You are on page 1of 1

Manuel Torres, Jr.

vs Court of
Appeals
278 SCRA 793 – Business Organization – Corporation Law – Transfer of Shares of Stocks
– Corporate Records
Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty &
Development Corporation (TRDC). TRDC is a small family owned corporation and other
stockholders thereof include Judge Torres’ nieces and nephews. However, even though
Judge Torres owns the majority of TRDC and was also the president thereof, he is only
entitled to one vote among the 9-seat Board of Directors, hence, his vote can be easily
overridden by minority stockholders. So in 1987, before the regular election of TRDC
officers, Judge Torres assigned one share (qualifying share) each to 5 “outsiders” for the
purpose of qualifying them to be elected as directors in the board and thereby strengthen
Judge Torres’ power over other family members.
However, the said assignment of shares were not recorded by the corporate secretary, Ma.
Christina Carlos (niece) in the stock and transfer book of TRDC. When the validity of said
assignments were questioned, Judge Torres ratiocinated that it is impractical for him to
order Carlos to make the entries because Carlos is one of his opposition. So what Judge
Torres did was to make the entries himself because he was keeping the stock and transfer
book. He further ratiocinated that he can do what a mere secretary can do because in the
first place, he is the president.
Since the other family members were against the inclusion of the five outsiders, they
refused to take part in the election. Judge Torres and his five assignees then decided to
conduct the election among themselves considering that the 6 of them constitute a quorum.
ISSUE: Whether or not the inclusion of the five outsiders are valid. Whether or not the
subsequent election is valid.
HELD: No. The assignment of the shares of stocks did not comply with procedural
requirements. It did not comply with the by laws of TRDC nor did it comply with Section 74
of the Corporation Code. Section 74 provides that the stock and transfer book should be
kept at the principal office of the corporation. Here, it was Judge Torres who was keeping it
and was bringing it with him. Further, his excuse of not ordering the secretary to make the
entries is flimsy. The proper procedure is to order the secretary to make the entry of said
assignment in the book, and if she refuses, Judge Torres can come to court and compel her
to make the entry. There are judicial remedies for this. Needless to say, the subsequent
election is invalid because the assignment of shares is invalid by reason of procedural
infirmity. The Supreme Court also emphasized: all corporations, big or small, must abide by
the provisions of the Corporation Code. Being a simple family corporation is not an
exemption. Such corporations cannot have rules and practices other than those established
by law.

You might also like