1.

Columbia Pictures vs Court of Appeals (261 SCRA 144)

 A foreign Corporation which owns the Copyright to foreign films and exclusive
distribution rights in the Philippines and appointed an attorney in-fact to file
criminal cases on behalf of the corporation is not doing business in the Philippines
because the contract was executed abroad and the hiring of the attorney-in-fact is
merely for the protection of its property rights.
 Mere passive investment in equity and voting the equity shares of the corporation
to elect its director in the board of a domestic corporation is not tantamount to
doing business.
Doctrines:
It is not the absence of the prescribed license but “doing business” in the Philippines
without such license which debars the foreign corporation from access to our courts.
No general rule or governing principles can be laid down as to what constitutes
“doing” or “engaging in” or “transacting” business.
Jurisprudence has, however, held that the term implies a continuity of commercial
dealings and arrangements, and contemplates, to that extent, the performance of
acts or works or the exercise of some of the functions normally incident to or in
progressive prosecution of the purpose and subject of its organization.
Facts: Complainants lodged a formal complaint with the NBI for violation of PD No.
49 and sought its assistance in their anti-film piracy drive. Agents of the NBI and
private researchers made discreet surveillance on various video establishments in
Metro Manila including Sunshine. NBI Senior Agent Lauro C. Reyes applied for a
search warrant with the court a quo against Sunshine seeking the seizure, among
others, of pirated video tapes of copyrighted films all of which were enumerated in a
list attached to the application, and, television sets, video cassettes and/or laser disc
recordings equipment and other machines and paraphernalia used or intended to be
used in the unlawful exhibition, showing, reproduction, sale, lease or disposition of
videograms tapes in the premises above described.
The search warrant was served. The NBI Agents found and seized various video tapes
of duly copyrighted motion pictures/films owned or exclusively distributed by private
complainants, and machines, equipment, television sets, paraphernalia, materials,
accessories all of which were included in the receipt for properties accomplished by
the raiding team.
A “Return of Search Warrant” was filed with the Court. A”Motion To Lift the Order of
Search Warrant” was filed but was later denied for lack of merit. A Motion for
reconsideration of the Order of denial was filed. Petitioners appealed to the CA but it
was dismissed as well as the MR was denied.
Issue: Whether or not Columbia Pictures as a legal standing maintain a suit in
Philippine Courts
Held: The obtainment of a license prescribed by Section 125 of the Corporation Code
is not a condition precedent to the maintenance of any kind of action in Philippine
courts by a foreign corporation, However, under the aforequoted provision, no
foreign corporation shall be permitted to transact business in the Philippines, as this
phrase is understood under the Corporation Code, unless it shall have the license
required by law, and until it complies with the law in transacting business here, it
shall not be permitted to maintain any suit in local courts. As thus interpreted, any
 foreign corporation not doing business in the Philippines may maintain an action in
our courts upon any cause of action, provided that the subject matter and the
defendant are within the jurisdiction of the court. It is not the absence of the
prescribed license but “doing business” in the Philippines without such license which
debars the foreign corporation from access to our courts. In other words, although a
foreign corporation is without license to transact business in the Philippines, it does
not follow that it has no capacity to bring an action. Such license is not necessary if it
is not engaged in business in the Philippines.
No general rule or governing principles can be laid down as to what constitutes
“doing” or “engaging in” or “transacting” business. Each case must be judged in the
light of its own peculiar environmental circumstances. The true tests, however, seem
to be whether the foreign corporation is continuing the body or substance of the
business or enterprise for which it was organized or whether it has substantially
retired from it and turned it over to another.
The Corporation Code does not itself define or categorize what acts constitute doing
or transacting business in the Philippines. Jurisprudence has, however, held that the
term implies a continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or the exercise of
some of the functions normally incident to or in progressive prosecution of the
purpose and subject of its organization.

2. Cemco Holdings vs National Life Insurance Company, 529 SCRA 2007

 The tender offer rule covers not only direct acquisition but also indirect
acquisition or any type of acquisition. Whatever may be the method by which
control of a public company is obtained either through the direct purchase of its
stocks or through indirect means, mandatory tender offer rule applies.
i. When is mandatory tender offer applicable?
ii. What is insider trading? When is an insider liable for insider trading?
 Insider trading is the buying and selling of securities by an insider while in
the possession of a material non-public information.
FACTS: Union Cement Corporation (UCC), a publicly-listed company, has two principal
stockholders – UCHC, a non-listed company, with shares amounting to 60.51%, and petitioner
Cemco with17.03%. Majority of UCHC’s stocks were owned by BCI with 21.31% and ACC with
29.69%. Cemco, on the other hand, owned 9% of UCHC stocks. In a disclosure letter, BCI
informed the Philippine Stock Exchange (PSE) that it and its subsidiary ACC had passed
resolutions to sell to Cemco BCI’s stocks in UCHC equivalent to 21.31% and ACC’s stocks in
UCHC equivalent to 29.69%.
As a consequence of this disclosure, the PSE inquired as to whether the Tender Offer Rule
under Rule 19 of the Implementing Rules of the Securities Regulation Code is not applicable to
the purchase by petitioner of the majority of shares of UCC. The SEC en banc had resolved that
the Cemco transaction was not covered by the tender offer rule. Feeling aggrieved by the
transaction, respondent National Life Insurance Company of the Philippines, Inc., a minority
stockholder of UCC, sent a letter to Cemco demanding the latter to comply with the rule on
mandatory tender offer. Cemco, however, refused.
Respondent National Life Insurance Company of the Philippines, Inc. filed a complaint with the
SEC asking it to reverse its 27 July 2004 Resolution and to declare the purchase agreement of
Cemco void and praying that the mandatory tender offer rule be applied to its UCC shares.
The SEC ruled in favor of the respondent by reversing and setting aside its 27 July
2004Resolution and directed petitioner Cemco to make a tender offer for UCC shares to
respondent and other holders of UCC shares similar to the class held by UCHC in accordance
with Section 9(E), Rule 19 of the Securities Regulation Code.
On petition to the Court of Appeals, the CA rendered a decision affirming the ruling of the SEC.
It ruled that the SEC has jurisdiction to render the questioned decision and, in any event,
Cemco was barred by estoppel from questioning the SEC’s jurisdiction.
It, likewise, held that the tender offer requirement under the Securities Regulation Code and
its Implementing Rules applies to Cemco’s purchase of UCHC stocks. Cemco’s motion for
reconsideration was likewise denied.
ISSUES:
1. Whether or not the SEC has jurisdiction over respondent’s complaint and to require Cemco
to make a tender offer for respondent’s UCC shares.
2. Whether or not the rule on mandatory tender offer applies to the indirect acquisition of
shares in a listed company, in this case, the indirect acquisition by Cemco of 36% of UCC, a
publicly-listed company, through its purchase of the shares in UCHC, a non-listed company.
HELD:
YES. In taking cognizance of respondent’s complaint against petitioner and eventually
rendering a judgment which ordered the latter to make a tender offer, the SEC was acting
pursuant to Rule19(13) of the Amended Implementing Rules and Regulations of the Securities
Regulation Code, to wit:
“ 13. Violation If there shall be violation of this Rule by pursuing a purchase of equity shares of
a public company at threshold amounts without the required tender offer, the Commission,
upon complaint, may nullify the said acquisition and direct the holding of a tender offer. This
shall be without prejudice to the imposition of other sanctions under the Code.”
The foregoing rule emanates from the SEC’s power and authority to regulate, investigate or
supervise the activities of persons to ensure compliance with the Securities Regulation Code,
more specifically the provision on mandatory tender offer under Section 19thereof. Moreover,
petitioner is barred from questioning the jurisdiction of the SEC. It must be pointed out that
petitioner had participated in all the proceedings before the SEC and had prayed for
affirmative relief.
2. YES. Tender offer is a publicly announced intention by a person acting alone or in concert
with other persons to acquire equity securities of a public company.
A public company is defined as a corporation which is listed on an exchange, or a corporation
with assets exceeding P50,000,000.00 and with 200 or more stockholders, at least 200 of them
holding not less than 100 shares of such company .
Stated differently, a tender offer is an offer by the acquiring person to stockholders of a public
company for them to tender their shares therein on the terms specified in the offer.
Tender offer is in place to protect minority shareholders against any scheme that dilutes the
share value of their investments. It gives the minority shareholders the chance to exit the
company under reasonable terms, giving them the opportunity to sell their shares at the same
price as those of the majority shareholders. The SEC and the Court of Appeals ruled that the
indirect acquisition by petitioner of 36% of UCC shares through the acquisition of the non-
listed UCHC shares is covered by the mandatory tender offer rule. The legislative intent of
Section 19 of the Code is to regulate activities relating to acquisition of control of the listed
company and for the purpose of protecting the minority stockholders of a listed corporation.
Whatever may be the method by which control of a public company is obtained, either
through the direct purchase of its stocks or through an indirect means, mandatory tender offer
applies. As appropriately held by the Court of Appeals:
The petitioner posits that what it acquired were stocks of UCHC and not UCC. By
happenstance, as a result of the transaction, it became an indirect owner of UCC. We are
constrained, however, to construe ownership acquisition to mean both direct and indirect.
What is decisive is the determination of the power of control. The legislative intent behind the
tender offer rule makes clear that the type of activity intended to be regulated is the
acquisition of control of the listed company through the purchase of shares. Control may [be]
effected through a direct and indirect acquisition of stock, and when this takes place,
irrespective of the means, a tender offer must occur. The bottom line of the law is to give the
shareholder of the listed company the opportunity to decide whether or not to sell in
connection with a transfer of control. x x x

3. Republic Planters Bank vs Agana, GR No. 51765, March 3, 1997)

 While the preferred shares are cumulative and participating, the holders thereof
are entitled to dividends only if the unrestricted retained earnings are sufficient to
pay such dividends. Dividends are declared based on unrestricted retained
earnings and not on the amount of net profit.
Facts:
Private respondents Robes-Francisco
Realty and Development Corporation (hereafter, "the Corporation") and Adalia F. Robes...
private respondent Corporation secured a loan from petitioner in the amount of P120,000.00.
s part of the proceeds of the loan, preferred shares of stocks were issued to private
respondent Corporation, through its officers then, private respondent Adalia F. Robes and one
Carlos F. Robes. In other words, instead of giving the legal tender totaling to the full amount of
the loan, which is P120,000.00, petitioner lent such amount partially in the form of money and
partially in the form of stock certificates
Said stock certificates were in the name of private respondent Adalia F. Robes and Carlos F.
Robes, who subsequently, however, endorsed his shares in favor of Adalia F. Robes.
Said certificates of stock bear the following terms and conditions:
"The Preferred Stock shall have the following rights, preferences, qualifications and
limitations, to wit:
Of the right to receive a quarterly dividend of One Per Centum (1%), cumulative and
participating.
xxx
That such preferred shares may be redeemed, by the system of drawing lots, at any time after
two (2) years from the date of issue at the option of the Corporation. x x x."...
private respondents proceeded against petitioner and filed a Complaint anchored on private
respondents' alleged rights to collect dividends under the preferred shares in question and to
have petitioner redeem the same under the terms and conditions of the... stock certificates.
he trial court rendered the herein assailed decision in favor of private respondents. In ordering
petitioner to pay private respondents the face value of the stock certificates as redemption
price, plus 1% quarterly interest thereon until full payment
Issues:
The petitioner argues that it cannot be compelled to redeem the preferred shares issued to
the private respondent
Ruling:
A preferred share of stock, on one hand, is one which entitles the holder thereof to certain
preferences over the holders of common stock. The preferences are designed to induce
persons to subscribe for shares of a corporation.[9] Preferred shares take a... multiplicity of
forms. The most common forms may be classified into two: (1) preferred shares as to assets;
and (2) preferred shares as to dividends. The former is a share which gives the holder thereof
preference in the distribution of the assets of the corporation in case of... liquidation;[10] the
latter is a share the holder of which is 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.
There is no guaranty, however,... that the share will receive any dividends
Under the old Corporation Law in force at the time the contract between the petitioner and
the private respondents was entered into, it was provided that "no corporation shall make or
declare any dividend except from the surplus profits... arising from its business, or distribute
its capital stock or property other than actual profits among its members or stockholders until
after the payment of its debts and the termination of its existence by limitation or lawful
dissolution."[12] Similarly,... the present Corporation Code[13] provides that the board of
directors of a stock corporation may declare dividends only out of unrestricted retained
earnings
Preferences granted to preferred stockholders, moreover, do not give them a lien upon the
property of the corporation nor make them creditors of the corporation, the right of the
former being always subordinate to the latter.
Dividends are thus payable only when there are profits earned by the corporation and as a
general rule, even if there are existing profits, the board of directors has the discretion to
determine whether or not dividends are to be declared
Redeemable shares, on the other hand, are shares usually preferred, which by their terms are
redeemable at a fixed date, or at the option of either issuing corporation, or the stockholder,
or both at a certain redemption price
A redemption by the... corporation of its stock is, in a sense, a repurchase of it for cancellation.
[18] The present Code allows redemption of shares even if there are no unrestricted retained
earnings on the books of the corporation.
However, while redeemable shares may be redeemed regardless of the existence of
unrestricted retained earnings, this is subject to... the condition that the corporation has, after
such redemption, assets in its books to cover debts and liabilities inclusive of capital stock.
Redemption, therefore, 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.
The redemption therefore is clearly the type known as "optional". Thus, except as otherwise
provided in the stock... certificate, the redemption rests entirely with the corporation and the
stockholder is without right to either compel or refuse the redemption of its stock.
The redemption of said shares cannot be allowed. As pointed out by the petitioner, the Central
Bank made a finding that said petitioner has been suffering from chronic reserve deficiency
Redemption of preferred shares was prohibited for a just and valid reason

Principles:

4. Andaya vs Rural Bank of Cabadbaran, GR No. 188769, August 3, 2016

 The Supreme Court (abandoning its previous ruling in Ponce vs Alsons Cement)
ruled that the transferees of shares of stock are real parties in interest having a
cause of action for mandamus to compel the registration of transfer and the
corresponding issuance of stock certificates even without the written authority
from the seller to cancel the certificate and register the shares in the books of the
corporation.

ACTS:
Joseph Omar O. Andaya bought from Chute 2,200 shares of stock in the Rural Bank of
Cabadbaran. The transaction was evidenced by a notarized document denominated as Sale
of Shares of Stocks. Chute duly endorsed and delivered the certificates of stock to Andaya and,
subsequently, requested the bank to register the transfer and issue new stock certificates in
favor of the latter. Andaya also separately communicated with the bank’s corporate secretary,
respondent Oraiz, reiterating Chute’s request for the issuance of new stock certificates in
petitioner’s favor.
A few days later, the bank’s corporate secretary wrote Chute to inform her that he could not
register the transfer. He explained that under a previous stockholders’ Resolution, existing
stockholders were given priority to buy the shares of others in the event that the latter offered
those shares for sale (i.e., a right of first refusal). He then asked Chute if she, instead, wished
to have her shares offered to existing stockholders. He told her that if no other stockholder
would buy them, she could then proceed to sell her shares to outsiders.
The bank eventually denied the request of Andaya.
Hence, Andaya instituted an action for mandamus and damages against the Rural Bank of
Cabadbaran; its corporate secretary, Oraiz; and its legal counsel, Gonzalez. Petitioner sought
to compel them to record the transfer in the bank’s stock and transfer book and to issue new
certificates of stock in his name.
The RTC issued a Decision dismissing the complaint. The trial court ruled that Andaya had no
standing to compel the bank to register the transfer and issue stock certificates in his name.
ISSUE:
Whether Andaya, as a transferee of shares of stock, may initiate an action for mandamus
compelling the Rural Bank of Cabadbaran to record the transfer of shares in its stock and
transfer book, as well as issue new stock certificates in his name.
RULING:
It is already settled jurisprudence that the registration of a transfer of shares of stock is a
ministerial duty on the part of the corporation. Aggrieved parties may then resort to the
remedy of mandamus to compel corporations that wrongfully or unjustifiably refuse to record
the transfer or to issue new certificates of stock. This remedy is available even upon the
instance of a bona fide transferee who is able to establish a clear legal right to the registration
of the transfer. This legal right inherently flows from the transferee’s established ownership of
the stocks, a right that has been recognized by this Court as early as in Price v. Martin:
A person who has purchased stock, and who desires to be recognized as a stockholder, for the
purpose of voting, must secure a standing by having the transfer recorded upon the books. If
the transfer is not duly made upon request, he has, as his remedy, to compel it to be made.
Thus, in Pacific Basin Securities Co., Inc., v. Oriental Petroleum and Minerals Corp., this Court
stressed that the registration of a transfer of shares is ministerial on the part of the
corporation:
Clearly, the right of a transferee/assignee to have stocks transferred to his name is an inherent
right flowing from his ownership of the stocks. The Court had ruled in Rural Bank of Salinas,
Inc. v. Court of Appeals that the corporation’s obligation to register is ministerial, citing
Fletcher, to wit:
In transferring stock, the secretary of a corporation acts in purely ministerial capacity, and
does not try to decide the question of ownership.
The duty of the corporation to transfer is a ministerial one and if it refuses to make such
transaction without good cause, it may be compelled to do so by mandamus.
The Court further held in Rural Bank of Salinas that the only limitation imposed by Section 63
of the Corporation Code is when the corporation holds any unpaid claim against the shares
intended to be transferred.
Consequently, transferees of shares of stock are real parties in interest having a cause of
action for mandamus to compel the registration of the transfer and the corresponding
issuance of stock certificates.
We also rule that Andaya has been able to establish that he is a bona fide transferee of the
shares of stock of Chute. The existence, genuineness, and due execution of the following
documents evidencing the sale: (1) a notarized Sale of Shares of Stocks showing Chute’s sale of
2,200 shares of stock to petitioner; (2) a Documentary Stamp Tax Declaration/Return (3)
Capital Gains Tax Return; and (4) stock certificates covering the subject shares duly endorsed
by Chute have been admitted and remain undisputed. There is no doubt that Andaya had the
standing to initiate an action for mandamus to compel the Rural Bank of Cabadbaran to record
the transfer of shares in its stock and transfer book and to issue new stock certificates in his
name.
As the transferee of the shares, petitioner stands to be benefited or injured by the judgment in
the instant petition, a judgment that will either order the bank to recognize the legitimacy of
the transfer and petitioner’s status as stockholder or to deny the legitimacy thereof.

5. Interport Resources Corporation vs. Securities Specialist Inc. GR No. 154069, June 6, 2016
 The effect of the sale of the shares was to extinguish the obligation of the seller to
the Corporation to pay whatever is the balance in the contract of subscription.
The sale of shares to the buyer with the consent of the corporation effectively
resulted in novation.

FACTS: In January 1977, Oceanic Oil & Mineral Resources, Inc. (Oceanic) entered into a
subscription agreement with R.C. Lee, a domestic corporation engaged in the trading of
stocks and other securities, covering 5,000,000 of its shares with par value of P0.01 per
share, for a total of P50,000.00. Thereupon, R.C. Lee paid 25% of the subscription,
leaving 75% unpaid. Consequently, Oceanic issued Subscription Agreements Nos. 1805,
1808, 1809, 1810, and 1811 to R.C. Lee.

On July 28, 1978, Oceanic merged with Interport, with the latter as the surviving
corporation. Interport was a publicly-listed domestic corporation whose shares of stocks
were traded in the stock exchange. Under the terms of the merger, each share of
Oceanic was exchanged for a share of Interport.

On April 16, 1979 and April 18, 1979, SSI, a domestic corporation registered as a dealer
in securities, received in the ordinary course of business Oceanic Subscription
Agreements Nos. 1805, 1808 to 1811, all outstanding in the name of R.C. Lee, and
Oceanic official receipts showing that 25% of the subscriptions had been paid. The
Oceanic subscription agreements were duly delivered to SSI through stock assignments
indorsed in blank by R.C. Lee.

Later on, R.C. Lee requested Interport for a list of subscription agreements and stock
certificates issued in the name of R.C. Lee and other individuals named in the request. In
response, Atty. Rhodora B. Morales, Interport’s Corporate Secretary, provided the
requested list of all subscription agreements of Interport and Oceanic, as well as the
requested stock certificates of Interport. Upon finding no record showing any transfer or
assignment of the Oceanic subscription agreements and stock certificates of Interport as
contained in the list, R.C. Lee paid its unpaid subscriptions and was accordingly issued
stock certificates corresponding thereto.

On February 8, 1989, Interport issued a call or the full payment of subscription

receivables, setting March 15, 1989 as the deadline. SSI tendered payment prior to the
deadline through two stockbrokers of the Manila Stock Exchange. However, the
stockbrokers reported to SSI that Interport refused to honor the Oceanic subscriptions.

Still on the date of the deadline, SSI directly tendered payment to Interport for the
balance of the 5,000,000 shares covered by the Oceanic subscription agreements, some
of which were in the name of R.C. Lee and indorsed in blank. Interport originally
rejected the tender of payment for all unpaid subscriptions on the ground that the
Oceanic subscription agreements should have been previously converted to shares in
Interport.

SSI then required Interport to furnish it with a copy of any notice requiring the
conversion of Oceanic shares to Interport shares. However, Interport failed to show any
proof of the notice. Thus, through a letter dated March 30, 1989, SSI asked the SEC for a
copy of Interport’s board resolution requiring said conversion. The SEC, through Atty. Fe
Eloisa C. Gloria, Director of Brokers and Exchange Department, informed SSI that the
SEC had no record of any such resolution.

Having confirmed the non-existence of the resolution, Francisco Villaroman, President

of SSI, met with Pablo Roman, President and Chairman of the Board of Interport, and
Atty. Pineda, Interport’s Corporate Secretary, at which meeting Villaroman formally
requested a copy of the resolution. However, Interport did not produce a copy of the
resolution.
Despite that meeting, Interport still rejected SSI’s tender of payment for the 5,000,000
shares covered by the Oceanic Subscription Agreements Nos. 1805, and 1808 to 1811.
On March 31, 1989, or 16 days after its tender of payment, SSI learned that Interport
had issued the 5,000,000 shares to R.C. Lee, relying on the latter’s registration as the
owner of the subscription agreements in the books of the former, and on the affidavit
executed by the President of R.C. Lee stating that no transfers or encumbrances of the
shares had ever been made.

Thus, on April 27, 1989, SSI wrote R.C. Lee demanding the delivery of the 5,000,000
Interport shares on the basis of a purported assignment of the subscription agreements
covering the shares made in 1979. R.C. Lee failed to return the subject shares inasmuch
as it had already sold the same to other parties. SSI thus demanded that R.C. Lee pay
not only the equivalent of the 25% it had paid on the subscription but the whole
5,000,000 shares at current market value.

SSI also made demands upon Interport and R.C. Lee for the cancellation of the shares
issued to R.C. Lee and for the delivery of the shares to SSI.

On October 6, 1989, after its demands were not met, SSI commenced this case in the
SEC to compel the respondents to deliver the 5,000,000 shares and to pay damages. It
alleged fraud and collusion between Interport and R.C. Lee in rejecting the tendered
payment and the transfer of the shares covered by the subscription agreements.

ISSUE: WON THE CORPORATION IS OBLIGED TO TRANSFER THE SUBSCRIPTION INFAVOR

OF SSI.

HELD: YES. Clearly, the effect of the assignment of the subscription agreements to SSI
was to extinguish the obligation of R.C. Lee to Oceanic, now Interport, to settle the
unpaid balance on the subscription. As a result of the assignment, Interport was no
longer obliged to accept any payment from R.C. Lee because the latter had ceased to be
privy to Subscription Agreements Nos. 1805, and 1808 to 1811 for having been
extinguished insofar as it was concerned. On the other hand, Interport was legally
bound to accept SSI’s tender of payment for the 75% balance on the subscription price
because SSI had become the new debtor under Subscription Agreements Nos. 1805, and
1808 to 1811. As such, the issuance of the stock certificates in the name of R.C. Lee had
no legal basis in the absence of a contractual agreement between R.C. Lee and
Interport.

Under Section 63 of the Corporation Code, no transfer of shares of stock 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. Hence:

[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. As between the
corporation on the one hand, and its shareholders and third persons on the other, the
corporation looks only to its books for the purpose of determining who its shareholders
are. It is only when the transfer has been recorded in the stock and transfer book that a
corporation may rightfully regard the transferee as one of its stockholders. From this
time, the consequent obligation on the part of the corporation to recognize such rights
as it is mandated by law to recognize arises.

This statutory rule cannot be strictly applied herein, however, because Interport had
unduly refused to recognize the assignment of the shares between R.C. Lee and SSI.
Accordingly, we adopt with approval the SEC’s following conclusion that —

. . . To say that the ten years since the assignment had been made are a sufficient lapse
of time in order for respondent SSI to be considered to have abandoned its rights under
the subscription agreements, is to ignore the rule —

“The right to have the transfer registered exists from the time of the transfers and it is
to the transferee’s benefit that the right be exercised early. However, since the law does
not prescribed (sic) any period within which the registration should be effected the
action to be enforced the right does not accrue until here has been a demand and a
refusal to record the transfer.” (11 Campus 310, 1990 ed., citing Won v. Wack Wack
Golf, 104 Phil. 466, Emphasis Supplied).

Petitioner SSI was denied recognition of its subscription agreement on March 15, 1989;
the complaint against the respondents was filed before the SEC on October 6 of that
same year. This is the period of time that is to be taken into account, not the period
between 1979 and 1989. The Commission thus finds that petitioner acted with sufficient
dispatch in seeking to enforce its rights under the subscription agreements, and sought
the intervention of this Commission within a reasonable period.

In the affidavit of respondent R.C. Lee’s president, Ramon C. Lee, dated February 22,
1989, there are several averments that need to be examined, in the light of respondent
R.C. Lee’s claim of having acted in good faith.

The first is the statement made in paragraph 3 thereof:

“That R.C. Lee Securities, Inc. has delivered to Interport its subscription Agreements for
Twenty Five Million (25,000,000) shares of Oceanic for conversion into Interport shares
however, as of date, only twenty million (20,000,000) shares have been duly covered by
Interport Subscription Agreements and the Five million (5,000,000) shares still remains
without Subscription Agreements”. TIADCc

No explanation is given for the failure of respondent Interport to convert the five (5)
million shares. As can be seen from the letter of Interport to counsel of R.C. Lee, dated
January 27, 1989, already mentioned above, these five (5) million shares purportedly
belonging to respondent R.C. Lee do not seem to be covered by any properly identified
subscription agreements. Yet respondent Interport issued the shares without
respondent R.C. Lee having anything to show for the same. On the other hand,
respondent Interport refused to recognize complainant SSI’s claim to five (5) millions
(sic) shares inspite of the fact that its claim was fully supported by duly issued
subscription agreements, stock assignment and receipts of payment of the initial
subscription. .