Case Citation: Andaya vs. Rural Bank of Cabadbaran, Inc., 799 SCRA 325, G.R. No.

188769

Date: August 3, 2016

Petitioners: Joseph Omar O. Andaya

Respondents: Rural Bank of Cabadbaran, Inc.

Syllabus Topic: Right to register transfer of shares in the books of the corporation

Doctrine: The right of a transferee/assignee to have stocks transferred to his name is an

inherent right flowing from his ownership of the stocks. In transferring stock, the
secretary of a corporation acts in purely ministerial capacity, and does not try to
decide the question of ownership. The duty of the corporation to transfer is a
ministerial one and if it refuses to make such transaction without good cause, it may
be compelled to do so by mandamus. The only limitation imposed by Section 63 of
the Corporation Code is when the corporation holds any unpaid claim against the
shares intended to be transferred.

Quick summary: Andaya bought from Concepcion Chute 2,200 shares of stock in the Rural Bank of
Cabadbaran for Php220,000, evidenced by a notarized document denominated as
Antecedent Sale of Shares of Stocks. Chute endorsed and delivered the certificates of stock to
Facts: Andaya and requested the bank to register the transfer in the bank's stock and transfer
book and to issue new stock certificates in favor of the latter.

However, the bank's corporate secretary Demosthenese Oraiz denied the request,
stating that under a stockholders' Resolution, existing stockholders have a right of first
refusal in the event shares of other stockholders are offered for sale. Andaya opposed
the denial and claimed that the restriction did not appear in the bank's Articles of
Incorporation, by-laws, or certificates of stock.

The bank eventually denied to register the transfer to Andaya due to conflict of interest.
It claimed that Andaya was then president and CEO of the Green bank of Caraga, a
competitor bank, and that the purchase “could be the beginning of a hostile bid to take-
over control” of the bank. It also maintained that stockholders have a right of first
refusal.

Andaya instituted an action for mandamus and damages against the bank, its corporate
secretary, Oraiz and its legal counsel, Ricardo Gonzales to compel them to record the
transfer and to issue new certificates in his name.

Lower court/s The RTC dismissed the complaint on the ground that Andaya had no standing for failing
Ruling: to show that he was authorized by Chute to make the transfer. Andaya filed a petition
for review to the SC on pure questions of law.

Issue: Whether or not Andaya, the transferee of shares of stock, may compel the bank to
record the transfer of shares and issue new stock certificates in his name

SC Ruling: Yes. A bona fide transferee, who is able to establish a clear legal right to the registration
of the transfer, may resort to the remedy of mandamus to compel corporations that
wrongfully or unjustifiably refuse to record the transfer or to issue new certificates of
stock.

CORPORATION LAW
PLM JD 3-3 (2021-2022)
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 Andaya has been able to establish that he is a bona fide transferee of Chute's shares
of stock. He presented to the RTC tha notarized Sale of Shares of Stocks, a
Documentary Stamp Tax Declaration/Return, a Capital Gains Tax Return and stock
certificates covering the subject shares duly endorsed by Chute. There is no doubt that

Andaya had the standing to initiate an action for manadamus to compel the bank to
record the transfer of shares in its stock and transfer book and to issue new stock
certificates in his name.

Moreover, the Section 98 of the Corporation Code, upon which the bank relies, applied
only to close corporations.

SECTION 98. Validity restrictions on transfer of shares. - Restrictions on the right to

transfer shares must appear in the articles of incorporation and in the by-laws as well
as in the certificate of stock; otherwise, the same shall not be binding on any purchaser
thereof in good faith. Said restrictions shall not be more than onerous than granting the
existing stockholders or the corporation the option to purchase the shares of the
transferring stockholder with such reasonable terms, conditions or period stated
therein. If upon the expiration of said period, the existing stockholders or the
corporation fails to exercise the option to purchase, the transferring stockholder may
sell his shares to any third person. There must first be a factual determination that the
bank is indeed a close corporation before the abovementioned section can be applied
in the instant case.

Others/Notes:

CORPORATION LAW
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