PHILIPPINE TRUST COMPANY vs MARCIANO RIVERA De Silva subscribed for 650 shares of stock of Aboitiz = Paid 200 shares
50 shares of stock of Aboitiz = Paid 200 shares only
Mariano Rivera = one of the incorporators of Cooperativa Naval Filipina
The corporation became insolvent = Phil Trust became the ASSIGNEE during
bankruptcy
Phil Trust instituted to recover one-half of the stock subscription of the defendant
( w/c was NOT PAID by Mariano )
Reason for non-payment = resolution was made
1. capital should be reduced by 50 per centum
2. subscribers released from the obligation to pay any unpaid balance of
their subscription in excess of 50 per centum of the same
Trial judge ruled resolution relied upon was without effect and was still liable for the
unpaid balance.
Hence appeal.
Held: YES
1. subscription to the capital of a corporation constitute a find to which
creditors have a right to look for satisfaction of their claims and that the
assignee in insolvency can maintain an action upon any unpaid stock
subscription in order to realize assets for the payment of its debts
2. Gen RULE: A corporation has no power to release an original
subscriber to its capital stock from the obligation of paying for his
share
Exception: 1. valuable consideration for such release
2. as against creditors a reduction of the capital stock can
take place only in the manner an under the
conditions prescribed by the statute or the charter
or the articles of incorporation
1. Resolution was wholly ineffectual
 an attempted withdrawal of so much capital from the fund
upon which the company's creditors were entitled ultimately
to rely
 effected without compliance with the statutory requirements
ROMANA MIRANDA vs TARLAC RICE MILL CO., INC.
Alberto Miranda subscribed for 100 shares of Tarlac Rice Mill Company TO BE PAID
IN INSTALLMENTS
He transferred in lieu of cash for the benefit and to the credit of the Tarlac Rice Mill
Company, Inc = a parcel of land
Tarlac loaned from Mariano Tablante and mortgaged the said land to him
Became due on 1929 = Not Paid = Sold the Land for payment
Miranda questioned the sale should have not be made because:
1. violated the terms of the contract in mortgaging the land = because the
only sum then due is 3000
2. that when the remaining installments of the stock subscription became
due = no obligation to pay because the corporation had already ceased
to do business
Issue:
WON the mortgage and subsequent sale of the land is valid?
Held: YES
a) BOD may at any time declare due and payable to the corporation unpaid
subscriptions
 this power of the directors is absolute and cannot be limited
by the subscription contract
b) No call is necessary when a subscription is payable = when it is
payable in installments at specified times
 RULE = duty of the subscriber to pay AS SOON AS IT IS
DUE = without any call or demand
 Failure = action may be brought at any time
 When this action was filed on September 2, 1930, the last of
the instalments had already become payable in accordance
with the subscription agreement.
 Neither the fact that the corporation has ceased to do
business nor the fact that the other stockholders have not
been required to pay for their shares in accordance with their
subscription agreement justifies us in ordering the
corporation to return to the plaintiff the amount paid in by
Alberto Miranda.
DE SILVA vs ABOITIZ & COMPANY, INC.
he was notified of a resolution = declaring the unpaid subscriptions to the capital
stock of the corporation to have become due and payable ( was published )
Did not pay = Declared Delinquent
Filed a complaint Resolution was invalid = Grounds:
1. prescribing another method of paying the subscription to the capital
stock different from that provided in its by-laws
2. all the shares subscribed and not paid = shall be paid out of the 70% of
the profit obtained
Trial Court dismissed the complaint. Hence appeal.
Issue:
WON collect subscription by another method different from that prescribed in the by-
laws?
Held: YES
1. it is discretionary on the part of the board of directors to do whatever is
provided in the said article relative to the application of a part of the 70
per cent of the profit
2. If the board of directors does not wish to make use of said authority it
has two other remedies for accomplishing the same purpose
 special remedy given by the statute = permitting the
corporation to put the unpaid stock for sale and dispose
of it for the account of the delinquent subscriber
 PROVIDED 4 in Corporation Law = which is binding upon
it and its stockholders
 artificial entity created by virtue of that same law = made use
of the discretionary power granted to it by that law
3. the plaintiff has no right whatsoever under the provision of the above
cited article 46 of the said by-laws to prevent the board of directors from
applying any other method than that mentioned in the said article
FUA CUN vs RICARDO SUMMERS
Chua Soco subscribed 500 shares of China Banking Corporation = paid half of the
subscription price
Condition = failure to pay = 500 shares specified in this receipt is subject to sale by
the China Banking Corporation for the payment of any unpaid subscriptions
Chua Soco executed a promissory note in favor of the plaintiff Fua Cun = chattel
mortgage on the shares
500 shares were attached and levied upon to satisfy his debt with China Banking
Corp
Fua Cun thereupon brought the present action = Grounds:
1. by virtue of the payment of the one-half of the subscription price
2. in effect became the owner of 250 shares
3. By virtue of Chattle Mortgage = hold priority over the claim
Trial court ruled in favor of Fua Cun = ORDER the return of the shares. Hence
appeal
Issue:
WON by paying one-half of the subscription in effect became the owner of 250
shares?
Held: NO
A subscriber does not become the owner of a particular number of shares
corresponding to the amount he already paid but merely holds a right of equity in
the total number of shares subscribed.
Complete ownership over the total number of shares subscribed will only vest
with the stockholder upon payment of the whole subscription price.
Supplementary Notes:
 A banking corporation has no lien upon its own stock for the indebtedness of
the stockholders even when the by-laws provide that the shares shall be
transferable only upon the books of the corporation and that no such transfer
shall be made if the holder of the shares is indebted to the corporation.
  In the absence of special agreement to the contrary, a subscriber for a
certain number of shares of stock does not upon payment of one-half of the
subscription price, become entitled to the issuance of certificates for one-half
the number of shares subscribed for.
 An equity in shares of stock may be assigned, the assignment becoming
effective as between the parties and as to third parties with notice
RICARDO A. NAVA vs PEERS MARKETING CORPORATION, RENATO R. CUSI
and AMPARO CUSI
Teofilo Po subscribed to 80 shares of Peers Marketing Corporation = 25% of the
amount of his subscription was paid
Po sold to Nava his shares = Po represented that he was "the absolute and
registered owner of twenty shares"
Nava requested to register the sale in the books of the corporation
Denied because not fully paid
Po was delinquent in the payment and corporation had a claim on his entire
subscription
Nava filed a petition for mandamus to order the PEERS Marketing to register the
sale
Peers marketing’s defense their by-law provides that = no shares of stock against
which the corporation holds an unpaid claim are transferable in the books of
the corporation.
Issue:
WON the provision in the by-laws is valid?
Held: YES
1. The corporation may include in its by-laws rules not inconsistent
with law governing the transfer of its shares of stock
 The twenty shares in question, however, are not covered

by any certificate of stock in Po's name.
As no stock certificate was issued to Po; and without the
stock certificate, which is the evidence of ownership of
corporate stock, the assignment of corporate shares is
effective only between the parties to the transaction.
 HENCE no clear legal duty on the part of the officers of
the corporation to register the 20 shares in Nava's
name.
2. A stock subscription is a subsisting liability from the time the
subscription is made.
 subscriber is as much bound to pay his subscription as
he would be to pay any other debt
 The right of the corporation to demand payment is no
less incontestable.
Republic Planters Bank vs. Agana
Robes Realty secured a loan P120000 from the Republic Planters Bank
** Partially in the form Money and Partially in the form ofpreferred shares of
stocks
Stocks bear the following terms and conditions:
1. right to receive a quarterly dividend of 1% (cumulative and participating )
2. such preferred shares may be redeemed
Robes Realty filed a complaint = Failure of the bank to give dividends and redeem
the shares
Trial court ordered the bank to:
1. pay Robes Realty the face value of the stock certificates as redemption
price
2. 1% quarterly interest thereon until full payment
Hence Appeal.
Issue:
WON the bank can be compelled to redeem the preferred shares issued to RFRDC
and Robes?
WON entitled to the payment of certain rate of interest on the stocks as a matter of
right without necessity of a prior declaration of dividend?
Held: NO and NO
1. option to redeem was clearly vested in the bank
 GR: the redemption rests entirely with the corporation
and the stockholder is without right to either compel or
refuse the redemption of its stock
Exception: otherwise provided in the stock certificate
 the terms and conditions set forth therein use the word "may"
= HENCE OPTIONAL
 The Central Bank also made a finding that the Bank has been
suffering from chronic reserve deficiency = ORDERED not to
redeem any preferred shares Since redemption would reduce
the assets of the Bank to the prejudice of its depositors and
creditors
 The directive, in limiting the exercise of a right granted by law
to a corporate entity, may thus be considered as an exercise
of police power.
2. Payment of dividends to a stockholder is not a matter of right but a matter
of consensus
 RULE = stockholders do not become entitled to the
payment thereof as a matter of right without necessity of
a prior declaration of dividends
3. ”Interest bearing stocks” = on which the corporation agrees absolutely to
pay interest before dividends are paid to common stockholders is legal
only when construed as requiring payment of interest as dividends
from net earnings or surplus only
 Thus, the declaration of dividends is dependent upon the
availability of surplus profit or unrestricted retained earnings,
as the case may be.
 even if there are existing profits, the board of directors has the
discretion to determine whether or not dividends are to be
declared
Supplementary Notes
 preferred share of stock = one which entitles the holder thereof to certain
preferences over the holders of common stock
 preferences are designed to induce persons to subscribe for shares of a
corporation
 The most common forms may be classified into two:
1. preferred shares as to assets = preference in the distribution of
the assets of the corporation in case of liquidation
2. preferred as to dividends = entitled to receive dividends on said
share to the extent agreed upon before any dividends at all are
paid to the holders of common stock
 RULE = There is no guarantee, however, that the share will receive any
dividends.
 Preferences (X) Includes:
a) lien upon the property of the corporation
b) being creditors of the corporation
*** Rule = Right of SH is subordinate to the Creditors
 Shareholders, both common and preferred are considered = risk takers who
invest capital in the business arid who can look only to what is left after
corporate debts and liabilities are fully paid.
 Redeemable shares
 usually preferred
 When = by their terms are redeemable at a fixed date, / at the
option of either corporation or stockholder or both at certain
redemption price
 RULE = redemption may not be made where the corporation
is insolvent or if such redemption will cause insolvency or
inability of the corporation to meet its debts as they mature.
COMMISSIONER OF INTERNAL REVENUE vs. MANNING
A Trust agreement was entered into because: Reese’s desire that Mantrasco and
Mantrasoc’s 2 subsidiaries to continue under the management of Manning et al
upon his [Reese] death
Reese died = Mantrasco paid Reese’s estate the value of his shares
= This shares was cancelled and a new certificate was issued in the
name of Mantrasco
When said purchase price has been fully paid = shares which were declared as
dividends
BIR issued assessments = failed to declare the said stock dividends as part of their
taxable income
** concluded that the distribution of Reese's shares as stock dividends was in
effect a distribution of the "asset or property of the corporation
They appealed to the CTA = Absolved their liability = Grounds: their respective 1/3
interest in Mantrasco remained the same
Issue:
WON the shares are treasury shares?
Held: NO
1. Treasury shares = are stocks issued and fully paid for and re-acquired by
the corporation either by purchase, donation forfeiture or other means
 They do not have the status of outstanding shares
 ALTHOUGH not retired = Corporation has the option of
reissuance or selling it again
2. so long as it remains a treasury share = it does not participate in
dividends NOR vote in stockholders’ meeting
 (X) Dividends = dividends cannot be declared by the
corporation to itself
 (X) Voting Power = otherwise equal distribution of voting
powers among stockholders will be effectively lost and
the directors will be able to perpetuate their control of the
corporation
 It still represents a paid-for interest in the property of the
corporation
3. Manifest Intentions of the Party to the Trust agreement
 Treat the Shares of Reese AS ABSOLUTELY OUTSTANDING
until fully paid
 RULE = A stock dividend being one payable in capital
stock cannot be declared out of the outstanding
corporate stock BUT ONLY from Retained Earnings
 Hence declaration of Stock Dividend is NULL AND VOID
( Violative of public Policy )
Supplementary Notes
 Nature of a stock dividend = always involves a transfer of surplus (or profit)
to capital stock
= a conversion of surplus or undivided profits
into capital stock which is
distributed to stockholders in lieu
of a cash dividend
Nielson & Co. Inc. vs. Lepanto Consolidated Mining Co.
Nielson entered into a management contract with Lepanto
** Nielson was given the right for 5 years to develop and operate the mining
claims of Lepanto
Contract was modified = which grants Nielson as compensation for its services
“10% of any dividends declared and paid.”
The SC ruled before that the import of this provision is that Nielson will be given
10% of what is actually going to be declared and distributed as dividends by
Lepanto
** Since Lepanto declared a total of P3M of dividends during the period of
extension of the contract, the SC ordered Lepanto to grant P300,000 worth
of its stocks to Nielson
Lepanto contests this judgment =Such provision is contrary to the Corporation Code
Issue:
WON a corporation can issue stock dividends to a person who is not a stockholder
in payment of services rendered?
Held: NO
1. Nielson is not entitled to a share in the stock dividends since he is not a
stockholder
 Effects of the Inclusion of a Non-stockholder as a Stock
Dividend Beneficiary:
a) deprives a stockholder of his right share in the
corporate profits
b) proportion of a stockholder’s interest changes
radically to his or her detriment
c) non-stockholder benefits without assuming the
same risks as those born by a stockholder
2. Dividend = the portion of the profits of the enterprise which the
corporation sets apart for ratable division among the holders of the
capital stock
 stocks issued as dividend can only be issued to existing
stockholders
 they are the only ones entitled to a proportional share in that
part of the surplus which is declared as dividends
3. the intention was only to tie the computation of Nielson’s compensation
with 10% of the declared dividend IN WHAT EVER FORM it may be
 The dividend is only the basis but not the source for such
payment
Supplementary Notes
 General Rule: No Stock dividend may be declared, except out of
unrestricted retained earnings.
 Retained Earnings – the net accumulated earnings of the corporation
out transactions with individuals or firms outside of the corporation.
Retained earnings include earnings from the sale of goods or services in
the ordinary course of its business, as well as earnings from the sale of
corporate property other than its stock in trade, at a price higher than cost.
 Implicit from the term retained earnings is the limitation that a corporation
has no power to declare dividends unless its legal or stated capital is
maintained.
 Retained earnings (X) include transactions involving:
a) treasury stock = purchase and sale of such stock are regarded
as contractions and expansions or paid-in capital.
b) donations = also considered as additional paid-in capital.
c) value of existing assets has increased = forms part of
unrealized capital
 Unrestricted Retained Earnings – the undistributed earnings of the
corporation which have NOT been allocated for any managerial,
contractual or legal purposes and which are free for distribution to
the stockholders as dividends.
COMMISSIONER OF INTERNAL REVENUE vs COURT OF APPEALS
Don Andres Soriano (American) = founder of Soriano Corp had a total
shareholdings of 185,000 shares
When he died = half of the shares he held went to his wife as her conjugal share
and half to his estate
Even after his death = the estate still continued to receive stock dividends from ASC
until it grew to total of 108,000 shares
ASC made a board resolution = for the redemption of shares from Soriano’s estate
= Purpose: for the planned “Filipinization” of ASC
Shares were redeemed = tax audit was conducted
CIR issued an assessment against ASC for deficiency withholding tax-at-source =
Grounds:
1. when the redemption was made =the estate profited (because ASC
would have to pay the estate to redeem)
2. ASC would have withheld tax payments from the Soriano Estate yet it
remitted no such withheld tax to the government
ASC’s Defense:
** not duty bound to withhold tax from the estate FOR the purpose = “Filipinization”
of ASC and also to reduce its remittance abroad
ISSUE:
WON ASC’s arguments are tenable?
Held: NO
1. The proceeds from a redemption is taxable and ASC is duty bound to
withhold the tax at source
 total of 108,000 shares redeemed composing of Original
Issuance and Stock Dividend
 Sale of stock dividends is taxable
2. Tax Code presumes that every distribution of corporate property, in
whole or in part, is made out of corporate profits such as stock
dividends.
 108,000 shares were distributed from the capital of ASC
 capital cannot be distributed in the form of redemption of
stock dividends without violating the trust fund doctrine
 RULE = Once capital, it is always capital
Steinberg v. Velasco
Steinberg is the receiver of the Sibuguey Trading Company
It is alleged that the Officers of Sibuguey
1. approved and authorized various unlawful purchases already made of a
large portion of the capital stock
** diverting its funds = in fraud of the creditors of the corporation
2. BOD of Sibuguey Trading Company authorized the purchase of 330 shares
of stock of the corporation
** when they had accounts payable to about Php 14K
3. declared payment of P3000 as dividends to stockholders
** when they had accounts payable of about Php 9K
Steinberg prayed that the Officers be liable for the amount of the capital stock
purchased and the amount of the dividends paid
The lower court dismissed the complained and rendered judgment in favor of the
defendants.
Hence appeal. In their defense = Grounds:
1. the amount represented by said dividends really constitutes a surplus profit
of the corporation
2. Since they have Accounts Receivable amounting to 12K
Issue:
WON Board of Directors of Sibuguey could legally declare a dividend?
Held: NO
1. there was no stipulation as to the actual cash value of those
accounts.
 Hence the purchase of its own stock and in declaring
dividends = the real assets of the corporation were
diminished by Php 6,300 ( Payment = affect the financial
condition of the corporation )
 the corporation did not have then an actual bona fide
surplus from which dividends could be paid
- RULE = The creditors of a corporation have the right to assume that so
long as there are debts and liabilities, the board of directors of the
corporation will not use its assets to purchase its own stock or to
declare dividends to its stockholders when the corporation is insolvent.
- GR: It has been said that directors are not liable for losses resulting to
the corporation from want of knowledge on their part; or for mistakes of
judgment, provided they were honest, and provided they are fairly within
the scope of the powers and discretion confided to the managing body.
Exception: If the directors of a corporation do acts clearly beyond
their power, by reason of which a loss
ensued, or dispose of its property without
authority = LIABLE for the loss out of their
private estate
BALTAZAR vs LINGAYEN GULF ELECTRIC POWER
Lingayen Gulf = is alleged that it has always been the practice and procedure of the
Corporation to issue certificates of stock to its individual subscribers for unpaid
shares of stock
Baltazar subscribed but failed to pay for the full subscription = corporation issued
certificates of stock for his paid share
Annual stockholders' meeting was held = Resolution
1. cancelling some stocks for delinquency
2. all unpaid subscription should bear interest annually from the year of
subscription
3. declaring all shares having been declared delinquent are incapacitated
to vote.
Trial court ruled that all shares covered by fully paid capital stock shares = entitled
to vote in all meetings of SH
Issues :
WON SH who has not fully paid his subscription be divested of his voting rights?
Held: NO
If a stockholder in a stock corporation subscribes to a certain number of shares and
makes partial payment for which he is issued certificates of stock, he is entitled to
vote the latter, notwithstanding the fact that he has not paid the balance of his
subscription which has been called for payment or declared delinquent
The Fua vs Cun (equity on vote) principle does not come in this case
sec 37 (64) states that “No certificate of stock shall be issued to a
subscriber as fully paid up until the full par value thereof, or the full subscription in
the case of no par stock, has been paid by him to the corporation. Subscribed
shares not fully paid up may be voted provided no subscription is unpaid and
delinquent.”
it modified sec 36 of the old corporation law by making payment of “par value”as
prerequisite for the issuance of certificates of par value stocks and makes payment
of full subscription as prerequisite for issuance of certificates of no-par value stocks.
Stated in another way, the present law requires as a condition before a share
holder can vote his shares, that his full subscription be paid in the case of no
par value stock; and in case of stock corporation with par value, the
stockholder can vote the shares fully paid by him only, irrespective of the
unpaid delinquent shares.
CHUA GUAN vs SAMAHANG MAGSASAKA
Gonzalo Toco mortgaged his shares to Chua Chiu to guarantee the payment of debt
Chua Chiu assigned all his right and interest in said mortgage to Chua Guan was
registered in the
1. office of the register of deeds in the City of Manila
2. the office of the said corporation
Toco defaulted = HENCE Chua Guan foreclosed said mortgage
Chua Guan = Highest bidder
= Sheriff executed in his favor a certificate of sale of said shares
tendered the certificates of stock standing in the name of Toco = wants to:
1. have it canceled
2. Issue new ones in his name
Officers REFUSED = Reason: prior to the date when the Chua made demands = 9
attachments were made on the stocks
: Chua Refused to have these attachments noted on
the new certificates
Issue:
WON registration of said chattel mortgage give constructive notice to the said
attaching creditors?
Held: NO it was invalid
The registration of the chattel mortgage in the office of the corporation was
not necessary and had no legal effect.
two ways for executing a valid chattel mortgage which shall be effective against third
persons.
a) the possession of the property mortgage must be delivered to and
retained by the mortgagee
b) without such delivery the mortgage must be recorded in the proper office
or offices of the register or registers of deeds
the proper place of registration of such a mortgage
 the chattel mortgage should be registered both at owner's domicile and
principal office of the Corporation
 the property mortgaged is not the certificate but the participation
and share of the owner in the assets of the corporation
 THEREFORE = Registration of chattel mortgage in the office of
corporation not necessary and had no legal effect.
ENRIQUE MONSERRAT vs CERON
Enrique Monserrat assigned the usufruct of half of his common shares of stock to
Ceron
Condition = prohibiting Ceron from selling, mortgaging, encumbering, or exercising
any act implying absolute ownership
Ceron = mortgaged and endorsed the shares of stock including Monserrat’s shares
to Eduardo Matute
= as payment of his debt
Matute was not informed of the condition
Trial court ruled in favor of Monserrat and declared the mortgage null and void
Hence Matute appealed.
Issue:
WON it is necessary to enter upon the books of the corporation a mortgage
constituted on common shares of stock in order that such mortgage may be valid
and effective against 3rd persons?
Held:
Section 35 of the Corporation Law does not require any entry except
of transfers of shares of stock in order that such transfers may be valid as
against third persons
 Transfer = to assign or waive the right in, or absolute ownership of, a
thing in favor of another, making him the owner thereof ( absolute and
unconditional conveyance of the title and ownership of a share of stock )
 chattel mortgage is not the transfer referred to in Corporation law
 THEREFORE notation upon the books of the corporation is not
necessary requisite to its validity
USON vs DIOSOMITO
Diosomito sold and delivered his North Electric shares to Barcelon
Uson sued Diosomito for a debt and attached the said shares ( w/c was still in
Diosomito name on the books of the Corp )
Then Barcelon presented the certificates for registration = 9 months after the
attachment had been levied 3
Trial Court ruled in favor of Uson = Hence the Shares were foreclosed
Uson was the highest bidder
Barcelon sold the same to H.P.L. Jollye = files and action in court
The lower court ruled for Uson.
Issue:
WON a bona fide transfer of the shares of a corporation, not registered or noted on
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?
Held: NO
“no transfer, however, shall be valid except as between the parties, until the
transfer is entered and noted upon the books of the corporation.”
 right of the owner of the shares of stock to transfer the same by delivery
= limited and restricted by the law
 Therefore, the transfer from Diosomito to Barcelon was not valid as to
Uson
 Reason = since at the time it was attached, the shares still stood in
the name of Diosomito on the books of the corporation
RULE = an attachment lien prevails over a prior unregistered bona fide stock
transfer.
ESCAÑO vs FILIPINAS MINING CORPORATION
The CFI of Manila ordered Salvosa to transfer and deliver to Escano shares of the
Filipinas Mining Corp.
The escrow however was only to be transferred upon its release by the said
Company.
Despite the said order = Salvosa was able to sell the shares to Bengzon
Bengzon thereafter sold the shares to Standard Investment
Filipinas Mining thereafter issued certificates of shares of stock to Standard
Investment
** despite the fact that the sales and transfers from Salvosa to Bengzon, Bengzon
to Standard, were not recorded in the corporate books until 3 years after the
said shares were attached by garnishment.
Issue: Whether the issuance of the certificate of shares of stock by Filipinas Mining
to Standard Investment was valid as against the attaching creditor of the said
shares?
Held: No.
1. transfer needs to be recorded in the corporate books to be effective
as against 3rd persons This recording is required
 reasons:
1) to know who the real owner of the shares
2) gives the corporation a chance to object to such transfer =
against any claims it may have on the stock
3) to avoid fictitious and fraudulent transfers
RULE = There is no valid reason to treat unissued shares held in escrow
differently from the issued shares insofar as their sale and transfer are
concerned.
Supplementary Notes
 No Registration of Transfer of Unpaid Shares
o The shares are thus not transferable on the corporate books
o there is nothing to prevent the stockholder from transferring his
interest in the corporation by way of a deed of assignment
o “unpaid claim” of section 63 = does not necessarily mean that
there should have been a previous call by the board of
directors
o As long as portion remains unpaid
 Remedy if Registration Refused
o action to enforce the right does not accrue until there has been
a demand and a refusal to record the transfer
o wrongfully refuse = Petition for Mandamus
PONCE vs ALSONS CEMENT CORPORATION
Ponce and Gaid executed a “Deed of Undertaking” = endorsing the shares of
Victory Cement Corporation to Ponce
VCC was renamed Floro Cement Corporation (FCC) and then to Alsons Cement
Corporation (ACC)
Until Now = no stock issued in the name of Gaid
Ponce Filed a Petition for Mandamus = Grounds:
** Despite repeated demands = the ACC refused without any justifiable reason to
issue the stocks
ACC moved to dismiss.
SEC dismissed the case. SEC En Banc reversed the decision.
ACC appeal to CA. Reversed the decision = Grounds:
1. The transfer of the shares between Gaid and Ponce was NOT registered
in the stock and transfer book of ACC
2. Ponce has no cause of action.
ISSUE:
WON the cert. of stocks of Gaid can be transferred to Ponce
Held: NO
1. Ponce had not made a previous request upon to record the alleged transfer
of stocks.
 RULE = a transfer of shares of stock not recorded in the
stock and transfer book of the corporation is non-existent as
far as the corporation is concerned.
 the corporation looks only to its books for the purpose of
determining who its shareholders are
 UPON RECORD = rightfully regard the transferee as one of its
stockholders
 without such recording = may legally refuse the issuance of
stock certificates in the name of the transferee
2. mere indorsement of stock certificates does not in itself give to the indorsee
such a right to have a transfer of the shares of stock on the books of the
company
 GR: mandamus should not issue to compel the secretary of a
corporation to make a transfer of the stock on the books of the
company
Exception: it affirmatively appears that he has failed or
refused so to do, upon the demand either
of the person in whose name the stock is
registered, or of some person holding a
power of attorney for that purpose from
the registered owner of the stock.
3. mandamus - proper remedy to make him the rightful owner and holder of a
stock certificate to be issued in his name
 Held: NO
1. No share of stock against which the corporation holds any unpaid
claim, shall be transferable on the books of the corporation.
 To issue the writ = require an officer to transfer stock under
conditions where the law expressly prohibited such
transfer
 The writ of mandamus will never issue to compel a person to
violate an express provision of the law

2. Writ will not ordinarily issue if the plaintiff has other remedies
 corporation improperly refuses to transfer = clearly liable for the damages

TAN v. SEC

Alfonso = owner of 400 shares of the capital stock ( evidenced by certificate number
2)
= elected as President

Young and Ong ( incorporators ) = withdrew by assigning to the corp. their shares
Batong Buhay vs. CA
Tan's certificate of stock was cancelled by virtue of a resolution = made new stocks
certificate for Alfonso and Angel Batong Buhay issued Stocks to Francisco Aguac

Tan sold (50) shares out of his capital stock to Angel = in order to complete the Francisco Aguac sold his shares to of the Incoporated Mining Corporation w/o
Directors knowledge of his wife Paula

Alfonso S. Tan was given back Stock Certificate = for him to endorse and he
deliberately withheld it for reasons of his own
** so as if no delivery
Tan was dislodged from his position as president = WITHDREW
BOD had a meeting = effecting the cancellation of Stock Certificate of Alfonso
Paula requested Batong Buhay to withhold the transfer of the shares = BEING A
CONJUGAL PROPERTY proceeds were not given to her
A criminal case was filed against Aguac
Incoporated Mining's counsel presented the certificate for registration for transfer to
his name

Alfonso S. Tan filed the SEC case questioning the cancellation of his stocks
ISSUE:
WON transfer is valid w/o delivery?
Held: YES
Section 63 of the Corporation Code of the Philippines is NOT "mandatory in
nature"
 Facts = there was already delivery of the unendorsed Stock
Certificate No. 2
= return of the cancelled certificate and Deliberate non-
indorsement
 But delivery is not essential where it appears that the persons sought
to be held as stockholders are officers of the corporation, and have
the custody of the stock book
The certificate is not stock in the corporation but is merely evidence of the
holder's interest and status in the corporation
 Only representation of his equity = but is not in law the equivalent of
such ownership
 expresses the contract = but is not essential to the existence of a
share in stock
Batong buhay refused to transfer = Reason = that they might he held liable for
damages
Petitioner prayed for preliminary mandatory injunction = Granted
BUT = appealed because lower court's alleged failure to award damages for the
wrongful refusal of petitioner to transfer
Not Granted. Hence Appeal.
Issue:
WON Court of Appeals award damages by way of unrealized profits despite the
absence of supporting evidence?
Held: NO
Stipulation of facts of the parties = (X) show intent to sell on specific dates
 True that stocks may rise and fall
 whatever profits could have been made are purely SPECULATIVE
 RULE = speculative damages cannot be recovered

a certificate of stock is not a negotiable instrument

 sometime regarded as quasi-negotiable = transferred by
endorsement, coupled with delivery
 non-negotiable = holder thereof takes it without prejudice to such
rights or defenses as the registered owner/s or transferror's
creditor may have under the law, except insofar as such rights
or defenses are subject to the limitations imposed by the
principles governing estoppels

HAGER vs BRYAN

Hager filed a writ of mandamus against the Bryan ( Corp Sec ) = to compel him to
transfer upon the books of the company certain shares of stock SOLD TO HIM BY
LEVERING

certificates were issued in the name of Bryan-London & Co. and by them indorsed
to your petitioner

Bryan refused to transfer stocks and filed a demurrer

Issue:
WON a writ of mandamus is proper in this case?