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Rural Bank of Salinas, Inc. v. CA

210 SCRA 510

FACTS: Clemente G. Guerrero, President of the Rural Bank of Salinas, Inc., executed a Special Power of Attorney in
favor of his wife, Melania to sell or otherwise dispose of and/or mortgage 473 shares of stock of the Bank
registered in his name (represented by the Bank's stock certificates nos. 26, 49 and 65), to execute the proper
documents therefor, and to receive and sign receipts for the dispositions. Melania, 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). Melania Guerrero presented to Rural Bank of
Salinas the 2 Deeds of Assignment for registratidfdfon with a request for the transfer in the Bank's stock and
transfer book of the 473 shares of stock so assigned, the cancellation of stock certificates in the name of Clemente,
and the issuance of new stock certificates in the name of the new owners thereof., Rural Bank denied such
request. Melania filed with the SEC an action for mandamus against Rural Bank of Salinas, its President and
Corporate Secretary.

The Bank in their Answer with counterclaim alleged that upon the death of Clemente, his 473 shares of stock
became the property of his estate, and his property and that of his widow should first be settled and liquidated in
accordance with law before any distribution can be effected so that petitioners may not be a party to any scheme
to evade payment of estate or inheritance tax and in order to avoid liability to any third persons or creditors of the
late Clemente.

Maripol Guerrero filed a motion for intervention (legally adopted daughter of the late Clemente and Melanie)
stating that a Petition for the administration of the estate of Clemente had been filed but her motion was denied.
She then filed before the CFI of Rizal, against Melanie for the annulment of the Deeds of Assignment for being
fictitious, void or simulated. The Bank then filed a motion to dissmiss/suspend hearing pending resolution of the
case for annulment. However, SEC denied such motion.

SEC rendered a Decision granting the writ of Mandamus and directing petitioners to cancel stock certificates of the
Bank, and to issue new certificates in the names of private respondents, except Melania Guerrero. Appealed to the
CA but CA affirmed the decision of SEC.

ISSUES:

1. WON SEC has the power to adjudicate the case. -Yes

2. WON corporatons may by its board, its by-laws, or the act of its officers create restrictions in stock
transfers.No.

3. WON the Bank being a corporation may refuse to transfer and register stocks. No.

HELD: 1. Section 5 (b) of P.D. No. 902-A grants to the SEC the original and exclusive jurisdiction to hear and decide
cases involving intracorporate controversies. An intracorporate controversy has been defined as one which arises
between a stockholder and the corporation. There is no distinction, qualification, nor any exception whatsoever
(Rivera vs. Florendo, 144 SCRA 643 [1986]). The case at bar involves shares of stock, their registration, cancellation
and issuances thereof by petitioner Rural Bank of Salinas. It is therefore within the power of respondent SEC to
adjudicate.

2. 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
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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 vs. Nolasco, Supra).

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, which is absent here.

3. The right of a transferee/assignee to have stocks transferred to his name is an inherent right flowing from his
ownership of the stocks. Respondent SEC correctly ruled in favor of the registering of the shares of stock in
question in private respondent's names. Such ruling finds support under Section 63 of the Corporation Code, to
wit:

Sec. 63. . . . 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 . . .

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. (Fletcher, Sec. 5528, page 434).

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. (See. 5518, 12 Fletcher 394)