SAN SEBASTIAN COLLEGE-RECOLETOS

COLLEGE OF LAW
2114-A Claro M. Recto Avenue, Zone 040, Brgy. 390,
Quiapo Manila 1001 Philippines
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CORPORATION LAW & BASIC SECURITIES
1st SEM (SY. 2023-2024)

G.R. No. 120138 September 5, 1997

MANUEL A. TORRES, JR., (Deceased), GRACIANO J. TOBIAS, RODOLFO L.
JOCSON, JR., MELVIN S. JURISPRUDENCIA, AUGUSTUS CESAR AZURA
and EDGARDO D. PABALAN, petitioners,
vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION,
TORMIL REALTY & DEVELOPMENT CORPORATION, ANTONIO P. TORRES,
JR., MA. CRISTINA T. CARLOS, MA. LUISA T. MORALES and DANTE D.
MORALES, respondents.

KAPUNAN, J.:

Doctrine:

It is the corporate secretary's duty and obligation to register valid

transfers of stocks and if said corporate officer refuses to comply, the
transferor-stockholder may rightfully bring suit to compel performance.

Facts
The late Manuel A. Torres, Jr. (Judge Torres for brevity) was the majority
stockholder of Tormil Realty & Development Corporation while private
respondents who are the children of Judge Torres' deceased brother Antonio A.
Torres, constituted the minority stockholders.
In 1984, Judge Torres, in order to make substantial savings in taxes,
adopted an "estate planning" scheme under which he assigned to Tormil Realty
& Development Corporation (Tormil for brevity) various real properties he
owned and his shares of stock in other corporations in exchange for 225,972
Tormil Realty shares.
Consequently, the aforelisted properties were duly recorded in the
inventory of assets of Tormil Realty and the revenues generated by the said
properties were correspondingly entered in the corporation's books of account
and financial records.
Pursuant thereto, Judge Torres assigned from his own shares, one (l)
share each to petitioners Tobias, Jocson, Jurisprudencia, Azura and Pabalan.
These assigned shares were in the nature of "qualifying shares," for the sole

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 SAN SEBASTIAN COLLEGE-RECOLETOS
COLLEGE OF LAW
2114-A Claro M. Recto Avenue, Zone 040, Brgy. 390,
Quiapo Manila 1001 Philippines
---------------------------------------------------------------------
CORPORATION LAW & BASIC SECURITIES
1st SEM (SY. 2023-2024)

purpose of meeting the legal requirement to be able to elect them (Tobias and
company) to the Board of Directors as Torres' nominees.

Issue
Whether or not the directors were all validly elected.

Ruling
No. It is precisely the brewing family discord between Judge Torres and
private respondents — his nephew and nieces that should have placed Judge
Torres on his guard. He should have been more careful in ensuring that his
actions (particularly the assignment of qualifying shares to his nominees)
comply with the requirements of the law. Petitioners cannot use the flimsy
excuse that it would have been a vain attempt to force the incumbent corporate
secretary to register the aforestated assignments in the stock and transfer book
because the latter belonged to the opposite faction. It is the corporate
secretary's duty and obligation to register valid transfers of stocks and if said
corporate officer refuses to comply, the transferor-stockholder may rightfully
bring suit to compel performance. In other words, there are remedies within
the law that petitioners could have availed of, instead of taking the law in their
own hands, as the cliche goes.

SEC EN BANC RULING CONURRED BY SC:

In the absence of (any) provision to the contrary, the corporate
secretary is the custodian of corporate records. Corollarily, he keeps the
stock and transfer book and makes proper and necessary entries therein.

Contrary to the generally accepted corporate practice, the stock

and transfer book of TORMIL was not kept by Ms. Maria Cristina T.
Carlos, the corporate secretary but by respondent Torres, the President
and Chairman of the Board of Directors of TORMIL. In contravention to
the above cited provision, the stock and transfer book was not kept at

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 SAN SEBASTIAN COLLEGE-RECOLETOS
COLLEGE OF LAW
2114-A Claro M. Recto Avenue, Zone 040, Brgy. 390,
Quiapo Manila 1001 Philippines
---------------------------------------------------------------------
CORPORATION LAW & BASIC SECURITIES
1st SEM (SY. 2023-2024)

the principal office of the corporation either but at the place of

respondent Torres.

These being the obtaining circumstances, any entries made in the

stock and transfer book on March 8, 1987 by respondent Torres of an
alleged transfer of nominal shares to Pabalan and Co. cannot therefore
be given any valid effect. Where the entries made are not valid, Pabalan
and Co. cannot therefore be considered stockholders of record of
TORMIL. Because they are not stockholders, they cannot therefore be
elected as directors of TORMIL. To rule otherwise would not only
encourage violation of clear mandate of Sec. 74 of the Corporation Code
that stock and transfer book shall be kept in the principal office of the
corporation but would likewise open the flood gates of confusion in the
corporation as to who has the proper custody of the stock and transfer
book and who are the real stockholders of records of a certain
corporation as any holder of the stock and transfer book, though not the
corporate secretary, at pleasure would make entries therein.

The fact that respondent Torres holds 81.28% of the outstanding

capital stock of TORMIL is of no moment and is not a license for him to
arrogate unto himself a duty lodged to (sic) the corporate secretary. 26

All corporations, big or small, must abide by the provisions of the

Corporation Code. Being a simple family corporation is not an exemption. Such
corporations cannot have rules and practices other than those established by
law.