given to a stockholder in section 51 of the
Corporation Law which states: The records of all business
transactions of the corporation and the minutes of any meeting shall
be open to the inspection of any director, member, or stockholder of
the corporation at reasonable hour can be exercised either by
himself or by any duly authorized representative or attorney in fact,
and either with or without the attendance of the stockholder. This is
in conformity with the general rule that what a man may do in
person he may do through another.
TOPIC: STOCKHOLDERS
G.R. No. 133969 January 26, 2000
NEMESIO GARCIA, petitioner,
vs. NICOLAS JOMOUAD, Ex-officio Provincial Sheriff of Cebu and
SPOUSES JOSE ATINON & SALLY ATINON, respondents.
Doctrine: All transfers not so entered on the books of the
corporation are absolutely void; not because they are without notice
or fraudulent in law or fact, but because they are made so void by
statute.
FACTS:
1. Jaime Dico used to be employed as the manager of Young Auto
Supply, which was owned by the petitioner, Nemesio Garcia. In
order to assist Dico in entertaining the clients, Garcia lent his
Proprietary Ownership Certificate (POC) in Cebu Country Club so that
Dico could enjoy the signing provileges of its members.
2. Thereafter, Dico resigned from the Company and returned the
POC. He then executed a Deed of Transfer covering the POC in favor
of Garcia. The Club was furnished with a copy of the said deed but
the transfer was not recorded in the books of the Club because
Garcia failed to present proof of payment of the requisite capital
gains tax.
3. The Spouses Atinon, respondents, filed a collection case against
Jaime Dico for the amount of P900,000.00. After the judgment
became final and executory, the respondent sheriff proceeded with
its execution and levied on the POC share of Dico in the Cebu
Country Club, and scheduled it for public auction.
4. Claiming ownership over the POC, Garcia filed an action for
injunction to enjoin respondents from proceeding with the auction.
5. The RTC dismissed the complaint of Garcia for injunction for lack
of merit, and on appeal, such was likewise affirmed by the CA.
Garcia claimed the POC although in the name of Dico cannot be
levied upon on execution to satisfy the judgment debt because even
prior to the institution of the case:
a. The spouses Atinon had knowledge that Dico already conveyed
back the ownership of the subject, certificate to petitioner;
b. Dico executed a deed of transfer, dated 18 November 1992,
covering the subject certificate in favor of petitioner and the Club
was furnished with a copy thereof; and
c. Dico resigned as a proprietary member of the Club and his
resignation was accepted by the board of directors at their meeting
on 4 May 1993.
ISSUE: "Whether a bona fide transfer of the shares of a corporation,
not registered or noted in the books of the corporation, is 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, such is not valid.
1. Sec. 63 of the Corporation Code reads:
Sec. 63 Certificate of stock and transfer of shares. The capital
stock of corporations shall be divided into shares for which
certificates signed by the president or vice-president, countersigned
by the secretary or assistant secretary, 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 or certificates 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 recorded in the books of
the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate
or certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid
claim shall be transferable in the books of the corporation.
2. The transfer of the subject certificate made by Dico to petitioner
was not valid as to the spouses Atinon, the judgment creditors, as
the same still stood in the name of Dico, the judgment debtor, at the
time of the levy on execution. In addition, as correctly ruled by the
CA, the entry in the minutes of the meeting of the Club's board of
directors noting the resignation of Dico as proprietary member
thereof does not constitute compliance with Section 63 of the
Corporation Code. Said provision of law strictly requires the
recording of the transfer in the books of the corporation, and not
elsewhere, to be valid as against third parties. Accordingly, the CA
committed no reversible error in rendering the assailed decision.
DISPOSITIVE:
IN VIEW OF THE FOREGOING, the Court RESOLVED to DENY the
petition.