CASE # 266

I. SHORT TITLE RURAL BANK OF SALINAS v. CA

II. FULL TITLE Rural Bank of Salinas, Inc., Manuel Salud, Luzviminda Trias and Francisco Trias, vs.
Court Of Appeals, Securities and Exchange Commission, Melania A. Guerrero, Luz
Andico, Wilhelmina G. Rosales, Francisco M. Guerrero, Jr., and Francisco Guerrero, Sr.,
– G.R. No. 96674, June 26, 1992, J. Paras

III. TOPIC I. Revised Corporation Code – I. Capital Structure – 2. Share of Stock – a. Nature of
Stock

IV. PREPARED BY Francois Amos Palomo

V. STATEMENT OF FACTS

Clemente G. Guerrero, President of the Rural Bank of Salinas, Inc., executed a Special Power of Attorney in
favor of his wife, Melania Guerrero, giving and granting the latter full power and authority to sell or otherwise
dispose of and/or mortgage 473 shares of stock of the Bank registered in his name. Melania Guerrero, as
Attorney-in-Fact, executed a Deed of Assignment for 472 shares out of the 473 shares, in favor of private
respondents Luz Andico (457 shares), Wilhelmina Rosales (10 shares) and Francisco Guerrero, Jr. (5 shares).

Melanie then later executed a Deed of Assignment for the remaining one (1) share of stock in favor of private
respondent Francisco Guerrero, Sr. She subsequently presented to Rural Bank of Salinas the two (2) Deeds of
Assignment for registration with a request for the transfer in the Bank's stock and transfer book of the 473
shares of stock so assigned. However, the bank denied her request.

VI. STATEMENT OF THE CASE

On Dec. 5, 1980, Melania filed with the SEC an action for mandamus against the Rural Bank of Salinas, its
President, and Corporate Secretary. The bank filed an Answer with counterclaim, alleging that upon Clemente
G. Guerrero’s death, his 473 shares of stock became the property of his estate, and his property and that of his
widow should rest be settled and liquidated in accordance with law before any distribution can be effected.

Maripol Guererro, a legally adopted daughter of the late Clemente and Melania, filed a motion for
intervention. She claimed that a petiton for administration of the eastate had been filed; the deeds of
assignment are fictitious and antedated; the transfer would deprive her of her share in the inheritance. The
SEC heasing officer denied the motion and was affirmed by the SEC En Banc on appeal. On December 10,
1984, the SEC hearing officer granted the writ of mandamus and affirmed by the En Banc hence this appeal.

VII. ISSUE:

Whether or not the CA erred in sustaining the SEC when it compelled by Mandamus the Rural Bank of Salinas
to register in its stock and transfer book the transfer of 473 shares of stock to private respondents?

VIII. RULING

NO. The SEC correctly ruled in favor of the registering of the shares of stock in question in Melania's names.

Sec. 63 of the RCC provides: “…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.
In the case of Fleisher v. Botica Nolasco, the Court interpreted that Sec. 63 contemplates no restriction as to
whom the stocks may be transferred. It does not suggest that any discrimination may be created by the
corporation in favor of, or against a certain purchaser. The owner of shares, as owner of personal property, is
at liberty, under said section to dispose them in favor of whomever he pleases, without limitation in this
respect, than the general provisions of law. The only limitation imposed by Sec. 63 is when the corporation
holds any unpaid claim against the shares intended to be transferred, which is absent here.

A corporation, either by its board, its by-laws, or the act of its officers, cannot create restrictions in stock
transfers, because:

Restrictions in the traffic of stock must have their source in legislative enactment, as the corporation itself
cannot create such impediment. By-laws are intended merely for the protection of the corporation, and
prescribe regulation, not restriction; they are always subject to the charter of the corporation. The
corporation, in the absence of such power, cannot ordinarily inquire into or pass upon the legality of the
transactions by which its stock passes from one person to another, nor can it question the consideration upon
which a sale is based. (Tomson on Corporation Sec. 4137, cited in Fleisher v. Nolasco)

The right of a transferee/assignee to have stocks transferred to his name is an inherent right flowing from his
ownership of the stocks. Thus, whenever a corporation refuses to transfer and register stock in cases like the
present, mandamus will lie to compel the officers of the corporation to transfer said stock in the books of the
corporation. The corporation's obligation to register is ministerial. In transferring stock, the secretary of a
corporation acts in purely ministerial capacity, and does not try to decide the question of ownership. If it
refuses to make such transaction without good cause, it may be compelled to do so by mandamus.

At all events, the registration is without prejudice to the proceedings in court to determine the validity of the
Deeds of Assignment of the shares of stock in question.

IX. DISPOSITIVE PORTION

WHEREFORE, the petition is DISMISSED for lack of merit.