G.R. No.

183278               April 24, 2009
IMELDA O. COJUANGCO, PRIME HOLDINGS, INC., AND THE
ESTATE OF RAMON U. COJUANGCO Petitioners,
vs.
SANDIGANBAYAN, REPUBLIC OF THE PHILIPPINES, AND THE
SHERIFF OF SANDIGANBAYAN, Respondents.
CARPIO MORALES, J.:
FACTS OF THE CASE
corporation as a return upon their investmentand the right
thereto is an incident of ownership of stock.
It is thus clear that the Republic is entitled to the dividends
accruing from the subject 111,415 shares since 1986 when
they were sequestered up to the time they were transferred
to Metro Pacific via the Sale and Purchase Agreement of
February 28, 2007; and that the Republic has since the latter
date been serving as trustee of those dividends for the Metro
Pacific up to the present, subject to the terms and conditions
of the said agreement they entered into.

Respondent Republic of the Philippines (Republic) filed before

the Sandiganbayan a "Complaint for Reconveyance,
Reversion, Accounting, Restitution and Damages,", praying
for the recovery of alleged ill-gotten wealth from the late
President Marcos and former First Lady Imelda Marcos and
their cronies, including some 2.4 million shares of stock in the
Philippine Long Distance Telephone Company (PLDT).

The complaint, which was later amended to implead herein

petitioners Ramon and Imelda Cojuangco (the Cojuangcos),
alleged that the Marcoses’ ill-gotten wealth included shares
in the PLDT covered by shares of stock in the Philippine
Telecommunications Investment Corporation (PTIC),
registered in the name of Prime Holdings, Inc. (Prime
Holdings).

The Sandiganbayan dismissed the complaint with respect to

the recovery of the PLDT shares, hence, the Republic
appealed to the Supreme Court.

The Supreme Court ruled in favor of the Republic, declaring it

to be the owner of 111,415 PTIC shares registered in the
name of Prime Holdings. Sandiganbayan granted the Motion
for the Issuance of a Writ of Execution with respect to the
reconveyance of the shares issued by PLDT infavort of PTIC,
but denied the prayer for accounting of dividends.

ISSUE:

Whether the Republic, having transferred the shares to a

third party, is entitled to the dividends, interests, and
earnings. YES!

RULING

1. Disposition Portion. In G.R. No. 153459, although the

inclusion of the dividends, interests, and earnings of the
111,415 PTIC shares as belonging to the Republic was not
mentioned in the dispositive portion of the Court’s
Decision, it is clear from its body that what was being
adjudicated in favor of the Republic was the whole block of
shares and the fruits thereof, said shares having been
found to be part of the Marcoses’ ill-gotten wealth, and
therefore, public money. It would be absurd to award the
shares to the Republic as their owner and not include the
dividends and interests accruing thereto.  An owner who
cannot exercise the “juses” or attributes of ownership —
the right to possess, to use and enjoy, to abuse or
consume, to accessories, to dispose or alienate, to recover
or vindicate, and to the fruits – is a crippled owner.

The term "dividend" in its technical sense and ordinary

acceptation is that part or portion of the profits of the
enterprise which the corporation, by its governing agents,
sets apart for ratable division among the holders of the
capital stock. It is a payment to the stockholders of a
G.R. No. L-17518             October 30, 1922
FREDERICK C. FISHER, plaintiff-appellant,
vs.
WENCESLAO TRINIDAD, Collector of Internal Revenue,
defendant-appellee.
JOHNSON, J.:
FACTS OF THE CASE
        The Philippine American Drug Company was a
corporation duly organized and existing under the laws of the
Philippine Islands. Appellant Frederick Fisher was a
stockholder in said corporation. The corporation declared a
"stock dividend" which was issued to the appellant. The
appellant, upon demand of the appellee, paid under protest,
and voluntarily, the sum as income tax on said stock dividend.
For the recovery of that sum, the present action was
instituted. The defendant demurred to the petition upon the
ground that it did not state facts sufficient to constitute cause
of action. The demurrer was sustained and the plaintiff
appealed.
          To sustain his appeal the appellant cites and relies on
the case of Eisner vs. Macomber which held that "stock
dividends" were capital and not an "income" and therefore
not subject to the "income tax" law.
          The appellee admits the doctrine but argues that said
Act No. 2833, in imposing the tax on the stock dividend, does
not violate the provisions of the Jones Law. The appellee
further argues that the statute of the United States providing
for tax upon stock dividends is different from the statute of
the Philippine Islands, and therefore the decision of the
Supreme Court of the United States should not be followed in
interpreting the statute in force here.
ISSUE
  Are the "stock dividends" in the present case "income" and
taxable as such under the provisions of section 25 of Act No.
2833?
DECISION
Stock dividends are not income. The same cannot be taxes
under that provision of Act No. 2833 which provides for a tax
upon income.
RULING         
         Generally speaking, stock dividends represent
undistributed increase in the capital of corporations or
firms, joint stock companies, etc., etc., for a particular
period. They are used to show the increased interest or
proportional shares in the capital of each stockholder. In
other words, the inventory of the property of the
corporation, etc., for particular period shows an increase in
its capital, so that the stock theretofore issued does not show
the real value of the stockholder's interest, and additional
stock is issued showing the increase in the actual capital, or
property, or assets of the corporation, etc.
         For bookkeeping purposes, when stock dividends are
declared, the corporation or company acknowledges a
liability, in form, to the stockholders, equivalent to the
aggregate par value of their stock, evidenced by a "capital
stock account." If profits have been made by the corporation
during a particular period and not divided, they create
additional bookkeeping liabilities under the head of "profit
and loss," "undivided profits," "surplus account," etc., or the
like. None of these, however, gives to the stockholders as a
body, much less to any one of them, either a claim against
the going concern or corporation, for any particular sum of
money, or a right to any particular portion of the asset, or any
shares sells or until the directors conclude that dividends shall
be made a part of the company's assets segregated from the
common fund for that purpose. The dividend normally is
payable in money and when so paid, then only does the
stockholder realize a profit or gain, which becomes his
separate property, and thus derive an income from the
capital that he has invested. Until that, is done the increased
assets belong to the corporation and not to the individual
stockholders.
                    The stockholder who receives a stock dividend
has received nothing but a representation of his increased
interest in the capital of the corporation. There has been no
separation or segregation of his interest. All the property or
capital of the corporation still belongs to the corporation.
There has been no separation of the interest of the
stockholder from the general capital of the corporation. The
stockholder, by virtue of the stock dividend, has no separate
or individual control over the interest represented thereby,
further than he had before the stock dividend was issued.
He cannot use it for the reason that it is still the property of
the corporation and not the property of the individual
holder of stock dividend. A certificate of stock represented
by the stock dividend is simply a statement of his
proportional interest or participation in the capital of the
corporation. For bookkeeping purposes, a corporation, by
issuing stock dividend, acknowledges a liability in form to the
stockholders, evidenced by a capital stock account. The
receipt of a stock dividend in no way increases the money
received of a stockholder nor his cash account at the close of
the year. It simply shows that there has been an increase in
the amount of the capital of the corporation during the
particular period, which may be due to an increased business
or to a natural increase of the value of the capital due to
business, economic, or other reasons. We believe that the
Legislature, when it provided for an "income tax," intended
to tax only the "income" of corporations, firms or
individuals, as that term is generally used in its common
acceptation; that is that the income means money received,
coming to a person or corporation for services, interest, or
profit from investments. We do not believe that the
Legislature intended that a mere increase in the value of the
capital or assets of a corporation, firm, or individual, should
be taxed as "income." Such property can be reached under
the ordinary from of taxation.
Distinction between Extraordinary Cash Dividends and Stock
Dividends Declared
Extraordinary Cash Dividend Stock Dividends Declared
Disbursement to the stockholder No disbursement by the
of accumulated earnings, and corporation. It parts with
the corporation at once parts
nothing to the stockholder.
irrevocably with all interest
The latter receives, not an
thereon
actual dividend, but
certificate of stock which
simply evidences his interest
in the entire capital,
including such as by
investment of accumulated
profits has been added to the
original capital.
 Citing case of DeKoven vs. They are not income to him,
Alsop but represent additions to
the source of his income,
namely, his invested capital.
When a cash becomes the
absolute property of the
stockholders and cannot be
reached by the creditors of
the corporation in the
absence of fraud.

     A stock dividend however, still being the property of the

corporation and not the stockholder, it may be reached by an
execution against the corporation, and sold as a part of the
property of the corporation. In such a case, if all the property
of the corporation is sold, then the stockholder certainly
could not be charged with having received an income by
virtue of the issuance of the stock dividend. Until the dividend
is declared and paid, the corporate profits still belong to the
corporation, not to the stockholders, and are liable for
corporate indebtedness. The rule is well established that cash
dividend, whether large or small, are regarded as "income"
and all stock dividends, as capital or assets.

  The question whether stock dividends are income, or capital,

or assets has frequently come before the courts in another
form — in cases of inheritance. A is a stockholder in a large
corporation. He dies leaving a will by the terms of which he
give to B during his lifetime the "income" from said stock,
with a further provision that C shall, at B's death, become the
owner of his share in the corporation. During B's life the
corporation issues a stock dividend. Does the stock dividend
belong to B as an income, or does it finally belong to C as a
part of his share in the capital or assets of the corporation,
which had been left to him as a remainder by A? While there
has been some difference of opinion on that question, we
believe that a great weight of authorities hold that the stock
dividend is capital or assets belonging to C and not an income
belonging to B.

Distinction between the title of a corporation, and the

interest of its members or stockholders in the property of
the corporation

The ownership of that property is in the corporation, and not

in the holders of shares of its stock. The interest of each
stockholder consists in the right to a proportionate part of
the profits whenever dividends are declared by the
corporation, during its existence, under its charter, and to a
like proportion of the property remaining, upon the
termination or dissolution of the corporation, after payment
of its debts."

In the case of Dekoven vs. Alsop (205 Ill ,309, 63 L. R. A. 587)

Mr. Justice Wilkin said: "A dividend is defined as a corporate
profit set aside, declared, and ordered by the directors to be
paid to the stockholders on demand or at a fixed time. Until
the dividend is declared, these corporate profits belong to the
corporation, not to the stockholders, and are liable for
corporate indebtedness.

     

     
G.R. No. 152578 November 23, 2005
REPUBLIC OF THE PHILIPPINES vs ESTATE OF HANS M. MENZI
TINGA, J.:
FACTS OF THE CASE
Manila Bulletin started as a shipping journal by its American
owner, publisher and editor Carson Taylor. The Swiss-Filipino
industrialist Hans Menzi purchased the Bulletin from Taylor.
Emilio Yap, owner of US Automotive, purchased Bulletin
shares from Menzi and became one of the major
stockholders. On April 2, 1968, a stock option was executed
by and between Menzi and Menzi and Co. on the one hand,
and Yap and US Automotive on the other, whereby the
parties gave each other preferential right to buy the other’s
Bulletin shares.
President Corazon C. Aquino issued Executive Order (EO) No.
1, creating the Presidential Commission on Good Government
(PCGG) tasked with, among others, the recovery of all ill-
gotten wealth accumulated by former President Ferdinand
Marcos. Following a lead that Marcos had substantial
holdings in Bulletin Publishing Corporation (Bulletin), the
PCGG issued a Writ of Sequestration against all shares of
stocks, assets, properties, records and documents of HMHMI.
Bulletin shares sold
Sandiganbayan ruled that the
by the late Hans M. Menzi to U.S.
Automotive Co., Inc., the sale thereof
being valid and legal.
The Sandiganbayan likewise rejected Cojuangco's contention
that the Bulletin and HMHMI shares registered in his name
'were not acquired and held by him as dummy, nominee
and/or agent of defendants Ferdinand E. Marcos and Imelda
Romualdez Marcos, but upon the request, and as nominee,
of the late Hans Menzi who owned and delivered to him
said shares. According to the Sandiganbayan, Cojuangco
failed to present evidence necessary to establish his
affirmative defense.
As regards the 214 block, the Sandiganbayan ruled that there
is no longer any dispute concerning the ownership of the
46,620.5 shares held by Campos and the 121,178 shares held
by Zalamea in view of the Teehankee Resolution and the fact
that these shares have been waived and assigned to PCGG.
The Sandiganbayan went on to declare that the only
remaining issue pertaining to Cojuangco's claim to his alleged
portion of the 214 block should be resolved in favor of the
Republic because of Cojuangco's consistent disavowal of any
proprietary interest in the shares which are the subject
matter of the instant case and his claim that he held the
shares as nominee of Menzi.
Atty. Amorsolo V. Mendoza, vice president of US Automotive,
executed a promissory note with his personal guarantee in
favor of Menzi, promising to pay the latter the balance as
consideration for Menzi’s sale of 154,472 Bulletin shares.
Three weeks later, Menzi died. The court appointed Manuel
G. Montecillo as the executor of the Estate of Hans M. Menzi
and, later, as president of HMHMI. Atty. Montecillo received
from US Automotive two (2) checks in full payment of the
agreed purchase price and interest for the sale.
The objection raised by the Republic actually concerns the
authority of Atty. Montecillo, the executor of Menzi's estate,
to indorse the said certificates.
ISSUE
Whether or not the share of Cojuanco was held as a nominee
of Menzi. NO!
RULING
Campos and Zalamea validly ceded their shares in favor of
the Government
 Sandiganbayan's evaluation was correct that the Estate of
Menzi and HMHMI do not prove their allegation that Campos,
Cojuangco and Zalamea are Menzi's nominees, taking into
account the express admission of Campos that he owned the
shares upon Marcos' instruction, the declaration of Zalamea
that he does not claim true and beneficial ownership of the
shares, and the absolute dearth of evidence regarding
Cojuangco's assertion that he is Menzi's nominee.
 Parenthetically, the fact that the stock certificates covering
the shares registered under the names of Campos, Cojuangco
and Zalamea were found in Menzi's possession does not
necessarily prove that the latter owned the shares. A stock
certificate is merely a tangible evidence of ownership of
shares of stock. Its presence or absence does not affect the
right of the registered owner to dispose of the shares
covered by the stock certificate. Hence, as registered
owners, Campos and Zalamea validly ceded their shares in
favor of the Government. This assignment is now a fait
accompli for the benefit of the entire nation.
 The contention that the sale of the 214 block to the Bulletin
was null and void as the PCGG failed to obtain approval from
the Sandiganbayan is likewise unmeritorious. While it is true
that the PCGG is not empowered to sell sequestered assets
without prior Sandiganbayan approval, this case presents a
clear exception because this Court itself, in the Teehankee
Resolution, directed the PCGG to accept the cash deposit
offered by Bulletin in payment for the Cojuangco and
Zalamea sequestered shares subject to the alternatives
mentioned therein and the outcome of the remand to the
Sandiganbayan on the question of ownership of these
sequestered shares.
Valid Sale
Atty. Montecillo's authority to negotiate the transfer and
execute the necessary documents for the sale of the 154
block is found in the General Power of Attorney executed by
Menzi. Atty. Montecillo's authority to accept payment of the
purchase price for the 154 block sold to US Automotive after
Menzi's death springs from the latter's Last Will and
Testament and the Order of the probate court confirming the
sale and authorizing Atty. Montecillo to accept payment
therefor. Hence, before and after Menzi's death, Atty.
Montecillo was vested with ample authority to effect the sale
of the 154 block to US Automotive.
GR 124535, 28 September 2001 reconsideration was likewise denied by the SEC en banc in a
Resolution dated 29 September 1995. A petition for review
was filed before the Court of Appeals (CA-GR SP 38861),
Rural Bank of Lipa City Inc., etc. vs. Court of Appeals assailing the Order of the SEC en banc. The appellate court
upheld the ruling of the SEC. Bautista, et al.'s motion for
reconsideration was likewise denied by the Court of Appeals.
FACTS OF THE CASE The bank, Bautista, et al. filed the instant petition for review.

Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of
Lipa City, executed a Deed of Assignment, wherein he
assigned his shares, as well as those of 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.
Sometime thereafter, Reynaldo Villanueva, Sr. and his wife,
Avelina, executed an Agreement wherein they acknowledged
their indebtedness to the Bank 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 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 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.
Issue: Whether there was valid transfer of the shares to the
Bank.
Held: For a valid transfer of stocks, there must be strict
compliance with the mode of transfer prescribed by law. 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. Still, while the
assignment may be valid and binding on the bank, et al. and
the Villanuevas, it does not necessarily make the transfer
effective. Consequently, the bank et al., 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
Villanuevas 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.

The Villanuevas ignored the bank's 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. 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. 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. Accordingly, a writ of preliminary injunction was
issued enjoining Bautista, et. al. from acting as directors and
officers of the bank. Thereafter, Bautista, et al. filed an urgent
motion to quash the writ of preliminary injunction,
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 9 days
away, the Villanuevas filed an Omnibus Motion praying that
the said meeting and election of officers be suspended or
held in abeyance, and that the 1993 Board of Directors be
allowed, in the meantime, to act as such. 1 day before the
scheduled stockholders meeting, the SEC Hearing Officer
granted the Omnibus Motion by issuing a temporary
restraining order preventing Bautista, et al. from holding the
stockholders meeting and electing the board of directors and
officers of the Bank. A petition for Certiorari and Annulment
with Damages was filed by the Rural Bank, its directors and
officers before the SEC en banc. SEC en banc denied the
petition for certiorari. A subsequent motion for
G.R. No. 116631 October 28, 1998
MARSH THOMSON, vs. COURT OF APPEALS and THE AMERICAN
CHAMPER OF COMMERCE OF THE PHILIPPINES, INC  nominee of private respondent.
QUISUMBING, J.:
FACTS OF THE CASE
Petitioner Marsh Thomson (Thomson) was the Executive Vice-
President and, later on, the Management Consultant of private
respondent, the American Chamber of Commerce of the Philippines,
Inc. (AmCham) for over ten years.
While petitioner was still working with private respondent, his
superior, A. Lewis Burridge, retired as AmCham's President. Before
Burridge decided to return to his home country, he wanted to
transfer his proprietary share in the Manila Polo Club (MPC) to
petitioner. However, through the intercession of Burridge, private
respondent paid for the share but had it listed in petitioner's name.
When petitioner's contract of employment was up for renewal in
1989, he notified private respondent that he would no longer be
available as Executive Vice President. Still, the private respondent
asked the petitioner to stay on for another six (6) months. Petitioner
indicated his acceptance of the consultancy arrangement with a
counter-proposal in his letter dated October 8, 1989, among others
as follows:
11.) Retention of the Polo Club share, subject to my
reimbursing the purchase price to the Chamber, or one
hundred ten thousand pesos (P110,000.00). 8
Private respondent rejected petitioner's counter-proposal. Pending
the negotiation for the consultancy arrangement, private
respondent executed a Release and Quitclaim, 9 stating that
"AMCHAM, its directors, officers and assigns, employees and/or
representatives do hereby release, waive, abandon and discharge J.
MARSH THOMSON from any and all existing claims that the
AMCHAM, its directors, officers and assigns, employees and/or
representatives may have against J. MARSH THOMSON." 10 The
quitclaim, expressed in general terms, did not mention specifically
the MPC share.
Private respondent, through counsel sent a letter to the petitioner
demanding the return and delivery of the MPC share which "it
(AmCham) owns and placed in your (Thomson's) name." Failing to
get a favorable response, private respondent filed, a complaint
against petitioner praying, inter alia, that the Makati Regional Trial
Court render judgment ordering Thomson "to return the Manila
Polo Club share to the plaintiff and transfer said share to the
nominee of plaintiff.
In said decision, the trial court awarded the MPC share to defendant
(petitioner now) on the ground that the Articles of Incorporation and
By-laws of Manila Polo Club prohibit artificial persons, such as
corporations, to be club members. CA set aside the ruling of the trial
court.
ISSUE
(1) Did respondent court err in holding that private respondent is
the beneficial owner of the disputed share? (2) Did the respondent
court err in ordering petitioner to transfer said share to private
respondent's nominees?
Petitioner claims ownership of the MPC share, asserting that he
merely incurred a debt to respondent when the latter advanced the
funds for the purchase of the share. On the other hand, private
respondent asserts beneficial ownership whereby petitioner only
holds the share in his name, but the beneficial title belongs to
private respondent. To resolve the first issue, we must clearly
distinguish a debt from a trust.
DECISION
Petitioner has the obligation to transfer now said share to the
RULING
The beneficiary of a trust has beneficial interest in the trust
property, while a creditor has merely a personal claim against the
debtor. In trust, there is a fiduciary relation between a trustee and a
beneficiary, but there is no such relation between a debtor and
creditor. While a debt implies merely an obligation to pay a certain
sum of money, a trust refers to a duty to deal with a specific
property for the benefit of another. If a creditor-debtor relationship
exists, but not a fiduciary relationship between the parties, there is
no express trust. However, it is understood that when the purported
trustee of funds is entitled to use them as his or her own (and
commingle them with his or her own money), a debtor-creditor
relationship exists, not a trust. 21
In the present case, as the Executive Vice-President of AmCham,
petitioner occupied a fiduciary position in the business of AmCham.
AmCham released the funds to acquire a share in the Club for the
use of petitioner but obliged him to "execute such document as
necessary to acknowledge beneficial ownership thereof by the
Chamber". A trust relationship is, therefore, manifestly indicated.
Moreover, petitioner failed to present evidence to support his
allegation of being merely a debtor when the private respondent
paid the purchase price of the MPC share. Applicable here is the
rule that a trust arises in favor of one who pays the purchase money
of property in the name of another, because of the presumption
that he who pays for a thing intends a beneficial interest therein for
himself. Although petitioner initiated the acquisition of the share,
evidence on record shows that private respondent acquired said
share with its funds. Petitioner did not pay for said share, although
he later wanted to, but according to his own terms, particularly the
price thereof. Petitioner voluntarily affixed his signature recognizing
his employer as the beneficial owner of the MPC share. N
The Manila Polo Club does not necessarily prohibit the transfer of
proprietary shares by its members. The Club only restricts
membership to deserving applicants in accordance with its rules,
when the amended Articles of Incorporation states that: "No
transfer shall be valid except between the parties, and shall be
registered in the Membership Book unless made in accordance with
these Articles and the By-Laws". 33 Thus, as between parties herein,
there is no question that a transfer is feasible. Moreover, authority
granted to a corporation to regulate the transfer of its stock does
not empower it to restrict the right of a stockholder to transfer his
shares, but merely authorizes the adoption of regulations as to the
formalities and procedure to be followed in effecting transfer.
In this case, the petitioner was the nominee of the private
respondent to hold the share and enjoy the privileges of the club.
G.R. No. L-45048 January 7, 1987
BATONG BUHAY GOLD MINES, INC., vs. COURT OF APPEALS and
INC. MINING CORPORATION,
PARAS, J.:
FACTS OF THE CASE
The defendant Batong Buhay Gold Mines, Inc. issued Stock
Certificate shares with a par value of P0.01 per share to Francisco
Aguac who was then legally married to Paula G. Aguac, but the said
spouses had lived separately for more than fourteen (14) years prior
to the said date. Francisco Aguac sold his shares in favor of the
plaintiff Batong Buhay Gold Mines, Inc.,, the said transaction being
evidenced by a deed of sale. The said sale was made by Francisco
Aguac without the knowledge or consent of his wife Paula G. Aguac.
Paula G. Aguac wrote a letter to the president of defendant Batong
Buhay Gold Mines, Inc. asking that the transfer of the shares sold by
her husband be withheld, inasmuch as the same constituted
conjugal property and her share of proceeds of the sale was not
given to her.
Francisco Aguac was charged in a criminal complaint.
The defendants justify their refusal to transfer the shares of stock of
Francisco Aguac in the name of the plaintiff in view of their
apprehension that they might he held liable for damages under
Article 173 of the Civil Code and the ruling of the Supreme Court in
Bucoy vs. Paulino, 23 SCRA 248.
The trial court handed down its judgment ordering the herein
petitioner to effect the transfer of the shares in the name of herein
respondent Incoporated Mining Corporation and declaring
permanent the writ of preliminary mandatory
ISSUE
1. May the Court of Appeals award damages by way of unrealized
profits despite the absence of supporting evidence, or merely on the
basis of pure assumption, speculation or conjecture; or can the
respondent recover damages by way of unrealized profits when it
has not shown that it was damaged in any manner by the act of
petitioner? NO!
DECISION
Ruling of CA is set aside.
RULING
The stipulation of facts of the parties does not at all show that
private respondent intended to sell, or would sell or would have sold
the stocks in question on specified dates. While it is true that shares
of stock may go up or down in value (as in fact the concerned shares
here really rose from fifteen (15) centavos to twenty three or twenty
four (23/24) centavos per share and then fell to about two (2)
centavos per share, still whatever profits could have been made are
purely SPECULATIVE, for it was difficult to predict with any decree of
certainty the rise and fall in the value of the shares. Thus this Court
has ruled that speculative damages cannot be recovered.
It is easy to say now that had private respondent gained legal title to
the shares, it could have sold the same and reaped a profit of
P5,624.95 but it could not do so because of petitioner's refusal to
transfer the stocks in the former's name at the time demand was
made, but then it is also true that human nature, being what it is,
private respondent's officials could also have refused to sell and
instead wait for expected further increases in value.
G.R. No. L-38684         December 21, 1933
CYRUS PADGETT, vs. BABCOCK & TEMPLETON, INC., and W. R.
BABCOCK,
IMPERIAL, J.:
FACTS OF THE CASE
The appellee Cyrus Padgett was an employee of the appellant
corporation. During that period he bought 35 shares thereof at P100
a share at the suggestion of the president of said corporation. He
was also the recipient of 9 shares by way of bonus during Christmas
seasons. Appellee became the owner of 44 shares for which the 12
certificates, The word "nontransferable" appears on each and every
one of these certificates The appellee proposed to the president that
the said corporation buy his 44 shares at par value plus the interest
thereon, or that he be authorized to sell them to other persons. The
corporation bought similar shares belonging to other employees, at
par value. Sometime later, the said president offered to buy the
appellee's shares first at P85 each and then at P80. The appellee did
not agree thereto.
The defendants admit that the 44 shares in question have become
the property of the plaintiff. They vigorously contend that there is
no existing law nor authority in support of the proposition that
they are bound to redeem or buy said shares at par value. Their
admission is only limited to the proposition that after the restriction
appearing thereon is eliminated, the plaintiff may sell the said
shares to anybody, at their market value or at any price he sees fit.
ISSUE Whether or not the defendants may be compelled to buy the
shares in question at par value.
DECISION
A restriction imposed upon a certificate of sharesis null and void on
the ground that it constitutes and unreasonable limitation of the
right of ownership and is in restraint of trade.
RULING
Shares of corporate stock being regarded as property, the owner of
such shares may, as a general rule, dispose of them as he sees fit,
unless the corporation has been dissolved, or unless the right to do
so is properly restricted, or the owner's privilege of disposing of his
shares has been hampered by his own action.
Any restriction on a stockholder's right to dispose of his shares must
be construed strictly; and any attempt to restrain a transfer of
shares is regarded as being in restraint of trade, in the absence of a
valid lien upon its shares, and except to the extent that valid
restrictive regulations and agreements exist and are applicable.
Subject only to such restrictions, a stockholder cannot be controlled
in or restrained from exercising his right to transfer by the
corporation or its officers or by o.ther stockholders, even though the
sale is to a competitor of the company, or to an insolvent person, or
even though a controlling interest is sold to one purchaser.
It is obvious, therefore, that the restriction consisting in the word
"nontransferable", appearing on the 12 certificates, Exhibits F to F-
11, is illegal and should be eliminated.
As we have hereinbefore stated, there is no existing law nor
authority in support of the plaintiff's claim to the effect that the
defendants are obliged to buy his shares of stock value at par
value, plus the interest demanded thereon. In this respect, we hold
that there has been no such contract, either express or implied,
between the plaintiff and the defendants. In the absence of a
similar contractual obligation and of a legal provision applicable
thereto, it is logical to conclude that it would be unjust and
unreasonable to compel the said defendants to comply with a non-
existent or imaginary obligation. Whereupon, we are likewise
compelled to conclude that the judgment originally rendered to that
effect is untenable and should be set aside.
G.R. No. L-57586 October 8, 1986
AQUILINO RIVERA, ISAMU AKASAKO and FUJIYAMA HOTEL
& RESTAURANT, INC., vs.THE HON. ALFREDO C. FLORENDO,
as CFI
FACTS OF THE CASE
Petitioner corporation Fujiyama Hotel & Restaurant, Inc was
organized and register under Philippine laws with a capital
stock of divided into shares of P100.00 par value each by the
herein petitioner Rivera and four (4) other incorporators.
Sometime thereafter petitioner Rivera increased his
subscription.
Subsequently, Isamu Akasako, a Japanese national and co-
petitioner who is allegedly the real owner of the shares of
stock in the name of petitioner Aquilino Rivera, sold the
shares of the same to private respondent Milagros Tsuchiya
with the assurance that Milagros Tsuchiya will be made the
President and Lourdes Jureidini a director after the purchase.
Aquilino Rivera who was in Japan also assured private
respondents by overseas call that he will sign the stock
certificates because Isamu Akasako is the real owner.
However, after the sale was consummated and the
consideration was paid with a receipt of payment, Aquilino
Rivera refused to make the indorsement unless he is also
paid.
It also appears that the other incorporators sold their shares
to both respondent Jureidini and Tsuchiya such that both
respondents became the owners of the majority out
outstanding subscribed shares of the corporation, and that
there was no dispute as to the legality of the transfer of the
stock certificate. Aquilino Rivera admitted the genuineness of
an the signatures of the officers of the corporation and of an
the indorsee therein. Private respondents attempted several
times to register their stock certificates with the corporation
but the latter refused to register the same. Thus, private
respondents filed a special civil action for mandamus and
damages with preliminary mandatory injunction and/or
receivership
Private respondent Lourdes Jureidini and her counsel failed to
appear. Accordingly the Court Resolved: (a) to IMPOSE on
said counsel Atty. Canlas a fine of P200.00 or to suffer
imprisonment if said fine is not paid; (b) to RESET the hearing
on the contempt incidents on March 3, 1982 and (c) to
REQUIRE the presence of Atty. Canlas and respondent
Lourdes Jureidini and of complainants Attys. Bibiano P.
Lasaca, Rodolfo A. Espiritu and Renato T. Paqui.
ISSUE:
Whether or not the CFI has jurisdiction over the petition for
mandamus and receivership "as well as in placing the
corporate assets under provisional receivership in the guise
of a writ of preliminary mandatory injunction, considering
private respondents are not yet stockholders.
Petitioner contends that the SEC has jurisdiction and not the
regular court.
RULING
I. Lower Court has no jurisdiction because the private
respondents are not yet stockholders
It has already been settled by Presidential Decree No. 902-A
that an intracorporate controversy would call for the
jurisdiction of the Securities and Exchange Commission. On
the other hand, an intra-corporate controversy has been
defined as "one which arises between a stockholder and the
corporate. There is no distinction, qualification, nor any
exemption whatsoever.". This Court has also ruled that cases
of private respondents who are not shareholders of the
corporation, cannot be a "controversy arising out of
intracorporate 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." (Sunset View Condominium Corporation v.
Campos, Jr., 104 SCRA 303, April 27, 1981).
Under Batas Pambansa Blg. 68 otherwise known as "The
Corporation Code of the Philippines," shares of stock are
transferred as follows:
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-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 recorded in the book 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.
xxx xxx xxx
As confirmed by this Court, "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 '
As the bone of contention in this case, is the refusal of
petitioner Rivera to indorse the shares of stock in question
and the refusal of the Corporation to register private
respondents' shares in its books, there is merit in the findings
of the lower court that the present controversy is not an
intracorporate controversy; private respondents are not yet
stockholders; they are only seeking to be registered as
stockholders because of an alleged sale of shares of stock to
them. Therefore, as the petition is filed by outsiders not yet
members of the corporation, jurisdiction properly belongs
to the regular courts.
II Mandatory Injunction must Fail
A mandatory injunction is granted only on a showing (a) that
the invasion of the right is material and substantial; (b) the
right of complainant is clear and unmistakable; and (c) there
is an urgent and permanent necessity for the writ to prevent
serious damage. (Pelejo v. Court of Appeals, 117 SCRA 668, In the case of Fleischer vs. Botica Nolasco Co. (47 Phil., 583), we
Oct. 18, 1982). have discussed the validity of a clause in the by-laws of the
defendant corporation, which provided that, under the same
conditions, the owner of a share of stock could not sell it to another
A mandatory injunction which commands the performance of person except to the defendant corporation. In deciding the legality
some specific act is regarded as of a more serious nature than and validity of said restriction, we held:
a mere prohibitive injunction, the latter being intended
generally to maintain the status quo only. While our courts, The only restraint imposed by the Corporation Law upon
being both of law and equity, have jurisdiction to issue a transfer of shares is found in section 35 of Act No. 1459,
mandatory writ, it has always been held that its issuance quoted above, as follows: "No transfer, however, shall be
would be justified only in clear cases; that it is generally valid, except as between the parties, until the transfer is
improper to issue it before final hearing because it tends to entered and noted upon the books of the corporation so
do more than maintain the status quo; that it should be as to show the names of the parties to the transaction, the
issued only where there is a willful and unlawful invasion of date of the transfer, the number of the certificate, and the
plaintiff's right and that the latter's case is one free from number of shares transferred." This restriction is necessary
in order that the officers of the corporation may know who
doubt and dispute. (National Marketing v. Cloribel, 22 SCRA
are the stockholders, which is essential in conducting
1038, March 13, 1968). elections of officers, in calling meetings of stockholders,
and for other purposes. But any restriction of the nature of
Respondent court in the instant case violated the that imposed in the by-law now in question, is ultra vires,
fundamental rule of injunctions that a mandatory injunction violative of the property rights of shareholders, and in
will not issue in favor of a party whose rights are not clear restraint of trade. (Id., p. 592.)
and free of doubt or as yet undetermined. It will be recalled
that the disputed shares of stock were purchased not from
the registered owner but from a Japanese national who
allegedly was the real owner thereof. It was also alleged that
the registered owner was only a dummy of Akasako. The
Order of the trial court is in effect a judgment on the merits,
declaring expressly or impliedly that petitioners are
stockholders of the Corporation at the hearing of only the
incident for the issuance of a Writ of Preliminary Injunction.
On the other hand if the Order amounts to a judgment on the
merits, the lower court should first rule on what private
respondents seek, the registration of their shareholdings in
the books of the corporation and the issuance of new stock
certificates. It is only thereafter that the subsequent act of
management may be ordered and the period of finality of
such a judgment should be in accordance with the Rules of
Court, giving the respondents the right to an appeal or review
and not be immediately executory as the Writ of Preliminary
Mandatory Injunction would infer.
89 Phil 780 (1955)
JOSEFA SANTAMARIA, assisted by her husband, FRANCISCO
SANTAMARIA, Jr., vs. THE HONGKONG AND SHANGHAI
BANKING CORPORATION and R. W. TAPLIN
BAUTISTA ANGELO, J.:
FACTS OF THE CASE
Petitioner Mrs. Josefa T. Santamaria bought 10,000 shares of
the Batangas Minerals, Inc., through the offices of Woo, Uy-
Tioco & Naftaly, a stock brokerage firm and pay the sum. The
buyer received Stock Certificate issued in the name of Woo,
Uy-Tioco & Naftaly and indorsed in bank by this firm.
Santamaria placed an order for the purchase of 10,000 shares
of the Crown Mines, Inc. with R.J. Campos & Co., a brokerage
firm, and delivered Certificate to the latter as security with
the understanding that said certificate would be returned to
her upon payment of the 10,000 Crown Mines, Inc. shares.
The receipt of the certificate in question signed by one Mr.
Cosculluela, Manager of the R.J. Campos & Co., Inc. According
to certificate, R. J. Campos & Co., Inc. bought for Mrs. Josefa
Santamaria 10,000 shares of the Crown Mines, Inc.
At the time of the delivery of a stock Certificate to R.J.
Campos & Co., Inc. this certificate was in the same condition
as that when Mrs. Santamaria received from Woo, Uy-Tioco
& Naftaly, with the sole difference that her name was later
written in lead pencil on the upper right hand corner thereof.
Two days later, on March 11, Mrs. Santamaria went to R.J.
Campos & Co., Inc. to pay for her order of 10,000 Crown
Mines shares and to get back Certificate. Cosculluela then
informed her that R.J. Campos & Co., Inc. was no longer
allowed to transact business due to a prohibition order from
Securities and Exchange Commission. She was also inform
that her Stock certificate was in the possession of the
Hongkong and Shanghai Banking Corporation.
Certificate came into possession of the Hongkong and
Shanghai Banking Corporation because R.J. Campos & Co.,
Inc. had opened an overdraft account with this bank and
pledged to the said bank "all stocks, shares and securities
which I/we may hereafter come into their possession of
my/our account and whether originally deposited for safe
custody only or for any other securities now deposited or for
any other purposes whatsoever."
The Certificate indorsed by R.J. Campos Co. Inc. to the
Hongkong & Shanghai Banking Corporation, was sent by the
latter to the office of the Batangas Minerals, Inc. with the
request that the same be cancelled and a new certificate be
issued. As per this request the Batangas Minerals, Inc. issued
Certificate in the name of Robert W. Taplin as trustee and
nominee of the Hongkong & Shanghai Banking Corporation.
In Civil Case, R.J. Campos & Co., Inc. was declared insolvent,
the court granted the motion of the Hongkong & Shanghai
Banking Corporation to sell the R.J. Campos & Co., Inc.,
securities listed in its motion. The shares were sold to the
same bank by the Sheriff for P300 at the foreclosure sale
authorized by said order.
R.J. Campos, the president of R.J. Campos & Co., Inc., was
found guilty for the crime of estafa y the CFI and CA. When
Mrs. Santamaria failed in her efforts to force the civil
judgment rendered in her favor in the criminal case because
the accused became insolvent, she filed her complaint in this
case. At the trial both parties agreed that the 10,000
Batangas Minerals shares, have no actual market value.
ISSUE
Whether or not the trial court erred in finding that the
plaintiff-appellee was not chargeable with negligence in the
transaction which gave rise to this case.
DECISION
The plaintiff, in failing to take the necessary precautions upon
delivering the certificate of stock to her broker, was
chargeable with negligence in the transaction which resulted
to her own prejudice, and as such, she is estopped from
asserting title to it as against the defendant Bank.
RULING
In making said deposit, plaintiff did not take any precaution to
protect herself against the possible misuse of the shares
represented by the certificate of stock. Plaintiff could have
asked the corporation that had issued said certificate to
cancel it and issue another in lieu thereof in her name to
apprise the holder that she was the owner of said
certificate. This she failed to do, and instead she delivered
said certificate, as it was, to R.J. Campos & Co., Inc., thereby
clothing the latter with apparent title to the shares
represented by said certificate including apparent authority
to negotiate it by delivering it to said company while it was
indorsed in blank by the person or firm appearing on its face
as the owner thereof. The defendant Bank had no knowledge
of the circumstances under which the certificate of stock was
delivered to R.J. Campos & Co., Inc., and had a perfect right to
assume that R.J. Campos & Co., Inc. was lawfully in
possession of the certificate in view of the fact that it was a
street certificate, and was in such form as would entitle any
possessor thereof to a transfer of the stock on the books of
the corporation concerned.
She is, therefore, estopped from claiming further title to or
interest therein as against abona fide pledge or transferee
thereof, for it is a well-known rule that a bona fide pledgee or
transferee of a stock from the apparent owner is not
chargeable with knowledge of the limitations placed on it by
the real owner, or of any secret agreement relating to the use
which might be made of the stock by the holder.
The rule is "where one of two innocent parties must suffer
by reason of a wrongful or unauthorized act, the loss must
fall on the one who first trusted the wrong doer and put in
his hands the means of inflicting such loss" (Fletcher
Cyclopedia of Corporations, supra).
2. Was the defendants Bank obligated to inquire who was the
real owner of the shares represented by the certificate of
stock, and could it be charged with negligence for having
failed to do so? NO.
It should be noted that the certificate of stock in question was
issued in the name of the brokerage firm-Woo, Uy-Tioco &
Naftaly and that it was duly indorsed in blank by said firm,
and that said indorsement was guaranteed by R.J. Campos &
Co., Inc., which in turn indorsed it in blank. This certificate is
what it is known as street certificate. Upon its face, the
holder was entitled to demand its transfer into his name
from the issuing corporation. The Bank was not obligated to
look beyond the certificate to ascertain the ownership of G.R. No. 112941 February 18, 1999
the stock at the time it received the same from R.J. Campos
& Co., Inc., for it was given to the Bank pursuant to their NEUGENE MARKETING INC., ET. AL.  vs. COURT OF APPEALS
letter of hypothecation.
 PURISIMA, J.:
A mere claim and of ownership does not establish the fact
of ownership. The right of the plaintiff in such a case would FACTS OF THE CASE
be against the transferor. In fact, this is the attitude plaintiff
has adopted when she filed a charge for estafa against Rafael
NEUGENE was duly registered with this Commission to
J. Campos, which culminated in his prosecution and
engage in trading business for a term of fifty (50) years.
conviction, and it is only when she found him to be insolvent
Private respondents, Charles O. Sy, Arsenio Yang, Jr. and Lok
that she decided to go against the Bank. The fact that on the
Chun Suen, who are holders of at least two-thirds (2/3) of
right margin of the said certificate the name of the plaintiff
the outstanding capital stock sent notice to the directors of
appeared written, granting it to be true, cannot be
NEUGENE for a board meeting and a notice for a special
considered sufficient reason to indicate that its owner was
stockholders' meeting on to consider the dissolution of
the plaintiff considering that said certificate was indorsed in
NEUGENE. The directors and stockholders then present,
blank by her brokers Woo, Uy-Tioco & Naftaly, was
voted for and approved a resolution dissolving NEUGENE.
guaranteed by indorsement in blank by R.J. Campos & Co.,
Acting upon private respondents's Petition for Dissolution,
Inc.,
SEC issued a Certificate of Dissolution of NEUGENE.

Herein petitioners brought an action to annul or set aside the

said SEC Certification on the Dissolution of Neugene.
Petitioners stated, that they are the majority stockholders of
NEUGENE, owning eighty percent (80%) of its outstanding
capital stock, at the time of the adoption and approval of the
Resolution for the Dissolution of NEUGENE, and that the
private respondents had divested themselves of their
stockholdings when they endorsed their stock certificates in
blank and delivered the same to the Uy Family, the beneficial
owners of NEUGENE. The Uy family agreed to award
NEUGENE's stock certificates to Johnny K. H. Uy, who, in turn,
authorized Johnson Lee to dispose of the same; and that
Johnson Lee sold the said shares of stock to the petitioners,
Leoncio Tan and Nicanor Martin. Petitioner alleged that the
proceedings of the meetings were improperly called and held
without a quorum.

Private respondents, theorized that the alleged assignments

of shares of stock in favor of petitioners were simulated and
fraudulently effected, as there never was any agreement
because subject stock certificates of the private respondents
covering their shares of stock were endorsed in blank by
them and delivered to the Uy family, who were the beneficial
owners of NEUGENE, for safe keeping, but the same were
stolen by the spouses, Johnny K. H. Uy and Magdalena Go-
Uy, without the knowledge and authority of the Uy family.
The private respondents never sold their shares of stock in
NEUGENE to any of the petitioners or other stockholders of
record, prior to the dissolution of the corporation.

SEC Panel of Hearing Officers nullified the Certification on the

Dissolution of NEUGENE issued by SEC, holding that the
private respondents were no longer holders of at least two-
thirds (2/3) of the outstanding capital stock of . The udgment
of SEC was reversed by the Court of Appeals. Upholding the
validity of NEUGENE's dissolution.

ISSUE

Whether or not the respondents where holders of the

majority shares of stocks at the time of dissolution of
NEUGENE.

DECISION

Resolution of CA is affirmed. The Certificate of Stocks of the

private respondents were stolen and were not validly
transferred.
RULING

The certificates of stock of the private respondents were

stolen and therefore not validly transferred, and the transfers
of stock relied upon by petitioners were fraudulently
recorded in the Stock and Transfer Book of NEUGENE under
the column "Certificates Cancelled".

The transfers of stock in question lack the requisite

approval, the private respondents categorically declared
under oath that subject certificates of stock of theirs were
stolen from the confidential vault of the Uy family and
illegally transferred to the names of petitioners in the Stock
and Transfer Book of NEUGENE. The complete absence of a
cause or consideration renders the contract absolutely void
and inexistent.

SEC En Banc and its Panel Of Hearing Officers misappreciated

the true nature of the relationship between the stockholders
of NEUGENE and the Uy family, who had the understanding
that the beneficial ownership of NEUGENE would remain with
the Uy family, such that subject shares of stock were,
immediately upon issuance, endorsed in blank by the
shareholders and entrusted to the Uy family, through Ban Ha
Chua, for safekeeping. Such beneficial ownership of the Uy
family is admitted not only in the testimonies of private
respondents but also of the petitioners. Both the petitioners
Johnson Lee (a member of the Uy family himself), and Sony
Moreno, the corporate secretary, were aware of the real
import or significance of the indorsements in blank on the
stock certificates of the private respondent. They acted in bad
faith in assigning subject certificates of stock to the
petitioners, Nicanor Martin and Leoncio Tan, and in recording
the said transfers in dispute in the Stock and Transfer book of
NEUGENE.
G.R. No. L-19441             March 27, 1923
FUA CUN (alias Tua Cun), vs. RICARDO SUMMERS, in his
capacity as Sheriff ex-oficio of the City of Manila, and the
CHINA BANKING CORPORATION
OSTRAND, J.:
FACTS OF THE CASE
Chua Soco subscribed for 500 of stock of the defendant
Banking Corporation, one-half of the subscription price, in
cash, for which a receipt was issued in the following terms:
in default thereof, a receiver may be appointed to close up
the business of the bank in accordance with law."
A bank organized under that Act can have no lien on its own
stock for the indebtedness of the stockholders even when the
by-laws provide that the shares shall be transferable only on
the books of the corporation and that no such transfer shall
be made if the holder of the shares is indebted to the
corporation. The reasons for this doctrine are obvious; if
banking corporations were given a lien on their own stock
for the indebtedness of the stockholders, the prohibition
against granting loans or discounts upon the security of the
stock would become largely ineffective.

Turning now to the rights of the plaintiff in the stock in

Upon receipt of the balance of said subscription in
question, it is argued that the interest held by Chua Soco was
accordance with the terms of the calls of the Board
merely an equity which could not be made the subject of a
of Directors, and surrender of this certificate, duly
chattel mortgage. Though the courts have uniformly held
executed certificates for said five hundred shares of
that chattel mortgages on shares of stock and other choses
stock will be issued to the order of the subscriber.
in action are valid as between the parties; an equity in
shares of stock is of such an intangible character that it is
Chua Soco executed a promissory note in favor of the plaintiff somewhat difficult to see how it can be treated as a chattel
Fua Cun for the sum of P25,000 payable in ninety days and and mortgaged in such a manner that the recording of the
drawing interest at the rate of 1 per cent per month, securing mortgage will furnish constructive notice to third parties.
the note with a chattel mortgage on the shares of stock
subscribed for by Chua Soco, who also endorsed the receipt
There can be no doubt that an equity in shares of stock may
above mentioned and delivered it to the mortgagee. The
be assigned and that the assignment is valid as between the
plaintiff thereupon took the receipt to the manager of the
parties and as to persons to whom notice is brought home.
defendant Bank and informed him of the transaction with
Such an assignment exists here, though it was made for the
Chua Soco, but was told to await action upon the matter by
purpose of securing a debt. The endorsement was
the Board of Directors.
accompanied by the delivery of the receipt to the plaintiff and
further strengthened by the execution of the chattel
Chua Soco appears to have become indebted to the China mortgage, which mortgage, at least, operated as a
Banking Corporation for dishonored acceptances of conditional equitable assignment.
commercial paper and in an action brought against him to
recover this amount, Chua Soco's interest in the 500 shares
As against the rights of the plaintiff the defendant bank had,
subscribed for was attached and the receipt seized by the
no lien unless by virtue of the attachment. But the
sheriff. The attachment was levied after the defendant bank
attachment was levied after the bank had received notice of
had received notice of the facts that the receipt had been
the assignment of Chua Soco's interests to the plaintiff and
endorsed over to the plaintiff.
was therefore subject to the rights of the latter. It follows
that as against these rights the defendant bank holds no lien
Fua Cun thereupon brought the present action maintaining whatever.
that by virtue of the payment of the one-half of the
subscription price of five hundred shares Chua Soco in effect
The court erred in holding the plaintiff as the owner of 250
became the owner of 250 shares and that the defendants be
shares of stock; "the plaintiff's rights consist in an equity in
ordered to deliver the receipt in question to him; and that he
five hundred shares and upon payment of the unpaid portion
be awarded the sum of P5,000 in damages for wrongful
of the subscription price he becomes entitled to the issuance
attachment.
of certificate for said five hundred shares in his favor."
The trial court rendered judgment in favor of the plaintiff
declaring that Chua Soco, through acquired the right to 250
shares fully paid up. Judgment the defendants appeal.

DECISION

Plaintiff is not the owner of the 250 shares of stock.

RULING

A corporation has no lien upon the shares of stockholders

for any indebtedness to the corporation. On the contrary,
section 120 of the Corporation Act provides that "no bank
organized under this Act shall make any loan or discount on
the security of the shares of its own capital stock, nor be the
purchaser or holder of any such shares, unless such security
or purchase shall be necessary to prevent loss upon a debt
previously contracted in good faith, and stock so purchased
or acquired shall, within six months from the time of its
purchase, be sold or disposed of at public or private sale, or,
G.R. No. 133969           January 26, 2000 transfer, the number of the certificate or certificates
and the number of shares transferred.
NEMESIO GARCIA, vs. NICOLAS JOMOUAD, Ex-
officio  Provincial Sheriff of Cebu No shares of stock against which the corporation
holds any unpaid claim shall be transferable in the
KAPUNAN,  J.: books of the corporation.

FACTS OF THE CASE Whether a bona fide transfer of the shares of a corporation,

Action for collection of sum of money filed by the spouses
Atinon against Jaime Dico. RTC rendered judgment ordering
Dico to pay the spouses Atinon the sum of P900,000.00 plus
interests. After said judgment became final and executory,
respondent sheriff proceeded with its execution. In the
course thereof, the Proprietary Ownership Certificate (POC)
in the Cebu Country Club, which was in the name of Dico, was
levied on and scheduled for public auction. Claiming
ownership over the subject certificate. Petitioner Garcia filed
with the RTC an action for injunction with prayer for
preliminary injunction against respondents spouses Jose and
Sally Atinon and Nicolas Jomouad, ex-officio sheriff to enjoin
respondents from proceeding with the auction. After trial, the
lower court dismiss the petition. CA affirmed.
Petitioner avers that Dico, the judgment debtor of the
spouses Atinon, was employed as manager of his
(petitioner's) Young Auto Supply. In order to assist him in
entertaining clients, petitioner "lent" his POC to Dico so the
latter could enjoy the "signing" privileges of its members.
Thereafter, Dico resigned as manager of petitioner's business.
Upon demand of petitioner, Dico returned POC to him. Dico
then executed a Deed of Transfer, covering the subject
certificate in favor of petitioner. The Club was furnished with
a copy of said deed but the transfer was not recorded in the
books of the Club because petitioner failed to present proof
of payment of the requisite capital gains tax.
not registered or noted in the books of the corporation, is
valid as against a subsequent lawful attachment of said
shares, regardless of whether the attaching creditor had
actual notice of said transfer or not."The attachment
prevails over the unrecorded transfer stating thus —
All transfers of shares should be entered, as here
required, on the books of the corporation. And it is
equally clear to us that all transfers of shares not so
entered are invalid as to attaching or execution
creditors of the assignors, as well as to the
corporation and to subsequent purchasers in good
faith, and, indeed, as to all persons interested,
except the parties to such transfers. All transfers not
so entered on the books of the corporation are
absolutely void; not because they are without
notice or fraudulent in law or fact, but because they
are made so void by statute.3
The transfer of the subject certificate made by Dico to
petitioner was not valid as to the spouses Atinon, the
judgment creditors, as the same still stood in the name of
Dico, the judgment debtor, at the time of the levy on
execution. In addition, as correctly ruled by the CA, the entry
in the minutes of the meeting of the Club's board of directors
noting the resignation of Dico as proprietary member thereof
does not constitute compliance with Section 63 of the
Corporation Code.

ISSUE

WON CA erroneously relied on Section 63 of the Corporation

Code in upholding the levy on the subject certificate to satisfy
the judgment debt of Dico.

DECISION

CA decision is affirmed.

RULING

The petition is without merit.

Sec. 63 of the Corporation Code reads:

Sec. 63 Certificate of stock and transfer of shares. —

The capital stock of 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-
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 recorded
in the books of the corporation showing the names of
the parties to the transaction, the date of the

[G.R. No. 120138. September 5, 1997]
MANUEL A. TORRES, JR., (Deceased), vs. CA
FACTS OF THE CASE
The late Manuel A. Torres, Jr. (Judge Torres for brevity) was
the majority stockholder of Tormil Realty & Development
Corporation while private respondents who are the children
of Judge Torres deceased brother Antonio A. Torres,
constituted the minority stockholders. lesvirtuallawlibrary
In 1984, Judge Torres, in order to make substantial savings in
taxes, adopted an estate planning scheme under which he
assigned to Tormil Realty & Development Corporation (Tormil
for brevity) various real properties he owned and his shares
of stock in other corporations in exchange for 225,972 Tormil
Realty shares. On various, ten (10) deeds of assignment were
executed by the late Judge Torres.Consequently, the
aforelisted properties were duly recorded in the inventory of
assets of Tormil Realty and the revenues generated by the
said properties were correspondingly entered in the
corporations books of account and financial records. Likewise,
all the assigned parcels of land were duly registered with
the respective Register of Deeds in the name of Tormil
Realty, except for the ones located in Makati and Pasay City.
At the time of the assignments and exchange, however, only
225,000 Tormil Realty shares remained unsubscribed, all of
which were duly issued to and received by Judge Torres .
Due to the insufficient number of shares of stock issued to
Judge Torres and the alleged refusal of private respondents
to approve the needed increase in the corporations
authorized capital stock , Judge Torres revoked the two (2)
deeds of assignment covering the properties in Makati and
Pasay City.
Noting the disappearance of the Makati and Pasay City
properties from the corporations inventory of assets and
financial records private respondents, filed a complaint with
the Securities and Exchange Commission to compel Judge
Torres to deliver to Tormil Corporation the two (2) deeds of
assignment. Private respondents found that Judge Torres,
formed and organized a corporation named Torres-Pabalan
Realty and Development Corporation and that as part of
Judge Torres contribution to the new corporation, he
executed in its favor a Deed of Assignment conveying the
same Makati and Pasay City properties he had earlier
transferred to Tormil.
Pursuant thereto, Judge Torres assigned from his own shares,
one (1) share each to petitioners Tobias, Jocson,
Jurisprudencia, Azura and Pabalan. These assigned shares
were in the nature of qualifying shares, for the sole purpose
of meeting the legal requirement to be able to elect them
(Tobias and company) to the Board of Directors as Torres
nominees. Private respondents alleged that the petitioners-
nominees were not legitimate stockholders of Tormil
because the assignment of shares to them violated the
minority stockholders right of pre-emption as provided in
the corporations articles and by-laws.
SEC rendered a decision in favor of private respondents. CA
affirmed the order of SEC.
Petitioners insist that the assignment of qualifying shares to
the nominees of the late Judge Torres (herein petitioners)
does not partake of the real nature of a transfer or
conveyance of shares of stock as would call for the imposition
of stringent requirements with respect to the recording of the
transfer of said shares. Anyway, petitioners add, there was
substantial compliance with the above-stated requirement
since said assignments were entered by the late Judge Torres
himself in the corporations stock and transfer book prior to
the annual stockholders meeting and which entries were
confirmed by petitioner Azura who was appointed Assistant
Corporate Secretary by Judge Torres.
Petitioners further argue that:
10.10. Certainly, there is no legal or just basis for the
respondent S.E.C. to penalize the late Judge Torres by
invalidating the questioned entries in the stock and transfer
book, simply because he initially made those entries (they
were later affirmed by an acting corporate secretary) and
because the stock and transfer book was in his possession
instead of the elected corporate secretary, if the background
facts herein-before narrated and the serious animosities that
then reigned between the deceased Judge and his relatives
are to be taken into account;
RULING
Petitioners contentions lack merit. Transfers of Judge Torres
is void.
Petitioners cannot use the flimsy excuse that it would have
been a vain attempt to force the incumbent corporate
secretary to register the aforestated assignments in the stock
and transfer book because the latter belonged to the
opposite faction. It is the corporate secretarys duty and
obligation to register valid transfers of stocks and if said
corporate officer refuses to comply, the transferor-
stockholder may rightfully bring suit to compel
performance.25 In other words, there are remedies within
the law that petitioners could have availed of, instead of
taking the law in their own hands, as the cliche goes.
Section 74 of the Corporation Code, as follows (Rollo, p. 45):
In the absence of (any) provision to the contrary, the
corporate secretary is the custodian of corporate records.
Corollarily, he keeps the stock and transfer book and makes
proper and necessary entries therein.
In contravention to the above cited provision, the stock and
transfer book was not kept at the principal office of the
corporation either but at the place of respondent Torres.
Any entries made in the stock and transfer by respondent
Torres of an alleged transfer of nominal shares to Pabalan
and Co. cannot therefore be given any valid effect.

[GR 58168, 19 December 1989]
Magsaysay-Labrador, et. al. vs. Court of Appeals
Facts: Adelaida Rodriguez-Magsaysay, widow and
special administratix of the estate of the late Senator
Genaro Magsaysay, brought before CFI an action
against Artemio Panganiban, Subic Land
Corporation (SUBIC), Filipinas Manufacturer's
Bank (FILMANBANK) and the Register of Deeds
of Zambales, for the annulment of the Deed of
Assignment executed by the late Senator in favor of
SUBIC (as a result of which TCT 3258 was
cancelled and TCT 22431 issued in the name of
SUBIC), for the annulment of the Deed of
Mortgage executed by SUBIC in favor of
FILMANBANK , and cancellation of TCT, and for
the latter to issue a new title in her favor.
of the parties or an interest against both, or he must
be so situated as to be adversely affected by a
distribution or other disposition of the property in
the custody of the court or an officer thereof . Here,
the interest, if it exists at all, of the Magsaysay
sisters is indirect, contingent, remote, conjectural,
consequential and collateral. At the very least, their
interest is purely inchoate, or in sheer expectancy of
a right in the management of the corporation and to
share in the profits thereof and in the properties and
assets thereof on dissolution, after payment of the
corporate debts and obligations. While a share of
stock represents a proportionate or aliquot interest
in the property of the corporation, it does not vest
the owner thereof with any legal right or title to any
of the property, his interest in the corporate property
being equitable or beneficial in nature. Shareholders
are in no legal sense the owners of corporate
property, which is owned by the corporation as a
distinct legal person.

Concepcion Magsaysay-Labrador, Soledad

Magsaysay-Cabrera, Luisa Magsaysay-Corpuz,
Felicidad Magsaysay, and Mercedes Magsaysay-
Diaz, sisters of the late senator, filed a motion for
intervention on the ground that their brother
conveyed to them 1/2 of his shareholdings in
SUBIC or a total of 416,566.6 shares and as
assignees of around 41 % of the total outstanding
shares of such stocks of SUBIC, they have a
substantial and legal interest in the subject matter of
litigation and that they have a legal interest in the
success of the suit with respect to SUBIC. The trial
court denied the motion for intervention, and ruled
that petitioners have no legal interest whatsoever in
the matter in litigation and their being alleged
assignees or transferees of certain shares in SUBIC
cannot legally entitle them to intervene because
SUBIC has a personality separate and distinct from
its stockholders.

On appeal, the Court of Appeals found no factual or

legal justification to disturb the findings of the
lower court. The appellate court further stated that
whatever claims the Magsaysay sisters have against
the late Senator or against SUBIC for that matter
can be ventilated in a separate proceeding. The
motion for reconsideration of the Magsaysay sisters
was denied. Hence, the petition for review on
certiorari.

Issue: Whether the Magsaysay sister, allegedly

stockholders of SUBIC, are interested parties in a
case where corporate properties are in dispute.

Held: Viewed in the light of Section 2, Rule 12 of

the Revised Rules of Court, the Magsaysay sisters
have no legal interest in the subject matter in
litigation so as to entitle them to intervene in the
proceedings. To be permitted to intervene in a
pending action, the party must have a legal interest
in the matter in litigation, or in the success of either

Ownership of Corporate Shares/ Stock Certificates:  requisites:  (1)  certificates must be signed by the
Valid Issuance
Bitong vs. CA [292 SCRA 503 (July 13 1998)]
Facts:  Bitong was the treasurer and member of the
BoD of Mr. & Mrs. Corporation.  She filed a
complaint with the SEC to hold respondent spouses
Apostol liable for fraud, misrepresentation,
disloyalty, evident bad faith, conflict of interest and
mismanagement in directing the affairs of the
corporation to the prejudice of the stockholders.  These considerations are founded on the basic
She alleges that certain transactions entered into by
the corporation were not supported by any
stockholder’s resolution.
The complaint sought to enjoin Apostol from
further acting as president-director of the
corporation and from disbursing any money or
funds.  Apostol contends that Bitong was merely a
holder-in-trust of the JAKA shares of the
corporation, hence, not entitled to the relief she
prays for.  SEC Hearing Panel issued a writ
enjoining Apostol.
envisions a formal certificate of stock which can be
issued only upon compliance with certain
president or vice president, countersigned by the
secretary or assistant secretary, and sealed with the
seal of the corporation, (2)  delivery of the
certificate; (3) the par value, as to par value shares,
or the full subscription as to no par value shares,
must be first fully paid; (4) the original certificate
must be surrendered where the person requesting
the issuance of a certificate is a transferee from a
stockholder.
principle that stock issued without authority and in
violation of the law is void and confers no rights on
the person to whom it is issued and subjects him to
no liabilities.  Where there is an inherent lack of
power in the corporation to issue the stock, neither
the corporation nor the person to whom the stock is
issued is estopped to question its validity since an
estoppel cannot operate to create stock which under
the law cannot have existence.

After hearing the evidence, SEC Hearing Panel

dissolved the writ and dismissed the complaint filed
by Bitong.  Bitong appealed to the SEC en banc. 
The latter reversed SEC Hearing Panel decision. 
Apostol filed petition for review with the CA.  CA
reversed SEC en banc ruling holding that Bitong
was not the owner of any share of stock in the
corporation and therefore, not a real party in interest
to prosecute the complaint.  Hence, this petition
with the SC.

Issue:  Whether or not Bitong was the real party in

interest.

Held:  Based on the evidence presented, it could be

gleaned that Bitong was not a bona fide stockholder
of the corporation.  Several corporate documents
disclose that the true party in interest was JAKA.
Although her buying of the shares were recorded in
the Stock and Transfer Book of the corporation, and
as provided by Sec. 63 of the Corp Code that no
transfer shall be valid except as between the parties
until the transfer is recorded in the books of the
corporation, and upon its recording the corporation
is bound by it and is estopped to deny the fact of
transfer of said shares, this provision is not
conclusive even against the corporation but are
prima facie evidence only.  Parol evidence may be
admitted to supply the omissions in the records,
explain ambiguities, or show what transpired where
no records were kept, or in some cases where such
records were contradicted.  Besides, the provision
 TAYAG VS BENGUET CONSOLIDATED INC.
FACTS
Idonah Slade Perkins is an owner of two stock certificates
covering 3,302 shares of Benguet consolidated Inc. When
shedied in New York City on March 27, 1960, the certificates
were transferred in the possession of County Trust Company
of New York, the domiciliary administrator of the estate of
Perkins.Meanwhile, in the Philippines, Renato Tayag
substituted Lazaro Marquez as ancillary administrator for
Perkinscertificates. Because of the dispute as to which of the
two administrators is entitled to the certificates of Perkins,
anaction was brought to court. CFI of Manila held that
domiciliary administrator (County Trust) should deliver
thecertificates to the anciliary administrator (Tayag). When
domiciliary administrator did not comply, court ordered that
thestocks be considered lost and new ones should be issed
under the name of Perkins and to be delivered to the
anciliaryadministrator. Benguet Consolidated, Inc., the
corporation appealed to the decision on the ground of the
stocks being inexistence and that it would be a violation of
the requirements of the corporations by-laws.
Issue: WON the contention of Benguet Consolidated, Inc.
warrant a reversal of the decision of the court because it
violates the corporation by-laws?
Held: No, Court held that appeal is not proper because a
corporation is in existence only as the law allows it. It cannot
choose which court order to follow and which to disregard.
SC said that Phil. courts have jurisdiction over shares of
stocks located in the Phils.
Ratio: Court clarifies that when a person owns several
properties within and outside her domicile (like Perkins),
there must bea domicile administrator to take care of the
estate where she lives and another anciliary administrator
(like Tayag in thePhilippines) to take care of the estate left in
the country where the property is situated. The domicile
administrator has no authority in the foreign country where
the property is. As for the main point, the Court emphasizes
the basic postulates of corporate theory. A corporation is an
artificial being created by operation of law. Court states that
it owes its life to the state and its birth is purely dependent
on the state swill. It is logically inconceivable that it will have
rights and privileges of a higher priority than that of its
creator as was suggested by Benguet’s contention that the
by-laws should not be violated by the court order. The
corporation cannotrefuse to yield obedience to acts of its
state organs, certainly not excluding the judiciary. To assert
that it can choose which court order to follow and which to
disregard is to confer upon it not autonomy which may be
conceded but license which cannot be tolerated. 
Art. 16. Real property as well as personal property is subject to the
law of the country where it is situated.
However, intestate and testamentary successions, both with respect
to the order of succession and to the amount of successional rights
and to the intrinsic validity of testamentary provisions, shall be
regulated by the national law of the person whose succession is
under consideration, whatever may be the nature of the property
and regardless of the country wherein said property may be found.
Balane: In Art. 16 par. 1 provides that the lex situs or lex rei sitae
governs real or personal prop. This rule applies even to incorporeal
property. In Tayag v. Benguet Consolidated, 26 S, the SC said that
Phil. courts have jurisdiction over shares of stocks located in the
Phils.
Tolentino: The rule of mobilia sequuntur personam in personal
property has yielded to the to the lex situs bec. of the great increase
in modern times of the amount and variety of prop. not immediately
connected w/ the person of the owner.
Law on Succession.-- The law governing succession may be
considered from the point of view of (a) the execution of wills, and
(b) the distribution of property. The formalities of execution of will
are generally governed by the law of the place of execution (Art. 17,
par. 1.) But the distribution of the estate is governed by the law of
the nation of the deceased.
Applicability of Foreign Law.-- The second par. of this article can be
invoked only when the deceased was vested w/ a descendible
interest in prop. w/in the jurisdiction of the Phils.
The intrinsic validity of the provisions of the will of a foreigner who
dies in the Phils. is to be determined by the laws of his own state or
country, and not by those of the Phils. Thus, a condition in a will of a
foreigner that his legatee respect his order that his prop. be
distributed according to the laws of the Phils. instead of the laws of
his own country, was held illegal and considered as not written.
Art. 17. The forms and solemnities of contracts, wills, and other
public instruments shall be governed by the laws of the country in
which they are executed.When the acts referred to are executed
before the diplomatic or consular officials of the Republic of the
Philippines in a foreign country, the solemnities established by
Philippine laws shall be observed in their execution.Prohibitive laws
concerning persons, their acts or property, and those which have for
their object public order, public policy and good customs shall not
be rendered ineffective by laws or judgments promulgated, or by
determinations or conventions agreed upon in a foreign country.
Balane: The rule in par. 1 is known as the lex loci celebrationis.
Tolentino: Validity and Effects of Obligations.-- The code fails to
mention the law w/c shall govern the validity and effects of
obligations. (1) First, the law designated by the parties shall be
applied; (2) if there is no stipulation on the matter, and the parties
are of the same nationality, their national law shall be applied; (3) if
this is not the case, the law of the place of perfection of the
obligation shall govern its essence and nature, and the law of the
place of the performance shall govern its fulfillment; (4) but if these
places are not specified and they cannot be deduced from the
nature and circumstances of the obligation, then the law of the
domicile of the passive subject shall apply. (Manresa and Valverde.)

G.R. No. 170585 October 6, 2008
DAVID C. LAO and JOSE C. LAO, vs DIONISIO C. LAO,
FACTS OF THE CASE
Petitioners David and Jose Lao filed a petition with the SEC
against respondent Dionisio Lao, president of Pacific Foundry
Shop Corporation (PFSC). Petitioners prayed for a declaration
as stockholders and directors of PFSC, issuance of certificates
of shares in their name and to be allowed to examine the
corporate books of PFSC.
Petitioners claimed that they are stockholders of PFSC based
on the General Information Sheet filed with the SEC, in which
they are named as stockholders and directors of the
corporation.
Respondent denied petitioners claim. He alleged that the
inclusion of their names in the corporations General
Information Sheet was inadvertently made. He also claimed
that petitioners did not acquire any shares in PFSC by any of
the modes recognized by law, namely subscription, purchase,
or transfer. Since they were neither stockholders nor
directors of PFSC, petitioners had no right to be issued
certificates or stocks or to inspect its corporate books.
Case was transferred from SEC to RTC.  RTC denied the
petition. CA affirmed the decision of RTC.
ISSUE
WON the mere inclusion as shareholder in the General
Information Sheet of a corporation sufficient proof that one is
a shareholder in such corporation?
DECISION
SC denies the petition.
RULING
 Petitioners failed to prove that they are shareholders of
PSFC.
Records, however, disclose that petitioners have no
certificates of shares in their name. A certificate of stock is
the evidence of a holders interest and status in a corporation.
It is a written instrument signed by the proper officer of a
corporation stating or acknowledging that the person named
in the document is the owner of a designated number of
shares of its stock. It is prima facie evidence that the holder is
a shareholder of a corporation.
Nor is there any written document that there was a sale of
shares, as claimed by petitioners. Petitioners did not present
any deed of assignment, or any similar instrument, between
Lao Pong Bao and Hipolito Lao; or between Lao Pong Bao and
petitioner David Lao. There is likewise no deed of assignment
between petitioner Jose Lao and private respondent Dionisio
Lao.  Absent a written document, petitioners must prove, at
the very least, possession of the certificates of shares in the
name of the alleged seller. Again, they failed to prove
possession. They failed to prove the due delivery of the
certificates of shares of the sellers to them. Section 63 of the
Corporation Code provides:
 cralawSec. 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-
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
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.
 In contrast, respondent was able to prove that he is the
owner of the disputed shares. He had in his possession the
certificates of stocks of Hipolito Lao. The certificates of
stocks were also properly endorsed to him. More
importantly, the transfer was duly registered in the stock
and transfer book of the corporation. Thus, as between the
parties, respondent has proven his right over the disputed
shares.
The mere inclusion as shareholder of petitioners in the
General Information Sheet of PFSC is insufficient proof that
they are shareholders of the company.
 That document alone does not conclusively prove that they
are shareholders of PFSC. The information in the document
will still have to be correlated with the corporate books of
PFSC. As between the General Information Sheet and the
corporate books, it is the latter that is controlling.
If a transferee of shares of stock who failed to register such
transfer in the Stock and Transfer Book of the Corporation
could not exercise the rights granted unto him by law as
stockholder, with more reason that such rights be denied to a
person who is not a stockholder of a corporation.
 It should be stressed that the burden of proof is on
petitioners to show that they are shareholders of PFSC. This is
so because they do not have any certificates of shares in their
name. Moreover, they do not appear in the corporate books
as registered shareholders. If they had certificates of shares,
the burden would have been with PFSC to prove that they
are not shareholders of the corporation.