Corpo Cases

RICARDO A. NAVA, petitioner-appellant.
vs.
PEERS MARKETING CORPORATION, RENATO R. CUSI and
AMPARO CUSI, respondents-appellees.
Rolando M. Medalla, for appellant.
Jose Y. Montalvo, for appellees.
AQUINO, J:
This is a mandamus case, Teofilo Po as an incorporator subscribed to
eighty shares of Peers Marketing Corporation at one hundred pesos
a share or a total par value of eight thousand pesos. Po paid two
thousand pesos or twenty-five percent of the amount of his
subscription. No certificate of stock was issued to him or, for that
matter, to any incorporator, subscriber or stockholder.
On April 2, 1966 Po sold to Ricardo A. Nava for two thousand pesos
twenty of his eighty shares. In the deed of sale Po represented that
he was "the absolute and registered owner of twenty shares" of Peers
Marketing Corporation.
Nava requested the officers of the corporation to register the sale in
the books of the corporation. The request was denied because Po
has not paid fully the amount of his subscription. Nava was informed
that Po was delinquent in the payment of the balance due on his
subscription and that the corporation had a claim on his entire
subscription of eighty shares which included the twenty shares that
had been sold to Nava.
On December 21, 1966 Nava filed this mandamus action in the Court
of First Instance of Negros Occidental, Bacolod City Branch to
compel the corporation and Renato R. Cusi and Amparo Cusi, its
executive vice-president and secretary, respectively, to register the
said twenty shares in Nava's name in the corporation's transfer book.
The respondents in their answer pleaded the defense that no shares
of stock against which the corporation holds an unpaid claim are
transferable in the books of the corporation.
After hearing, the trial court dismissed the petition. Nava appealed on
the ground that the decision "is contrary to law ". His sole assignment
of error is that the trial court erred in applying the ruling in Fua Cun
vs. Summers and China Banking Corporation, 44 Phil. 705 to justify
respondents' refusal in registering the twenty shares in Nava's name
in the books of the corporation.
The rule enunciated in the Fua Cun case is that payment of one-half
of the subscription does not entitle the subscriber to a certificate of

stock for one-half of the number of shares subscribed.
Appellant Nava contends that the Fua Cun case was decided under
section 36 of the Corporation Law which provides that "no certificate
of stock shall be issued to a subscriber as fully paid up until the full
par value thereof has been paid by him to the corporation". Section
36 was amended by Act No. 3518. It is now section 37. Section 37
provides 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
case of no par stock, has been paid by him to the corporation".
The issue is whether the officers of Peers Marketing Corporation can
be compelled by mandamus to enter in its stock and transfer book the
sale made by Po to Nava of the twenty shares forming part of Po's
subscription of eighty shares, with a total par value of P8,000 and for
which Po had paid only P2,000, it being admitted that the corporation
has an unpaid claim of P6,000 as the balance due on Po's
subscription and that the twenty shares are not covered by any stock
certificate.
Apparently, no provision of the by-laws of the corporation covers that
situation. The parties did not bother to submit in evidence the by-laws
nor invoke any of its provisions. The corporation can include in its bylaws rules, not inconsistent with law, governing the transfer of its
shares of stock (Sec. 137 , Act No. 1459; Fleischer vs. Botica
Nolasco Co., 47 Phil. 583, 589).
We hold that the transfer made by Po to Nava is not the "alienation,
sale, or transfer of stock" that is supposed to be recorded in the stock
and transfer book, as contemplated in section 52 of the Corporation
Law.
As a rule, the shares which may be alienated are those which are
covered by certificates of stock, as shown in the following provisions
of the Corporation Law and as intimated in Hager vs. Bryan, 19 Phil.
138 (overruling the decision in Hager vs. Bryan, 21 Phil. 523. See 19
Phil. 616, notes, and Hodges vs. Lezama, 14 SCRA 1030).
SEC. 35. The capital stock of stock corporations shall be divided into
shares for which certificates signed by the president or the vicepresident, countersigned by the secretary or clerk and sealed with the
seal of the corporation, shall be issued in accordance with the bylaws. 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,
the date of the transfer, the number of the certificate, and the number
of shares transferred.
No share of stock against which the corporation holds any unpaid
claim shall be transferable on the books of the corporation.
SEC. 36. (re voting trust agreement) ...
The certificates of stock so transferred shall be surrendered and
cancelled, and new certificates therefor issued to such person or
persons, or corporation, as such trustee or trustees, in which new
certificates it shall appear that they are issued pursuant to said
agreement.
xxx xxx xxx
(Emphasis supplied).
(In the case of nonstock corporations a membership certificate is
usually issued. Lee E. Won vs. Wack Wack Golf & Country Club, Inc.,
104 Phil. 466; Wack Wack Golf & Country Club, Inc. vs. Won, L23851, March 26, 1976, 70 SCRA 165).
As prescribed in section 35, shares of stock may be transferred by
delivery to the transferee of the certificate properly indorsed. "Title
may be vested in the transferee by delivery of the certificate with a
written assignment or indorsement thereof" (18 C.J.S. 928). There
should be compliance with the mode of transfer prescribed by law (18
C.J.S. 930).
The usual practice is for the stockholder to sign the form on the back
of the stock certificate. The certificate may thereafter be transferred
from one person to another. If the holder of the certificate desires to
assume the legal rights of a shareholder to enable him to vote at
corporate elections and to receive dividends, he fills up the blanks in
the form by inserting his own name as transferee. Then he delivers
the certificate to the secretary of the corporation so that the transfer
may be entered in the corporation's books. The certificate is then
surrendered and a new one issued to the transferee. (Hager vs.
Bryan, 19 Phil. 138, 143-4).
That procedure cannot be followed in the instant case because, as
already noted, the twenty shares in question are not covered by any
certificate of stock in Po's name. Moreover, the corporation has a
claim on the said shares for the unpaid balance of Po's subscription.
A stock subscription is a subsisting liability from the time the
subscription is made. The 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. (Velasco vs.
Poizat, 37 Phil. 802; Lumanlan vs. Cura, 59 Phil. 746).
A corporation cannot release an original subscriber from paying for
his shares without a valuable consideration (Philippine National Bank
vs. Bitulok Sawmill, Inc.,
L-24177-85, June 29, 1968, 23 SCRA 1366) or without the
unanimous consent of the stockholders (Lingayen Gulf Electric Power
Co., Inc. vs. Baltazar, 93 Phil 404).
Under the facts of this case, there is no clear legal duty on the part of
the officers of the corporation to register the twenty shares in Nava's
name, Hence, there is no cause of action for mandamus.
Nava argues that under section 37 a certificate of stock may be
issued for shares the par value of which have already been paid for
although the entire subscription has not been fully paid. He contends
that Peers Marketing Corporation should issue a certificate of stock
for the twenty shares, notwithstanding that Po had not paid fully his
subscription for the eighty shares, because section 37 requires full
payment for the subscription, as a condition precedent for the
issuance of the certificate of stock, only in the case of no par stock.
Nava relies on Baltazar v Lingayen Gulf Electric Power Co., Inc., L16236-38, June 30, 1965, 14 SCRA 522, where it was held that
section 37 "requires as a condition before a shareholder 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".
There is no parallelism between this case and the Baltazar case. It is
noteworthy that in the Baltazar case the stockholder, an incorporator,
was the holder of a certificate of stock for the shares the par value of
which had been paid by him. The issue was whether the said shares
had voting rights although the incorporator had not paid fully the total
amount of his subscription. That is not the issue in this case.
In the Baltazar case, it was held that where a stockholder subscribed
to a certain number of shares with par value and he made a partial
payment and was issued a certificate for the shares covered by his
partial payment, he is entitled to vote the said shares, although he
has not paid the balance of his subscription and a call or demand had
been made for the payment of the par value of the delinquent shares.
As already stressed, in this case no stock certificate was issued to

Po. Without 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 (Davis vs. Wachter, 140 So.
361).
The delivery of the stock certificate, which represents the shares to
be alienated , is essential for the protection of both the corporation
and its stockholders (Smallwood vs. Moretti, 128 So. 2d 628).
In view of the foregoing considerations, the trial court's judgment
dismissing the petition for mandamus is affirmed. Costs against the
petitioner-appellant.
SO ORDERED.
G.R. No. 126891 August 5, 1998
LIM TAY, petitioner,
vs.
COURT OF APPEALS, GO FAY AND CO. INC., SY GUIOK, and
THE ESTATE OF ALFONSO LIM, respondents.
PANGANIBAN, J.:
The duty of a corporate secretary to record transfers of stocks is ministerial. However, he cannot
be compelled to do so when the transferee's title to said shares has no prima facie validity or is
uncertain. More specifically, a pledgor, prior to foreclosure and sale, does not acquire ownership
rights over the pledged shares and thus cannot compel the corporate secretary to record his
alleged ownership of such shares on the basis merely of the contract of pledge. Similarly, the
SEC does not acquire jurisdiction over a dispute when a party's claim to being a shareholder is,
on the face of the complaint, invalid or inadequate or is otherwise negated by the very allegations
of such complaint. Mandamus will not issue to establish a right, but only to enforce one that is
already established.
Statement of the Case

There are the principles, used by this Court in resolving this Petition
for Review on Certiorari before us, assailing the October 24, 1996
Decision 1 of the Court of Appeals 2 in CA-GR SP No. 40832, the
dispositive portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition at bench is

DENIED DUE COURSE and is hereby DISMISSED. With costs
against the [p]etitioner. 3
By the foregoing disposition, the Court of Appeals effectively affirmed the
March 7, 1996 Decision 4 of the Securities and Exchange Commission
(SEC) en banc:
WHEREFORE, in view of all the foregoing, judgment is hereby

rendered dismissing the appeal on the ground that mandamus will
only issue upon a clear showing of ownership over the assailed

shares of stock, [t]he determination of which, on the basis of the
foregoing facts, is within the jurisdiction of the regular courts and not
with the SEC. 5
The SEC en banc upheld the August 16, 1993 Decision 6 of SEC Hearing
Officer Rolando C. Malabonga, which dismissed the action for mandamus
filed by petitioner.
The Facts
As found by the Court of Appeals, the facts of the case are as follows:
. . . On January 8, 1980, Respondent-Appellee Sy Guiok secured a
loan from the [p]etitioner in the amount of P40,000 payable within six
(6) months. To secure the payment of the aforesaid loan and interest
thereon, Respondent Guiok executed a Contract of Pledge in favor of
the [p]etitioner whereby he pledged his three hundred (300) shares of
stock in the Go Fay & Company Inc., Respondent Corporation, for
brevity's sake. Respondent Guiok obliged himself to pay interest on
said loan at the rate of 10% per annum from the date of said contract
of pledge. On the same date, Alfonso Sy Lim secured a loan from the
[p]etitioner in the amount of P40,000 payable in six (6) months. To
secure the payment of his loan, Sy Lim executed a "Contract of
Pledge" covering his three hundred (300) shares of stock in
Respondent Corporation. Under said contract, Sy Lim obliged himself
to pay interest on his loan at the rate of 10% per annum from the date
of the execution of said contract.
Under said "Contracts of Pledge," Respondent[s] Guiok and Sy Lim
covenanted, inter alia, that:
3. In the event of the failure of the PLEDGOR to pay the amount
within a period of six (6) months from the date hereof, the PLEDGEE
is hereby authorized to foreclose the pledge upon the said shares of
stock hereby created by selling the same at public or private sale with
or without notice to the PLEDGOR, at which sale the PLEDGEE may
be the purchaser at his option; and the PLEDGEE is hereby
authorized and empowered at his option to transfer the said shares of
stock on the books of the corporation to his own name and to hold the
certificate issued in lieu thereof under the terms of this pledge, and to
sell the said shares to issue to him and to apply the proceeds of the
sale to the payment of the said sum and interest, in the manner
hereinabove provided;
4. In the event of the foreclosure of this pledge and the sale of the
pledged certificate, any surplus remaining in the hands of the
PLEDGEE after the payment of the said sum and interest, and the
expenses, if any, connected with the foreclosure sale, shall be paid
by the PLEDGEE to the PLEDGOR;
5. Upon payment of the said amount and interest in full, the
PLEDGEE will, on demand of the PLEDGOR, redeliver to him the
said shares of stock by surrendering the certificate delivered to him
by the PLEDGOR or by retransferring each share to the PLEDGOR,
in the event that the PLEDGEE, under the option hereby granted,
shall have caused such shares to be transferred to him upon the
books of the issuing company."(idem, supra)
Respondent Guiok and Sy Lim endorsed their respective shares of
stock in blank and delivered the same to the [p]etitioner. 7
However, Respondent Guiok and Sy Lim failed to pay their respective
loans and the accrued interests thereon to the [p]etitioner. In October,
1990, the [p]etitioner filed a "Petition for Mandamus" against
Respondent Corporation, with the SEC entitled "Lim Tay versus Go
Fay & Company. Inc., SEC Case No. 03894", praying that:
PRAYER
WHEREFORE, premises considered, it is respectfully prayed that an
order be issued directing the corporate secretary of [R]espondent Go
Fay & Co., Inc. to register the stock transfers and issue new
certificates in favor of Lim Tay. It is likewise prayed that [R]espondent
Go Fay & Co., Inc[.] be ordered to pay all dividends due and
unclaimed on the said certificates to [P]laintiff Lim Tay.
Plaintiff further prays for such other relief just and equitable in the
premises. ( page 34, Rollo)
The [p]etitioner alleged, inter alia, in his Petition that the controversy
between him as stockholder and the Respondent Corporation was
intra-corporate in view of the obstinate refusal of the corporate
secretary of Respondent Corporation to record the transfer of the
shares of stock of Respondent Guiok and Sy Lim in favor of and
under the name of the [p]etitioner and to issue new certificates of
stock to the [p]etitioner.
The Respondent Corporation filed its Answer to the Complaint and
alleged, as Affirmative Defense, that:
AFFIRMATIVE DEFENSE
7. Respondent repleads and incorporates herein by reference the
foregoing allegations.
8. The Complaint states no cause of action against [r]espondent.
9. Complainant is not a stockholder of [r]espondent. Hence, the
Honorable Commission has no jurisdiction to enter the present

controversy since their [sic] is no intracorporate relationship between
complainant and respondent.
10. Granting arguendo that a pledge was constituted over the
shareholdings of Sy Guiok in favor of the complainant and that the
former defaulted in the payment of his obligations to the latter, the
same did not automatically vest [i]n complainant ownership of the
pledged shares. ( pace 37, Rollo)
In the interim, Sy Lim died. Respondents Guiok and the Intestate
Estate of Alfonso Sy Lim, represented by Conchita Lim, filed their
Answer-In-Intervention with the SEC alleging, inter alia, that:
xxx xxx xxx
3. Deny specifically the allegation under paragraph 5 of the Complaint
that, failure to pay the loan within the contract period automatically
foreclosed the pledged shares of stocks and that the share of stocks
are automatically purchased by the plaintiff, for being false and
distorted, the truth being that pursuant to the [sic] paragraph 3 of the
contract of pledges, Annexes "A" and "B", it is clear that upon failure
to pay the amount within the stipulated period, the pledgee is
authorized to foreclose the pledge and thereafter, to sell the same to
satisfy the loan. [H]owever, to this point in time, plaintiff has not
performed any operative act of foreclosing the shares of stocks of
[i]ntervenors in accordance with the Chattel Mortgage law, [n]either
was there any sale of stocks by way of public or private auction
made after foreclosure in favor of the plaintiff to speak about, and
therefore, the respondent company could not be force[d] to [sic] by
way of mandamus, to transfer the subject shares of stocks from the
name of your [i]ntervenors to that of the plaintiff in the absence of
clear and legal basis for such;
4. DENY specifically the allegations under paragraphs 6, 7 and 8 of
the complaint as to the existence of the alleged intracorporate dispute
between plaintiff and company for being without proper and legal
basis. In the first place, plaintiff is not a stockholder of the respondent
corporation; there was no foreclosure of shares executed in
accordance with the Chattel Mortgage Law whatsoever; there were
no sales consummated that would transfer to the plaintiff the subject
shares of stocks and therefore, any demand to transfer the shares of
stocks to the name of the plaintiff has no legal basis. In the second
place, [i]ntervenors had been in the past negotiating possible
compromise and at the same time, had tendered payment of the loan
secured by the subject pledges but plaintiff refused unjustifiably to

oblige and accept payment o[r] even agree on the computation of the
principal amount of the loan and interest on top of a substantial
amount offered just to settle and compromise the indebtedness of
[i]ntervenors;
II. SPECIAL AFFIRMATIVE DEFENSES
Intervenors replead by way of reference all the foregoing allegations
to form part of the special affirmative defenses;
5. This Honorable Commission has no jurisdiction over the person of
the respondent and nature of the action, plaintiff having no
personality at all to compel respondent by way of mandamus to
perform certain corporate function[s];
6. The complaint states no cause of action;
7. That respondent is not [a] real party in interest;
8. The appropriation of the subject shares of stocks by plaintiff,
without compliance with the formality of law, amounted to "[p]actum
commis[s]orium" therefore, null and void;
9. Granting for the sake of argument only that there was a valid
foreclosure and sale of the subject st[o]cks in favor of the plaintiff
which [i]ntervenors deny still paragraph 5 of the contract allows
redemption, for which intervenors are willing to redeem the share of
stocks pledged;
10. Even the Chattel Mortgage law allowed redemption of the [c]hattel
foreclosed;
11. As a matter of fact, on several occasions, [i]ntervenors had made
representations with the plaintiff for the compromise and settlement of
all the obligations secured by the subject pledges even offering to
pay compensation over and above the value of the obligations,
interest[s] and dividends accruing to the share of stocks but, plaintiff
unjustly refused to accept the offer of payment; ( pages 39-42, Rollo)
The [r]espondents-[i]ntervenors prayed the SEC that judgment be
rendered in their favor, as follows:
IV. PRAYER
It is respectfully prayed to this Honorable Commission after due
hearing, to dismiss the case for lack of merit, ordering plaintiff to
accept payment for the loans secured by the subject shares of stocks
and to pay plaintiff:
1. The sum of P50,000.00, as moral damages;
2. the sum of P50,000.00, as attorneys fees; and,
3. costs of suit.
Other reliefs just and equitable [are] likewise prayed for.

( pages 42-43, Rollo)
After due proceedings, the [h]earing [o]fficer promulgated a Decision
dismissing [p]etitioner's Complaint on the ground that although the
SEC had jurisdiction over the action, pursuant to the Decision of the
Supreme Court in the case of "Rural Bank of Salinas, et al. vs. Court
of Appeals, et al., 210 SCRA 510", he failed to prove the legal basis
for the secretary of the Respondent Corporation to be compelled to
register stock transfers in favor of the [p]etitioner and to issue new
certificates of stock under his name ( pages 67-77, Rollo). The
[p]etitioner appealed the Decision of the [h]earing [o]fficer to the SEC,
but, on March 7, 1996, the SEC promulgated a Decision, dismissing
[p]etitioner's appeal on the grounds that: (a) the issue between the
[p]etitioner and the [r]espondents being one involving the ownership
of the shares of stock pledged by Respondent Guiok and Sy Lim, the
SEC had no jurisdiction over the action filed by the [p]etitioner; (b) the
latter had no cause of action for mandamus against the Respondent
Corporation, the right of ownership of the [p]etitioner over the 300
shares of stock pledged by Respondent Guiok and Sy Lim not having
been as yet, established, preparatory to the institution of said Petition
for Mandamus with the SEC.
Ruling of the Court of Appeals
On the issue of jurisdiction, the Court of Appeals ruled:
In ascertaining whether or not the SEC had exclusive jurisdiction over
[p]etitioner's action, the [a]ppellate [c]ourt must delve into and
ascertain: (a) whether or not there is a need to enlist the expertise
and technical know-how of the SEC in resolving the issue of the
ownership of the shares of stock; (b) the status of the relationships of
the parties; [and] (c) the nature of the question that is the subject of
the controversy. Where the controversy is purely a civil matter
resoluble by civil law principles and there is no need for the
application of the expertise and technical know-how of the SEC, then
the regular courts have jurisdiction over the action. 8 [citations omitted]
On the issue of whether mandamus can be availed of by the
petitioner, the Court of Appeals agreed with the SEC, viz.:
. . . [T]he [p]etitioner failed to establish a clear and legal right to the
writ of mandamus prayed for by him. . . . Mandamus will not issue to
enforce a right which is in substantial dispute or to which a substantial
doubt exists . . . . The principal function of the writ of mandamus is to
command and expedite, and not to inquire and adjudicate and,
therefore it is not the purpose of the writ to establish a legal right, but
to enforce one which has already been established. 9 [citations omitted]
The Court of Appeals debunked petitioner's claim that he had
acquired ownership over the shares by virtue of novation, holding that
respondents' indorsement and delivery of the shares were pursuant
to Articles 2093 and 2095 of the Civil Code and that petitioner's
receipt of dividends was in compliance with Article 2102 of the same
Code. Petitioner's claim that he had acquired ownership of the shares
by virtue of prescription was likewise dismissed by Respondent Court
in this wise:
The prescriptive period for the action of Respondent[s] Guiok and Sy
Lim to recover the shares of stock from the [p]etitioner accrued only
from the time they paid their loans and the interests thereon and
[made] a demand for their return. 10
Hence, the petitioner brought before us this Petition for Review on
Certiorari in accordance with Rule 45 of the Rules of Court. 11
Assignment of Errors
Petitioner submits, for the consideration of this Court, these issues: 12
(a) Whether the Securities and Exchange Commission had
jurisdiction over the complaint filed by the petitioner; and
(b) Whether the petitioner is entitled to the relief of mandamus as
against the respondent Go Fay & Co., Inc.
In addition, petitioner contends that it has acquired ownership of the
shares "through extraordinary prescription," pursuant to Article 1132
of the Civil Code, and through respondents' subsequent acts, which
amounted to a novation of the contracts of pledge. Petitioner also
claims that there was dacion en pago, in which the shares of stock
were deemed sold to petitioner, the consideration for which was the
extinguishment of the loans and the interests thereon. Petitioner
likewise claims that laches bars respondents from recovering the
subject shares.
The Court's Ruling
The petition has no merit.
First Issue: Jurisdiction of the SEC
Claiming that the present controversy is intra-corporate and falls
within the exclusive jurisdiction of the SEC, petitioner relies heavily on
Abejo v. De la Cruz, 13 which upheld the jurisdiction of the SEC over a suit
filed by an unregistered stockholder seeking to enforce his rights. He also
seeks support from Rural Bank of Salinas, Inc. v. Court of Appeals, 14 which
ruled that the right of a transferee or an assignee to have stocks
transferred to his name was an inherent right flowing from his ownership of
the said stocks.
The registration of shares in a stockholder's name, the issuance of

stock certificates, and the right to receive dividends which pertain to
the said shares are all rights that flow from ownership. The
determination of whether or not a shareholder is entitled to exercise
the above-mentioned rights falls within the jurisdiction of the SEC.
However, if ownership of the shares is not clearly established and is
still unresolved at the time the action for mandamus is filed, then
jurisdiction lies with the regular courts.
Sec. 5 of Presidential Decree No. 902-A sets forth the jurisdiction of
the SEC as follows:
Sec. 5. In addition to the regulatory and adjudicative functions of the
Securities and Exchange Commission over corporations,
partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide cases involving:
(a) Devices or schemes employed by or any acts of the board of
directors, business associates, its officers or partners, amounting to
fraud and misrepresentation which may be detrimental to the interest
of the public and/or of stockholders, partners, members of
associations or organizations registered with the Commission;
(b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members, or associates;
between any or all of them and the corporation, partnership or
association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or
association and the State insofar as it concerns their individual
franchise or right to exist as such entity;
(c) Controversies in the election or appointment of directors, trustees,
officers or managers of such corporations, partnerships or
associations.
(d) Petitions of corporations, partnerships or associations to be
declared in the state of suspension of payments in cases where the
corporation, partnership or association possesses property to cover
all its debts but foresees the impossibility of meeting them when they
respectively fall due or in cases where the corporation, partnership or
association has no sufficient assets to cover its liabilities, but is under
the Management Committee created pursuant to this decree. 15
Thus, a controversy "among stockholders, partners or associates
themselves"
the SEC.
16
is intra-corporate in nature and falls within the jurisdiction of
As a general rule, the jurisdiction of a court or tribunal over the

subject matter is determined by the allegations in the complaint. 17 In
the present case, however, petitioner's claim that he was the owner of the
shares of stock in question has no prima facie basis.
In his Complaint, petitioner alleged that, pursuant to the contracts of

pledge, he became the owner of the shares when the term for the
loans expired. The Complaint contained the following pertinent
averments:
xxx xxx xxx
3. On [J]anuary 8, 1990, under a Contract of Pledge, Lim Tay
received three hundred (300) shares of stock of Go Fay & Co., Inc.,
from Sy Guiok as security for the payment of a loan of [f]orty
[t]housand [p]esos (P40,000.00) Philippine currency, the sum of
which was payable within six (6) months [with interest] at ten
percentum (10%) per annum from the date of the execution of the
contract; a copy of this Contract of Pledge is attached as Annex "A"
and made part hereof;
4. On the same date January 8, 1980, under a similar Contract of
Pledge, Lim Tay received three hundred (300) shares of stock of Go
Pay & Co., Inc. from Alfonso Sy Lim as security for the payment of a
loan of [f]orty [t]housand [p]esos (P40,000.00) Philippine currency,
the sum of which was payable within six (6) months [with interest] at
ten percentum (10%) per annum from the date of the execution of the
contract; a copy of this Contract of Pledge is attached as Annex "B"
and made part hereof;
5. By the express terms of the agreements, upon failure of the
borrowers to pay the stated amounts within the contract period, the
pledge is foreclosed and the shares of stock are purchased by
[p]laintiff, who is expressly authorized and empowered to transfer the
duly endorsed shares of stock on the books of the corporation to his
own name; . . . 18 (emphasis supplied)
However, the contracts of pledge, which were made integral parts of
the Complaint, contain this common proviso:
be the purchaser at his option; and the PLEDGEE is hereby

authorized and empowered at his option, to transfer the said shares
of stock on the books of the corporation to his own name and to hold
the certificate issued in lieu thereof under the terms of this pledge,
and to sell the said shares to issue to him and to apply the proceeds
of the sale to the payment of the said sum and interest, in the manner
hereinabove provided;
This contractual stipulation, which was part of the Complaint, shows
that plaintiff was merely authorized to foreclose the pledge upon
maturity of the loans, not to own them. Such foreclosure is not
automatic, for it must be done in a public or private sale. Nowhere did
the Complaint mention that petitioner had in fact foreclosed the
pledge and purchased the shares after such foreclosure. His status
as a mere pledgee does not, under civil law, entitle him to ownership
of the subject shares. It is also noteworthy that petitioner's Complaint
did not aver that said shares were acquired through extraordinary
prescription, novation or laches. Moreover, petitioner's claim,
subsequent to the filing of the Complaint, that he acquired ownership
of the said shares through these three modes is not indubitable and
still has to be resolved. In fact, as will be shown, such allegation-has
no merit. Manifestly, the Complaint by itself did not contain any prima
facie showing that petitioner was the owner of the shares of stocks.
Quite the contrary, it demonstrated that he was merely a pledgee, not
an owner. Accordingly, it failed to lay down a sufficient basis for the
SEC to exercise jurisdiction over the controversy. In fact, the very
allegations of the Complaint and its annexes negated the jurisdiction
of the SEC.
Petitioner's reliance on the doctrines set forth in Abejo v. De la Cruz
and Rural Bank of Salinas, Inc. v. Court of Appeals is misplaced. In
Abejo, he Abejo spouses sold to Telectronic Systems, Inc. shares of
stock in Pocket Bell Philippines, Inc. Subsequent to such contract of
sale, the corporate secretary, Norberto Braga, refused to record the
transfer of the shares in the corporate books and instead asked for
the annulment of the sale, claiming that he and his wife had a
preemptive right over some of the shares, and that his wife's shares
were sold without consideration or consent.
At the time the Bragas questioned the validity of the sale, the contract
had already been perfected, thereby demonstrating that Telectronic
Systems, Inc. was already the prima facie owner of the shares and,
consequently, a stockholder of Pocket Bell Philippines, Inc. Even if
the sale were to be annulled later on, Telectronic Systems, Inc. had,
in the meantime, title over the shares from the time the sale was
perfected until the time such sale was annulled. The effects of an
annulment operate prospectively and do not, as a rule, retroact to the
time the sale was made. Therefore, at the time the Bragas
questioned the validity of the tranfers made by the Abejos, Telectronic
Systems, Inc. was already a prima facie shareholder of the
corporation, thus making the dispute between the Bragas and the
Abejos "intra-corporate" in nature. Hence, the Court held that "the
issue is not on ownership of shares but rather the non-performance
by the corporate secretary of the ministerial duty of recording
transfers of shares of stock of the corporation of which he is
secretary." 19
Unlike Abejo, however, petitioner's ownership over the shares in this case
was not yet perfected when the Complaint was filed. The contract of
pledge certainly does not make him the owner of the shares pledged.
Further, whether prescription effectively transferred ownership of the
shares, whether there was a novation of the contracts of pledge, and
whether laches had set in were difficult legal issues, which were unpleaded
and unresolved when herein petitioner asked the corporate secretary of Go
Fay to effect the transfer, in his favor, of the shares pledged to him.
In Rural Bank of Salinas, Melenia Guerrero executed deeds of

assignment for the shares in favor of the respondents in that case.
When the corporate secretary refused to register the transfer, an
action for mandamus was instituted. Subsequently, a motion for
intervention was filed, seeking the annulment of the deeds of
assignment on the grounds that the same were fictitious and
antedated, and that they were in fact donations because the
considerations therefor were below the book value of the shares.
Like the Abejo spouses, the respondents in Rural Bank of Salinas
were already prima facie shareholders when the deeds of assignment
were questioned. If the said deeds were to be annulled later on,
respondents would still be considered shareholders of the corporation
from the time of the assignment until the annulment of such contracts.
Second Issue: Mandamus Will NotIssue to Establish a Right
Petitioner prays for the issuance of a writ of mandamus, directing the
corporate secretary of respondent corporation to have the shares
transferred to his name in the corporate books, to issue new
certificates of stock and to deliver the corresponding dividends to him.
20
In order that a writ of mandamus may issue, it is essential that the person
petitioning for the same has a clear legal right to the thing demanded and
that it is the imperative duty of the respondent to perform the act required.
It neither confers powers nor imposes duties and is never issued in
doubtful cases. It is simply a command to exercise a power already
possessed and to perform a duty already imposed. 21
In the present case, petitioner has failed to establish a clear legal right.
Petitioner's contention that he is the owner of the said shares is completely
without merit. Quite the contrary and as already shown, he does not have
any ownership rights at all. At the time petitioner instituted his suit at the
SEC, his ownership claim had no prima facie leg to stand on. At best, his
contention was disputable and uncertain Mandamus will not issue to
establish a legal right, but only to enforce one that is already clearly
established.
Without Foreclosure and

Purchase at Auction, Pledgor
Is Not the Owner of Pledged Shares
Petitioner initially argued that ownership of the shares pledged had
passed to him, upon Respondents Sy Guiok and Sy Lim's failure to
pay their respective loans. But on appeal, petitioner claimed that
ownership over the shares had passed to him, not via the contracts of
pledge, but by virtue of prescription and by respondents' subsequent
acts which amounted to a novation of the contracts of pledge. We do
not agree.
At the outset, it must be underscored that petitioner did not acquire
ownership of the shares by virtue of the contracts of pledge. Article
2112 of the Civil Code states:
The creditor to whom the credit has not been satisfied in due time,
may proceed before a Notary Public to the sale of the thing pledged.
This sale shall be made at a public auction, and with notification to
the debtor and the owner of the thing pledged in a proper case,
stating the amount for which the public sale is to be held. If at the first
auction the thing is not sold, a second one with the same formalities
shall be held; and if at the second auction there is no sale either, the
creditor may appropriate the thing pledged. In this case he shall be
obliged to give an acquittance for his entire claim.
Furthermore, the contracts of pledge contained a common proviso,
which we quote again for the sake of clarity:

be the purchaser at his option; and "the PLEDGEE is hereby
authorized and empowered at his option to transfer the said shares of
stock on the books of the corporation to his own name, and to hold
the certificate issued in lieu thereof under the terms of this pledge,
and to sell the said shares to issue to him and to apply the proceeds
of the sale to the payment of the said sum and interest, in the manner
hereinabove
provided; 22
There is no showing that petitioner made any attempt to foreclose or sell
the shares through public or private auction, as stipulated in the contracts
of pledge and as required by Article 2112 of the Civil Code. Therefore,
ownership of the shares could not have passed to him. The pledgor
remains the owner during the pendency of the pledge and prior to
foreclosure and sale, as explicitly provided by Article 2103 of the same
Code:
Unless the thing pledged is expropriated, the debtor continues to be

the owner thereof.
Nevertheless, the creditor may bring the actions which pertain to the
owner of the thing pledged in order to recover it from, or defend it
against a third person.
No Ownership
by Prescription
Petitioner did not acquire the shares by prescription either. The period
of prescription of any cause of action is reckoned only from the date
the cause of action accrued.
Since a cause of action requires as an essential element not only a
legal right of the plaintiff and a correlative obligation of the defendant,
but also an act or omission of the defendant in violation of said legal
right, the cause of action does not accrue until the party obligated
refuses, expressly or impliedly, to comply with its duty." 23 Accordingly,
a cause of action on a written contract accrues when a breach or violation
thereof occurs.
Under the contracts of pledge, private respondents would have a right

to ask for the redelivery of their certificates of stock upon payment of
their debts to petitioner, consonant with Article 2105 of the Civil Code,
which reads:
The debtor cannot ask for the return of the thing pledged against the
will of the creditor, unless and until he has paid the debt and its
interest, with expenses in a proper case. 24
Thus, the right to recover the shares based on the written contract of
pledge between petitioner and respondents would arise only upon
payment of their respective loans. Therefore, the prescriptive period within
which to demand the return of the thing pledged should begin to run only
after the payment of the loan and a demand for the thing has been made,
because it is only then that respondents acquire a cause of action for the
return of the thing pledged.
Prescription should not begin to run on the action to demand the

return of the thing pledged while the loan still exists. This is because
the right to ask for the return of the thing pledged will not arise so
long as the loan subsists. In the present case, the prescriptive period
did not begin to run when the loan became due. On the other hand, it
is petitioner's right to demand payment that may be in danger of
prescription.
Petitioner contends that he can be deemed to have acquired
ownership over the certificates of stock through extraordinary
prescription, as provided for in Article 1132 of the Civil Code which
states:
Art. 1132. The ownership of movables prescribes through
uninterrupted possession for four years in good faith.
The ownership of personal property also prescribes through
uninterrupted possession for eight years, without need of any other
condition. . . . .
Petitioner's argument is untenable. What is required by Article 1132 is
possession in the concept of an owner. In the present case,
petitioner's possession of the stock certificates came about because
they were delivered to him pursuant to the contracts of pledge. His
possession as a pledgee cannot ripen into ownership by prescription.
As aptly pointed out by Justice Jose C. Vitug:
Acquisitive prescription is a mode of acquiring ownership by a
possessor through the requisite lapse of time. In order to ripen into
ownership, possession must be in the concept of an owner, public,
peaceful and uninterrupted. Thus, possession with a juridical title,
such as by a usufructory, a trustee, a lessee, agent or a pledgee, not
being in the concept of an owner, cannot ripen into ownership by
acquisitive prescription unless the juridical relation is first expressly
repudiated and such repudiation has been communicated to the other
party. 25
Petitioner expressly repudiated the pledge, only when he filed his
Complaint and claimed that he was not a mere pledgee, but that he was
already the owner of the shares. Based on the foregoing, petitioner has not
acquired the certificates of stock through extraordinary prescription.
No Novation
in Favor of Petitioner
Neither did petitioner acquire the shares by virtue of a novation of the
contract of pledge. Novation is defined as "the extinguishment of an
obligation by a subsequent one which terminates it, either by
changing its object or principal conditions, by substituting a new
debtor in place of the old one, or by subrogating a third person to the
rights of the creditor." 26 Novation of a contract must not be presumed. "In
the absence of an express agreement, novation takes place only when the
old and the new obligations are incompatible on every point." 27
In the present case, novation cannot be presumed by (a) respondents'
indorsement and delivery of the certificates of stock covering the 600
shares, (b) petitioner's receipt of dividends from 1980 to 1983, and (c) the
fact that respondents have not instituted any action to recover the shares
since 1980.
Respondents' indorsement and delivery of the certificates of stock

were pursuant to paragraph 2 of the contract of pledge which reads:
2. The said certificates had been delivered by the PLEDGOR
endorsed in blank to be held by the PLEDGEE under the pledge as
security for the payment of the aforementioned sum and interest
thereon
accruing. 28
This stipulation did not effect the transfer of ownership to petitioner. It was
merely in compliance with Article 2093 of the Civil Code, 29 which requires
that the thing pledged be placed in the possession of the creditor or a third
person of common agreement; and Article 2095, 30 which states that if the
thing pledged are shares of stock, then the "instrument proving the right
pledged" must be delivered to the creditor.
Moreover, the fact that respondents allowed the petitioner to receive

dividends pertaining to the shares was not meant to relinquish
ownership thereof. As stated by respondent corporation, the same
was done pursuant to an agreement between the petitioner and
Respondents Sy Guiok and Sy Lim, following Article 2102 of the civil
Code which provides:
It the pledge earns or produces fruits, income, dividends, or interests,
the creditor shall compensate what he receives with those which are
owing him; but if none are owing him, or insofar as the amount may
exceed that which is due, he shall apply it to the principal. Unless
there is a stipulation to the contrary, the pledge shall extend to the
interest and the earnings of the right pledged.

Novation cannot be inferred from the mere fact that petitioner has not,
since 1980, instituted any action to recover the shares. Such action is
in fact premature, as the loan is still outstanding. Besides, as already
pointed out, novation is never presumed or inferred.
No Dacion en Pago
in Favor of Petitioner
Neither can there be dacion en pago, in which the certificates of stock
are deemed sold to petitioner, the consideration for which is the
extinguishment of the loans and the accrued interests thereon.
Dacion en pago is a form of novation in which a change takes place
in the object involved in the original contract. Absent an explicit
agreement, petitioner cannot simply presume dacion en pago.
Laches Not
a Bar to Petitioner
Petitioner submits that "the inaction of the individual respondents with
respect to the recovery of the shares of stock serves to bar them from
asserting rights over said shares on the basis of laches." 31
Laches has been defined as "the failure or neglect, for an unreasonable
length of time, to do that which by exercising due diligence could or should
have been done earlier; it is negligence or omission to assert a right within
a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it." 32
In this case, it is in fact petitioner who may be guilty of laches. Petitioner
had all the time to demand payment of the debt. More important, under the
contracts of pledge, petitioner could have foreclosed the pledges as soon
as the loans became due. But for still unknown or unexplained reasons, he
failed to do so, preferring instead to pursue his baseless claim to
ownership.
WHEREFORE, the petition is hereby DENIED and the assailed

Decision is AFFIRMED. Costs against petitioner.
SO ORDERED.
THE RURAL BANK OF LIPA CITY, INC., THE

OFFICERS AND DIRECTORS, BERNARDO
BAUTISTA, JAIME CUSTODIO, OCTAVIO
KATIGBAK, FRANCISCO CUSTODIO, and
JUANITA BAUTISTA OF THE RURAL BANK OF

LIPA CITY, INC., petitioners, vs. HONORABLE
COURT OF APPEALS, HONORABLE
COMMISSION EN BANC, SECURITIES AND
EXCHANGE COMMISSION, HONORABLE
ENRIQUE L. FLORES, JR., in his capacity as
Hearing Officer, REYNALDO VILLANUEVA, SR.,
AVELINA M. VILLANUEVA, CATALINO
VILLANUEVA, ANDRES GONZALES, AURORA
LACERNA, CELSO LAYGO, EDGARDO REYES,
ALEJANDRA TONOGAN and ELENA USI,
respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is a petition for review on certiorari assailing the

Decision of the Court of Appeals dated February 27, 1996, as well
as the Resolution dated March 29, 1996, in CA-G.R. SP No.
38861.
The instant controversy arose from a dispute between the
Rural Bank of Lipa City, Incorporated (hereinafter referred to as
the Bank), represented by its officers and members of its Board of
Directors, and certain stockholders of the said bank. The records
reveal the following antecedent facts:
Private respondent Reynaldo Villanueva, Sr., a stockholder of
the Rural Bank of Lipa City, executed a Deed of Assignment, [if !
supportFootnotes][1][endif]
wherein he assigned his shares, as well as those of
eight (8) other shareholders under his control with a total of 10,467
shares, in favor of the stockholders of the Bank represented by its
directors Bernardo Bautista, Jaime Custodio and Octavio
Katigbak. Sometime thereafter, Reynaldo Villanueva, Sr. and his
wife, Avelina, executed an Agreement[if !supportFootnotes][2][endif] wherein they
acknowledged their indebtedness to the Bank in the amount of
Four Million Pesos (P4,000,000.00), and stipulated that said debt

will be paid out of the proceeds of the sale of their real property
described in the Agreement.
At a meeting of the Board of Directors of the Bank on
November 15, 1993, the Villanueva spouses assured the Board that
their debt would be paid on or before December 31 of that same
year; otherwise, the Bank would be entitled to liquidate their
shareholdings, including those under their control. In such an
event, should the proceeds of the sale of said shares fail to satisfy
in full the obligation, the unpaid balance shall be secured by other
collateral sufficient therefor.
When the Villanueva spouses failed to settle their obligation to
the Bank on the due date, the Board sent them a letter [if !supportFootnotes][3]
[endif]
demanding: (1) the surrender of all the stock certificates issued
to them; and (2) the delivery of sufficient collateral to secure the
balance of their debt amounting to P3,346,898.54. The
Villanuevas ignored the banks demands, whereupon their shares
of stock were converted into Treasury Stocks. Later, the
Villanuevas, through their counsel, questioned the legality of the
conversion of their shares.[if !supportFootnotes][4][endif]
On January 15, 1994, the stockholders of the Bank met to elect
the new directors and set of officers for the year 1994. The
Villanuevas were not notified of said meeting. In a letter dated
January 19, 1994, Atty. Amado Ignacio, counsel for the Villanueva
spouses, questioned the legality of the said stockholders meeting
and the validity of all the proceedings therein. In reply, the new set
of officers of the Bank informed Atty. Ignacio that the Villanuevas
were no longer entitled to notice of the said meeting since they had
relinquished their rights as stockholders in favor of the Bank.
Consequently, the Villanueva spouses filed with the Securities
and Exchange Commission (SEC), a petition for annulment of the
stockholders meeting and election of directors and officers on
January 15, 1994, with damages and prayer for preliminary
injunction[if !supportFootnotes][5][endif], docketed as SEC Case No. 02-94-4683.
Joining them as co-petitioners were Catalino Villanueva, Andres
Gonzales, Aurora Lacerna, Celso Laygo, Edgardo Reyes,

Alejandro Tonogan, and Elena Usi. Named respondents were the
newly-elected officers and directors of the Rural Bank, namely:
Bernardo Bautista, Jaime Custodio, Octavio Katigbak, Francisco
Custodio and Juanita Bautista.
The Villanuevas main contention was that the stockholders
meeting and election of officers and directors held on January 15,
1994 were invalid because: (1) they were conducted in violation of
the by-laws of the Rural Bank; (2) they were not given due notice
of said meeting and election notwithstanding the fact that they had
not waived their right to notice; (3) they were deprived of their
right to vote despite their being holders of common stock with
corresponding voting rights; (4) their names were irregularly
excluded from the list of stockholders; and (5) the candidacy of
petitioner Avelina Villanueva for directorship was arbitrarily
disregarded by respondent Bernardo Bautista and company during
the said meeting.
On February 16, 1994, the SEC issued a temporary restraining
order enjoining the respondents, petitioners herein, from acting as
directors and officers of the Bank, and from performing their duties
and functions as such.[if !supportFootnotes][6][endif]
In their joint Answer,[if !supportFootnotes][7][endif] the respondents therein
raised the following defenses:
1) The petitioners have no legal capacity to sue;
2) The petition states no cause of action;
3) The complaint is insufficient;
4) The petitioners claims had already been paid, waived, abandoned,
or otherwise extinguished;
5) The petitioners are estopped from challenging the conversion of
their shares.
Petitioners, respondents therein, thus moved for the lifting of

the temporary restraining order and the dismissal of the petition for
lack of merit, and for the upholding of the validity of the
stockholders meeting and election of directors and officers held on
January 15, 1994. By way of counterclaim, petitioners prayed for
actual, moral and exemplary damages.

On April 6, 1994, the Villanuevas application for the issuance
of a writ of preliminary injunction was denied by the SEC Hearing
Officer on the ground of lack of sufficient basis for the issuance
thereof. However, a motion for reconsideration[if !supportFootnotes][8][endif] was
granted on December 16, 1994, upon finding that since the
Villanuevas have not disposed of their shares, whether voluntarily
or involuntarily, they were still stockholders entitled to notice of
the annual stockholders meeting was sustained by the SEC.
Accordingly, a writ of preliminary injunction was issued enjoining
the petitioners from acting as directors and officers of the bank. [if !
Thereafter, petitioners filed an urgent motion to quash the writ

of preliminary injunction,[if !supportFootnotes][10][endif] challenging the propriety
of the said writ considering that they had not yet received a copy of
the order granting the application for the writ of preliminary
injunction.
With the impending 1995 annual stockholders meeting only
nine (9) days away, the Villanuevas filed an Omnibus Motion[if !
praying that the said meeting and election of officers
scheduled on January 14, 1995 be suspended or held in abeyance,
and that the 1993 Board of Directors be allowed, in the meantime,
to act as such. One (1) day before the scheduled stockholders
meeting, the SEC Hearing Officer granted the Omnibus Motion by
issuing a temporary restraining order preventing petitioners from
holding the stockholders meeting and electing the board of
directors and officers of the Bank.[if !supportFootnotes][12][endif]
A petition for Certiorari and Annulment with Damages was
filed by the Rural Bank, its directors and officers before the SEC
en banc,[if !supportFootnotes][13][endif] naming as respondents therein SEC
Hearing Officer Enrique L. Flores, Jr., and the Villanuevas,
erstwhile petitioners in SEC Case No. 02-94-4683. The said
petition alleged that the orders dated December 16, 1994 and
January 13, 1995, which allowed the issuance of the writ of
preliminary injunction and prevented the bank from holding its
1995 annual stockholders meeting, respectively, were issued by

the SEC Hearing Officer with grave abuse of discretion amounting
to lack or excess of jurisdiction. Corollarily, the Bank, its directors
and its officers questioned the SEC Hearing Officers right to
restrain the stockholders meeting and election of officers and
directors considering that the Villanueva spouses and the other
petitioners in SEC Case No. 02-94-4683 were no longer
stockholders with voting rights, having already assigned all their
shares to the Bank.
In their Comment/Opposition, the Villanuevas and other
private respondents argued that the filing of the petition for
certiorari was premature and there was no grave abuse of
discretion on the part of the SEC Hearing Officer, nor did he act
without or in excess of his jurisdiction.
On June 7, 1995, the SEC en banc denied the petition for
certiorari in an Order,[if !supportFootnotes][14][endif] which stated:
Inthecasenowbeforeus,petitionerscouldnotshowanyproofof
despoticorarbitraryexerciseofdiscretioncommittedbythe
hearingofficerinissuingtheassailedorderssaveandexceptthe
allegationthattheprivaterespondentshavealreadytransferred
theirstockholdingsinfavorofthestockholdersoftheBank.This,
however,istheveryissueofthecontroversyinthecaseaquoand
which,toourmind,shouldrightfullybelitigatedandproven
beforethehearingofficer.Thisissobecauseoftheundisputed
factthe(sic)privaterespondentsarestillinpossessionofthestock
certificatesevidencingtheirstockholdingsandasheldbythe
SupremeCourtinEmbassyFarms,Inc.v.CourtofAppeals,etal.,
188SCRA492,citingNavav.PeersMarketingCorp.,thenon
deliveryofthestockcertificatedoesnotmakethetransferofthe
sharesofstockeffective.Foraneffectivetransferofstock,the
modeoftransferasprescribedbylawmustbefollowed.
WelikewisefindthattheprovisionoftheCorporationCodecited
bythehereinpetitioner,particularlySection83thereof,tosupport
theclaimthattheprivaterespondentsarenolongerstockholdersof
theBankismisplaced.Thesaidlawappliestoacquisitionof
sharesofstockbythecorporationintheexerciseofastockholders
rightofappraisalorwhenthesaidstockholderoptstodissentona
specificcorporateactinthoseinstancesprovidedbylawand
demandsthepaymentofthefairvalueofhisshares.Itdoesnot
contemplateatransferwherebythestockholder,intheexercise
ofhisrighttodisposeofhisshares(jusdisponendi)sellsorassigns
hisstockholdingsinfavorofanotherpersonwheretheprovisions
ofSection63ofthesameCodeshouldbecompliedwith.
Thehearingofficer,therefore,hadabasisinissuingthequestioned
orderssincetheprivaterespondentsrightsasstockholdersmaybe
prejudicedshouldthewritofinjunctionnotbeissued.Theprivate
respondentsarepresumablystockholdersoftheBankinviewof
thefactthattheyhaveintheirpossessionthestockcertificates
evidencingtheirstockholdings.Untilprovenotherwise,they
remaintobesuchandthehearingofficer,beingtheonedirectly
confrontedwiththefactsandpiecesofevidenceinthecase,may
issuesuchordersandresolutionswhichmaybenecessaryor
reasonablerelativetheretotoprotecttheirrightsandinterestinthe
meantimethatthesaidcaseisstillpendingtrialonthemerits.
A subsequent motion for reconsideration[if !supportFootnotes][15][endif] was
likewise denied by the SEC en banc in a Resolution[if !supportFootnotes][16][endif]
dated September 29, 1995.
A petition for review was thus filed before the Court of
Appeals, which was docketed as CA-G.R. SP No. 38861, assailing
the Order dated June 7, 1995 and the Resolution dated September
29, 1995 of the SEC en banc in SEC EB No. 440. The ultimate
issue raised before the Court of Appeals was whether or not the
SEC en banc erred in finding:
1.ThattheHon.HearingOfficerinSECCaseNo.02944683did
notcommitanygraveabuseofdiscretionthatwouldwarrantthe
filingofapetitionforcertiorari;
2.Thattheprivaterespondentsarestillstockholdersofthesubject
bankandfurtherstatedthatitdoesnotcontemplateatransfer
wherebythestockholders,intheexerciseofhisrighttodisposeof
hisshares(JusDisponendi)sellsorassignshisstockholdingsin
favorofanotherpersonwheretheprovisionsofSec.63ofthe
sameCodeshouldbecompliedwith;and
3.Thattheprivaterespondentsarepresumablystockholdersofthe
bankinviewofthefactthattheyhaveintheirpossessionthestock
certificatesevidencingtheirstockholdings.
On February 27, 1996, the Court of Appeals rendered the
assailed Decision[if !supportFootnotes][17][endif] dismissing the petition for review
for lack of merit. The appellate court found that:
ThepublicrespondentiscorrectinholdingthattheHearing
Officerdidnotcommitgraveabuseofdiscretion.Theofficer,in
exercisinghisjudicialfunctions,didnotexercisehisjudgmentina
capricious,whimsical,arbitraryordespoticmanner.The
questionedOrdersissuedbytheHearingOfficerwerebasedon
pertinentlawandthefactsofthecase.
Section63oftheCorporationCodestates:xxxSharesofstock
soissuedarepersonalpropertyandmaybetransferredbydelivery
ofthecertificateorcertificatesindorsedbytheownerxxx.No
transfer,however,shallbevalid,exceptasbetweentheparties,
untilthetransferisrecordedinthebooksofthecorporationsoas
toshowthenamesofthepartiestothetransaction,thedateofthe
transfer,thenumberofthecertificateorcertificatesandthe
numberofsharestransferred.
Inthecaseatbench,whenprivaterespondentsexecutedadeedof
assignmentoftheirsharesofstocksinfavoroftheStockholdersof
theRuralBankofLipaCity,representedbyBernardoBautista,
JaimeCustodioandOctavioKatigbak,titletosuchshareswillnot
beeffectiveunlessthedulyindorsedcertificateofstockis
deliveredtothem.Foraneffectivetransferofsharesofstock,the
modeandmanneroftransferasprescribedbylawshouldbe
followed.Privaterespondentsarestillpresumedtobetheowners
ofthesharesandtobestockholdersoftheRuralBank.
Wefindnoreversibleerrorinthequestionedorders.
Petitioners motion for reconsideration was likewise denied by
the Court of Appeals in an Order[if !supportFootnotes][18][endif] dated March 29,
1996.
Hence, the instant petition for review seeking to annul the
Court of Appeals decision dated February 27, 1996 and the
resolution dated March 29, 1996. In particular, the decision is
challenged for its ruling that notwithstanding the execution of the
deed of assignment in favor of the petitioners, transfer of title to
such shares is ineffective until and unless the duly indorsed
certificate of stock is delivered to them. Moreover, petitioners
faulted the Court of Appeals for not taking into consideration the
acts of disloyalty committed by the Villanueva spouses against the
Bank.
We find no merit in the instant petition.
The Court of Appeals did not err or abuse its discretion in
affirming the order of the SEC en banc, which in turn upheld the
order of the SEC Hearing Officer, for the said rulings were in
accordance with law and jurisprudence.
The Corporation Code specifically provides:
SECTION63.Certificateofstockandtransferofshares.The
capitalstockofstockcorporationsshallbedividedintosharesfor
whichcertificatessignedbythepresidentorvicepresident,
countersignedbythesecretaryorassistantsecretary,andsealed
withthesealofthecorporationshallbeissuedinaccordancewith
thebylaws.Sharesofstockssoissuedarepersonalpropertyand
maybetransferredbydeliveryofthecertificateorcertificates
indorsedbytheownerorhisattorneyinfactorotherperson
legallyauthorizedtomakethetransfer.Notransfer,however,
shallbevalid,exceptasbetweentheparties,untilthetransferis
recordedinthebooksofthecorporationsoastoshowthenames
ofthepartiestothetransaction,thedateofthetransfer,thenumber
ofthecertificateorcertificatesandthenumberofshares
transferred.
Nosharesofstockagainstwhichthecorporationholdsanyunpaid
claimshallbetransferableinthebooksofthecorporation.
(Underscoringours)
Petitioners argue that by virtue of the Deed of Assignment, [if !
private respondents had relinquished to them any
and all rights they may have had as stockholders of the Bank.
While it may be true that there was an assignment of private
respondents shares to the petitioners, said assignment was not
sufficient to effect the transfer of shares since there was no
endorsement of the certificates of stock by the owners, their
attorneys-in-fact or any other person legally authorized to make the
transfer. Moreover, petitioners admit that the assignment of shares
was not coupled with delivery, the absence of which is a fatal
defect. The rule is that the delivery of the stock certificate duly
endorsed by the owner is the operative act of transfer of shares
from the lawful owner to the transferee.[if !supportFootnotes][20][endif] Thus, title
may be vested in the transferee only by delivery of the duly
indorsed certificate of stock.[if !supportFootnotes][21][endif]
We have uniformly held that for a valid transfer of stocks,
there must be strict compliance with the mode of transfer
prescribed by law.[if !supportFootnotes][22][endif] The requirements are: (a) There
must be delivery of the stock certificate; (b) The certificate must be
endorsed by the owner or his attorney-in-fact or other persons
legally authorized to make the transfer; and (c) To be valid against
third parties, the transfer must be recorded in the books of the
corporation. As it is, compliance with any of these requisites has
not been clearly and sufficiently shown.
It may be argued that despite non-compliance with the
requisite endorsement and delivery, the assignment was valid
between the parties, meaning the private respondents as assignors
and the petitioners as assignees. While the assignment may be
valid and binding on the petitioners and private respondents, it
does not necessarily make the transfer effective. Consequently, the
petitioners, as mere assignees, cannot enjoy the status of a

stockholder, cannot vote nor be voted for, and will not be entitled
to dividends, insofar as the assigned shares are concerned.
Parenthetically, the private respondents cannot, as yet, be deprived
of their rights as stockholders, until and unless the issue of
ownership and transfer of the shares in question is resolved with
finality.
There being no showing that any of the requisites mandated by
[if !supportFootnotes][23][endif]
law
was complied with, the SEC Hearing Officer
did not abuse his discretion in granting the issuance of the
preliminary injunction prayed for by petitioners in SEC Case No.
02-94-4683 (herein private respondents). Accordingly, the order of
the SEC en banc affirming the ruling of the SEC Hearing Officer,
and the Court of Appeals decision upholding the SEC en banc
order, are valid and in accordance with law and jurisprudence, thus
warranting the denial of the instant petition for review.
To enable the shareholders of the Rural Bank of Lipa City, Inc.
to meet and elect their directors, the temporary restraining order
issued by the SEC Hearing Officer on January 13, 1995 must be
lifted. However, private respondents shall be notified of the
meeting and be allowed to exercise their rights as stockholders
thereat.
While this case was pending, Republic Act No. 8799[if !
was enacted, transferring to the courts of general
jurisdiction or the appropriate Regional Trial Court the SECs
jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A.[if !supportFootnotes][25][endif] One of those cases
enumerated is any controversy arising out of intra-corporate or
partnership relations, between and among stockholders, members,
or associates, between any and/or all of them and the corporation,
partnership or association of which they are stockholders, members
or associates, respectively; and between such corporation,
partnership or association and the state insofar as it concerns their
individual franchise or right to exist as such entity. The instant
controversy clearly falls under this category of cases which are
now cognizable by the Regional Trial Court.

Pursuant to Section 5.2 of R.A. No. 8799, this Court
designated specific branches of the Regional Trial Courts to try and
decide cases formerly cognizable by the SEC. For the Fourth
Judicial Region, specifically in the Province of Batangas, the RTC
of Batangas City, Branch 32 is the designated court.[if !supportFootnotes][26][endif]
WHEREFORE, in view of all the foregoing, the instant petition
for review on certiorari is DENIED. The Decision and Resolution
of the Court of Appeals in CA-G.R. SP No. 38861 are hereby
AFFIRMED. The case is ordered REMANDED to the Regional
Trial Court of Batangas City, Branch 32, for proper disposition.
The temporary restraining order issued by the SEC Hearing Officer
dated January 13, 1995 is ordered LIFTED.
SO ORDERED.
VICENTE C. PONCE, petitioner, vs. ALSONS

CEMENT CORPORATION, and FRANCISCO M.
GIRON, JR., respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks to annul the decision

of the Court of Appeals, in CA-G.R. SP No. 46692, which
set aside the decision
of the Securities and
Exchange Commission (SEC) En Banc in SEC-AC No. 545
and reinstated the order
of the Hearing Officer
dismissing herein petitioners complaint. Also assailed is the
CAs resolution
of August 10, 1999, denying
petitioners motion for reconsideration.
On January 25, 1996, plaintiff (now petitioner) Vicente C.
Ponce, filed a complaint
with the SEC for
mandamus and damages against defendants (now
respondents) Alsons Cement Corporation and its corporate
secretary Francisco M. Giron, Jr. In his complaint, petitioner
[if !supportFootnotes][1]
[endif]
alleged, among others, that:

xxx
5.ThelateFaustoG.GaidwasanincorporatorofVictoryCement
Corporation(VCC),havingsubscribedtoandfullypaid239,500
sharesofsaidcorporation.
6.OnFebruary8,1968,plaintiffandFaustoGaidexecuteda
DeedofUndertakingandIndorsementwherebythelatter
acknowledgesthattheformeristheownerofsaidsharesandhe
wasthereforeassigning/endorsingthesametotheplaintiff.Acopy
ofthesaiddeed/indorsementisattachedasAnnexA.
7.OnApril10,1968,VCCwasrenamedFloroCement
Corporation(FCCforbrevity).
8.OnOctober22,1990,FCCwasrenamedAlsonsCement
Corporation(ACCforbrevity)asshownbytheAmendedArticles
ofIncorporationofACC,acopyofwhichisattachedasAnnex
B.
9.FromthetimeofincorporationofVCCuptothepresent,no
certificatesofstockcorrespondingtothe239,500subscribedand
fullypaidsharesofGaidwereissuedinthenameofFaustoG.
Gaidand/ortheplaintiff.
10.Despiterepeateddemands,thedefendantsrefusedandcontinue
torefusewithoutanyjustifiablereasontoissuetoplaintiffthe
certificatesofstockscorrespondingtothe239,500sharesofGaid,
inviolationofplaintiffsrighttosecurethecorresponding
certificateofstockinhisname.
Attached to the complaint was the Deed of Undertaking and
Indorsement
upon which petitioner based his
petition for mandamus. Said deed and indorsement read as
follows:
DEEDOFUNDERTAKING
KNOWALLMENBYTHESEPRESENTS:
I,VICENTEC.PONCE,istheownerofthetotalsubscriptionof
FaustoGaidwithVictoryCementCorporationinthetotalamount
[if!supportFootnotes][6][endif]
ofTWOHUNDREDTHIRTYNINETHOUSANDFIVE
HUNDRED(P239,500.00)PESOSandthatFaustoGaiddoesnot
haveanyliabilitywhatsoeveronthesubscriptionagreementin
favorofVictoryCementCorporation.
(SGD.)VICENTEC.PONCE
February8,1968
CONFORME:
(SGD.)FAUSTOGAID
INDORSEMENT
I,FAUSTOGAIDisindorsingthetotalamountofTWO
HUNDREDTHIRTYNINETHOUSANDFIVEHUNDRED
(239,500.00)stocksofVictoryCementCorporationtoVICENTE
C.PONCE.
(SGD.)FAUSTOGAID
With these allegations, petitioner prayed that judgment be
rendered ordering respondents (a) to issue in his name
certificates of stocks covering the 239,500 shares of stocks
and its legal increments and (b) to pay him damages.
[if !
Instead of filing an answer, respondents moved to dismiss

the complaint on the grounds that: (a) the complaint states
no cause of action; mandamus is improper and not available
to petitioner; (b) the petitioner is not the real party in interest;
(c) the cause of action is barred by the statute of limitations;
and (d) in any case, the petitioners cause of action is barred
by laches.
They argued, inter alia, that there
being no allegation that the alleged INDORSEMENT was
recorded in the books of the corporation, said indorsement
by Gaid to the plaintiff of the shares of stock in question
assuming that the indorsement was in fact a transfer of
stockswas not valid against third persons such as
ALSONS under Section 63 of the Corporation Code.
There was, therefore, no specific legal duty on
the part of the respondents to issue the corresponding
[if !
certificates of stock, and mandamus will not lie.

Petitioner filed his opposition to the motion to dismiss on
February 19, 1996 contending that: (1) mandamus is the
proper remedy when a corporation and its corporate
secretary wrongfully refuse to record a transfer of shares
and issue the corresponding certificates of stocks; (2) he is
the proper party in interest since he stands to be benefited or
injured by a judgment in the case; (3) the statute of
limitations did not begin to run until defendant refused to
issue the certificates of stock in favor of the plaintiff on April
13, 1992.
After respondents filed their reply, SEC Hearing Officer
Enrique L. Flores, Jr. granted the motion to dismiss in an
Order dated February 29, 1996, which held that:
xxx
Insofarastheissuanceofcertificatesofstockisconcerned,thereal
partyininterestisFaustoG.Gaid,orhisestateorhisheirs.Gaid
wasanincorporatorandanoriginalstockholderofthedefendant
corporationwhosubscribedandfullypaidfor239,500sharesof
stock(Annex"B").InaccordancewithSection37oftheold
CorporationLaw(ActNo.1459)obtainingin1968whenthe
defendantcorporationwasincorporated,aswellasSection64of
thepresentCorporationCode(BatasPambansaBlg.68),a
stockholderwhohasfullypaidforhissubscriptiontogetherwith
interestandexpensesincaseofdelinquentshares,isentitledtothe
issuanceofacertificateofstockforhisshares.Accordingto
paragraph9oftheComplaint,nostockcertificatewasissuedto
Gaid.
ComesnowtheplaintiffwhoseekstostepintotheshoesofGaid
andtherebybecomeastockholderofthedefendantcorporationby
demandingissuanceofthecertificatesofstockinhisname.This
hecannotdo,fortworeasons:thereisnorecordofanyassignment
ortransferinthebooksofthedefendantcorporation,andthereis
noinstructionorauthorityfromthetransferor(Gaid)forsuch
assignmentortransfer.Indeed,nothingisallegedinthecomplaint
onthesetwopoints.
xxx
Inthepresentcase,thereisnotevenanyindorsementofanystock
certificatetospeakof.Whattheplaintiffpossessesisadocument
bywhichGaidsupposedlytransferredthesharestohim.
Assumingthedocumenthasthiseffect,neverthelessthereis
neitheranyallegationnoranyshowingthatitisrecordedinthe
booksofthedefendantcorporation,suchrecordingbeinga
prerequisitetotheissuanceofastockcertificateinfavorofthe
transferee.
Petitioner appealed the Order of dismissal. On January 6,
1997, the Commission En Banc reversed the appealed
Order and directed the Hearing Officer to proceed with the
case. In ruling that a transfer or assignment of stocks need
not be registered first before it can take cognizance of the
case to enforce the petitioners rights as a stockholder, the
Commission En Banc cited our ruling in Abejo vs. De la
Cruz, 149 SCRA 654 (1987) to the effect that:
xxxAstheSECmaintains,Thereisnorequirementthata
stockholderofacorporationmustbearegisteredoneinorderthat
theSecuritiesandExchangeCommissionmaytakecognizanceof
asuitseekingtoenforcehisrightsassuchstockholder.Thisis
becausetheSECbyexpressmandatehasabsolutejurisdiction,
supervisionandcontroloverallcorporationsandiscalleduponto
enforcetheprovisionsoftheCorporationCode,amongwhichis
thestockpurchasersrighttosecurethecorrespondingcertificate
inhisnameundertheprovisionsofSection63oftheCode.
Needlesstosay,anyproblemencounteredinsecuringthe
certificatesofstockrepresentingtheinvestmentmadebythebuyer
mustbeexpeditiouslydealtwiththroughadministrativemandamus
proceedingswiththeSEC,ratherthanthroughtheusualtedious
regularcourtprocedure.xxx
Applyingthisprincipleinthecaseonhand,atransferor
assignmentofstocksneednotberegisteredfirstbeforethe
Commissioncantakecognizanceofthecasetoenforcehisrights
asastockholder.Also,theproblemencounteredinsecuringthe
certificatesofstockmadebythebuyermustbeexpeditiouslytaken
upthroughthesocalledadministrativemandamusproceedings
withtheSECthanintheregularcourts.
The Commission En Banc also found that the Hearing
Officer erred in holding that petitioner is not the real party in
interest.
xxx
Asappearingintheallegationsofthecomplaint,plaintiffappellant
isthetransfereeofthesharesofstockofGaidandistherefore
entitledtoavailofthesuittoobtaintheproperremedytomake
himtherightfulownerandholderofastockcertificatetobeissued
inhisname.Moreover,defendantappelleesfailedtoshowthatthe
transferornorhisheirshaverefutedtheownershipofthe
transferee.Assumingtheseallegationstobetrue,thecorporation
hasamereministerialdutytoregisterinitsstockandtransferbook
thesharesofstockinthenameoftheplaintiffappellantsubjectto
thedeterminationofthevalidityofthedeedofassignmentinthe
propertribunal.
Their motion for reconsideration having been denied, herein
respondents appealed the decision
of the SEC
En Banc and the resolution
denying their
motion for reconsideration to the Court of Appeals.
In its decision, the Court of Appeals held that in the absence
of any allegation that the transfer of the shares between
Fausto Gaid and Vicente C. Ponce was registered in the
stock and transfer book of ALSONS, Ponce failed to state a
cause of action. Thus, said the CA, the complaint for
mandamus should be dismissed for failure to state a cause
of action.
petitioners motion for
reconsideration was likewise denied in a resolution
[if !supportFootnotes]
dated August 10, 1999.

Hence, the instant petition for review on certiorari alleging
that:
I.THEHONORABLECOURTOFAPPEALSERREDIN
HOLDINGTHATTHECOMPLAINTFORISSUANCEOFA
CERTIFICATEOFSTOCKFILEDBYPETITIONERFAILED
TOSTATEACAUSEOFACTIONBECAUSEITDIDNOT
ALLEGETHATTHETRANSFEROFTHESHARES(SUBJECT
MATTEROFTHECOMPLAINT)WASREGISTEREDINTHE
STOCKANDTRANSFERBOOKOFTHECORPORATION,
CITINGSECTION63OFTHECORPORATIONCODE.
II.THEHONORABLECOURTOFAPPEALSERREDIN
NOTAPPLYINGTHECASESOFABEJOVS.DELACRUZ,
149SCRA654ANDRURALBANKOFSALINAS,INC.,ET
ALVS.COURTOFAPPEALS,ETAL.,G.R.NO.96674,JUNE
26,1992.
III.THEHONORABLECOURTOFAPPEALSERREDIN
APPLYINGA1911CASE,HAGERVS.BRYAN,19PHIL.
138,TODISMISSTHECOMPLAINTFORISSUANCEOFA
CERTIFICATEOFSTOCK.
At issue is whether the Court of Appeals erred in holding that
herein petitioner has no cause of action for a writ of
mandamus.
Petitioner first contends that the act of recording the transfer
of shares in the stock and transfer book and that of issuing a
certificate of stock for the transferred shares involves only
one continuous process. Thus, when a corporate secretary
is presented with a document of transfer of fully paid shares,
it is his duty to record the transfer in the stock and transfer
book of the corporation, issue a new stock certificate in the
name of the transferee, and cancel the old one. A transferee
who requests for the issuance of a stock certificate need not
spell out each and every act that needs to be done by the
corporate secretary, as a request for issuance of stock
[18][endif]
certificates necessarily includes a request for the recording

of the transfer. Ergo, the failure to record the transfer does
not mean that the transferee cannot ask for the issuance of
stock certificates.
Secondly, according to petitioner, there is no law, rule or
regulation requiring a transferor of shares of stock to first
issue express instructions or execute a power of attorney for
the transfer of said shares before a certificate of stock is
issued in the name of the transferee and the transfer
registered in the books of the corporation. He contends that
Hager vs. Bryan, 19 Phil. 138 (1911), and Rivera vs.
Florendo, 144 SCRA 643 (1986), cited by respondents, do
not apply to this case. These cases contemplate a situation
where a certificate of stock has been issued by the company
whereas in this case at bar, no stock certificates have been
issued even in the name of the original stockholder, Fausto
Gaid.
Finally, petitioner maintains that since he is under no
compulsion to register the transfer or to secure stock
certificates in his name, his cause of action is deemed not to
have accrued until respondent ALSONS denied his request.
Respondents, in their comment, maintain that the transfer of
shares of stock not recorded in the stock and transfer book
of the corporation is non-existent insofar as the corporation
is concerned and no certificate of stock can be issued in the
name of the transferee. Until the recording is made, the
transfer cannot be the basis of issuance of a certificate of
stock. They add that petitioner is not the real party in
interest, the real party in interest being Fausto Gaid since it
is his name that appears in the records of the corporation.
They conclude that petitioners cause of action is barred by
prescription and laches since 24 years elapsed before he
made any demand upon ALSONS.
We find the instant petition without merit. The Court of
Appeals did not err in ruling that petitioner had no cause of
action, and that his petition for mandamus was properly

dismissed.
There is no question that Fausto Gaid was an original
subscriber of respondent corporations 239,500 shares. This
is clear from the numerous pleadings filed by either party. It
is also clear from the Amended Articles of Incorporation
approved on August 9, 1995
that
each share had a par value of P1.00 per share. And, it is
undisputed that petitioner had not made a previous request
upon the corporate secretary of ALSONS, respondent
Francisco M. Giron Jr., to record the alleged transfer of
stocks.
The Corporation Code states that:
SEC.63.Certificateofstockandtransferofshares.Thecapital
stockofstockcorporationsshallbedividedintosharesforwhich
certificatessignedbythepresidentorvicepresident,countersigned
bythesecretaryorassistantsecretary,andsealedwiththesealof
thecorporationshallbeissuedinaccordancewiththebylaws.
Sharesofstocksoissuedarepersonalpropertyandmaybe
transferredbydeliveryofthecertificateorcertificatesindorsedby
theownerorhisattorneyinfactorotherpersonlegallyauthorized
tomakethetransfer.Notransfer,however,shallbevalid,except
asbetweentheparties,untilthetransferisrecordedinthebooksof
thecorporationsoastoshowthenamesofthepartiestothe
transaction,thedateofthetransfer,thenumberofthecertificateor
certificatesandthenumberofsharestransferred.
Nosharesofstockagainstwhichthecorporationholdsanyunpaid
claimshallbetransferableinthebooksofthecorporation.
Pursuant to the foregoing provision, 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
[if !
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.
Hence, without such recording, the transferee may not be
regarded by the corporation as one among its stockholders
and the corporation may legally refuse the issuance of stock
certificates in the name of the transferee even when there
has been compliance with the requirements of Section 64
of the Corporation Code. This is the import of
Section 63 which states that No transfer, however, shall be
valid, except 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 the certificate or certificates and the number of
shares transferred. The situation would be different if the
petitioner was himself the registered owner of the stock
which he sought to transfer to a third party, for then he would
be entitled to the remedy of mandamus.
From the corporations point of view, the transfer is not
effective until it is recorded. Unless and until such recording
is made the demand for the issuance of stock certificates to
the alleged transferee has no legal basis. 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.
In other words, the stock and transfer book is
the basis for ascertaining the persons entitled to the rights
and subject to the liabilities of a stockholder. Where a
transferee is not yet recognized as a stockholder, the
corporation is under no specific legal duty to issue stock
certificates in the transferees name.
[if !
[if !
It follows that, as held by the Court of Appeals:

xxxuntilregistrationisaccomplished,thetransfer,thoughvalid
betweentheparties,cannotbeeffectiveasagainstthecorporation.
Thus,intheabsenceofanyallegationthatthetransferoftheshares
betweenGaidandtheprivaterespondent[hereinpetitioner]was
registeredinthestockandtransferbookofthepetitioner
corporation,theprivaterespondenthasfailedtostateacauseof
action.
Petitioner insists that it is precisely the duty of the corporate
secretary, when presented with the document of fully paid
shares, to effect the transfer by recording the transfer in the
stock and transfer book of the corporation and to issue stock
certificates in the name of the transferee. On this point, the
SEC En Banc cited Rural Bank of Salinas, Inc. vs. Court of
Appeals,
where we held that:
ForthepetitionerRuralBankofSalinastorefuseregistrationof
thetransferredsharesinitsstockandtransferbook,whichdutyis
ministerialonitspart,istorendernugatoryandineffectualthe
spiritandintentofSection63oftheCorporationCode.Thus,
respondentCourtofAppealsdidnoterrinupholdingthedecision
ofrespondentSECaffirmingtheDecisionofitsHearingOfficer
directingtheregistrationofthe473sharesinthestockandtransfer
bookinthenamesofprivaterespondents.Atallevents,the
registrationiswithoutprejudicetotheproceedingsincourtto
determinethevalidityoftheDeedsofAssignmentofthesharesof
stockinquestion.
In Rural Bank of Salinas, Inc., however, private respondent
Melania Guerrero had a Special Power of Attorney executed
in her favor by Clemente Guerrero, the registered
stockholder. It gave Guerrero full authority to sell or
otherwise dispose of the 473 shares of stock registered in
Clementes name and to execute the proper documents
therefor. Pursuant to the authority so given, Melania
assigned the 473 shares of stock owned by Guerrero and
presented to the Rural Bank of Salinas the deeds of

assignment covering the assigned shares. Melania
Guerrero prayed for the transfer of the stocks in the stock
and transfer book and the issuance of stock certificates in
the name of the new owners thereof. Based on those
circumstances, there was a clear duty on the part of the
corporate secretary to register the 473 shares in favor of the
new owners, since the person who sought the transfer of
shares had express instructions from and specific authority
given by the registered stockholder to cause the disposition
of stocks registered in his name.
That cannot be said of this case. The deed of undertaking
with indorsement presented by petitioner does not establish,
on its face, his right to demand for the registration of the
transfer and the issuance of certificates of stocks. In Hager
vs. Bryan, 19 Phil. 138 (1911), this Court held that a petition
for mandamus fails to state a cause of action where it
appears that the petitioner is not the registered stockholder
and there is no allegation that he holds any power of
attorney from the registered stockholder, from whom he
obtained the stocks, to make the transfer, thus:
Itappears,however,fromtheoriginalaswellastheamended
petition,thatthispetitionerisnottheregisteredownerofthestock
whichheseekstohavetransferred,andexceptinsofarashe
allegesthatheistheownerofthestockandthatitwas"indorsed"
tohimonFebruary5bytheBryanLandonCompany,inwhose
nameitisregisteredonthebooksoftheVisayanElectric
Company,thereisnoallegationthatthepetitionerholdsanypower
ofattorneyfromtheBryanLandonCompanyauthorizinghimto
makedemandonthesecretaryoftheVisayanElectricCompanyto
makethetransferwhichpetitionerseekstohavemadethroughthe
mediumofthemandamusofthiscourt.
Withoutdiscussingordecidingtherespectiverightsoftheparties
whichmightbeproperlyassertedinanordinaryactionoranaction
inthenatureofanequitablesuit,weareallagreedthatinacase
suchasthatatbar,amandamusshouldnotissuetocompelthe
secretaryofacorporationtomakeatransferofthestockonthe
booksofthecompany,unlessitaffirmativelyappearsthathehas
failedorrefusedsotodo,uponthedemandeitheroftheperson
inwhosenamethestockisregistered,orofsomepersonholding
apowerofattorneyforthatpurposefromtheregisteredownerof
thestock.Thereisnoallegationinthepetitionthatthepetitioner
oranyoneelseholdsapowerofattorneyfromtheBryanLandon
Companyauthorizingademandforthetransferofthestock,orthat
theBryanLandonCompanyhaseveritselfmadesuchdemand
upontheVisayanElectricCompany,andintheabsenceofsuch
allegationwearenotabletosaythattherewassuchaclear
indisputableduty,suchaclearlegalobligationuponthe
respondent,astojustifytheissuanceofthewrittocompelhimto
performit.
Undertheprovisionsofourstatutetouchingthetransferofstock
(secs.35and36ofActNo.1459),
themere
indorsementofstockcertificatesdoesnotinitselfgivetothe
indorseesucharighttohaveatransferofthesharesofstockonthe
booksofthecompanyaswillentitlehimtothewritofmandamus
tocompelthecompanyanditsofficerstomakesuchtransferathis
demand,because,undersuchcircumstancestheduty,thelegal
obligation,isnotsoclearandindisputableastojustifytheissuance
ofthewrit.Asageneralruleandespeciallyundertheabovecited
statute,asbetweenthecorporationontheonehand,andits
shareholdersandthirdpersonsontheother,thecorporationlooks
onlytoitsbooksforthepurposeofdeterminingwhoits
shareholdersare,sothatamereindorseeofastockcertificate,
claimingtobetheowner,willnotnecessarilyberecognizedas
suchbythecorporationanditsofficers,intheabsenceofexpress
instructionsoftheregisteredownertomakesuchtransfertothe
indorsee,orapowerofattorneyauthorizingsuchtransfer.
[if!supportFootnotes]
[30][endif]
In Rivera vs. Florendo, 144 SCRA 643, 657 (1986), we

reiterated that a mere indorsement by the supposed owners
of the stock, in the absence of express instructions from
them, cannot be the basis of an action for mandamus and
that the rights of the parties have to be threshed out in an
ordinary action. That Hager and Rivera involved petitions for
mandamus to compel the registration of the transfer, while
this case is one for issuance of stock, is of no moment. It
has been made clear, thus far, that before a transferee may
ask for the issuance of stock certificates, he must first cause
the registration of the transfer and thereby enjoy the status
of a stockholder insofar as the corporation is concerned. A
corporate secretary may not be compelled to register
transfers of shares on the basis merely of an indorsement of
stock certificates. With more reason, in our view, a
corporate secretary may not be compelled to issue stock
certificates without such registration.
Petitioners reliance on our ruling in Abejo vs. De la Cruz,
149 SCRA 654 (1987), that notice given to the corporation of
the sale of the shares and presentation of the certificates for
transfer is equivalent to registration is misplaced. In this
case there is no allegation in the complaint that petitioner
ever gave notice to respondents of the alleged transfer in his
favor. Moreover, that case arose between and among the
principal stockholders of the corporation, Pocket Bell, due to
the refusal of the corporate secretary to record the transfers
in favor of Telectronics of the corporations controlling 56%
shares of stock which were covered by duly endorsed stock
certificates. As aforesaid, the request for the recording of a
transfer is different from the request for the issuance of stock
certificates in the transferees name. Finally, in Abejo we did
not say that transfer of shares need not be recorded in the
books of the corporation before the transferee may ask for
the issuance of stock certificates. The Courts statement,
that there is no requirement that a stockholder of a

corporation must be a registered one in order that the
Securities and Exchange Commission may take cognizance
of a suit seeking to enforce his rights as such stockholder
among which is the stock purchasers right to secure the
corresponding certificate in his name,
was
addressed to the issue of jurisdiction, which is not pertinent
to the issue at hand.
Absent an allegation that the transfer of shares is recorded
in the stock and transfer book of respondent ALSONS, there
appears no basis for a clear and indisputable duty or clear
legal obligation that can be imposed upon the respondent
corporate secretary, so as to justify the issuance of the writ
of mandamus to compel him to perform the transfer of the
shares to petitioner. The test of sufficiency of the facts
alleged in a petition is whether or not, admitting the facts
alleged, the court could render a valid judgment thereon in
accordance with the prayer of the petition.
This test would not be satisfied if, as in this case, not all the
elements of a cause of action are alleged in the complaint.
Where the corporate secretary is under no
clear legal duty to issue stock certificates because of the
petitioners failure to record earlier the transfer of shares,
one of the elements of the cause of action for mandamus is
clearly missing.
That petitioner was under no obligation to request for the
registration of the transfer is not in issue. It has no
pertinence in this controversy. One may own shares of
corporate stock without possessing a stock certificate. In
Tan vs. SEC, 206 SCRA 740 (1992), we had occasion to
declare that a certificate of stock is not necessary to render
one a stockholder in a corporation. But a certificate of stock
is the tangible evidence of the stock itself and of the various
interests therein. The certificate is the evidence of the
holders interest and status in the corporation, his ownership
[if !
of the share represented thereby. The certificate is in law, so

to speak, an equivalent of such ownership. It expresses the
contract between the corporation and the stockholder, but it
is not essential to the existence of a share in stock or the
creation of the relation of shareholder to the corporation.
In fact, it rests on the will of the stockholder
whether he wants to be issued stock certificates, and a
stockholder may opt not to be issued a certificate. In Won
vs. Wack Wack Golf and Country Club, Inc., 104 Phil. 466
(1958), we held that considering that the law does not
prescribe a period within which the registration should be
effected, the action to enforce the right does not accrue until
there has been a demand and a refusal concerning the
transfer. In the present case, petitioners complaint for
mandamus must fail, not because of laches or estoppel, but
because he had alleged no cause of action sufficient for the
issuance of the writ.
WHEREFORE, the petition is DENIED for lack of merit.
The decision of the Court of Appeals, in CA-G.R. SP No.
46692, which set aside that of the Securities and Exchange
Commission En Banc in SEC-AC No. 545 and reinstated the
order of the Hearing Officer, is hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
[if !

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RICARDO A. NAVA, petitioner-appellant.

of the subscription does not entitle the subscriber to a certificate of

transfer. No transfer, however, shall be valid, except as between the,

subscription is made. The subscriber is as much bound to pay his

As already stressed, in this case no stock certificate was issued to

Statement of the Case

IN THE LIGHT OF ALL THE FOREGOING, the Petition at bench is

WHEREFORE, in view of all the foregoing, judgment is hereby

only issue upon a clear showing of ownership over the assailed

Honorable Commission has no jurisdiction to enter the present

secured by the subject pledges but plaintiff refused unjustifiably to

Other reliefs just and equitable [are] likewise prayed for.

The registration of shares in a stockholder's name, the issuance of

is intra-corporate in nature and falls within the jurisdiction of

As a general rule, the jurisdiction of a court or tribunal over the

In his Complaint, petitioner alleged that, pursuant to the contracts of

be the purchaser at his option; and the PLEDGEE is hereby

In Rural Bank of Salinas, Melenia Guerrero executed deeds of

Without Foreclosure and

or without notice to the PLEDGOR, at which sale the PLEDGEE may

Unless the thing pledged is expropriated, the debtor continues to be

Under the contracts of pledge, private respondents would have a right

Prescription should not begin to run on the action to demand the

Respondents' indorsement and delivery of the certificates of stock

Moreover, the fact that respondents allowed the petitioner to receive

interest and the earnings of the right pledged.

WHEREFORE, the petition is hereby DENIED and the assailed

THE RURAL BANK OF LIPA CITY, INC., THE

JUANITA BAUTISTA OF THE RURAL BANK OF

Before us is a petition for review on certiorari assailing the

Four Million Pesos (P4,000,000.00), and stipulated that said debt

Gonzales, Aurora Lacerna, Celso Laygo, Edgardo Reyes,

Petitioners, respondents therein, thus moved for the lifting of

actual, moral and exemplary damages.

Thereafter, petitioners filed an urgent motion to quash the writ

1995 annual stockholders meeting, respectively, were issued by

petitioners, as mere assignees, cannot enjoy the status of a

now cognizable by the Regional Trial Court.

VICENTE C. PONCE, petitioner, vs. ALSONS

This petition for review seeks to annul the decision

alleged, among others, that:

Instead of filing an answer, respondents moved to dismiss

certificates of stock, and mandamus will not lie.

dated August 10, 1999.

certificates necessarily includes a request for the recording

action, and that his petition for mandamus was properly

of determining who its shareholders are.

It follows that, as held by the Court of Appeals:

presented to the Rural Bank of Salinas the deeds of

In Rivera vs. Florendo, 144 SCRA 643, 657 (1986), we

that there is no requirement that a stockholder of a

of the share represented thereby. The certificate is in law, so

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