CORPORATION LAW

TOPIC Stocks and Stockholders – Certificates of stock and their transfer

CASE TITLE Tee Ling Kiat v. Ayala Corp.

GR. NO. GR No. 192530 DATE March 7, 2018

DOCTRINE How can transfer of stocks be valid against third parties?

To be valid against third parties, the transfer must be recorded in the

books of the corporation.

Section 63 of the Corporation Code of the Philippines (Now in Sec. 62 of

Revised Corp. Code) provide:

Sec. 63. -xxx No transfer shall be valid, except as between the parties,
until the transfer is recorded in the books of the corporation showing the
names of the parties to the transaction, the date of the transfer, the
number of certificate or certificates, and the number of shares
transferred.

FACTS This case concerns a Petition for Review on Certiorari filed by Tee Ling Kiat
against Ayala Corporation, which was substituted by its assignee and
successor in interest Bienvenido B.M. Amora, Jr. (Amora).

Antecedent Facts

On January 28, 1991, Ayala Corporation instituted a Complaint for Sum of

Money with an application for writ of attachment against Spouses Dee. On May
21, 1980, Ayala Investment Development Corporation (AIDC) granted the
amount of P2 Million in a money market line in favor of Continental
Manufacturing Corporation (CMC), its then President being Dewey Dee. Later
on, CMC defaulted in its obligation, leading Ayala Corporation to institute a
claim for sum of money against CMC and Spouses Dee. RTC-Makati City ruled
in favor of Ayala Corporation.

Thereafter, A Notice of Levy on Execution was issued and addressed to the

Register of Deeds of Antipolo City to levy upon “rights, claims, shares, interest,
title and participation,” that the Spouses Dee may have on parcels of land.
According to the Sheriff’s Return, the title over the subject properties are
registered in the name of Vonnel Industrial Park, Inc. (VIP).

Tee Ling Kiat v. Ayala Corp. Page | 1

 On March 26, 2007, before the scheduled sale on execution, Tee Ling Kiat filed
a Third-Party Claim alleging that:

Mr. Dewey Dee was indeed one of the incorporators of VIP; however,
he is no longer a stockholder. He no longer has any rights, claims,
shares, interest, title, and participation in VIP or any of its properties.
That, as early as December 1980, Mr. Dewey Dee has already sold to
Mr. Tee Ling Kiat all his stocks in VIP being evidenced by a cancelled
check.

In an attached Affidavit executed by Tee Ling Kiat, he attested that:

• he is a stockholder of VIP and that he acquired knowledge of levy on
the subject properties through a newspaper,
• he attached photocopies of the cancelled checks alleging the payment
for the purchase of Dewey Dee’s shares in VIP.

Amora, in his opposition, claimed that the records in the Securities and
Exchange Commission does not include the name of Tee Ling Kiat as an
existing stockholder of VIP.

Regional Trial Court ruled that: Tee Ling Kiat failed to provide evidence that
Dewey Dee indeed sold him the shares of stock in accordance with law as it
was not recorded in the books of VIP, as required by Sec. 63 of the Corporation
Code. Thereby, there was no valid transfer of shares as against third persons.

Court of Appeals ruled that: Tee Ling Kiat failed to prove the veracity of the
claimed Deed of Sale of Shares of Stock as it is not sufficient to merely attach
photocopies of the deed or payment of checks. CA said that Tee Ling Kiat
needed to submit evidence to prove that the transaction of the sale took place.
This concludes that Tee Ling Kiat is not a real party-in-interest, as there is no
proof as to the alleged sale of Dewey Dee’s shares of stock to him.

ISSUE Whether Dewey Dee had in fact sold his shares of stock to Tee Ling Kiat in
1980, which would result in Tee Ling Kiat being considered as the real party-in-
interest, and thereby having legal standing as to the Third-Party Claim and
petition for certiorari.

RULING NO.

Court held that Tee Ling Kiat could not substantially prove ownership of stocks
as he could only produce a cancelled check issued by Tee Ling Kiat in favor of
Dewey Dee and a photocopy of the Deed of Sale of Shares of Stock. It was
held that a photocopy of a document has no probative value and is inadmissible
as evidence. Further, Tee Ling Kiat did not offer an explanation as to why the
original Deed of Sale of Shares of Stock could not be produced.

Tee Ling Kiat v. Ayala Corp. Page | 2

Court held that the sale of shares of stock contained in the photocopies can
only be valid between the parties, but is not binding on the corporation if the
same is not recorded in the books of the corporation, in accordance with law.
Hence, the sale is neither valid nor binding as to corporations or as to third
persons.

As such, Tee Ling Kiat’s third party claim is still dismissed.

Dispositive portion:
WHEREFORE, premises considered, the instant petition for review is DENIED.
The Decision dated September 25, 2009 and Resolution dated May 26, 2019
are hereby AFFIRMED.

Tee Ling Kiat v. Ayala Corp. Page | 3