Nava vs.

Peers Marketing

Facts: Teofilo Po, as an incorporator, subscribed to 80 shares of Peers Marketing Corporation at P !0 per share or a total par value of P8,000.00. Po paid P!,000.00 or !"# of the a$ount of his subscription. No certificate of stock %as issued to hi$ or, for that $atter, to an& incorporator, subscriber or stockholder. 'ater, Po sold to (icardo ). Nava, !0 of his 80 shares for P!,000.00. *n the deed of sale, Po represented that he %as the absolute and registered o%ner of !0 shares of Peers Marketing Corporation. Nava re+uested the officers of the corporation to register the sale in the books of the corporation. The re+uest %as denied because Po has not paid full& the a$ount of his subscription. Nava %as infor$ed that Po %as delin+uent in the pa&$ent of the balance due on his subscription and that the corporation had a clai$ on his entire subscription of 80 shares %hich included the!0 shares that had been sold to Nava. Nava then filed a $anda$us action in the CF* to co$pel the corporation and (enato (. Cusi and )$paro Cusi, its e,ecutive vice-president and secretar&, respectivel&, to register the said !0 shares in Nava.s na$e in the corporation.s transfer book. The respondents in their ans%er pleaded the defense that no shares of stock against %hich the corporation holds an unpaid clai$ are transferable in the books of the corporation. CF* dis$issed the case and applied the ruling in Fua Cun vs. /u$$ers and China 0anking Corporation %hich states that that pa&$ent of one-half of the subscription does not entitle the subscriber to a certificate of stock for one-half of the nu$ber of shares subscribed.

*ssue: 12N officers of Peers Marketing Corporation can be co$pelled b& $anda$us to enter in its stock and transfer book the sale $ade b& Po to Nava.

3eld: /C held that the transfer $ade b& Po to Nava is not the 4alienation, sale, or transfer of stock4 that is supposed to be recorded in the stock and transfer book. )s a rule, the shares %hich $a& be alienated are those %hich are covered b& certificates of stock, as sho%n in the follo%ing provisions of the Corporation 'a%. /5C. 6" 7no% /ec. 869 The capital stock of stock corporations shall be divided into shares for %hich certificates signed b& the president or the vice-president,

countersigned b& the secretar& or clerk and sealed %ith the seal of the corporation, shall be issued in accordance %ith the b&-la%s. /hares of stock so issued are personal propert& and $a& be transferred b& deliver& of the certificate indorsed b& the o%ner or his attorne& in fact or other person legall& authori:ed to $ake the transfer. No transfer, ho%ever, shall be valid, e,cept as bet%een the, parties, until the transfer is entered and noted upon the books of the corporation so as to sho% the na$es of the parties to the transaction, the date of the transfer, the nu$ber of the certificate, and the nu$ber of shares transferred. No share of stock against %hich the corporation holds an& unpaid clai$ shall be transferable on the books of the corporation.

/5C. 68. 7re voting trust agree$ent9 ... The certificates of stock so transferred shall be surrendered and cancelled, and ne% certificates therefor issued to such person or persons, or corporation, as such trustee or trustees, in %hich ne% certificates it shall appear that the& are issued pursuant to said agree$ent. ,,, ,,, ,,,

)s prescribed in /ec. 6", shares of stock $a& be transferred b& deliver& to the transferee of the certificate properl& indorsed. Title $a& be vested in the transferee b& deliver& of the certificate %ith a %ritten assign$ent or indorse$ent thereof. There should be co$pliance %ith the $ode of transfer prescribed b& la%. The usual practice is for the stockholder to sign the for$ on the back of the stock certificate. The certificate $a& thereafter be transferred fro$ one person to another. *f the holder of the certificate desires to assu$e the legal rights of a shareholder to enable hi$ to vote at corporate elections and to receive dividends, he fills up the blanks in the for$ b& inserting his o%n na$e as transferee. Then he delivers the certificate to the secretar& of the corporation so that the transfer $a& be entered in the corporation.s books. The certificate is then surrendered and a ne% one issued to the transferee. That procedure cannot be follo%ed in the instant case because the !0 shares are not covered b& an& certificate of stock in Po.s na$e. Moreover, the corporation has a clai$ on the said shares for the unpaid balance of Po.s subscription. ) stock subscription is a subsisting liabilit& fro$ the ti$e the subscription is $ade. The subscriber is as $uch bound to pa& his subscription as he %ould be to pa& an& other debt. The right of the corporation to de$and pa&$ent is no less incontestable.

No stock certificate %as issued to Po. 1ithout stock certificate, %hich is the evidence of o%nership of corporate stock, the assign$ent of corporate shares is effective onl& bet%een the parties to the transaction. The deliver& of the stock certificate, %hich represents the shares to be alienated , is essential for the protection of both the corporation and its stockholders ) corporation cannot release an original subscriber fro$ pa&ing for his shares %ithout a valuable consideration or %ithout the unani$ous consent of the stockholders.

)dditional info: Nava argues that under /ec. 6;, a certificate of stock $a& be issued for shares the par value of %hich have alread& been paid for although the entire subscription has not been full& paid. Nava relies on 0alta:ar v 'inga&en <ulf 5lectric Po%er Co., *nc. %here it %as held that /ec. 6; 4re+uires as a condition before a shareholder can vote his shares that his full subscription be paid in the case of no par value stock= and in case of stock corporation %ith par value, the stockholder can vote the shares fully paid by him only, irrespective of the unpaid delinquent shares4. There is no parallelis$ bet%een this case and the 0alta:ar case. *n 0alta:ar, the stockholder, an incorporator, %as the holder of a certificate of stock for the shares the par value of %hich had been paid b& hi$. The issue %as %hether the said shares had voting rights although the incorporator had not paid full& the total a$ount of his subscription. That is not the issue in this case. *n the 0alta:ar case, it %as held that %here a stockholder subscribed to a certain nu$ber of shares %ith par value and he $ade a partial pa&$ent and %as issued a certificate for the shares covered b& his partial pa&$ent, he is entitled to vote the said shares , although he has not paid the balance of his subscription and a call or de$and had been $ade for the pa&$ent of the par value of the delin+uent shares.