PIONEER INSURANCE & SURETY CORPORATION versus CA, BORDER MACHINERY &

HEAVY EQUIPMENT, INC., (BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM

(G.R. No. 84197 July 28, 1989); AND
JACOB S. LIM versus CA, PIONEER INSURANCE AND SURETY CORPORATION, BORDER
MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO and MODESTO CERVANTES
and CONSTANCIO MAGLANA (G.R. No. 84157 July 28, 1989)

TOPIC: Nationality of Corporation > 1. Place of Incorporation Test; 2. Control Test; 3.

Grandfather Rule

FACTS:

In 1965, Jacob S. Lim was engaged in the airline business as owner-operator of Southern Air
Lines (SAL) a single proprietorship.

On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and
executed a sales contract for the sale and purchase of two DC-3A Type aircrafts and one set of
necessary spare parts for the total agreed price of US $109,000.00 to be paid in installments.

On May 22, 1965, Pioneer Insurance and Surety Corporation as surety executed and issued its
Surety Bond No. 6639 in favor of JDA, in behalf of its principal, Lim, for the balance price of the
aircrafts and spare parts.

It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco),
Francisco and Modesto Cervantes and Constancio Maglana contributed some funds used in the
purchase of the above aircrafts and spare parts. The funds were supposed to be their contributions
to a new corporation proposed by Lim to expand his airline business.

They executed two separate indemnity agreements in favor of Pioneer, one signed by Maglana
and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. The indemnity
agreements stipulated that the indemnitors principally agree and bind themselves jointly and
severally to indemnify and hold and save Pioneer from and against any/all damages, losses, costs,
damages, taxes, penalties, charges and expenses of whatever kind and nature which Pioneer may
incur in consequence of having become surety upon the bond/note and to pay, reimburse and make
good to Pioneer, its successors and assigns, all sums and amounts of money which it or its
representatives should or may pay or cause to be paid or become liable to pay on them of whatever
kind and nature.

On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of
Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It
was stipulated therein that Lim transfer and convey to the surety the two aircrafts.

Lim defaulted on his subsequent installment payments prompting JDA to request payments
from the surety. Pioneer paid a total sum of P298,626.12. Pioneer then filed a petition for the
extrajudicial foreclosure of the said chattel mortgage before the Sheriff of Davao City. The
Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of the
aircrafts,
 On July 19, 1966, Pioneer filed an action for judicial foreclosure with an application for a writ
of preliminary attachment against Lim and respondents, the Cervanteses, Bormaheco and Maglana.
In their Answers, Maglana, Bormaheco and the Cervanteses filed cross-claims against Lim alleging
that they were not privies to the contracts signed by Lim and, by way of counterclaim, sought for
damages for being exposed to litigation and for recovery of the sums of money they advanced to Lim
for the purchase of the aircrafts in question. After trial on the merits, a decision was rendered
holding Lim liable to pay Pioneer but dismissed Pioneer's complaint against all other defendants. The
appellate court modified the trial court's decision in that the plaintiff’s complaint against all the
defendants was dismissed. In all other respects the trial court's decision was affirmed.

The petitioner, therefore, questions the appellate court's findings ordering him to reimburse
certain amounts given by the respondents to the petitioner as their contributions to the intended
corporation. Jacob S. Lim premised that as a result of the failure of respondents Bormaheco, Spouses
Cervantes, Constancio Maglana and petitioner Lim to incorporate, a de facto partnership among them
was created, and that as a consequence of such relationship all must share in the losses and/or gains
of the venture in proportion to their contribution. The petitioner, therefore, questions the appellate
court's findings ordering him to reimburse certain amounts given by the respondents to the petitioner
as their contributions to the intended corporation.
ISSUES:
Petitioner Jacob S. Lim poses the following issues:
1. What legal rules govern the relationship among co-investors whose agreement was to
do business through the corporate vehicle but who failed to incorporate the entity in
which they had chosen to invest?
2. How are the losses to be treated in situations where their contributions to the intended
'corporation' were invested not through the corporate form?

RULING:

The instant petitions are DISMISSED. The questioned decision of the Court of
Appeals is
AFFIRMED.

No de facto partnership was created among the parties which would entitle the
petitioner to a reimbursement of the supposed losses of the proposed corporation.

The record shows that the petitioner was acting on his own and not in behalf of his other
would-be incorporators in transacting the sale of the airplanes and spare parts.

We first state the principles. While it has been held that as between themselves the rights of
the stockholders in a defectively incorporated association should be governed by the supposed
charter and the laws of the state relating thereto and not by the rules governing partners, it is
ordinarily held that persons who attempt, but fail, to form a corporation and who carry on business
under the corporate name occupy the position of partners inter se. Thus, where persons associate
themselves together under articles to purchase property to carry on a business, and their
organization is so defective as to come short of creating a corporation within the statute, they
become in legal effect partners inter se, and their rights as members of the company to the property
acquired by the company will be recognized. However, such a relation does not necessarily exist, for
ordinarily persons cannot be made to assume the relation of partners, as between themselves, when
their purpose is that no partnership shall exist, and it should be implied only when necessary to do
justice between the parties; thus, one who takes no part except to subscribe for stock in a proposed
corporation which is never legally formed does not become a partner with other subscribers who
engage in business under the name of the pretended corporation, so as to be liable as such in an
action for settlement of the alleged partnership and contribution. A partnership relation between
certain stockholders and other stockholders, who were also directors, will not be implied in the
absence of an agreement, so as to make the former liable to contribute for payment of debts illegally
contracted by the latter.

In the instant case, it is to be noted that the petitioner was declared non-suited for his failure
to appear during the pretrial despite notification. In his answer, the petitioner denied having received
any amount from respondents Bormaheco, the Cervanteses and Maglana. The trial court and the
appellate court, however, found through Exhibit 58, that the petitioner received the amount of
P151,000.00 representing the participation of Bormaheco and Atty. Constancio B. Maglana in the
ownership of the subject airplanes and spare parts. The record shows that defendant Maglana gave
P75,000.00 to petitioner Jacob Lim thru the Cervanteses.

It is therefore clear that the petitioner never had the intention to form a corporation with the
respondents despite his representations to them. This gives credence to the cross-claims of the
respondents to the effect that they were induced and lured by the petitioner to make contributions to
a proposed corporation which was never formed because the petitioner reneged on their agreement.

Applying therefore the principles of law earlier cited to the facts of the case, necessarily, no de
facto partnership was created among the parties which would entitle the petitioner to a
reimbursement of the supposed losses of the proposed corporation. The record shows that the
petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting
the sale of the airplanes and spare parts
CASE # 2: ABOITIZ EQUITY VENTURES (AEV) versus VICTOR S. CHIONGBIAN, BENJAMIN
D. GOTHONG, and CARLOS A. GOTHONG LINES, INC. (CAGLI); (G.R. No.197530 July 9,
2014)

TOPIC: Corporate Juridical Personality > 1. Doctrine of Separate Juridical Personality; 2.

Doctrine of Piercing the Corporate Veil.

FACTS:

On January 8, 1996, Aboitiz Shipping Corporation ("ASC"), principally owned by the Aboitiz
family, CAGLI, principally owned by the Gothong family, and William Lines, Inc. ("WLI"), principally
owned by the Chiongbian family, entered into an agreement whereby ASC and CAGLI would transfer
their shipping assets to WLI in exchange for WLI’s shares of stock. WLI, in turn, would run their
merged shipping businesses and, henceforth, be known as WG&A, Inc. ("WG&A"). Sec. 11.06 of the
Agreement required all disputes arising out of or in connection with the Agreement Tobe settled by
Arbitration. Among the attachments to the Agreement was Annex SL-V. Annex SL-V confirmed WLI’s
commitment to acquire certain inventories of CAGLI. These inventories would have a total aggregate
value of, at most, ₱400 million. Annex SL-V also specifically stated that such acquisition was
"pursuant to the Agreement." Pursuant to Annex SL-V, inventories were transferred from CAGLI to
WLI. These inventories were assessed to have a value of 514 million, which was later adjusted to
558.89 million. Of the total amount of 558.89 million, "CAGLI was paid the amount of 400 Million." In
addition to the payment of 400 million, petitioner Aboitiz Equity Ventures ("AEV") noted that WG&A
shares with a book value of 38.5 million were transferred to CAGLI. As there was still a balance, in
2001, CAGLI sent WG&A (the renamed WLI) demand letters "for the return of or the payment for the
excess inventories." AEV alleged that to satisfy CAGLI’s demand, WLI/WG&A returned inventories
amounting to 120.04 million. As proof of this, AEV attached copies of delivery receipts signed by
CAGLI’s representatives.

Sometime in 2002, the Chiongbian and Gothong families decided to leave the WG&A
enterprise and sell their interest in WG&A to the Aboitiz family. As such, a share purchase agreement
("SPA") was entered into by petitioner AEV and the respective shareholders groups of the
Chiongbians and Gothongs. In the SPA, AEV agreed to purchase the Chiongbian group's 40.61%
share and the Gothong group's 20.66% share in WG&A’s issued and outstanding stock. Section 6.5 of
the SPA provided for arbitration as the mode of settling any dispute arising from the SPA. Section 6.8
of the SPA further provided that the Agreement (of January 8, 1996) shall be deemed terminated
except its Annex SL-V. As part of the SPA, the parties entered into an Escrow Agreement whereby
ING Bank N.V.-Manila Branch was to take custody of the shares subject of the SPA. Section 14.7 of
the Escrow Agreement provided that all disputes arising from it shall be settled through arbitration.
As a result of the SPA, AEV became a stockholder of WG&A. Subsequently, WG&A was renamed
Aboitiz Transport Shipping Corporation ("ATSC").

Petitioner AEV alleged that in 2008, CAGLI resumed making demands despite having already
received 120.04 million worth of excess inventories. CAGLI initially made its demand to ATSC (the
renamed WLI/WG&A). As alleged by AEV, however, CAGLI subsequently resorted to a "shotgun
approach" and directed its subsequent demand letters to AEV as well as to FCLC (a company related
to respondent Chiongbian). AEV responded to CAGLI’s demands through several letters. AEV rebuffed
CAGLI's demands noting that: (1) CAGLI already received the excess inventories; (2) it was not a
party to CAGLI's claim as it had a personality distinct from WLI/WG&A/ATSC; and (3) CAGLI's claim
was already barred by prescription. In a reply-letter, CAGLI claimed that it was unaware of the
delivery to it of the excess inventories and asked for copies of the corresponding delivery receipts.
CAGLI threatened that unless it received proof of payment or return of excess inventories having
been made on or before March 31, 1996, it would pursue arbitration. In letters written for AEV, it was
noted that the excess inventories were delivered to GT Ferry Warehouse. Attached to these letters
were a listing and/or samples of the corresponding delivery receipts. In these letters it was also
noted that the amount of excess inventories delivered (120.04 million) was actually in excess of the
value of the supposedly unreturned inventories (119.89 million). Thus, it was pointed out that it was
CAGLI which was liable to return the difference between 120.04 million and 119.89 million.

Its claims not having been satisfied, CAGLI filed on November 6, 2008 the first of two
applications for arbitration against respondent Chiongbian, ATSC, ASC, and petitioner AEV, before the
Cebu City Regional Trial Court, Branch 20. In response, AEV filed a motion to dismiss and argued that
CAGLI failed to state a cause of action as there was no agreement to arbitrate between CAGLI and
AEV. Specifically, AEV pointed out that: (1) AEV was never a party to the January 8, 1996 Agreement
or to its Annex SL-V; (2) while AEV is a party to the SPA and Escrow Agreement, CAGLI's claim had
no connection to either agreement; (3) the unsigned and unexecuted SPA attached to the complaint
cannot be a source of any right to arbitrate; and (4) CAGLI did not say how WLI/WG&A/ATSC's
obligation to return the excess inventories can be charged to AEV.

On December 4, 2009, the Cebu City Regional Trial Court, Branch 20 issued an order
dismissing the first complaint with respect to AEV. It sustained AEV’s assertion that there was no
agreement binding AEV and CAGLI to arbitrate CAGLI’s claim. Whether by motion for reconsideration,
appeal or other means, CAGLI did not contest this dismissal. On February 26, 2010, the Cebu
City Regional Trial Court, Branch 20 issued an order directing the parties remaining in
the first complaint (after the discharge of AEV) to proceed with arbitration. The second
complaint was docketed as Civil Case No. CEB-37004 and was also in view of the return of the
same excess inventories subject of the first complaint. On October 28, 2010, AEV filed a motion to
dismiss the second complaint on the following grounds (1) forum shopping; (2) failure to state a
cause of action; (3) res judicata; and (4) litis pendentia. In the first of the two (2) assailed orders
dated May 5, 2011, the Cebu City Regional Trial Court, Branch 10 denied AEV's motion to dismiss.

ISSUES: (specific to the topic)

1. Whether petitioner, Aboitiz Equity Ventures, Inc., is bound by an agreement to arbitrate with
Carlos A. Gothong Lines, Inc., with respect to the latter’s claims for unreturned inventories
delivered to William Lines, Inc./WG&A, Inc./Aboitiz Transport System Corporation

RULING:

WHEREFORE, the petition is GRANTED. The assailed orders dated May 5, 2011 and
June 24, 2011 of the Regional Trial Court, Cebu City, Branch 10 in Civil Case No. CEB-
37004 are declared VOID. The Regional Trial Court, Cebu City, Branch 10 is ordered to
DISMISS Civil Case No. CEB-37004.

1. There is no agreement binding AEV to arbitrate with CAGLI on the latter’s claims
arising from Annex SL-V.
 For arbitration to be proper, it is imperative that it be grounded on an agreement between the
parties. In this petition, not one of the parties — AEV, CAGLI, Victor S. Chiongbian, and Benjamin D.
Gothong — has alleged and/or shown that the controversy is properly the subject of "compulsory
arbitration [as] provided by statute." Thus, the propriety of compelling AEV to submit itself to
arbitration must necessarily be founded on contract. Four (4) distinct contracts have been cited in the
present petition:

1. The January 8, 1996 Agreement in which ASC, CAGLI, and WLI merged their shipping
enterprises, with WLI (subsequently renamed WG&A) as the surviving entity. Section 11.06
of this Agreement provided for arbitration as the mechanism for settling all disputes arising
out of or in connection with the Agreement.

2. Annex SL-V of the Agreement between CAGLI and WLI (and excluded ASC and any other
Aboitiz controlled entity), and which confirmed WLI’s commitment to acquire certain
inventories, worth not more than 400 million, of CAGLI. Annex SL-V stated that the
acquisition was "pursuant to the Agreement." It did not contain an arbitration clause.

3. The September 23, 2003 Share Purchase Agreement or SPA in which AEV agreed to
purchase the Chiongbian and Gothong groups' shares in WG&A’s issued and outstanding
stock. Section 6.5 of the SPA provided for arbitration as the mode of settling any dispute
arising from the SPA. Section 6.8 of the SPA further provided that the Agreement of
January 8, 1996 shall be deemed terminated except its Annex SL-V.

4. The Escrow Agreement whereby ING Bank N.V.-Manila Branch was to take custody of the
shares subject of the SPA. Section 14.7 of the Escrow Agreement provided that all disputes
arising from it shall be settled via arbitration.

Annex SL-V is only between WLI and CAGLI — it necessarily follows that none but
WLI/WG&A/ATSC and CAGLI are bound by the terms of Annex SL-V. It is elementary that contracts
are characterized by relativity or privity, that is, that "[c]ontracts take effect only between the
parties, their assigns and heirs." As such, one who is not a party to a contract may not seek relief for
such contract’s breach. Likewise, one who is not a party to a contract may not be held liable for
breach of any its terms. While the principle of privity or relativity of contracts acknowledges that
contractual obligations are transmissible to a party’s assigns and heirs, AEV is not WLI’s successor-in-
interest. In the period relevant to this petition, the transferee of the inventories transferred by CAGLI
pursuant to Annex SL-V assumed three (3) names: (1) WLI, the original name of the entity that
survived the merger under the January 8, 1996 Agreement; (2) WG&A, the name taken by WLI in the
wake of the Agreement; and (3) ATSC, the name taken by WLI/WG&A in the wake of the SPA. As
such, it is now ATSC that is liable under Annex SL-V.

Pursuant to the January 8, 1996 Agreement, the Aboitiz group (via ASC) and the Gothong
group (via CAGLI) became stockholders of WLI/WG&A, along with the Chiongbian group (which
initially controlled WLI). This continued until, pursuant to the SPA, the Gothong group and the
Chiongbian group transferred their shares to AEV. With the SPA, AEV became a stockholder of
WLI/WG&A, which was subsequently renamed ATSC. Nonetheless, AEV’s status as ATSC’s
stockholder does not subject it to ATSC’s obligations. It is basic that a corporation has a personality
separate and distinct from that of its individual stockholders. Thus, a stockholder does not
automatically assume the liabilities of the corporation of which he is a stockholder. A corporation is
an artificial entity created by operation of law. It possesses the right of succession and such powers,
attributes, and properties expressly authorized by law or incident to its existence. It has a personality
separate and distinct from that of its stockholders and from that of other corporations to which it
may be connected. As a consequence of its status as a distinct legal entity and as a result of a
conscious policy decision to promote capital formation, a corporation incurs its own liabilities and is
legally responsible for payment of its obligations. In other words, by virtue of the separate juridical
personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder.
This protection from liability for shareholders is the principle of limited liability.

In fact, even the ownership by a single stockholder of all or nearly all the capital stock of a
corporation is not, in and of itself, a ground for disregarding a corporation’s separate personality.
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not in itself sufficient ground for disregarding the separate corporate
personality. A corporation’s authority to act and its liability for its actions are separate and apart from
the individuals who own it. The so-called veil of corporation fiction treats as separate and distinct the
affairs of a corporation and its officers and stockholders. As a general rule, a corporation will be
looked upon as a legal entity, unless and until sufficient reason to the contrary appears. When the
notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend
crime, the law will regard the corporation as an association of persons. Also, the corporate entity may
be disregarded in the interest of justice in such cases as fraud that may work inequities among
members of the corporation internally, involving no rights of the public or third persons. In both
instances, there must have been fraud and proof of it. For the separate juridical personality of a
corporation to be disregarded, the wrongdoing must be clearly and convincingly established. It
cannot be presumed.

AEV’s status as ATSC’s stockholder is, in and of itself, insufficient to make AEV liable for
ATSC’s obligations. Moreover, the SPA does not contain any stipulation which makes AEV assume
ATSC’s obligations. At no point does the text of Section 6.8 support the position that AEV steps into
the shoes of the obligor under Annex SL-V and assumes its obligations. Neither does Section 6.5 of
the SPA suffice to compel AEV to submit itself to arbitration. While it is true that Section 6.5
mandates arbitration as the mode for settling disputes between the parties to the SPA, Section 6.5
does not indiscriminately cover any and all disputes which may arise between the parties to the SPA.
Rather, Section 6.5 is limited to "dispute[s] arising between the parties relating to this Agreement
[i.e., the SPA]."122 To belabor the point, the obligation which is subject of the present dispute
pertains to Annex SL-V, not to the SPA. That the SPA, in Section 6.8, recognizes the subsistence of
Annex SL-V is merely a factual recognition. It does not create new obligations and does not alter or
modify the obligations spelled out in Annex SL-V. AEV was drawn into the present controversy on
account of its having entered into the SPA. This SPA made AEV a stockholder of WLI/WG&A/ATSC.
Even then, AEV retained a personality separate and distinct from WLI/WG&A/ATSC. The SPA did not
render AEV personally liable for the obligations of the corporation whose stocks it held. The obligation
animating CAGLI’s desire to arbitrate is rooted in Annex SL-V. Annex SL-V is a contract entirely
different from the SPA. It created distinct obligations for distinct parties. AEV was never a party to
Annex SL-V. Rather than pertaining to AEV, Annex SL-V pertained to a different entity: WLI (renamed
WG&A then renamed ATSC). AEV is, thus, not bound by Annex SL-V. On one hand, Annex SL-V does
not stipulate that disputes arising from it are to be settled via arbitration. On the other hand, the SPA
requires arbitration as the mode for settling disputes relating to it and recognizes the subsistence of
the obligations under Annex SL-V. But as a separate contract, the mere mention of Annex SL-V in the
SPA does not suffice to place Annex SL-V under the ambit of the SPA or to render it subject to the
SPA’s terms, such as the requirement to arbitrate.
CASE # 3: HENRY FLEISCHER versus BOTICA NOLASCO CO., INC. (G.R. No. L-23241
March 14, 1925)

TOPIC: Adoption of By-Laws; a. nature and functions of by laws; b. requisites of valid by-
laws; c. binding effects; d. amendment

FACTS:

Manuel Gonzalez was the original owner of the five shares of stock in question, Nos. 16, 17,
18, 19 and 20 of the Botica Nolasco, Inc.;

On March 11, 1923, he assigned and delivered said five shares to the plaintiff, Henry Fleischer
together with other credits, in consideration of a large sum of money owed by Gonzalez to Fleischer.

On March 13, 1923, Dr. Eduardo Miciano, who was the secretary-treasurer of said corporation,
offered to buy from Henry Fleischer, on behalf of the corporation, said shares of stock, at their par
value of P100 a share, for P500; that by virtue of article 12 of the by-laws of Botica Nolasco, Inc.,
said corporation had the preferential right to buy from Manuel Gonzalez said shares. The plaintiff
refused to sell them to the defendant. The plaintiff requested Doctor Miciano to register said shares
in his name. Doctor Miciano refused to do so, saying that it would be in contravention of the by-laws
of the corporation.

Also, on March 13, 1923, two days after the assignment of the shares to the plaintiff, Manuel
Gonzales made a written statement to the Botica Nolasco, Inc., requesting that the five shares of
stock sold by him to Henry Fleischer be noted transferred to Fleischer's name. He also acknowledged
in said written statement the preferential right of the corporation to buy said five shares.

On June 14, 1923, Gonzalez wrote a letter to the Botica Nolasco, withdrawing and cancelling
his written statement of March 13, 1923, to which letter the Botica Nolasco on June 15, 1923,
replied, declaring that his written statement was in conformity with the by-laws of the corporation;
that his letter of June 14th was of no effect, and that the shares in question had been registered in
the name of the Botica Nolasco, Inc.

ISSUE:

1. Whether or not article 12 of the by-laws of the Botica Nolasco, Inc., is in conflict with the
provisions of the Corporation Law (Act No. 1459).

RULING:

The by-law now in question was adopted under the power conferred upon the corporation by
section 13, paragraph 7; but in adopting said by-law the corporation has transcended the limits fixed
by law in the same section, and has not taken into consideration the provisions of section 35 of Act
No. 1459 which states that:

“SEC. 35. The capital stock of stock corporations shall be divided into shares for which
certificates signed by the president or the vice-president, countersigned by the secretary or clerk and
sealed with the seal of the corporation, shall be issued in accordance with the by-laws. Shares of
stock so issued are personal property and may be transferred by delivery of the certificate indorsed
by the owner or his attorney in fact or other person legally authorized to make the transfer. No
transfer, however, shall be valid, except as between the parties, until the transfer is entered
and noted upon the books of the corporation so as to show the names of the parties to
the transaction, that date of the transfer, the number of the certificate, and the number
of shares transferred.”

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. On the other hand, it is equally well settled that by-laws of a corporation must
be reasonable and for a corporate purpose, and always within the charter limits. They must always
be strictly subordinate to the constitution and the general laws of the land. They must not infringe
the policy of the state, nor be hostile to public welfare. They must not disturb vested rights or impair
the obligation of a contract, take away or abridge the substantial rights of stockholder or member,
affect rights of property or create obligations unknown to the law.

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.

And moreover, the by-laws now in question cannot have any effect on the appellee. He had no
knowledge of such by-law when the shares were assigned to him. He obtained them in good faith
and for a valuable consideration. He was not a privy to the contract created by said by-law between
the shareholder Manuel Gonzalez and the Botica Nolasco, Inc. Said by-law cannot operate to defeat
his rights as a purchaser.

Whenever a corporation refuses to transfer and register stock in cases like the present,
mandamus will lie to compel the officers of the corporation to transfer said stock upon the books of
the corporation.

In view of all the foregoing, we are of the opinion, and so hold, that the decision of the lower
court is in accordance with law and should be and is hereby affirmed, with costs. So ordered.