206 Embassy Farms Inc. v. CA
It noted that EBE has not delivered the certificate of
G.R. No. 80682, August 13, 1990.
J. Paras
FACTS
1. Sometime on August 2, 1984, Alexander G. Asuncion
(AGA) and Eduardo B. Evangelista (EBE) entered into a
Memorandum of Agreement.
a. EBE obligated himself to transfer to AGA 19 parcels
of agri land with an aggregate area of 104,447sq
meters in Bulacan, together with the stocks,
equipment and facilities of a piggery farm owned by
Embassy Farms, a registered corp wherein 90% of
its shares of stocks is owned by EBE.
b. EBE also obligated himself to cede, transfer and
convey “in a manner absolute and irrevocable any
and all of his shares of stocks” in Embassy Farms
to AGA or his nominees until it shall constitute 90%
of the paid-in-equity of said corporation.
c. EBE obligated himself to turnover to AGA the
effective control and management of the piggery
upon signing of the agreement.
d. AGA obligated himself, upon signing of the
agreement to pay to EBE the total sum of close to
P8,63,000.
e. AGA obligated himself to organize and register a
new corporation with an authorized capital stock of
P10M which upon registration will take over the
rights and liabilities of AGA.
2. Pursuant to clause 8 of MOA, EBE turned over to AGA the
effective control and management of the piggery at
Embassy Farms.
3. In accordance with clause 15 of MOA, EBE served as
President and Chief Executive of Embassy Farms. He
endorsed in blank all his shares of stock. However, despite
the indorsement, EBE retained possession of said shares
and opted to deliver to AGA only upon full compliance of
the latter of his obligation under MOA.
4. Notwithstanding the non-delivery of shares of stocks, AGA
transferred a total of 8,602 shares to several persons.
5. For failure to comply with his obligations, EBE intimated
the institution of legal action but was pre-empted by AGA
by filing an action for rescission of the MOA with damages.
a. AGA alleged that EBE misrepresented the piggery
business since it is actually losing and EBE’s failure
to execute the deeds of conveyance of the 19
parcels of land.
6. Pasig Court granted the writ of preliminary injunction by
AGA. On EBE’s motion, it issued an order to break open
the premises of Embassy Farms to enforce the writ of PI.
7. Embassy Farms filed a pet. w/ CA for prohibition with PI. It
also instituted an action for Injunction w/ damages against
EBE alleging that EBE forced his way inside the Embassy
Farms and while inside took some cash and check.
8. MTD filed by EBE was denied.
9. Fifth Division of CA sustained the order of Pasig Court
based on the findings that:
a. BODs of Embassy are nominees of AGA so that it
considered AGA and Embassy Farms as one and
the same person.
b.
stock outstanding in his name in the books of the
corp to AGA because AGA has not complied with
the terms and conditions of MOA.
c. it will appear that no transfer of shares of stock has
been made by EBE to AGA as there had been no
delivery of cert. in order to produce or effect the
transfer if such shares of stock.
ISSUE
Whether or not the appellate court committed a reversible error
when it sustained the order dated of the Pasig Court and lifted
the restraining order it had issued.
HELD
NO. It must be stressed that the case at bar is merely an
offshoot of a controversy yet to be decided on the merits by the
Pasig Court. The action for rescission filed by AGA will
ultimately settle the controversy as to whether it is AGA or EBE
who have reneged on their obligations under MOA.
From the pleadings submitted, it is clear that although EBE has
indorsed in blank the shares outstanding in his name he has
not delivered the cert of stocks to AGA because the latter has
not fully complied with his obligations under MOA. There being
no delivery of the indorsed shares of stock, AGA cannot
therefore effectively transfer to other person or his nominees
the undelivered shares of stocks. For an effective transfer of
shares of stock the mode and manner of transfer as prescribed
by law must be followed. Under Corp Code, Sec. 3, shares of
stock may be transferred by delivery to the transferee of the
certificate properly indorsed.
In the case at bar
The certificate of stock was not actually delivered to AGA so
that EBE is still the controlling stockholder of Embassy Farms
despite the execution of MOA and the turnover of control and
management of Embassy Farms.
Rescission filed by AGA
It merely restored and established status quo prior to the
execution of MOA. It would be unjust and unfair to allow AGA
and his nominees to control and manage the Embassy Farms
despite the fact that AGA who is the source of their supposed
shares of stock in the corp is not asking for the delivery of the
indorsed cert of stock but for the rescission of the MOA.
Rescission would result to mutual restitution.
Not intra-corporate controversy
The conflict here is between AGA and EBE arising from a
contract denominated as MOA. The controversy in reality
involves the contractual rights and obligations of AGA and EBE
under the MOA and not to the enforcement of rights and
obligations under corp code or internal or corporate affairs.
AGA or his nominees are not even the lawful stockholders of
Embassy Farms because EBE for a justifiable reason has
withheld the delivery of the indorsed certificate of stocks.
Petition is denied.