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Bitong alleged before the SEC that she had been the Treasurer and a Member of the
Board of Directors of Mr. & Ms. from the time it was incorporated and was the
registered owner of !"### shares of stoc$ out of the %"#&& total outstanding shares.
Bitong complained of irregularities from !'&( to !'&) b* Eugenia +postol" ,resident
and Chair of the Board of Directors- that e.cept for the sale of the name Philippine
Inquirer to Philippine Daily Inquirer all other transactions and agreements entered
into b* Mr. & Ms. with ,D/ were not supported b* an* bond and0or stoc$holders1
That upon instructions of Eugenia +postol" Mr. & Ms. made se2eral cash ad2ances to
,D/ on 2arious occasions amounting to ,(.3M. 4n some of these borrowings ,D/
paid no interest whatsoe2er. Despite the fact that the ad2ances made b* Mr. & Ms.
to ,D/ were boo$ed as ad2ances to an a5liate" there e.isted no board resolution"
contract nor an* other document which could legall* authori6e the creation of and
support to an a5liate.
7urther" she alleges that +postol" Magsanoc and 8u*da subscribed to ,D/ shares of
stoc$ at ,9#: each or a total of ,!9#:. The stoc$ subscriptions were paid for b* Mr.
& Ms. and initiall* treated" as recei2ables from o5cers and emplo*ees. But" no
pa*ments were e2er recei2ed from respondents" Magsanoc and 8u*da.
,etitioner then ;led a deri2ati2e suit before the SEC allegedl* for the bene;t of Mr.
& Ms. Publishing Co., Inc., against respondents +postol.
<owe2er" pri2ate respondents contended that petitioner" being merel* a holder=in=
trust of >+:+ shares" onl* represented and continued to represent >+:+ in the board.
The* argued that petitioner was not the true part* to this case" the real part* being
>+:+ which continued to be the true stoc$holder of Mr. & Ms. <ence" petitioner did
not ha2e the personalit* to initiate and prosecute the deri2ati2e suit which"
conse?uentl*" must be dismissed.
+t the trial" petitioner contends that she became the registered and bene;cial
owner of '') shares of stoc$ of Mr. & Ms. out of the %"#&& total outstanding shares
after she ac?uired them from >+:+ through a deed of sale e.ecuted on 39 >ul* !'&(
and recorded in the Stoc$ and Transfer Boo$ of Mr. & Ms. under Certi;cate of Shares
of Stoc$ 8o. ##&. She pointed out that Senator Enrile decided that >+:+ should
completel* di2est itself of its holdings in Mr. & Ms. and this resulted in the sale to
her of >+:+1s interest and holdings in that publishing ;rm.
,ri2ate respondents refuted the statement of petitioner that she was a stoc$holder
of Mr. & Ms. since 39 >ul* !'&( as respondent Eugenia D. +postol signed Certi;cate
of Stoc$ 8o. ##& onl* on !) March !'&'" and not on 39 >ul* !'&(. +nd" since the
Stoc$ and Transfer Boo$ which petitioner presented in e2idence was not registered
with the SEC" the entries therein including Certi;cate of Stoc$ 8o. ##& were
+fter trial on the merits" the SEC <earing ,anel dismissed the deri2ati2e suit ;led b*
Bitong appealed to the SEC En Banc.
The SEC En Banc re2ersed the decision of the <earing ,anel.
@espondents then ;led for a petition for re2iew and certiorari" which were
C+ rendered a decision re2ersing the SEC En Banc and held that petitioner was not
the owner of an* share of stoc$ in Mr. & Ms. and therefore not the real part*=in=
interest to prosecute the complaint she had instituted against pri2ate respondents.
7or not being the real part*=in=interest" petitioner1s complaint did not state a cause
of action" a defense which was ne2er wai2ed. Motion for reconsideration was
li$ewise denied. <ence" this petition.
ISSUE: Ahether or not petitioner is a bona fde stoc$holder of Mr. & Ms. at the time
of the transaction complained of" thus gi2ing her standing to institute a deri2ati2e
action for the bene;t of the corporation.
RULING: Sec. B( of the Corporation Code en2isions a formal certi;cate of stoc$
which can be issued onl* upon compliance with certain re?uisites. First" the
certi;cates must be signed b* the president or 2ice=president" countersigned b* the
secretar* or assistant secretar*" and sealed with the seal of the corporation. + mere
t*pewritten statement ad2ising a stoc$holder of the e.tent of his ownership in a
corporation without ?uali;cation and0or authentication cannot be considered as a
formal certi;cate of stoc$. econd" deli2er* of the certi;cate is an essential
element of its issuance. <ence" there is no issuance of a stoc$ certi;cate where it is
ne2er detached from the stoc$ boo$s although blan$s therein are properl* ;lled up
if the person whose name is inserted therein has no control o2er the boo$s of the
compan*. !hird" the par 2alue" as to par 2alue shares" or the full subscription as to
no par 2alue shares" must ;rst be full* paid. Fourth" the original certi;cate must be
surrendered where the person re?uesting the issuance of a certi;cate is a
transferee from a stoc$holder.
The certi;cate of stoc$ itself once issued is a continuing a5rmation or
representation that the stoc$ described therein is 2alid and genuine and is at
least pri"a #acie e2idence that it was legall* issued in the absence of e2idence to
the contrar*. <owe2er" this presumption ma* be rebutted. Similarl*" boo$s and
records of a corporation which include e2en the stoc$ and transfer boo$ are
generall* admissible in e2idence in fa2or of or against the corporation and its
members to pro2e the corporate acts" its ;nancial status and other matters
including one1s status as a stoc$holder. The* are ordinaril* the best e2idence of
corporate acts and proceedings. <owe2er" the boo$s and records of a corporation
are not conclusi2e e2en against the corporation but are pri"a #acie e2idence onl*.
,arol e2idence ma* be admitted to suppl* omissions in the records" e.plain
ambiguities" or show what transpired where no records were $ept" or in some cases
where such records were contradicted. The eCect of entries in the boo$s of the
corporation which purport to be regular records of the proceedings of its board of
directors or stoc$holders can be destro*ed b* testimon* of a more conclusi2e
character than mere suspicion that there was an irregularit* in the manner in which
the boo$s were $ept. These considerations are founded on the basic principle that
stoc$ issued without authorit* and in 2iolation of law is 2oid and confers no rights
on the person to whom it is issued and subDects him to no liabilities. Ahere there is
an inherent lac$ of power in the corporation to issue the stoc$" neither the
corporation nor the person to whom the stoc$ is issued is estopped to ?uestion its
2alidit* since an estopped cannot operate to create stoc$ which under the law
cannot ha2e e.istence.
,etitioner in her repl* admitted that while respondent Eugenia D. +postol signed the
Certi;cate of Stoc$ 8o. ##& in petitioner1s name onl* in !'&'" it was issued b* the
corporate secretar* in !'&( and that the other certi;cates co2ering shares in Mr. &
Ms. had not *et been signed b* respondent Eugenia D. +postol at the time of the
;ling of the complaint with the SEC although the* were issued *ears before. Based
on this admission of petitioner" there is no truth to the statement written in
Certi;cate of Stoc$ 8o. ##& that the same was issued and signed on 39 >ul* !'&( b*
its dul* authori6ed o5cers speci;call* the ,resident and Corporate Secretar*
because the actual date of signing thereof was !) March !'&'. Eeril*" a formal
certi;cate of stoc$ could not be considered issued in contemplation of law unless
signed b* the president or 2ice=president and countersigned b* the secretar* or
assistant secretar*. /n this case" contrar* to petitioner1s submission" the Certi;cate
of Stoc$ 8o. ##& was onl* legall* issued on !) March !'&' when it was actuall*
signed b* the ,resident of the corporation" and not before that date. Ahile a
certi;cate of stoc$ is not necessar* to ma$e one a stoc$holder" e.g." where he is an
incorporator and listed as stoc$holder in the articles of incorporation although no
certi;cate of stoc$ has *et been issued" it is supposed to ser2e as paper
representati2e of the stoc$ itself and of the owner1s interest therein. <ence" when
Certi;cate of Stoc$ 8o. ##& was admittedl* signed and issued onl* on !) March
!'&' and not on 39 >ul* !'&(" e2en as it indicates that petitioner owns '') shares
of stoc$ of Mr. & Ms." the certi;cate has no e2identiar* 2alue for the purpose of
pro2ing that petitioner was a stoc$holder since !'&( up to !'&'.
The basis of a stoc$holder1s suit is alwa*s one in e?uit*. <owe2er" it cannot prosper
without ;rst compl*ing with the legal re?uisites for its institution. The most
important of these is the bona fde ownership b* a stoc$holder of a stoc$ in his own
right at the time of the transaction complained of which in2ests him with standing
to institute a deri2ati2e action for the bene;t of the corporation. A<E@E74@E" the
petition is DE8/ED.