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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
registration 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.

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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 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)