HENRY FLEISCHER vs. BOTICA NOLASCO., INC.
GR NO. L-23241
FACTS:
This action was commenced in the CFI against the board of directors of the Botica
Nolasco, Inc., a corporation duly organized and existing under the laws of the Philippine Islands.
The plaintiff prayed that said board of directors be ordered to register in the books of the
corporation five shares of its stock in the name of Henry Fleischer, the plaintiff, and to pay him
the sum of P500 for damages sustained by him resulting from the refusal of said body to
register the shares of stock in question.
Defendant answered the amended complaint denying generally and specifically each
and every one of the material allegations thereof, and, as a special defense, alleged that the
defendant, pursuant to article12 of its by-laws, had preferential right to buy from the plaintiff said
shares at the par value of P100 a share, plus P90 as dividends corresponding to the year 1922,
and that said offer was refused by the plaintiff.
Trial Court held that, in his opinion, article 12 of the by-laws of the corporation which
gives it preferential right to buy its shares from retiring stockholders, is in conflict with Act No.
1459 (Corporation Law), especially with section 35 thereof; and rendered a judgment in favor of
plaintiff. Hence, this appeal.
ISSUE:
Whether or not the Article 12 of the by-laws of the Botica Nolasco, Inc., constitutes a bylaw or regulation adopted by the Botica Nolasco, Inc., governing the transfer of shares of stock
of said corporation?
RULING:
No.
As a general rule, the by-laws of a corporation are valid if they are reasonable and
calculated to carry into effect the objects of the corporation, and are not contradictory to the
general policy of the laws of the land.
Under a statute authorizing by- laws for the transfer of stock, a corporation can do no
more than prescribe a general mode of transfer on the corporate books and cannot justify an
unreasonable restriction upon the right of sale.
The only restraint imposed by the Corporation Law upon transfer of shares is found in
section 35 of Act No. 1459, quoted above, as follows: "No transfer, however, shall be valid,
except as between the parties, until the transfer is entered and noted upon the books of the
corporation so as to show the names of the parties to the transaction, the date of the transfer,
the number of the certificate, and the number of shares transferred." This restriction is
necessary in order that the officers of the corporation may know who are the stockholders,
which is essential in conducting elections of officers, in calling meeting of stockholders, and for
other purposes. but any restriction of the nature of that imposed in the by-law now in question, is
ultra vires, violative of the property rights of shareholders, and in restraint of trade.
Nora Bitong vs. Court of Appeals (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 Bitong is a shareholder, hence a real party-in-interest
RULING:
No. Bitong is not the real party in interest. 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. Although her buying of the shares
were recorded in the Stock and Transfer Book of the corporation, and as provided by Sec. 63 of
the Corp Code that no transfer shall be valid except as between the parties until the transfer is
recorded in the books of the corporation, and upon its recording the corporation is bound by it
and is estopped to deny the fact of transfer of said shares, this provision is not conclusive even
against the corporation but are prima facie evidence only. Parol evidence may be admitted to
supply the omissions in the records, explain ambiguities, or show what transpired where no
records were kept, or in some cases where such records were contradicted. Besides, the
provision envisions a formal certificate of stock which can be issued only upon compliance with
certain requisites: (1) 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, (2) delivery of the certificate; (3) the par value, as to par value shares, or the full
subscription as to no par value shares, must be first fully paid; (4) the original certificate must be
surrendered where the person requesting the issuance of a certificate is a transferee from a
stockholder. These considerations are founded on the basic principle that stock issued without
authority and in violation of the law is void and confers no rights on the person to whom it is
issued and subjects him to no liabilities. Where there is an inherent lack of power in the
corporation to issue the stock, neither the corporation nor the person to whom the stock is
issued is estopped to question its validity since an estoppel cannot operate to create stock
which under the law cannot have existence.
VICENTE C. PONCE vs ALSONS CEMENT CORPORATION and FRANCICSO M. GIRON
GR NO 139802
FACTS:
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 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. Despite repeated demands, the ACC refused to issue the
certificates of stocks SEC Hearing Officer Enrique L. Ponce, filed a complaint with the SEC for
mandamus CA: mandamus should be dismissed for failure to state a cause of action.
ISSUE:
Whether the certificates of stock issued to Fausto Gaid can be validly transferred to Vicente
Ponce
RULING:
NO. No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation. 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. In a case such as that at bar,
a mandamus should not issue to compel the secretary of a corporation to make a transfer of
the stock on the books of the company. Unless it affirmatively appears that he has failed or
refused so to do, upon the demand either of the person in whose name the stock is registered,
or of some person holding a power of attorney for that purpose from the registered owner of the
stock. Mere indorsee of a stock certificate, claiming to be the owner, will not necessarily be
recognized as such by the corporation and its officers, in the absence of express instructions of
the registered owner to make such transfer to the indorsee, or a power of attorney authorizing
such transfer.
TEE LING KIAT vs. AYALA CORPORATION
GR NO. 192530
FACTS:
Ayala Corporation instituted a Complaint for Sum of Money with an application for a writ
of attachment against the Spouses Dee. Notice of Levy on Execution was issued and
addressed to the Register of Deeds of Antipolo City, to levy upon "the rights, claims, shares,
interest, title and participation" that the Spouses Dee may have in parcels of land. The parcels
of land were registered in the name of Vonnel Industrial Park, Inc. (VIP). The titles over the
subject properties are registered in the name of VIP, in which Dewey Dee was an incorporator.
Tee Ling Kiat filed a Third-Party Claim, alleging that while Mr. Dewey Dee was indeed
one of the incorporators of VIP, he is no longer a stockholder thereof. He no longer has any
rights, claims, shares, interest, title and participation in VIP or any of its properties. As early as
December 1980, Mr. Dewey Dee has already sold to Mr. Tee Ling Kiat all his stocks in VIP, as
evidenced by a cancelled check which he issued in Mr. Tee Ling Kiat's favor.
The RTC denied VIP and Tee Ling Kiat's Omnibus Motion and disallowed the third-party
claim because the alleged sale of shares of stock from Dewey Dee to Tee Ling Kiat was not
proven. The purported Deed of Sale of Shares of Stock was not recorded in the stock and
transfer books of VIP, as required by Section 63 of the Corporation Code.45 Thus, there was no
valid transfer of shares as against third persons. CA denied Tee Ling Kiat's petition for certiorari,
on the ground that Tee Ling Kiat is not a real party-in-interest, especially considering that the
alleged sale of Dewey Dee's shares of stock to Tee Ling Kiat has not been proven.
ISSUE:
Whether the CA committed any reversible error in ruling that Tee Ling Kiat is not a real party in
interest especially considering that the alleged sale of Dewey Dee’s shares of stock to Tee Ling
Kiat has not been proven
RULING:
NO. The CA did not commit any reversible error.Here, Tee Ling Kiat imputes error on
the CA by the simple expedient of arguing that he did not personally need to prove that the sale
of shares of stock between Dewey Dee and himself had in fact transpired, as the duty to record
the sale in the corporate books lies with VIP. Such an argument, however, fails to recognize that
the very right of Tee Ling Kiat, as a third-party claimant, to institute a terceria is founded on his
claimed title over the levied property
Even if it could be assumed that the sale of shares of stock contained in the photocopies
had indeed transpired, such transfer is only valid as to the parties thereto, but is not binding on
the corporation if the same is not recorded in the books of the corporation. Here, the records
show that the purported transaction between Tee Ling Kiat and Dewey Dee has never been
recorded in VIP's corporate books. Thus, the transfer, not having been recorded in the
corporate books in accordance with law, is not valid or binding as to the corporation or as to
third persons.