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Trust Fund Doctrine

1. Turner vs Lorenzo Shipping 636 SCRA 13 (2010)


The petitioners (Philip and Elnora Turner) held 1,010,000 shares of stock
of the respondent (Lorenzo Shipping Corp.), a domestic corporation
engaged primarily in cargo shipping activities. The respondent decided to
amend its articles of incorporation to remove the stockholders pre-emptive
rights to newly issued shares of stock. The petitioners voted against the
amendment and demanded payment of their shares at the rate of
P2.276/share based on the book value of the shares, or a total of
P2,298,760.00.
The respondent found the fair value of the shares demanded to be
unacceptable. It insisted that the market value on the date before the
action to remove the pre-emptive right was taken should be the value, or
P0.41/share (P414,100.00) and that the payment could be made only if the
respondent had unrestricted retained earnings in its books to cover the
value of the shares, which was not the case.
Respondent refused the petitioners demand, explaining that pursuant to
the Corporation Code, the dissenting stockholders exercising their
appraisal rights could be paid only when the corporation had unrestricted
retained earnings to cover the fair value of the shares, but that it had no
retained earnings at the time of the petitioners demand
Issue: Whether the petitioners have a valid cause of action against the
respondent.
Held:
No. SC upheld the decision of the CA. RTC acted in excess of its
jurisdiction.
No payment shall be made to any dissenting stockholder unless the
corporation has unrestricted retained earnings in its books to cover the
payment (apply the Trust fund doctrine). In case the corporation has no
available unrestricted retained earnings in its books, Sec. 83 provides that
if the dissenting stockholder is not paid the value of his shares within 30
days after the award, his voting and dividend rights shall immediately be
restored.
The trust fund doctrine backstops the requirement of unrestricted retained
earnings to fund the payment of the shares of stocks of the withdrawing

stockholders. Under the doctrine, the capital stock, property, and other
assets of a corporation are regarded as equity in trust for the payment of
corporate creditors, who are preferred in the distribution of corporate
assets. The creditors of a corporation have the right to assume that the
board of directors will not use the assets of the corporation to purchase its
own stock for as long as the corporation has outstanding debts and
liabilities. There can be no distribution of assets among the stockholders
without first paying corporate debts. Thus, any disposition of corporate
funds and assets to the prejudice of creditors is null and void.
2. Lu vs Lu Ym Sr. 643 SCRA 23 (2011)
To suggest at all that David Lu, et al. were seeking to recover specific
properties of LLDC through Civil Case No. CEB-25502 was even
absolutely fallacious. Under the trust fund doctrine, the capital stock,
properties, and other assets of a corporation are regarded as held in trust
for the corporate creditors, who, being preferred in the distribution of the
corporate assets, must first be paid before any corporate assets may be
distributed among the stockholders.13 In the event of the dissolution of
LLDC, therefore, David Lu, et al. would get only the value of their minority
number of shares, not the value of the 600,000 shares. Indeed, a basic
concept in corporate law is that a shareholders interest in corporate
property, if it exists at all, is indirect, contingent, remote, conjectural,
consequential, and collateral. A share of stock, although representing a
proportionate or aliquot interest in the properties of the corporation, does
not vest its holder with any legal right or title to any of the properties, such
holders interest in the properties being equitable or beneficial in nature. A
shareholder is in no legal sense the owner of corporate properties, which
are owned by the corporation as a distinct legal person.
3. Halley vs Printwell GR 157549 May 30 2011
FACTS:
BMPI (Business Media Philippines Inc.) is a corporation under the control
of its stockholders, including Donnina Halley. In the course of its business,
BMPI commissioned PRINTWELL to print Philippines, Inc. (a magazine
published and distributed by BMPI). PRINTWELL extended 30-day credit
accommodation in favor of BMPI and in a period of 9 mos. BMPI placed
several orders amounting to 316,000.
However, only 25,000 was paid hence a balance of 291,000. PRINTWELL
sued BMPI for collection of the unpaid balance and later on impleaded
BMPIs original stockholders and incorporators to recover on their unpaid
subscriptions.

It appears that BMPI has an authorized capital stock of 3M divided into


300,000 shares with P10 par value. Only 75,000 shares worth P750,000
were originally subscribed of which P187,500 were paid up capital. Halley
subscribed to 35,000 shares worth P350,000 but only paid P87,500.
Halley contends that:
1. They all had already paid their subscriptions in full
2. BMPI had a separate and distinct personality
3. BOD and SH had resolved to dissolve BMPI
RTC and CA:
Defendant merely used the corporate fiction as a cloak/cover to create an
injustice (against PRINTWELL). Rejected allegations of full payment in
view of irregularity in the issuance of ORs Payment made on a later date
was covered by an OR with a lower serial number than payment made on
an earlier date).
Doctrine of Limited Liability
ISSUE: Whether or not petitioner Donnina Halley is personally liable
though she submits she had no participation in the transaction between
BMPI and Printwell and that BMPI acted on its own.
HELD:
Yes. Although a corporation has a personality separate and distinct from
those of its stockholders, directors, or officers, such separate and distinct
personality is merely a fiction created by law for the sake of convenience
and to promote the ends of justice. The corporate personality may be
disregarded, and the individuals composing the corporation will be treated
as individuals, if the corporate entity is being used as a cloak or cover for
fraud or illegality; as a justification for a wrong; as an alter ego, an adjunct,
or a business conduit for the sole benefit of the stockholders. As a general
rule, a corporation is looked upon as a legal entity, unless and until
sufficient reason to the contrary appears. Thus, the courts always presume
good faith, and for that reason accord prime importance to the separate
personality of the corporation, disregarding the corporate personality only
after the wrongdoing is first clearly and convincingly established. It thus
behooves the courts to be careful in assessing the milieu where the
piercing of the corporate veil shall be done.
Although nowhere in Printwells amended complaint or in the testimonies
Printwell offered can it be read or inferred from that the petitioner was

instrumental in persuading BMPI to renege on its obligation to pay; or that


she induced Printwell to extend the credit accommodation by
misrepresenting the solvency of BMPI to Printwell, her personal liability,
together with that of her co-defendants, remained because the CA found
her and the other defendant stockholders to be in charge of the operations
of BMPI at the time the unpaid obligation was transacted and incurred.
We clarify that the trust fund doctrine is not limited to reaching the
stockholders unpaid subscriptions. The scope of the doctrine when the
corporation is insolvent encompasses not only the capital stock, but also
other property and assets generally regarded in equity as a trust fund for
the payment of corporate debts.[36]All assets and property belonging to
the corporation held in trust for the benefit of creditors thatwere distributed
or in the possession of the stockholders, regardless of full paymentof their
subscriptions, may be reached by the creditor in satisfaction of its claim.
Also, under the trust fund doctrine, a corporation has no legal capacity to
release an original subscriber to its capital stock from the obligation of
paying for his shares, in whole or in part,[37] without a valuable
consideration, or fraudulently, to the prejudice of creditors.The creditor is
allowed to maintain an action upon any unpaid subscriptions and thereby
steps into the shoes of the corporation for the satisfaction of its debt.To
make out a prima facie case in a suit against stockholders of an insolvent
corporation to compel them to contribute to the payment of its debts by
making good unpaid balances upon their subscriptions, it is only
necessary to establish that the stockholders have not in good faith paid the
par value of the stocks of the corporation.
The petitioner posits that the finding of irregularity attending the issuance of
the receipts (ORs) issued to the other stockholders/subscribers should not
affect her because her receipt did not suffer similar irregularity.
Notwithstanding that the RTC and the CA did not find any irregularity in the OR
issued in her favor, we still cannot sustain the petitioners defense of full
payment of her subscription.
Lastly, the petitioner maintains that both lower courts erred in relying on the
articles of incorporation as proof of the liabilities of the stockholders
subscribing to BMPIs stocks, averring that the articles of incorporation did not
reflect the latest subscription status of BMPI.
Although the articles of incorporation may possibly reflect only the preincorporation status of a corporation, the lower courts reliance on that
document to determine whether the original subscribers already fully paid their

subscriptions or not was neither unwarranted nor erroneous. As earlier


explained, the burden of establishing the fact of full payment belonged not to
Printwell even if it was the plaintiff, but to the stockholders like the petitioner
who, as the defendants, averred full payment of their subscriptions as a
defense. Their failure to substantiate their averment of full payment, as well as
their failure to counter the reliance on the recitals found in the articles of
incorporation simply meant their failure or inability to satisfactorily prove their
defense of full payment of the subscriptions.

squabbles and future litigations unless the indispensable conditions and


procedures for the protection of corporate creditors are followed. Otherwise, the
corporate peace laudably hoped for by the court will remain nothing but a dream
because this time, it will be the creditors turn to engage in squabbles and litigations
should the court order an unlawful distribution in blatant disregard of the Trust
Fund Doctrine.

To reiterate, the petitioner was liable pursuant to the trust fund doctrine for the
corporate obligation of BMPI by virtue of her subscription being still unpaid.
Printwell, as BMPIs creditor, had a right to reach her unpaid subscription in
satisfaction of its claim.

In the instant case, the rescission of the Pre-Subscription Agreement will


effectively result in the unauthorized distribution of the capital assets and property
of the corporation, thereby violating the Trust Fund Doctrine and the Corporation
Code, since rescission of a subscription agreement is not one of the instances
when distribution of capital assets and property of the corporation is allowed.

4. Yamamoto vs. Nishino Leather Industries 551 SCRA 447 (2008)


It is settled that the property of a corporation is not the property of its stockholders
or members. Under the trust fund doctrine, the capital stock, property, and other
assets of a corporation are regarded as equity in trust for the payment of corporate
creditors which are preferred over the stockholders in the distribution of corporate
assets.[39] The distribution of corporate assets and property cannot be made to
depend on the whims and caprices of the stockholders, officers, or directors of the
corporation unless the indispensable conditions and procedures for the protection
of corporate creditors are followed.
5. Ong Yong vs Tiu GR 144476 April 8, 2003
The Trust Fund Doctrine, first enunciated by this Court in the 1923 case of
Philippine Trust Co. vs. Rivera, provides that subscriptions to the capital stock of a
corporation constitute a fund to which the creditors have a right to look for the
satisfaction of their claims. This doctrine is the underlying principle in the
procedure for the distribution of capital assets, embodied in the Corporation Code,
which allows the distribution of corporate capital only in three instances: (1)
amendment of the Articles of Incorporation to reduce the authorized capital stock,
(2) purchase of redeemable shares by the corporation, regardless of the existence
of unrestricted retained earnings, and (3) dissolution and eventual liquidation of the
corporation. Furthermore, the doctrine is articulated in Section 41 on the power of
a corporation to acquire its own shares and in Section 122 on the prohibition
against the distribution of corporate assets and property unless the stringent
requirements therefor are complied with.
The distribution of corporate assets and property cannot be made to depend on
the whims and caprices of the stockholders, officers or directors of the corporation,
or even, for that matter, on the earnest desire of the court a quo to prevent further

Subscription of Contracts
6. Ong Yong vs Tiu GR 144476 April 8, 2003
The Tius allege that they were prevented from participating in the management of
the corporation. There is evidence that the Ongs did prevent the rightfully elected
Treasurer, Cely Tiu, from exercising her function as such. The records show that
the President, Wilson Ong, supervised the collection and receipt of rentals in the
Masagana Citimall;[19] that he ordered the same to be deposited in the bank;[20]
and that he held on to the cash and properties of the corporation.[21] Section 25 of
the Corporation Code prohibits the President from acting concurrently as Treasurer
of the corporation. The rationale behind the provision is to ensure the effective
monitoring of each officers separate functions.
However, although the Tius were adversely affected by the Ongs unwillingness to
let them assume their positions, rescission due to breach of contract is definitely
the wrong remedy for their personal grievances. The Corporation Code, SEC rules
and even the Rules of Court provide for appropriate and adequate intra-corporate
remedies, other than rescission, in situations like this. Rescission is certainly not
one of them, specially if the party asking for it has no legal personality to do so and
the requirements of the law therefor have not been met. A contrary doctrine will
tread on extremely dangerous ground because it will allow just any stockholder, for
just about any real or imagined offense, to demand rescission of his subscription
and call for the distribution of some part of the corporate assets to him without
complying with the requirements of the Corporation Code.
Hence, the Tius, in their personal capacities, cannot seek the ultimate and
extraordinary remedy of rescission of the subject agreement based on a less than
substantial breach of subscription contract. Not only are they not parties to the

subscription contract between the Ongs and FLADC; they also have other
available and effective remedies under the law.
All this notwithstanding, granting but not conceding that the Tius possess the legal
standing to sue for rescission based on breach of contract, said action will
nevertheless still not prosper since rescission will violate the Trust Fund Doctrine
and the procedures for the valid distribution of assets and property under the
Corporation Code.
Certificate of Stocks and Transfer of Shares
7. Puno vs Puno Enterprises GR 177066 Sept. 11, 2009
Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent
Puno Enterprises, Inc. On March 14, 2003, petitioner Joselito Musni Puno,
claiming to be an heir of Carlos L. Puno, initiated a complaint for specific
performance against respondent. Petitioner averred that he is the son of the
deceased with the latters common-law wife, Amelia Puno. As surviving heir, he
claimed entitlement to the rights and privileges of his late father as stockholder of
respondent. The complaint thus prayed that respondent allow petitioner to inspect
its corporate book, render an accounting of all the transactions it entered into from
1962, and give petitioner all the profits, earnings, dividends, or income pertaining
to the shares of Carlos L. Puno.

8. Reyes vs RTC Makati GR 165744 Aug. 11, 2008


FACTS:
Petitioner and private respondent were siblings together with two others, namely
Pedro and Anastacia, in a family business established as Zenith Insurance
Corporation (Zenith), from which they owned shares of stocks. The Pedro and
Anastacia subsequently died. The former had his estate judicially partitioned
among his heirs, but the latter had not made the same in her shareholding in
Zenith. Zenith and Rodrigo filed a complaint with the Securities and Exchange
Commission (SEC) against petitioner (1) a derivative suit to obtain accounting of
funds and assets of Zenith, and (2) to determine the shares of stock of deceased
Pedro and Anastacia that were arbitrarily and fraudulently appropriated [by Oscar,
and were unaccounted for]. In his answer with counterclaim, petitioner denied the
illegality of the acquisition of shares of Anastacia and questioned the jurisdiction of
SEC to entertain the complaint because it pertains to settlement of [Anastacias]
estate. The case was transferred to. Petitioner filed Motion to Declare Complaint
as Nuisance or Harassment Suit and must be dismissed. RTC denied the motion.
The motion was elevated to the Court of Appeals by way of petition for certiorari,
prohibition and mandamus, but was again denied.
ISSUES:

Issue:

(1) Whether or not Rodrigo may be considered a stockholder of Zenith with


respect to the shareholdings originally belonging to Anastacia.

Whether Joselito Musni Puno as an heir is automatically entitled for the stocks
upon the death of a shareholder.

(2) Whether or not there is an intra-corporate relationship between the parties that
would characterize the case as an intra-corporate dispute?

Held:

RULINGS:

Upon the death of a shareholder, the heirs do not automatically become


stockholders of the corporation and acquire the rights and privileges of the
deceased as shareholder of the corporation. The stocks must be distributed first to
the heirs in estate proceedings, and the transfer of the stocks must be recorded in
the books of the corporation. Section 63 of the Corporation Code provides that no
transfer shall be valid, except as between the parties, until the transfer is recorded
in the books of the corporation. During such interim period, the heirs stand as the
equitable owners of the stocks, the executor or administrator duly appointed by the
court being vested with the legal title to the stock. Until a settlement and division of
the estate is effected, the stocks of the decedent are held by the administrator or
executor. Consequently, during such time, it is the administrator or executor who is
entitled to exercise the rights of the deceased as stockholder.

(1) No. Rodrigo must, hurdle two obstacles before he can be considered a
stockholder of Zenith with respect to the shareholdings originally belonging to
Anastacia. First, he must prove that there are shareholdings that will be left to him
and his co-heirs, and this can be determined only in a settlement of the decedents
estate. No such proceeding has been commenced to date. Second, he must
register the transfer of the shares allotted to him to make it binding against the
corporation. He cannot demand that this be done unless and until he has
established his specific allotment (and prima facie ownership) of the shares.
Without the settlement of Anastacias estate, there can be no definite partition and
distribution of the estate to the heirs. Without the partition and distribution, there
can be no registration of the transfer. And without the registration, we cannot
consider the transferee-heir a stockholder who may invoke the existence of an
intra-corporate relationship as premise for an intra-corporate controversy within the

jurisdiction of a special commercial court. The subject shares of stock (i.e.,


Anastacias shares) are concerned Rodrigo cannot be considered a stockholder
of Zenith.
Rodrigos bare claim that the complaint is a derivative suit will not suffice to confer
jurisdiction on the RTC (as a special commercial court) if he cannot comply with
the requisites for the existence of a derivative suit. These requisites are:

wrongdoing against the corporation that he can champion in his capacity as a


shareholder on record.
9. Ponce vs Alsons Cement Corp GR 139802 Dec. 10, 2002
The Corporation Code states that:

c.
the cause of action actually devolves on the corporation; the wrongdoing or
harm having been or being caused to the corporation and not to the particular
stockholder bringing the suit.

SEC. 63. Certificate of stock and transfer of shares.The capital stock of stock
corporations shall be divided into shares for which certificates signed by the
president or vice-president, countersigned by the secretary or assistant secretary,
and sealed with the seal of the corporation shall be issued in accordance with the
by-laws. Shares of stock so issued are personal property and may be transferred
by delivery of the certificate or certificates indorsed by the owner or his attorney-infact or other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is recorded in the
books of the corporation so as to show the names of the parties to the transaction,
the date of the transfer, the number of the certificate or certificates and the number
of shares transferred.

Based on these standards, we hold that the allegations of the present complaint do
not amount to a derivative suit.

No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.

First, as already discussed above, Rodrigo is not a shareholder with respect to the
shareholdings originally belonging to Anastacia; he only stands as a transfereeheir whose rights to the share are inchoate and unrecorded. With respect to his
own individually-held shareholdings, Rodrigo has not alleged any individual cause
or basis as a shareholder on record to proceed against Oscar.

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.[22] 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.[23] 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.

a.
the party bringing suit should be a shareholder during the time of the act or
transaction complained of, the number of shares not being material;
b.
the party has tried to exhaust intra-corporate remedies, i.e., has made a
demand on the board of directors for the appropriate relief, but the latter has failed
or refused to heed his plea; and

Second, in order that a stockholder may show a right to sue on behalf of the
corporation, he must allege with some particularity in his complaint that he has
exhausted his remedies within the corporation by making a sufficient demand upon
the directors or other officers for appropriate relief with the expressed intent to sue
if relief is denied.[35] Paragraph 8 of the complaint hardly satisfies this requirement
since what the rule contemplates is the exhaustion of remedies within the
corporate setting:
8. As members of the same family, complainant Rodrigo C. Reyes has resorted [to]
and exhausted all legal means of resolving the dispute with the end view of
amicably settling the case, but the dispute between them ensued.
Lastly, we find no injury, actual or threatened, alleged to have been done to the
corporation due to Oscars acts. If indeed he illegally and fraudulently transferred
Anastacias shares in his own name, then the damage is not to the corporation but
to his co-heirs; the wrongful transfer did not affect the capital stock or the assets of
Zenith. As already mentioned, neither has Rodrigo alleged any particular cause or

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[24] 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.[25]

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.[26] 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.
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.[33] 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.[34] 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 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.
10. Makati Sports Club Inc vs Cheng GR 178523 June 16, 2010
Whether the cert. of stocks of Gaid can be transferred to Ponce
HELD: NO. petition Denied.
SEC. 63. Certificate of stock and transfer of shares.The capital stock of stock
corporations shall be divided into shares for which certificates signed by the
president or vice-president, countersigned by the secretary or assistant secretary,
and sealed with the seal of the corporation shall be issued in accordance with the
by-laws. Shares of stock so issued are personal property and may be transferred
by delivery of the certificate or certificates indorsed by the owner or his attorney-infact or other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is recorded in the
books of the corporation so as to show the names of the parties to the transaction,
the date of the transfer, the number of the certificate or certificates and the number
of shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.
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.
In a case such as that at bar, a mandamus should not issue to compel the
secretary of a corporation to make a transfer of the stock on the books of the
company
Unless it affirmatively appears that he has failed or refused so to do, upon the
demand either of the person in whose name the stock is registered, or of some
person holding a power of attorney for that purpose from the registered owner of
the stock.
Mere indorsee of a stock certificate, claiming to be the owner, will not necessarily
be recognized as such by the corporation and its officers, in the absence of
express instructions of the registered owner to make such transfer to the indorsee,
or a power of attorney authorizing such transfer

mandamus - proper remedy to make him the rightful owner and holder of a stock
certificate to be issued in his name
11. Republic vs Sandiganbayan 648 SCRA 47
Concerning respondents shares of stock here, there is no evidence presented by
petitioner that they belong to the Government of the Philippines or any of its
branches, instrumentalities, enterprises, banks or financial institutions. Nor is there
evidence that respondents, taking undue advantage of their connections or
relationship with former President Marcos or his family, relatives and close
associates, were able to acquire those shares of stock.
12. Fontana Resort and Country Club vs Spouses Tan GR 154670 June
30, 2012
In this case, respondents have miserably failed to prove how petitioners employed
fraud to induce respondents to buy FRCCI shares. It can only be expected that
petitioners presented the FLP and the country club in the most positive light in
order to attract investor-members. There is no showing that in their sales talk to
respondents, petitioners actually used insidious words or machinations, without
which, respondents would not have bought the FRCCI shares. Respondents
appear to be literate and of above-average means, who may not be so easily
deceived into parting with a substantial amount of money. What is apparent to us is
that respondents knowingly and willingly consented to buying FRCCI shares, but
were later on disappointed with the actual FLP facilities and club membership
benefits.
Similarly, we find no evidence on record that petitioners defaulted on any of their
obligations that would have called for the rescission of the sale of the FRCCI
shares to respondents.
The right to rescind a contract arises once the other party defaults in the
performance of his obligation. Rescission of a contract will not be permitted for a
slight or casual breach, but only such substantial and fundamental breach as
would defeat the very object of the parties in making the agreement.[34] In the
same case as fraud, the burden of establishing the default of petitioners lies upon
respondents, but respondents once more failed to discharge the same.
Respondents decry the alleged arbitrary and unreasonable denial of their request
for reservation at FLP and the obscure and ever-changing rules of the country club
as regards free accommodations for FRCCI class D shareholders.
Yet, petitioners were able to satisfactorily explain, based on clear policies, rules,
and regulations governing FLP club memberships, why they rejected respondents
request for reservation on October 17, 1998. Respondents do not dispute that the

Articles of Incorporation and the By-Laws of FRCCI, as well as the promotional


materials distributed by petitioners to the public (copies of which respondents
admitted receiving), expressly stated that the subscribers of FRCCI class D shares
of stock are entitled free accommodation at an FLP two-bedroom villa only for one
week annually consisting of five (5) ordinary days, one (1) Saturday and one (1)
Sunday. Thus, respondents cannot claim that they were totally ignorant of such
rule or that petitioners have been changing the rules as they go along.
Respondents had already availed themselves of free accommodations at an FLP
villa on September 5, 1998, a Saturday, so that there was basis for petitioners to
deny respondents subsequent request for reservation of an FLP villa for their free
use on October 17, 1998, another Saturday.
Neither can we rescind the contract because construction of FLP facilities were still
unfinished by 1998. Indeed, respondents allegation of unfinished FLP facilities
was not disputed by petitioners, but respondents themselves were not able to
present competent proof of the extent of such incompleteness. Without any idea of
how much of FLP and which particular FLP facilities remain unfinished, there is no
way for us to determine whether petitioners were actually unable to deliver on their
promise of a first-class leisure park and whether there is sufficient reason for us to
grant rescission or annulment of the sale of FRCCI shares. Apparently,
respondents were still able to enjoy their stay at FLP despite the still ongoing
construction works, enough for them to wish to return and again reserve
accommodations at the park.

13. Forests Hills Gold and Country Club vs Vertex Sales and Trading GR
202205 March 6, 2013
ISSUE: w/n the delay in the issuance of
a stock
substantial breach that warrants rescission of the sale? YES

certificate

is

HELD: Physical delivery is necessary to transfer ownership of stocks. Failure to do


so is a substantial breach which gives rise to a right to rescind the contract.
FEGDI failed to deliver the stock certificates, within a reasonable time from the
point the shares should have been delivered. This was a substantial breach of their
contract entitling Vertex the right to rescind the sale under Article 1191 of the Civil
Code. It is not correct to say that a sale had already been consummated as Vertex
already enjoyed the rights a shareholder can exercise.
The enjoyment of these rights cannot suffice where the law, by its express terms,
requires a specific form to transfer ownership. Mutual restitution is required in
cases involving rescission under Article 1191 of the Civil Code; such restitution is
necessary to bring back the parties to their original situation prior to the inception

of the contract. Accordingly, the amount paid to FEGDI by reason of the sale
should be returned to Vertex. On the amount of damages, the CA is correct in not
awarding damages since Vertex failed to prove by sufficient evidence that it
suffered actual damage due to the delay in the issuance of the certificate of stock.
14. Teng vs SEC GR 184332 Feb 17, 2016
Under the sec. 63, certain minimum requisites must be complied with for there to
be a valid transfer of stocks, to wit: (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.
It is the delivery of the certificate, coupled with the endorsement by the owner or
his duly authorized representative that is the operative act of transfer of shares
from the original owner to the transferee.41 The Court even emphatically declared
in Fil-Estate Golf and Development, Inc., et al. v. Vertex Sales and Trading, Inc.42
that in "a sale of shares of stock, physical delivery of a stock certificate is one of
the essential requisites for the transfer of ownership of the stocks purchased."43
The delivery contemplated in Section 63, however, pertains to the delivery of the
certificate of shares by the transferor to the transferee, that is, from the original
stockholder named in the certificate to the person or entity the stockholder was
transferring the shares to, whether by sale or some other valid form of absolute
conveyance of ownership.44 "[S]hares of stock may be transferred by delivery to
the transferee of the certificate properly indorsed. Title may be vested in the
transferee by the delivery of the duly indorsed certificate of stock."
It is thus clear that Teng's position - that Ting Ping must first surrender Chiu's and
Maluto's respective certificates of stock before the transfer to Ting Ping may be
registered in the books of the corporation -does not have legal basis. The delivery
or surrender adverted to by Teng, i.e., from Ting Ping to TCL, is not a requisite
before the conveyance may be recorded in its books. To compel Ting Ping to
deliver to the corporation the certificates as a condition for the registration of the
transfer would amount to a restriction on the right of Ting Ping to have the stocks
transferred to his name, which is not sanctioned by law. The only limitation
imposed by Section 63 is when the corporation holds any unpaid claim against the
shares intended to be transferred.
Merger and Consolidation
15. BPI vs BPI Employees Union GR 164301 Aug. 10 2010 and Oct 19 2011
Although by virtue of the merger BPI steps into the shoes of FEBTC as a
successor employer as if the former had been the employer of the latters

employees from the beginning it must be emphasized that, in reality, the legal
consequences of the merger only occur at a specific date, i.e., upon its effectivity
which is the date of approval of the merger by the SEC. Thus, we observed in the
Decision that BPI and FEBTC stipulated in the Articles of Merger that they will both
continue their respective business operations until the SEC issues the certificate of
merger and in the event no such certificate is issued, they shall hold each other
blameless for the non-consummation of the merger.[16] We likewise previously
noted that BPI made its assignments of the former FEBTC employees effective on
April 10, 2000, or after the SEC approved the merger.[17] In other words, the
obligation of BPI to pay the salaries and benefits of the former FEBTC employees
and its right of discipline and control over them only arose with the effectivity of the
merger. Concomitantly, the obligation of former FEBTC employees to render
service to BPI and their right to receive benefits from the latter also arose upon the
effectivity of the merger. What is material is that all of these legal consequences of
the merger took place during the life of an existing and valid CBA between BPI and
the Union wherein they have mutually consented to include a Union Shop Clause.
From the plain, ordinary meaning of the terms of the Union Shop Clause, it covers
employees who (a) enter the employ of BPI during the term of the CBA; (b) are
part of the bargaining unit (defined in the CBA as comprised of BPIs rank and file
employees); and (c) become regular employees without distinguishing as to the
manner they acquire their regular status. Consequently, the number of such
employees may adversely affect the majority status of the Union and even its
existence itself, as already amply explained in the Decision.
Indeed, there are differences between (a) new employees who are hired as
probationary or temporary but later regularized, and (b) new employees who, by
virtue of a merger, are absorbed from another company as regular and permanent
from the beginning of their employment with the surviving corporation. It bears
reiterating here that these differences are too insubstantial to warrant the exclusion
of the absorbed employees from the application of the Union Shop Clause. In the
Decision, we noted that:
Verily, we agree with the Court of Appeals that there are no substantial differences
between a newly hired non-regular employee who was regularized weeks or
months after his hiring and a new employee who was absorbed from another bank
as a regular employee pursuant to a merger, for purposes of applying the Union
Shop Clause. Both employees were hired/employed only after the CBA was
signed. At the time they are being required to join the Union, they are both already
regular rank and file employees of BPI. They belong to the same bargaining unit
being represented by the Union. They both enjoy benefits that the Union was able
to secure for them under the CBA. When they both entered the employ of BPI, the
CBA and the Union Shop Clause therein were already in effect and neither of them

had the opportunity to express their preference for unionism or not. We see no
cogent reason why the Union Shop Clause should not be applied equally to these
two types of new employees, for they are undeniably similarly situated.

16. Mindanao Savings and Loan Association vs Wilkom 634 SCRA 291
(2010)
To resolve this petition, we must address two basic questions: (1) Was the merger
between FISLAI and DSLAI (now MSLAI) valid and effective; and (2) Was there
novation of the obligation by substituting the person of the debtor?
We answer both questions in the negative.
Ordinarily, in the merger of two or more existing corporations, one of the
corporations survives and continues the combined business, while the rest are
dissolved and all their rights, properties, and liabilities are acquired by the surviving
corporation. Although there is a dissolution of the absorbed or merged
corporations, there is no winding up of their affairs or liquidation of their assets
because the surviving corporation automatically acquires all their rights, privileges,
and powers, as well as their liabilities.

The merger, however, does not become effective upon the mere agreement of the
constituent corporations. Since a merger or consolidation involves fundamental
changes in the corporation, as well as in the rights of stockholders and creditors,
there must be an express provision of law authorizing them.
The steps necessary to accomplish a merger or consolidation, as provided for in
Sections 76,24 77,25 78,26 and 7927 of the Corporation Code, are:
(1) The board of each corporation draws up a plan of merger or consolidation.
Such plan must include any amendment, if necessary, to the articles of
incorporation of the surviving corporation, or in case of consolidation, all the
statements required in the articles of incorporation of a corporation.
(2) Submission of plan to stockholders or members of each corporation for
approval. A meeting must be called and at least two (2) weeks notice must be sent
to all stockholders or members, personally or by registered mail. A summary of the
plan must be attached to the notice. Vote of two-thirds of the members or of
stockholders representing two-thirds of the outstanding capital stock will be
needed. Appraisal rights, when proper, must be respected.

(3) Execution of the formal agreement, referred to as the articles of merger o[r]
consolidation, by the corporate officers of each constituent corporation. These take
the place of the articles of incorporation of the consolidated corporation, or amend
the articles of incorporation of the surviving corporation.
(4) Submission of said articles of merger or consolidation to the SEC for approval.
(5) If necessary, the SEC shall set a hearing, notifying all corporations concerned
at least two weeks before.
(6) Issuance of certificate of merger or consolidation.
Clearly, the merger shall only be effective upon the issuance of a certificate of
merger by the SEC, subject to its prior determination that the merger is not
inconsistent with the Corporation Code or existing laws. Where a party to the
merger is, a special corporation governed by its own charter, the Code particularly
mandates that a favorable recommendation of the appropriate government agency
should first be obtained.
In this case, it is undisputed that the articles of merger between FISLAI and DSLAI
were not registered with the SEC due to incomplete documentation. Consequently,
the SEC did not issue the required certificate of merger. Even if it is true that the
Monetary Board of the Central Bank of the Philippines recognized such merger,
the fact remains that no certificate was issued by the SEC. Such merger is still
incomplete without the certification.
The issuance of the certificate of merger is crucial because not only does it bear
out SECs approval but it also marks the moment when the consequences of a
merger take place. By operation of law, upon the effectivity of the merger, the
absorbed corporation ceases to exist but its rights and properties, as well as
liabilities, shall be taken and deemed transferred to and vested in the surviving
corporation.
The same rule applies to consolidation which becomes effective not upon mere
agreement of the members but only upon issuance of the certificate of
consolidation by the SEC. When the SEC, upon processing and examining the
articles of consolidation, is satisfied that the consolidation of the corporations is not
inconsistent with the provisions of the Corporation Code and existing laws, it
issues a certificate of consolidation which makes the reorganization official. The
new consolidated corporation comes into existence and the constituent
corporations are dissolved and cease to exist.
There being no merger between FISLAI and DSLAI (now MSLAI), for third parties
such as respondents, the two corporations shall not be considered as one but two
separate corporations. A corporation is an artificial being created by operation of

law. It possesses the right of succession and such powers, attributes, and
properties expressly authorized by law or incident to its existence. It has a
personality separate and distinct from the persons composing it, as well as from
any other legal entity to which it may be related. Being separate entities, the
property of one cannot be considered the property of the other.

garnishment of Trendlines deposit and other deposits it may have had with
Citytrust. Lee was denied. The CA then annulled RTCs orders finding grave abuse
of discretion on the part of RTC in denying Leesmotion to enforce garnishment
against Trendlines attached bank deposits with Citytrust, which have been
transferred to BPI by virtue of their merger.

Thus, in the instant case, as far as third parties are concerned, the assets of
FISLAI remain as its assets and cannot be considered as belonging to DSLAI and
MSLAI, notwithstanding the Deed of Assignment wherein FISLAI assigned its
assets and properties to DSLAI, and the latter assumed all the liabilities of the
former. As provided in Article 1625 of the Civil Code, "an assignment of credit, right
or action shall produce no effect as against third persons, unless it appears in a
public instrument, or the instrument is recorded in the Registry of Property in case
the assignment involves real property." The certificates of title of the subject
properties were clean and contained no annotation of the fact of assignment.
Respondents cannot, therefore, be faulted for enforcing their claim against FISLAI
on the properties registered under its name. Accordingly, MSLAI, as the successorin-interest of DSLAI, has no legal standing to annul the execution sale over the
properties of FISLAI. With more reason can it not cause the cancellation of the title
to the subject properties of Willkom and Go.

Issue:

17. BPI vs Lee Gr 190144 Aug 1, 2012


Respondent Carlito Lee filed a complaint for sum of money with damages and
application for issuance of a writ of attachment against Trendline and Buelva. He
alleged that he was enticed to invest his money with Trendline upon Buelvas
misrepresentation that she was its duly licensed investment consultant or
commodity saleswoman. RTC issued a writ of preliminary attachment whereby the
savings account of Trendline with Citytrust Banking Corporation were garnished.
Subsequently it held defendants jointly and severally liable to Lee for the full
amount of his investment plus legal interest' attorneys fees and costs of suit.
Citytrust filed an urgent motion to release the amount garnished to pay Trendlines
obligation and a similar motion was also filed by Trendline with the CA. the motion
was denied. Later on Citytrust and BPI merged with BPI as the surviving
corporation. The Articles of Merger provides among others that all liabilities and
obligations of Citytrust shall be transferred to and become the liabilities and
obligations of BPI in the same manner as if the BPI had itself incurred such
liabilities or obligations. Lee filed a motion for execution to release the garnished
deposits of Trendline. BPIs manager Mendoza denied having possession, control
and custody of any deposits or properties belonging to defendants, prompting Lee
to seek the production of their records of accounts with BPI. BPI said that it cannot
locate the defendants bank records with Citytrust. Lee filed again a motion for
execution and-or enforcement of garnishment to enforce against BPI the

Whether or not BPI may be held liable because of its merger with Citytrust
HELD: Yes. Petition is denied. Through the service of the writ of garnishment, the
garnishee becomes a virtual party to, or a forced intervenor in the case and the
trial court thereby acquires jurisdiction to bind him to compliance with all orders
and processes of the trial court with a view to the complete satisfaction of the
judgment of the court. Citytrust, therefore, upon service of the notice of
garnishment and its acknowledgment that it was in possession of defendants
deposit accounts in its letter became a virtual party to or a forced intervenor in the
civil case. As such, it became bound by the orders and processes issued by the
trial court despite not having been properly impleaded therein.
Consequently, by virtue of its merger with BPI on October 9, BPI as the surviving
corporation, effectively became the garnishee, thus the virtual party to the civil
case. Merger of two corporations produces the following effects: 1. The constituent
corporations shall become a single corporation which, in case of merger, shall be
the surviving corporation designated in the plan of merger and in case of
consolidation, shall be the consolidated corporation designated in the plan of
consolidation; 2. The separate existence of the constituent corporation shall cease,
except that of the surviving or the consolidated corporation; 3. The surviving or the
consolidated corporation shall possess all the rights' privileges' immunities and
powers and shall be subject to all the duties and liabilities of a corporation
organized under this Code; 4. The surviving or the consolidated corporation shall
thereupon and thereafter possess all the rights, privileges, immunities and
franchises of each of the constituent corporations and all property, real or
personal, and all receivables due on whatever account, including subscriptions to
shares and other choses in action, and all and every other interest of or belonging
to, or due to each constituent corporation, shall be deemed transferred to and
vested in such surviving or consolidated corporation without further act or deed;
and 5. The surviving or consolidated corporation shall be responsible and liable for
all the liabilities and obligations of each of the constituent corporations in the same
manner as if such surviving or consolidated corporation had itself incurred such
liabilities or obligations and any pending claim, action or proceeding brought by or
against any of such constituent corporations may be prosecuted by or against the
surviving or consolidated corporation. The rights of creditors or liens upon the

property of any of such constituent corporations shall not be impaired by such


merger or consolidation.
Although Citytrust was dissolved, no winding up of its affairs or liquidation of its
assets, privileges, powers and liabilities took place. As the surviving corporation,
BPI simply continued the combined businesses of the two banks and absorbed all
the rights, privileges, assets, liabilities and obligations of Citytrust, including the
latters obligation over the garnished deposits of the defendants. BPIs liability for
the garnished deposits of the defendants has been clearly established. By virtue of
the writ of garnishment, the deposits of the defendants with Citytrust were placed
in custodia legis of the court. From that time onwards' their deposits were under
the sole control of the RTC and Citytrust holds them subject to its orders until such
time that the attachment or garnishment is discharged, or the judgment in favor of
Lee is satisfied or the credit or deposit is delivered to the proper officer of the court.
Thus, Citytrust, and thereafter BPI, which automatically assumed the formers
liabilities and obligations upon the approval of their Articles of Merger, is obliged to
keep the deposit intact and to deliver the same to the proper officer upon order of
the court. The loss of bank records of a garnished deposit is not a ground for the
dissolution of garnishment. BPI cannot avoid the obligation attached to the writ of
garnishment by claiming that the fund was not transferred to it, in light of the
Articles of Merger which provides that all liabilities and obligations of Citytrust shall
be transferred to and become the liabilities and obligations of BPI in the same
manner as if the BPI had itself incurred such liabilities or obligations' and in order
that the rights and interest of creditors of Citytrust or liens upon the property of
Citytrust shall not be impaired by merger. BPI is liable to deliver the fund subject of
the writ of garnishment.
18. Bank of Commerce vs Radio Philippines Network GR 195615 Sep 29, 2014
19. Bank of Commerce vs Pilipinas Shell Petroleum GR 192398
It should be emphasized that in the instant case, the transfer of SPPCs real
property to respondent was pursuant to their approved plan of merger. In a merger
of two existing corporations, one of the corporations survives and continues the
business, while the other is dissolved, and all its rights, properties, and liabilities
are acquired by the surviving corporation.21 Although there is a dissolution of the
absorbed or merged corporations, there is no winding up of their affairs or
liquidation of their assets because the surviving corporation automatically acquires
all their rights,privileges, and powers, as well as their liabilities.22 Here, SPPC
ceasedto have any legal personality and respondent PSPC stepped into
everything that was SPPCs, pursuant to the law and the terms of their Plan of
Merger.

Pertinently, a merger of two corporations produces the following effects, among


others:
Sec. 80. Effects of merger or consolidation. x x x
xxxx
4. The surviving or the consolidated corporation shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises of each of the
constituent corporations; and all property, real or personal, and all receivables due
on whatever account, including subscriptions to shares and other choses in action,
and all and every other interest of, or belonging to, or due to each constituent
corporations, shall be taken and deemed to be transferred to and vested in such
surviving or consolidated corporation without further act or deed;23 (Emphasis
supplied.)
In a merger, the real properties are not deemed "sold" to the surviving corporation
and the latter could not be considered as "purchaser" of realty since the real
properties subject of the merger were merely absorbed by the surviving
corporation by operation of law and these properties are deemed automatically
transferred to and vestedin the surviving corporation without further act or deed.
Therefore, the transfer of real properties to the surviving corporation in pursuance
of a merger is not subject to documentary stamp tax. As stated at the outset,
documentary stamp tax is imposed only on all conveyances, deeds, instruments or
writing where realty sold shall be conveyed to a purchaser or purchasers. The
transfer of SPPCs real property to respondent was neither a sale nor was it a
conveyance of real property for a consideration contracted to be paidas
contemplated under Section 196 of the Tax Code. Hence, Section 196 ofthe Tax
Code is inapplicable and respondent is not liable for documentary stamp tax.
20. CIR vs La Tondena Distillers GR 175188
Facts:
As a result of the Plan of Merger between Sugarland Beverage Corporaiton (SBC),
SMC Juice, Inc., Metro Bottled Water Corporation (MWBC), and La Tondena
Distellers, Inc., the assets and liabilities of the absorbed corporations were
transferred to La Tondena Distillers, Inc., the surviving corporation. The latter then
requested confirmation of the tax-free nature of the merger from the Bureau of
Internal Revenue, which however denied it ruling that pursuant to Section 40(C)(2)
and (6)(b) of the 1997 National Internal Revenue Code (NIRC), no gain or loss
shall be recognised by the absorbed corporations as transferors of all assets and
liabilities. However, the the transfer of asstest shall be subject to documentary

stamp tax (DST) imposed under Section 196 of the NIRC. The corporation thus
paid under protest the DST from October 31, 2011 to November 15, 2001.
Claiming that it is exempt from payment of the DST, it filed with the Commissioner
of Internal Revenue an administrative claim for tax refund or tax credit in the
amount of P14,140,980.00 which it allegedly erroneously paid to the BIR. The
company also filed a Petition for Review with the CTA 2nd Division. The latter
decided in favour of the company, ruling that it is entitled to tax refund since
Section 196 of the NIRC does not apply because there is purchaser or buyer in the
case of a merger. Citing Section 80 of the Corporation Code, the CTA 2nd Division
explained that the assets of the absorbed corporations were not bought or
purchased by respondent but were transferred to and vested in respondent as an
inherent legal consequence of the merger, without any further act or deed.. Any
doubts as to the tax-free nature of the meter was removed by the subsequent
enactment of RA No. 9423 amending Section 199 0f the NIRC by specifically
exempting from the payment of DST the transfer of property pursuant to a merger.
When its motion for reconsideration was denied, the petitioner elevated the matter
to the CTA En Banc thru a Petition for Review, which also denied its petition,
holding that Section 196 of the NIRC does not apply to a merger as the properties
subject of a merger are not sold, but are merely absorbed by the surviving
corporation. In other words, the properties are transferred by operation of law,
without any further act or deed.

The petitioner assailed the CTA En Banc decision thru a petition for review on
certiorari with the Supreme Court, arguing that DST is levied on the exercise of the
privilege to convey real property regardless of the manner of conveyance. Thus, it
is imposed on all conveyances of realty, including realty transfer during a corporate
merger. As to the subsequent enactment of RA 9243, petitioner claims that
respondent cannot benefit from it as laws apply prospectively.

The Issue:
Whether DST may be levied on transfer or property during a merger.

The Ruling:
The Petition must fail.

In Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation,1


the Supreme Court already ruled that Section 196 of the NIRC does not include
the transfer of real property from one corporation to another pursuant to a merger.
It explained that:

[W]e do not find merit in petitioners contention that Section 196 covers all
transfers and conveyances of real property for a valuable consideration. A perusal
of the subject provision would clearly show it pertains only to sale transactions
where real property is conveyed to a purchaser for a consideration. The phrase
granted, assigned, transferred or otherwise conveyed is qualified by the word
sold which means that documentary stamp tax under Section 196 is imposed on
the transfer of realty by way of sale and does not apply to all conveyances of real
property. Indeed, as correctly noted by the respondent, the fact that Section 196
refers to words sold, purchaser and consideration undoubtedly leads to the
conclusion that only sales of real property are contemplated therein.

Thus, petitioner obviously erred when it relied on the phrase granted, assigned,
transferred or otherwise conveyed in claiming that all conveyances of real
property regardless of the manner of transfer are subject to documentary stamp
tax under Section 196. It is not proper to construe the meaning of a statute on the
basis of one part. x x x