PHILIPPINE TRUST COMPANY vs MARCIANO RIVERA

Mariano Rivera = one of the incorporators of Cooperativa Naval Filipina

The corporation became insolvent = Phil Trust became the ASSIGNEE during bankruptcy

Phil Trust instituted to recover one-half of the stock subscription of the defendant ( w/c was NOT PAID by Mariano )

Reason for non-payment = resolution was made

1. capital should be reduced by 50 per centum
2. subscribers released from the obligation to pay any unpaid balance of their subscription in excess of 50 per centum
of the same

Trial judge ruled resolution relied upon was without effect and was still liable for the unpaid balance.

Hence appeal.

Held: YES
1. subscription to the capital of a corporation constitute a find to which creditors have a right to look for satisfaction of
their claims and that the assignee in insolvency can maintain an action upon any unpaid stock subscription in order to
realize assets for the payment of its debts

2. Gen RULE: A corporation has no power to release an original subscriber to its capital stock from the obligation of
paying for his share
Exception: 1. valuable consideration for such release
2. as against creditors a reduction of the capital stock can take place only in the manner an under the
conditions prescribed by the statute or the charter or the articles of incorporation

1. Resolution was wholly ineffectual

 an attempted withdrawal of so much capital from the fund upon which the company's creditors were
entitled ultimately to rely
 effected without compliance with the statutory requirements
ROMANA MIRANDA vs TARLAC RICE MILL CO., INC.

Alberto Miranda subscribed for 100 shares of Tarlac Rice Mill Company TO BE PAID IN INSTALLMENTS

He transferred in lieu of cash for the benefit and to the credit of the Tarlac Rice Mill Company, Inc = a parcel of land

Tarlac loaned from Mariano Tablante and mortgaged the said land to him

Became due on 1929 = Not Paid = Sold the Land for payment

Miranda questioned the sale should have not be made because:

1. violated the terms of the contract in mortgaging the land = because the only sum then due is 3000
2. that when the remaining installments of the stock subscription became due = no obligation to pay because the
corporation had already ceased to do business

Issue:
WON the mortgage and subsequent sale of the land is valid?

Held: YES
a) BOD may at any time declare due and payable to the corporation unpaid subscriptions
 this power of the directors is absolute and cannot be limited by the subscription contract

b) No call is necessary when a subscription is payable = when it is payable in installments at specified times
 RULE = duty of the subscriber to pay AS SOON AS IT IS DUE = without any call or demand
 Failure = action may be brought at any time
 When this action was filed on September 2, 1930, the last of the instalments had already become payable in
accordance with the subscription agreement.
 Neither the fact that the corporation has ceased to do business nor the fact that the other stockholders have
not been required to pay for their shares in accordance with their subscription agreement justifies us in
ordering the corporation to return to the plaintiff the amount paid in by Alberto Miranda.
DE SILVA vs ABOITIZ & COMPANY, INC.

De Silva subscribed for 650 shares of stock of Aboitiz = Paid 200 shares only

he was notified of a resolution = declaring the unpaid subscriptions to the capital stock of the corporation to have become
due and payable ( was published )

Did not pay = Declared Delinquent

Filed a complaint Resolution was invalid = Grounds:

1. prescribing another method of paying the subscription to the capital stock different from that provided in its by-laws
2. all the shares subscribed and not paid = shall be paid out of the 70% of the profit obtained

Trial Court dismissed the complaint. Hence appeal.

Issue:
WON collect subscription by another method different from that prescribed in the by-laws?

Held: YES
1. it is discretionary on the part of the board of directors to do whatever is provided in the said article relative to the
application of a part of the 70 per cent of the profit

2. If the board of directors does not wish to make use of said authority it has two other remedies for accomplishing the
same purpose
 special remedy given by the statute = permitting the corporation to put the unpaid stock for sale and
dispose of it for the account of the delinquent subscriber
 PROVIDED 4 in Corporation Law = which is binding upon it and its stockholders
 artificial entity created by virtue of that same law = made use of the discretionary power granted to it by
that law

3. the plaintiff has no right whatsoever under the provision of the above cited article 46 of the said by-laws to prevent
the board of directors from applying any other method than that mentioned in the said article
FUA CUN vs RICARDO SUMMERS

Chua Soco subscribed 500 shares of China Banking Corporation = paid half of the subscription price

Condition = failure to pay = 500 shares specified in this receipt is subject to sale by the China Banking Corporation for the
payment of any unpaid subscriptions

Chua Soco executed a promissory note in favor of the plaintiff Fua Cun = chattel mortgage on the shares

500 shares were attached and levied upon to satisfy his debt with China Banking Corp

Fua Cun thereupon brought the present action = Grounds:

1. by virtue of the payment of the one-half of the subscription price
2. in effect became the owner of 250 shares
3. By virtue of Chattle Mortgage = hold priority over the claim

Trial court ruled in favor of Fua Cun = ORDER the return of the shares. Hence appeal

Issue:
WON by paying one-half of the subscription in effect became the owner of 250 shares?

Held: NO
A subscriber does not become the owner of a particular number of shares corresponding to the amount he already paid
but merely holds a right of equity in the total number of shares subscribed.

Complete ownership over the total number of shares subscribed will only vest with the stockholder upon payment of the
whole subscription price.

Supplementary Notes:
 A banking corporation has no lien upon its own stock for the indebtedness of the stockholders even when the by-laws
provide that the shares shall be transferable only upon the books of the corporation and that no such transfer shall be
made if the holder of the shares is indebted to the corporation.

 In the absence of special agreement to the contrary, a subscriber for a certain number of shares of stock does not
upon payment of one-half of the subscription price, become entitled to the issuance of certificates for one-half the
number of shares subscribed for.

 An equity in shares of stock may be assigned, the assignment becoming effective as between the parties and as to
third parties with notice
RICARDO A. NAVA vs PEERS MARKETING CORPORATION, RENATO R. CUSI and AMPARO CUSI

Teofilo Po subscribed to 80 shares of Peers Marketing Corporation = 25% of the amount of his subscription was paid

Po sold to Nava his shares = Po represented that he was "the absolute and registered owner of twenty shares"

Nava requested to register the sale in the books of the corporation

Denied because not fully paid

Po was delinquent in the payment and corporation had a claim on his entire subscription

Nava filed a petition for mandamus to order the PEERS Marketing to register the sale

Peers marketing’s defense their by-law provides that = no shares of stock against which the corporation holds an unpaid
claim are transferable in the books of the corporation.

Issue:
WON the provision in the by-laws is valid?

Held: YES
1. The corporation may include in its by-laws rules not inconsistent with law governing the transfer of its shares of
stock
 The twenty shares in question, however, are not covered by any certificate of stock in Po's name.
 As no stock certificate was issued to Po; and without the stock certificate, which is the evidence of
ownership of corporate stock, the assignment of corporate shares is effective only between the parties to
the transaction.
 HENCE no clear legal duty on the part of the officers of the corporation to register the 20 shares in Nava's
name.

2. A stock subscription is a subsisting liability from the time the subscription is made.
 subscriber is as much bound to pay his subscription as he would be to pay any other debt
 The right of the corporation to demand payment is no less incontestable.
Republic Planters Bank vs. Agana

Robes Realty secured a loan P120000 from the Republic Planters Bank
** Partially in the form Money and Partially in the form ofpreferred shares of stocks

Stocks bear the following terms and conditions:

1. right to receive a quarterly dividend of 1% (cumulative and participating )
2. such preferred shares may be redeemed

Robes Realty filed a complaint = Failure of the bank to give dividends and redeem the shares

Trial court ordered the bank to:

1. pay Robes Realty the face value of the stock certificates as redemption price
2. 1% quarterly interest thereon until full payment

Hence Appeal.

Issue:
WON the bank can be compelled to redeem the preferred shares issued to RFRDC and Robes?
WON entitled to the payment of certain rate of interest on the stocks as a matter of right without necessity of a prior
declaration of dividend?

Held: NO and NO
1. option to redeem was clearly vested in the bank
 GR: the redemption rests entirely with the corporation and the stockholder is without right to either
compel or refuse the redemption of its stock
Exception: otherwise provided in the stock certificate
 the terms and conditions set forth therein use the word "may" = HENCE OPTIONAL
 The Central Bank also made a finding that the Bank has been suffering from chronic reserve deficiency =
ORDERED not to redeem any preferred shares Since redemption would reduce the assets of the Bank to the
prejudice of its depositors and creditors
 The directive, in limiting the exercise of a right granted by law to a corporate entity, may thus be considered
as an exercise of police power.

2. Payment of dividends to a stockholder is not a matter of right but a matter of consensus

 RULE = stockholders do not become entitled to the payment thereof as a matter of right without necessity
of a prior declaration of dividends

3. ”Interest bearing stocks” = on which the corporation agrees absolutely to pay interest before dividends are paid to
common stockholders is legal only when construed as requiring payment of interest as dividends from net earnings
or surplus only
 Thus, the declaration of dividends is dependent upon the availability of surplus profit or unrestricted retained
earnings, as the case may be.
 even if there are existing profits, the board of directors has the discretion to determine whether or not
dividends are to be declared

Supplementary Notes
 preferred share of stock = one which entitles the holder thereof to certain preferences over the holders of common stock

 preferences are designed to induce persons to subscribe for shares of a corporation

 The most common forms may be classified into two:

 1. preferred shares as to assets = preference in the distribution of the assets of the corporation in case of
liquidation
2. preferred as to dividends = entitled to receive dividends on said share to the extent agreed upon before any
dividends at all are paid to the holders of common stock

 RULE = There is no guarantee, however, that the share will receive any dividends.

 Preferences (X) Includes:

a) lien upon the property of the corporation
b) being creditors of the corporation
*** Rule = Right of SH is subordinate to the Creditors

 Shareholders, both common and preferred are considered = risk takers who invest capital in the business arid who can
look only to what is left after corporate debts and liabilities are fully paid.

 Redeemable shares
 usually preferred
 When = by their terms are redeemable at a fixed date, / at the option of either corporation or stockholder or
both at certain redemption price
 RULE = redemption may not be made where the corporation is insolvent or if such redemption will cause
insolvency or inability of the corporation to meet its debts as they mature.
COMMISSIONER OF INTERNAL REVENUE vs. MANNING

A Trust agreement was entered into because: Reese’s desire that Mantrasco and Mantrasoc’s 2 subsidiaries to continue
under the management of Manning et al upon his [Reese] death

Reese died = Mantrasco paid Reese’s estate the value of his shares
= This shares was cancelled and a new certificate was issued in the name of Mantrasco

When said purchase price has been fully paid = shares which were declared as dividends

BIR issued assessments = failed to declare the said stock dividends as part of their taxable income
** concluded that the distribution of Reese's shares as stock dividends was in effect a distribution of the "asset or
property of the corporation

They appealed to the CTA = Absolved their liability = Grounds: their respective 1/3 interest in Mantrasco remained the
same

Issue:
WON the shares are treasury shares?

Held: NO
1. Treasury shares = are stocks issued and fully paid for and re-acquired by the corporation either by purchase, donation
forfeiture or other means
 They do not have the status of outstanding shares
 ALTHOUGH not retired = Corporation has the option of reissuance or selling it again

2. so long as it remains a treasury share = it does not participate in dividends NOR vote in stockholders’ meeting
 (X) Dividends = dividends cannot be declared by the corporation to itself
 (X) Voting Power = otherwise equal distribution of voting powers among stockholders will be effectively
lost and the directors will be able to perpetuate their control of the corporation
 It still represents a paid-for interest in the property of the corporation

3. Manifest Intentions of the Party to the Trust agreement

 Treat the Shares of Reese AS ABSOLUTELY OUTSTANDING until fully paid
 RULE = A stock dividend being one payable in capital stock cannot be declared out of the outstanding
corporate stock BUT ONLY from Retained Earnings
 Hence declaration of Stock Dividend is NULL AND VOID ( Violative of public Policy )

Supplementary Notes
 Nature of a stock dividend = always involves a transfer of surplus (or profit) to capital stock
= a conversion of surplus or undivided profits into capital stock which is distributed to
stockholders in lieu of a cash dividend
Nielson & Co. Inc. vs. Lepanto Consolidated Mining Co.

Nielson entered into a management contract with Lepanto

** Nielson was given the right for 5 years to develop and operate the mining claims of Lepanto

Contract was modified = which grants Nielson as compensation for its services “10% of any dividends declared and paid.”

The SC ruled before that the import of this provision is that Nielson will be given 10% of what is actually going to be
declared and distributed as dividends by Lepanto
** Since Lepanto declared a total of P3M of dividends during the period of extension of the contract, the SC ordered
Lepanto to grant P300,000 worth of its stocks to Nielson

Lepanto contests this judgment =Such provision is contrary to the Corporation Code

Issue:
WON a corporation can issue stock dividends to a person who is not a stockholder in payment of services rendered?

Held: NO
1. Nielson is not entitled to a share in the stock dividends since he is not a stockholder
 Effects of the Inclusion of a Non-stockholder as a Stock Dividend Beneficiary:
a) deprives a stockholder of his right share in the corporate profits
b) proportion of a stockholder’s interest changes radically to his or her detriment
c) non-stockholder benefits without assuming the same risks as those born by a stockholder

2. Dividend = the portion of the profits of the enterprise which the corporation sets apart for ratable division among
the holders of the capital stock
 stocks issued as dividend can only be issued to existing stockholders
 they are the only ones entitled to a proportional share in that part of the surplus which is declared as
dividends

3. the intention was only to tie the computation of Nielson’s compensation with 10% of the declared dividend IN WHAT
EVER FORM it may be
 The dividend is only the basis but not the source for such payment

Supplementary Notes
 General Rule: No Stock dividend may be declared, except out of unrestricted retained earnings.

 Retained Earnings – the net accumulated earnings of the corporation out transactions with individuals or firms
outside of the corporation. Retained earnings include earnings from the sale of goods or services in the ordinary
course of its business, as well as earnings from the sale of corporate property other than its stock in trade, at a price
higher than cost.
 Implicit from the term retained earnings is the limitation that a corporation has no power to declare dividends unless
its legal or stated capital is maintained.

 Retained earnings (X) include transactions involving:

a) treasury stock = purchase and sale of such stock are regarded as contractions and expansions or paid-in
capital.
b) donations = also considered as additional paid-in capital.
c) value of existing assets has increased = forms part of unrealized capital

 Unrestricted Retained Earnings – the undistributed earnings of the corporation which have NOT been allocated for
any managerial, contractual or legal purposes and which are free for distribution to the stockholders as dividends.
COMMISSIONER OF INTERNAL REVENUE vs COURT OF APPEALS

Don Andres Soriano (American) = founder of Soriano Corp had a total shareholdings of 185,000 shares

When he died = half of the shares he held went to his wife as her conjugal share and half to his estate

Even after his death = the estate still continued to receive stock dividends from ASC until it grew to total of 108,000 shares

ASC made a board resolution = for the redemption of shares from Soriano’s estate
= Purpose: for the planned “Filipinization” of ASC

Shares were redeemed = tax audit was conducted

CIR issued an assessment against ASC for deficiency withholding tax-at-source = Grounds:
1. when the redemption was made =the estate profited (because ASC would have to pay the estate to redeem)
2. ASC would have withheld tax payments from the Soriano Estate yet it remitted no such withheld tax to the
government

ASC’s Defense:
** not duty bound to withhold tax from the estate FOR the purpose = “Filipinization” of ASC and also to reduce its
remittance abroad

ISSUE:
WON ASC’s arguments are tenable?

Held: NO
1. The proceeds from a redemption is taxable and ASC is duty bound to withhold the tax at source
 total of 108,000 shares redeemed composing of Original Issuance and Stock Dividend
 Sale of stock dividends is taxable

2. Tax Code presumes that every distribution of corporate property, in whole or in part, is made out of corporate
profits such as stock dividends.
 108,000 shares were distributed from the capital of ASC
 capital cannot be distributed in the form of redemption of stock dividends without violating the trust fund
doctrine
 RULE = Once capital, it is always capital
Steinberg v. Velasco

Steinberg is the receiver of the Sibuguey Trading Company

It is alleged that the Officers of Sibuguey

1. approved and authorized various unlawful purchases already made of a large portion of the capital stock
** diverting its funds = in fraud of the creditors of the corporation
2. BOD of Sibuguey Trading Company authorized the purchase of 330 shares of stock of the corporation
** when they had accounts payable to about Php 14K
3. declared payment of P3000 as dividends to stockholders
** when they had accounts payable of about Php 9K

Steinberg prayed that the Officers be liable for the amount of the capital stock purchased and the amount of the dividends
paid

The lower court dismissed the complained and rendered judgment in favor of the defendants.

Hence appeal. In their defense = Grounds:

1. the amount represented by said dividends really constitutes a surplus profit of the corporation
2. Since they have Accounts Receivable amounting to 12K

Issue:
WON Board of Directors of Sibuguey could legally declare a dividend?

Held: NO
1. there was no stipulation as to the actual cash value of those accounts.
 Hence the purchase of its own stock and in declaring dividends = the real assets of the corporation were
diminished by Php 6,300 ( Payment = affect the financial condition of the corporation )
 the corporation did not have then an actual bona fide surplus from which dividends could be paid

- RULE = The creditors of a corporation have the right to assume that so long as there are debts and liabilities, the
board of directors of the corporation will not use its assets to purchase its own stock or to declare dividends to its
stockholders when the corporation is insolvent.

- GR: It has been said that directors are not liable for losses resulting to the corporation from want of knowledge on
their part; or for mistakes of judgment, provided they were honest, and provided they are fairly within the scope of
the powers and discretion confided to the managing body.
Exception: If the directors of a corporation do acts clearly beyond their power, by reason of which a loss
ensued, or dispose of its property without authority = LIABLE for the loss out of their private
estate
BALTAZAR vs LINGAYEN GULF ELECTRIC POWER

Lingayen Gulf = is alleged that it has always been the practice and procedure of the Corporation to issue certificates of stock
to its individual subscribers for unpaid shares of stock

Baltazar subscribed but failed to pay for the full subscription = corporation issued certificates of stock for his paid share

Annual stockholders' meeting was held = Resolution

1. cancelling some stocks for delinquency
2. all unpaid subscription should bear interest annually from the year of subscription
3. declaring all shares having been declared delinquent are incapacitated to vote.

Trial court ruled that all shares covered by fully paid capital stock shares = entitled to vote in all meetings of SH

Issues :
WON SH who has not fully paid his subscription be divested of his voting rights?

Held: NO
If a stockholder in a stock corporation subscribes to a certain number of shares and makes partial payment for which he is
issued certificates of stock, he is entitled to vote the latter, notwithstanding the fact that he has not paid the balance of his
subscription which has been called for payment or declared delinquent

The Fua vs Cun (equity on vote) principle does not come in this case

sec 37 (64) states that “No certificate of stock shall be issued to a subscriber as fully paid up until the full par value
thereof, or the full subscription in the case of no par stock, has been paid by him to the corporation. Subscribed shares not
fully paid up may be voted provided no subscription is unpaid and delinquent.”

it modified sec 36 of the old corporation law by making payment of “par value”as prerequisite for the issuance of certificates
of par value stocks and makes payment of full subscription as prerequisite for issuance of certificates of no-par value stocks.
Stated in another way, the present law requires as a condition before a share holder can vote his shares, that his full
subscription be paid in the case of no par value stock; and in case of stock corporation with par value, the stockholder can
vote the shares fully paid by him only, irrespective of the unpaid delinquent shares.
CHUA GUAN vs SAMAHANG MAGSASAKA

Gonzalo Toco mortgaged his shares to Chua Chiu to guarantee the payment of debt

Chua Chiu assigned all his right and interest in said mortgage to Chua Guan was registered in the
1. office of the register of deeds in the City of Manila
2. the office of the said corporation

Toco defaulted = HENCE Chua Guan foreclosed said mortgage

Chua Guan = Highest bidder

= Sheriff executed in his favor a certificate of sale of said shares

tendered the certificates of stock standing in the name of Toco = wants to:
1. have it canceled
2. Issue new ones in his name

Officers REFUSED = Reason: prior to the date when the Chua made demands = 9 attachments were made on the stocks
: Chua Refused to have these attachments noted on the new certificates

Issue:
WON registration of said chattel mortgage give constructive notice to the said attaching creditors?

Held: NO it was invalid

The registration of the chattel mortgage in the office of the corporation was not necessary and had no legal effect.

two ways for executing a valid chattel mortgage which shall be effective against third persons.
a) the possession of the property mortgage must be delivered to and retained by the mortgagee
b) without such delivery the mortgage must be recorded in the proper office or offices of the register or registers of
deeds

the proper place of registration of such a mortgage

 the chattel mortgage should be registered both at owner's domicile and principal office of the Corporation
 the property mortgaged is not the certificate but the participation and share of the owner in the assets of the
corporation
 THEREFORE = Registration of chattel mortgage in the office of corporation not necessary and had no legal effect.
ENRIQUE MONSERRAT vs CERON

Enrique Monserrat assigned the usufruct of half of his common shares of stock to Ceron

Condition = prohibiting Ceron from selling, mortgaging, encumbering, or exercising any act implying absolute ownership

Ceron = mortgaged and endorsed the shares of stock including Monserrat’s shares to Eduardo Matute
= as payment of his debt

Matute was not informed of the condition

Trial court ruled in favor of Monserrat and declared the mortgage null and void

Hence Matute appealed.

Issue:
WON it is necessary to enter upon the books of the corporation a mortgage constituted on common shares of stock in order
that such mortgage may be valid and effective against 3rd persons?

Held:
Section 35 of the Corporation Law does not require any entry except of transfers of shares of stock in order that such
transfers may be valid as against third persons
 Transfer = to assign or waive the right in, or absolute ownership of, a thing in favor of another, making him the
owner thereof ( absolute and unconditional conveyance of the title and ownership of a share of stock )
 chattel mortgage is not the transfer referred to in Corporation law
 THEREFORE notation upon the books of the corporation is not necessary requisite to its validity
USON vs DIOSOMITO

Diosomito sold and delivered his North Electric shares to Barcelon

Uson sued Diosomito for a debt and attached the said shares ( w/c was still in Diosomito name on the books of the Corp )

Then Barcelon presented the certificates for registration = 9 months after the attachment had been levied 3

Trial Court ruled in favor of Uson = Hence the Shares were foreclosed

Uson was the highest bidder

Barcelon sold the same to H.P.L. Jollye = files and action in court

The lower court ruled for Uson.

Issue:
WON a bona fide transfer of the shares of a corporation, not registered or noted on 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
“no transfer, however, shall be valid except as between the parties, until the transfer is entered and noted upon the
books of the corporation.”
 right of the owner of the shares of stock to transfer the same by delivery = limited and restricted by the law
 Therefore, the transfer from Diosomito to Barcelon was not valid as to Uson
 Reason = since at the time it was attached, the shares still stood in the name of Diosomito on the books of the
corporation

RULE = an attachment lien prevails over a prior unregistered bona fide stock transfer.
ESCAÑO vs FILIPINAS MINING CORPORATION

The CFI of Manila ordered Salvosa to transfer and deliver to Escano shares of the Filipinas Mining Corp.

The escrow however was only to be transferred upon its release by the said Company.

Despite the said order = Salvosa was able to sell the shares to Bengzon

Bengzon thereafter sold the shares to Standard Investment

Filipinas Mining thereafter issued certificates of shares of stock to Standard Investment

** despite the fact that the sales and transfers from Salvosa to Bengzon, Bengzon to Standard, were not recorded in the
corporate books until 3 years after the said shares were attached by garnishment.

Issue: Whether the issuance of the certificate of shares of stock by Filipinas Mining to Standard Investment was valid as
against the attaching creditor of the said shares?

Held: No.
1. transfer needs to be recorded in the corporate books to be effective as against 3rd persons This recording is required
 reasons:
1) to know who the real owner of the shares
2) gives the corporation a chance to object to such transfer = against any claims it may have on the stock
3) to avoid fictitious and fraudulent transfers

RULE = There is no valid reason to treat unissued shares held in escrow differently from the issued shares insofar as their
sale and transfer are concerned.

Supplementary Notes
 No Registration of Transfer of Unpaid Shares
o The shares are thus not transferable on the corporate books
o there is nothing to prevent the stockholder from transferring his interest in the corporation by way of a deed
of assignment
o “unpaid claim” of section 63 = does not necessarily mean that there should have been a previous call by the
board of directors
o As long as portion remains unpaid

 Remedy if Registration Refused

o action to enforce the right does not accrue until there has been a demand and a refusal to record the transfer
o wrongfully refuse = Petition for Mandamus
PONCE vs ALSONS CEMENT CORPORATION

Ponce and Gaid executed a “Deed of Undertaking” = endorsing the shares of Victory Cement Corporation to Ponce

VCC was renamed Floro Cement Corporation (FCC) and then to Alsons Cement Corporation (ACC)

Until Now = no stock issued in the name of Gaid

Ponce Filed a Petition for Mandamus = Grounds:

** Despite repeated demands = the ACC refused without any justifiable reason to issue the stocks

ACC moved to dismiss.

SEC dismissed the case. SEC En Banc reversed the decision.

ACC appeal to CA. Reversed the decision = Grounds:

1. The transfer of the shares between Gaid and Ponce was NOT registered in the stock and transfer book of ACC
2. Ponce has no cause of action.

ISSUE:
WON the cert. of stocks of Gaid can be transferred to Ponce

Held: NO
1. Ponce had not made a previous request upon to record the alleged transfer of stocks.
 RULE = a transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-
existent as far as the corporation is concerned.
 the corporation looks only to its books for the purpose of determining who its shareholders are
 UPON RECORD = rightfully regard the transferee as one of its stockholders
 without such recording = may legally refuse the issuance of stock certificates in the name of the transferee

2. mere indorsement of stock certificates does not in itself give to the indorsee such a right to have a transfer of the
shares of stock on the books of the company
 GR: mandamus should not issue to compel the secretary of a corporation to make a transfer of the stock on the
books of the company
Exception: 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.

3. mandamus - proper remedy to make him the rightful owner and holder of a stock certificate to be issued in his name
TAN v. SEC

Alfonso = owner of 400 shares of the capital stock ( evidenced by certificate number 2 )
= elected as President

Young and Ong ( incorporators ) = withdrew by assigning to the corp. their shares

Tan's certificate of stock was cancelled by virtue of a resolution = made new stocks certificate for Alfonso and Angel

Tan sold (50) shares out of his capital stock to Angel = in order to complete the Directors

Alfonso S. Tan was given back Stock Certificate = for him to endorse and he deliberately withheld it for reasons of his own
** so as if no delivery

Tan was dislodged from his position as president = WITHDREW

BOD had a meeting = effecting the cancellation of Stock Certificate of Alfonso

Alfonso S. Tan filed the SEC case questioning the cancellation of his stocks

ISSUE:
WON transfer is valid w/o delivery?

Held: YES
Section 63 of the Corporation Code of the Philippines is NOT "mandatory in nature"
 Facts = there was already delivery of the unendorsed Stock Certificate No. 2
= return of the cancelled certificate and Deliberate non-indorsement
 But delivery is not essential where it appears that the persons sought to be held as stockholders are officers of the
corporation, and have the custody of the stock book

The certificate is not stock in the corporation but is merely evidence of the holder's interest and status in the corporation
 Only representation of his equity = but is not in law the equivalent of such ownership
 expresses the contract = but is not essential to the existence of a share in stock

a certificate of stock is not a negotiable instrument

 sometime regarded as quasi-negotiable = transferred by endorsement, coupled with delivery
 non-negotiable = 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 estoppels
HAGER vs BRYAN

Hager filed a writ of mandamus against the Bryan ( Corp Sec ) = to compel him to transfer upon the books of the company
certain shares of stock SOLD TO HIM BY LEVERING

certificates were issued in the name of Bryan-London & Co. and by them indorsed to your petitioner

Bryan refused to transfer stocks and filed a demurrer

Issue:
WON a writ of mandamus is proper in this case?

Held: NO
1. No share of stock against which the corporation holds any unpaid claim, shall be transferable on the books of the
corporation.
 To issue the writ = require an officer to transfer stock under conditions where the law expressly prohibited
such transfer
 The writ of mandamus will never issue to compel a person to violate an express provision of the law

2. Writ will not ordinarily issue if the plaintiff has other remedies
 corporation improperly refuses to transfer = clearly liable for the damages
Batong Buhay vs. CA

Batong Buhay issued Stocks to Francisco Aguac

Francisco Aguac sold his shares to of the Incoporated Mining Corporation w/o knowledge of his wife Paula

Paula requested Batong Buhay to withhold the transfer of the shares = BEING A CONJUGAL PROPERTY proceeds were not
given to her

A criminal case was filed against Aguac

Incoporated Mining's counsel presented the certificate for registration for transfer to his name

Batong buhay refused to transfer = Reason = that they might he held liable for damages

Petitioner prayed for preliminary mandatory injunction = Granted

BUT = appealed because lower court's alleged failure to award damages for the wrongful refusal of petitioner to transfer

Not Granted. Hence Appeal.

Issue:
WON Court of Appeals award damages by way of unrealized profits despite the absence of supporting evidence?

Held: NO
Stipulation of facts of the parties = (X) show intent to sell on specific dates
 True that stocks may rise and fall
 whatever profits could have been made are purely SPECULATIVE
 RULE = speculative damages cannot be recovered