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RepublicofthePhilippines
SUPREMECOURT
Manila

SECONDDIVISION

G.R.No.189486September5,2012

SIMNYG.GUY,GERALDINEG.GUY,GLADYSG.YAO,andtheHEIRSOFTHELATEGRACEG.CHEU,
Petitioners,
vs.
GILBERTG.GUY,Respondent.

xx

G.R.No.189699

SIMNYG.GUY,GERALDINEG.GUY,GLADYSG.YAO,andtheHEIRSOFTHELATEGRACEG.CHEU,
Petitioners,
vs.
THEHON.OFELIAC.CALO,inhercapacityasPresidingJudgeoftheRTCMandaluyongCityBranch
211andGILBERTG.GUY,Respondents.

DECISION

PEREZ,J.:

THEFACTS

With 519,997 shares of stock as reflected in Stock Certificate Nos. 004014, herein respondent Gilbert G. Guy
(Gilbert) practically owned almost 80 percent of the 650,000 subscribed capital stock of GoodGold Realty &
Development Corporation (GoodGold),1 one of the multimillion corporations which Gilbert claimed to have
established in his 30s. GoodGolds remaining shares were divided among Francisco Guy (Francisco) with
130,000 shares, Simny Guy (Simny), Benjamin Lim and Paulino Delfin Pe, with one share each, respectively.
GilbertisthesonofspousesFranciscoandSimny.Simny,oneofthepetitioners,however,allegedthatitwasshe
andherhusbandwhoestablishedGoodGold,puttingthebulkofitssharesunderGilbertsname.Sheclaimedthat
with their eldest son, Gaspar G. Guy (Gaspar), having entered the Focolare Missionary in 1970s, renouncing
worldlypossessions,2sheandFranciscoputthefutureoftheGuygroupofcompaniesinGilbertshands.Gilbert
wasexpectedtobringtonewheightstheirfamilymultimillionbusinessesandthey,hisparents,hadhighhopesin
him.

Simny further claimed that upon the advice of their lawyers, upon the incorporation of GoodGold, they issued
stockcertificatesreflectingthesharesheldbyeachstockholderdulysignedbyFranciscoasPresidentandAtty.
EmmanuelParasasCorporateSecretary,withcorrespondingblankendorsementsatthebackofeachcertificate
including Stock Certificate Nos. 004014 under Gilberts name.3 These certificates were all with Gilberts
irrevocableendorsementandpowerofattorneytohavethesestockstransferredinthebooksofcorporation.4All
of these certificates were always in the undisturbed possession of the spouses Francisco and Simny, including
StockCertificateNos.004014.5

In 1999, the aging Francisco instructed Benjamin Lim, a nominal shareholder of GoodGold and his trusted
employee,tocollaboratewithAtty.EmmanuelParas,toredistributeGoodGoldsshareholdingsevenlyamonghis
children,namely,Gilbert,GraceGuyCheu(Grace),GeraldineGuy(Geraldine),andGladysGuy(Gladys),while
maintainingaproportionateshareforhimselfandhiswife,Simny.6

Accordingly, some of GoodGolds certificates were cancelled and new ones were issued to represent the
redistribution of GoodGolds shares of stock. The new certificates of stock were signed by Francisco and Atty.
EmmanuelParas,asPresidentandCorporateSecretary,respectively.

Thesharesofstockweredistributedamongthefollowingstockholders:

NAME NO.OFSHARES
FranciscoGuy[husband] 195,000
SimnyG.Guy[wife] 195,000
GilbertG.Guy[son] 65,000
 GeraldineG.Guy[daughter] 65,000
GraceG.Cheu(orherheirs)[daughter] 65,000
GladysG.Yao[daughter] 65,000
Total 650,0007

In September 2004, or five years after the redistribution of GoodGolds shares of stock, Gilbert filed with the
Regional Trial Court (RTC) of Manila, a Complaint for the "Declaration of Nullity of Transfers of Shares in
GoodGold and of General Information Sheets and Minutes of Meeting, and for Damages with Application for a
PreliminaryInjunctiveRelief,"againsthismother,Simny,andhissisters,Geraldine,Grace,andGladys.8 Gilbert
alleged,amongothers,thatnostockcertificateeverexisted9thathissignatureatthebackofthespuriousStock
Certificate Nos. 004014 which purportedly endorsed the same and that of the corporate secretary, Emmanuel
Paras,attheobversesideofthecertificateswereforged,and,hence,shouldbenullified.10

Gilbert, however, withdrew the complaint, after the National Bureau of Investigation (NBI) submitted a report to
theRTCofManilaauthenticatingGilbertssignatureintheendorsedcertificates.11TheNBIreportstated:

FINDINGS:

Comparative analysis of the specimens submitted under magnification using varied lighting
process and with the aid of photographic enlargements disclosed the presence of significant
and fundamental similarities in the personal handwriting habits existing between the
questionedsignaturesof"GILBERTG.GUY"and"EMMANUELC.PARAS,"ononehand,and
theircorrespondingstandardspecimen/exemplarsignatures,ontheotherhand,suchasin:

Basicdesignofletters/elements

Mannerofexecution/linequality

Minuteidentifyingdetails.

CONCLUSION:

A. The questioned and the standard specimen/exemplar signatures of Gilbert G. Guy were
writtenbyoneandthesameperson

B. The questioned and the standard specimen/exemplar signatures of "EMMANUEL C.

PARAS"werewrittenbyoneandthesameperson.(Emphasissupplied)12

The present controversy arose, when in 2008, three years after the complaint with the RTC of Manila was
withdrawn,Gilbertagainfiledacomplaint,thistime,withtheRTCofMandaluyong,captionedas"IntraCorporate
Controversy: For the Declaration of Nullity of Fraudulent Transfers of Shares of Stock Certificates, Fabricated
StockCertificates,FalsifiedGeneralInformationSheets,MinutesofMeetings,andDamageswithApplicationfor
theIssuanceofaWritofPreliminaryandMandatoryInjunction,"docketedasSECMC08112,againsthismother,
Simny,hissisters,Geraldine,Gladys,andtheheirsofhislatesisterGrace.13

Gilbertallegedthatheneversignedanydocumentwhichwouldjustifyandsupportthetransferofhissharesto
his siblings and that he has in no way, disposed, alienated, encumbered, assigned or sold any or part of his
sharesinGoodGold.14Healsodeniedtheexistenceofthecertificatesofstocks.Accordingtohim,"therewereno
certificatesofstocksunderhisnameforthesharesofstocksubscribedbyhimwereneverissuednordeliveredto
himfromthetimeoftheinceptionofthecorporation."15

GilbertaddedthattheAmendedGeneralInformationSheets(GIS)ofGoodGoldfortheyears2000to2004which
hissiblingssubmittedtotheSecuritiesandExchangeCommission(SEC)werespuriousasthesedidnotreflect
his true shares in the corporation which supposedly totaled to 595,000 shares16 that no valid stockholders
annualmeetingfortheyear2004washeld,henceproceedingstakenthereon,includingtheelectionofcorporate
officerswerenullandvoid17and,thathissiblingsareforeigncitizens,thus,cannotownmorethanfortypercent
oftheauthorizedcapitalstockofthecorporation.18

GilbertalsoaskedinhiscomplaintfortheissuanceofaWritofPreliminaryandMandatoryInjunctiontoprotecthis
rights.19

InanOrderdated30June2008,20theRTCdeniedGilbertsMotionforInjunctiveRelief21whichconstrainedhim
tofileamotionforreconsideration,and,thereafter,aMotionforInhibitionagainstJudgeEdwinSorongon,praying
thatthelatterrecusehimselffromfurthertakingpartinthecase.

Meanwhile,Gilbertssiblingsfiledamanifestationclaimingthatthecomplaintisanuisanceandharassmentsuit
underSection1(b),Rule1oftheInterimRulesofProcedureonIntraCorporateControversies.

In an Order dated 6 November 2008,22 the RTC denied the motion for inhibition. The RTC also dismissed the
case,declaringitanuisanceandharassmentsuit,viz.:
 WHEREFORE,thecourtresolves:

(1)ToDENYasitisherebyDENIEDrespondentsMotionforInhibition

(2)ToDENYasitisherebyDENIEDrespondentsMotionforReconsiderationoftheJune30,2008
Orderand,

(3)Todeclareasitisherbydeclaredtheinstantcaseasanuisanceorharassmentsuit.Accordingly,
pursuant to Section 1(b), Rule 1 of the Interim Rules of Procedure for IntraCorporate Dispute, the
instantcaseisherebyDISMISSED.Nopronouncementastocosts.23

ThisconstrainedGilberttoassailtheaboveOrderbeforetheCourtofAppeals(CA).Thepetitionforreviewwas
docketedasCAG.R.SPNo.106405.

InaDecision24dated27May2009,theCAupheldJudgeSorongonsrefusaltoinhibitfromhearingthecaseon
thegroundthatGilbertfailedtosubstantiatehisallegationofJudgeSorongonspartialityandbias.25

TheCA,inthesamedecision,alsodeniedGilbertsPetitionfortheIssuanceofWritofPreliminaryInjunctionfor
failure to establish a clear and unmistakable right that was violated as required under Section 3, rule 58 of the
1997RulesofCivilProcedure.26

The CA, however, found merit on Gilberts contention that the complaint should be heard on the merits. It held
that:

A reading of the Order, supra, dismissing the respondents complaint for being a harassment suit
revealedthatthecourtaquoreliedheavilyonthepiecesofdocumentaryevidencepresentedbythe
PetitionerstonegateRespondentsallegationoffraudulenttransferofsharesofstock,fabricationof
stockcertificatesandfalsificationofGeneralInformationSheets(GIS),inter alia. It bears emphasis
that the Respondent is even questioning the genuiness and authenticity of the Petitioners
documentaryevidence.Toourmind,onlyafullblowntrialonthemeritscanaffordthedetermination
ofthegenuinenessandauthenticityofthedocumentaryevidenceandotherfactualissueswhichwill
ultimatelyresolvewhethertherewasindeedatransferofsharesofstock.27

Hence,theseconsolidatedpetitions.

G.R.No.189486isaPetitionforReviewunderRule45oftheRulesofCourtfiledbySimny,Geraldine,Gladys,
andtheheirsofthelateGraceagainstGilbert,whichpraysthatthisCourtdeclareCivilCaseNo.SECMC08112,
aharassmentornuisancesuit.

Meanwhile, during the pendency of G.R. No. 189486, the trial court set the pretrial conference on the case
subjectofthiscontroversy,constrainingthepetitionerstofileaMotiontodeferthepretrial,whichwas,however,
deniedbythecourtaquoinanOrderdated11September2009,28viz.:

In a Resolution dated September 3, 2009, the Honorable Court of Appeals (CA) (Former Second
Division) denied the Motion for Partial Reconsideration filed [by petitioners] herein. Inasmuch as
thereisnolongeranyimpedimenttoproceedwiththeinstantcaseandthefactthatthiscourtwas
specificallydirectedbytheMay27,2009DecisionoftheCASecondDivisiontoproceedwiththetrial
onthemeritswithdispatch,thiscourtresolvestodenythemotionunderconsideration.

WHEREFORE, premises considered, the Motion to Defer PreTrial Conference and Further
ProceedingsfiledbypetitionersisherebyDENIED.SetthepretrialonOctober20,2009,at8:30in
themorning.

The denial of the petitioners motion to defer pretrial, compelled them to file with this Court a Petition for
Certiorari with Urgent Application for the Issuance of TRO and/or A Writ of Preliminary Injunction, docketed as
G.R.No.189699.BecauseofthependencyoftheG.R.No.189486beforeus,thepetitionersdeemedproperto
questionthesaiddenialbeforeusasanincidentarisingfromthemaincontroversy.29

OURRULING

Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or other
personsmaybeclassifiedintoindividualsuits,classsuits,andderivativesuits.30

An individual suit may be instituted by a stockholder against another stockholder for wrongs committed against
himpersonally,andtodeterminetheirindividualrights31thisisanindividualsuitbetweenstockholders.Butan
individualsuitmayalsobeinstitutedagainstacorporation,thesamehavingaseparatejuridicalpersonality,which
by its own may be sued. It is of course, essential that the suing stockholder has a cause of action against the
corporation.32

Individualsuitsagainstanotherstockholderoragainstacorporationareremedieswhichanaggrievedstockholder
may avail of and which are recognized in our jurisdiction as embedded in the Interim Rules on IntraCorporate
Controversy.Togetherwiththisrightistheparallelobligationofapartytocomplywiththecompulsoryjoinderof
indispensablepartieswhethertheymaybestockholdersorthecorporationitself.
Theabsenceofanindispensable
partyinacaserendersall
subsequentactionsofthecourtnull
andvoidforwantofauthoritytoact,
notonlyastotheabsentpartiesbut
evenastothosepresent.33

ItbearsemphasisthatthiscontroversystartedwithGilbertscomplaintfiledwiththeRTCofMandaluyongCityin
hiscapacityasstockholder,directorandVicePresidentofGoodGold.34

Gilberts complaint essentially prayed for the return of his original 519,997 shares in GoodGold, by praying that
thecourtdeclarethat"therewerenovalidtransfersofthecontestedsharestodefendantsandFrancisco."35 It
bafflesthisCourt,however,thatGilbertomittedFranciscoasdefendantinhiscomplaint.WhileGilbertcouldhave
optedtowaivehissharesinthenameofFranciscotojustifythelattersnoninclusioninthecomplaint,Gilbertdid
notdoso,butinstead,wantedeverythingbackandevenwantedthewholetransferofsharesdeclaredfraudulent.
This cannot be done, without including Francisco as defendant in the original case. The transfer of the shares
cannotbe,asGilbertwanted,declaredentirelyfraudulentwithoutincludingthoseofFranciscowhoownsalmosta
thirdofthetotalnumber.

Francisco,inboththe2004and2008complaints,isanindispensablepartywithoutwhomnofinaldetermination
can be had for the following reasons: (a) the complaint prays that the shares now under the name of the
defendants and Francisco be declared fraudulent (b) Francisco owns 195,000 shares some of which, Gilbert
praysbereturnedtohim(c)Franciscosignedthecertificatesofstocksevidencingtheallegedfraudulentshares
previouslyinthenameofGilbert.TheinclusionofthesharesofFranciscointhecomplaintmakesFranciscoan
indispensableparty.Moreover,thepronouncementaboutthesharesofFranciscowouldimpactonthehereditary
rights of the contesting parties or on the conjugal properties of the spouses to the effect that Francisco, being
husband of Simny and father of the other contesting parties, must be included for, otherwise, in his absence,
there cannot be a determination between the parties already before the court which is effective, complete, or
equitable.

The definition in the Rules of Court, Section 7, Rule 3 thereof, of indispensable parties as "parties in interest
withoutwhomnofinaldeterminationcanbehadofanaction"hasbeenjurisprudentiallyamplified.InSps.Garcia
v.Garcia,et.al.,36thisCourtheldthat:

Anindispensablepartyisapartywhohassuchaninterestinthecontroversyorsubjectmatterthata
finaladjudicationcannotbemade,inhisabsence,withoutinjuringoraffectingthatinterest,aparty
whohasnotonlyaninterestinthesubjectmatterofthecontroversy,butalsohasaninterestofsuch
naturethatafinaldecreecannotbemadewithoutaffectinghisinterestorleavingthecontroversyin
such a condition that its final determination may be wholly inconsistent with equity and good
conscience.Ithasalsobeenconsideredthatanindispensablepartyisapersoninwhoseabsence
there cannot be a determination between the parties already before the court which is effective,
complete, or equitable. Further, an indispensable party is one who must be included in an action
beforeitmayproperlygoforward.

This was our pronouncements in Servicewide Specialists Inc. v. CA,37 Arcelona v. CA,38 and Casals v. Tayud
GolfandCountryClub,Inc.39

Settledistherulethatjoinderofindispensablepartiesiscompulsory40beingasinequanonfortheexerciseof
judicialpower,41and,itisprecisely"whenanindispensablepartyisnotbeforethecourtthattheactionshouldbe
dismissed"forsuchabsencerendersallsubsequentactionsofthecourtnullandvoidforwantofauthoritytoact,
notonlyastotheabsentpartiesbutevenastothosepresent.42

It bears emphasis that Gilbert, while suing as a stockholder against his costockholders, should have also
impleadedGoodGoldasdefendant.Hiscomplaintalsoprayedfortheannulmentofthe2004stockholdersannual
meeting,theannulmentofthe2004electionoftheboardofdirectorsandofitsofficers,theannulmentof2004
GISsubmittedtotheSEC,issuanceofanorderfortheaccountingofallmoniesandrentalsofGoodGold,andthe
issuance of a writ of preliminary and mandatory injunction. We have made clear that GoodGold is a separate
juridicalentitydistinctfromitsstockholdersandfromitsdirectorsandofficers.Thetrialcourt,actingasaspecial
commercial court, cannot settle the issues with finality without impleading GoodGold as defendant. Like
Francisco,andforthesamereasons,GoodGoldisanindispensablepartywhichGilbertshouldhaveimpleaded
asdefendantinhiscomplaint.

Allegationsofdeceit,machination,
falsepretenses,misrepresentation,
andthreatsarelargelyconclusions
oflawthat,withoutsupporting
statementsofthefactstowhichthe
allegationsoffraudrefer,donot
sufficientlystateaneffectivecauseof
action.43

"In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with
particularity"44 to "appraise the other party of what he is to be called on to answer, and so that it may be
determinedwhetherthefactsandcircumstancesallegedamounttofraud."45Theseparticularswouldnecessarily
include the time, place and specific acts of fraud committed.46 "The reason for this rule is that an allegation of
fraudconcernsthemoralityofthedefendantsconductandheisentitledtoknowfullythegroundonwhichthe
allegationsaremade,sohemayhaveeveryopportunitytopreparehiscasetoclearhimselfatthetrial."47

ThecomplaintofGilbertstates:

13.ThesaidspuriousAmendedGISfortheyears2000,2001,2002,2003,2004andalsoinanother
falsified GIS for the year 2004, the petitioners indicated the following alleged stockholders of
GOODGOLDwiththeirrespectiveshareholdings,towit:

NAME NO.OFSHARES
FranciscoGuyCoChia 195,000
SimnyG.Guy 195,000
GilbertG.Guy 65,000
GeraldineG.Guy 65,000
GraceG.Cheu 65,000
GladysG.Yao 65,000
Total 650,000

14.TheabovespuriousGIS would show that form the original 519,997 shares of stocks owned by
therespondent,whichisequivalenttoalmost80%ofthetotalsubscriptionsand/ortheoutstanding
capital stock of GOODGOLD, respondents subscription was drastically reduced to only 65,000
sharesofstockswhichismerelyequivalenttoonly10percentoftheoutstandingcapitalstockofthe
corporation.

15. Based on the spurious GIS, shares pertaining to Benjamin Lim and Paulino Delfin Pe were
omittedandthetotalcorporatesharesoriginallyownedbyincorporatorsincludinghereinrespondent
havebeenfraudulentlytransferredanddistributed,asfollows:xxx(Emphasissupplied)

xxxx

18. To date, respondent is completely unaware of any documents signed by him that would justify
andsupporttheforegoingtransferofhissharestothedefendants.Respondentstronglyaffirmsthat
he has not in any way, up to this date of filing the instant complaint, disposed, alienated,
encumbered,assignedorsoldanyorpartofthesharesofstocksofGOODGOLDcorporationowned
byhimandregisteredunderhisnameunderthebooksofthecorporation.

19. Neither has respondent endorsed, signed, assigned any certificates of stock representing the
tangible evidence of his stocks ownership, there being no certificates of stocks issued by the
corporationnordeliveredtohimsinceitsinceptiononJune6,1988.Consideringthatthecorporation
is merely a family corporation, plaintiff does not find the issuance of stock certificates necessary to
protect his corporate interest and he did not even demand for its issuance despite the fact that he
wasthesolesubscriberwhoactuallypaidhissubscriptionatthetimeofincorporation.48

Testedagainstestablishedstandards,wefindthatthechargesoffraudwhichGilbertaccuseshissiblingsarenot
supported by the required factual allegations. In Reyes v. RTC of Makati,49 which we now reiterate, mutatis
mutandis, while the complaint contained allegations of fraud purportedly committed by his siblings, these
allegations are not particular enough to bring the controversy within the special commercial courts jurisdiction
theyarenotstatementsofultimatefacts,butaremereconclusionsoflaw:howandwhytheallegedtransferof
sharescanbecharacterizedas"fraudulent"werenotexplainedandelaboratedon.50AsemphasizedinReyes:

Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will
bring the case within the special commercial courts jurisdiction. To fall within this jurisdiction, there
must be sufficient nexus showing that the corporations nature, structure, or powers were used to
facilitatethefraudulentdeviceorscheme.51(Emphasissupplied)

Significantly,nocorporatepowerorofficewasallegedtohavefacilitatedthetransferofGilbertsshares.Howthe
petitioners perpetrated the fraud, if ever they did, is an indispensable allegation which Gilbert must have had
allegedwithparticularityinhiscomplaint,butwhichhefailedto.

Failuretospecificallyallegethe
fraudulentactsinintracorporate
controversiesisindicativeofa
harassmentornuisancesuitandmay
bedismissedmotuproprio.

Inordinarycases,thefailuretospecificallyallegethefraudulentactsdoesnotconstituteagroundfordismissal
sincesuchadefectcanbecuredbyabillofparticulars.52Thus:
 Failuretoallegefraudormistakewithasmuchparticularityasisdesirableisnotfatalifthegeneral
purport of the claim or defense is clear, since all pleadings should be so construed as to do
substantial justice. Doubt as to the meaning of the pleading may be resolved by seeking a bill of
particulars.

A bill of particulars may be ordered as to a defense of fraud or mistake if the circumstances

constitutingfraudormistakearenotstatedwiththeparticularityrequiredbytherule.53

Theabovestatedrule,however,doesnotapplytointracorporatecontroversies.InReyes,54wepronouncedthat
"in cases governed by the Interim Rules of Procedure on IntraCorporate Controversies a bill of particulars is a
prohibited pleading. It is essential, therefore, for the complaint to show on its face what are claimed to be the
fraudulentcorporateactsifthecomplainantwishestoinvokethecourtsspecialcommercialjurisdiction."Thisis
becausefraudinintracorporatecontroversiesmustbebasedon"devisesandschemesemployedby,oranyact
of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation
which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any
corporation,partnership,orassociation,"asstatedunderRule1,Section1(a)(1)oftheInterimRules.Theactof
fraud or misrepresentation complained of becomes a criterion in determining whether the complaint on its face
hasmerits,orwithinthejurisdictionofspecialcommercialcourt,ormerelyanuisancesuit.

ItdidnotescapeusthatGilbert,insteadofparticularlydescribingthefraudulentactsthathecomplainedof,just
made a sweeping denial of the existence of stock certificates by claiming that such were not necessary,
GoodGold being a mere family corporation.55 As sweeping and bereft of particulars is his claim that he "is
unaware of any document signed by him that would justify and support the transfer of his shares to herein
petitioners."56Evenmoretellingisthecontradictionbetweenthedenialoftheexistenceofstockcertificatesand
thedenialofthetransferofhissharesofstocks"underhisnameunderthebooksofthecorporations."

It is unexplained that while Gilbert questioned the authenticity of his signatures indorsing the stock certificates,
andthatofAtty.EmmanuelParas,thecorporatesecretary,hedidnotputinissueasdoubtfulthesignatureofhis
father which also appeared in the certificate as President of the corporation. Notably, Gilbert, during the entire
controversy that started with his 2004 complaint, failed to rebut the NBI Report which authenticated all the
signaturesappearinginthestockcertificates.

Evenbeyondthevacantpleadings,itsnatureasnuisanceispalpable.Torecapitulate,itwasonlyafterfiveyears
followingtheredistributionofGoodGoldssharesofstock,thatGilbertfiledwiththeRTCofManila,aComplaint
forthe"DeclarationofNullityofTransfersofSharesinGoodGoldandofGeneralInformationSheetsandMinutes
ofMeeting,andforDamageswithApplicationforaPreliminaryInjunctiveRelief,"againsthismother,Simny,and
his sisters, Geraldine, Grace, and Gladys.57 Gilbert alleged, among others, that no stock certificate ever
existed58 that his signature at the back of the spurious Stock Certificate Nos. 004014 which purportedly
endorsedthesameandthatofthecorporatesecretary,EmmanuelParas,attheobversesideofthecertificates
wereforged,and,hence,shouldbenullified.59GilbertwithdrewthiscomplaintaftertheNBIsubmittedareportto
theRTCofManilaauthenticatingGilbertssignatureintheendorsedcertificates.And,itwasonlyafterthreeyears
from the withdrawal of the Manila complaint, that Gilbert again filed in 2008 a complaint also for declaration of
nullityofthetransferofthesharesofstock,thistimewiththeRTCofMandaluyong.Thecaptionofthecomplaint
is "IntraCorporate Controversy: For the Declaration of Nullity of Fraudulent Transfers of Shares of Stock
Certificates, Fabricated Stock Certificates, Falsified General Information Sheets, Minutes of Meetings, and
DamageswithApplicationfortheIssuanceofaWritofPreliminaryandMandatoryInjunction,"docketedasSEC
MC08112,againsthismother,Simny,hissisters,Geraldine,Gladys,andtheheirsofhislatesisterGrace.60 1 w p h i1

Whenastockcertificateisendorsed
inblankbytheownerthereof,it
constituteswhatistermedas"street
certificate,"sothatuponitsface,the
holderisentitledtodemandits
transferhisnamefromtheissuing
corporation.

With Gilberts failure to allege specific acts of fraud in his complaint and his failure to rebut the NBI report, this
Courtpronounces,asaconsequencethereof,thatthesignaturesappearingonthestockcertificates,includinghis
blankendorsementthereonwereauthentic.WiththestockcertificateshavingbeenendorsedinblankbyGilbert,
which he himself delivered to his parents, the same can be cancelled and transferred in the names of herein
petitioners.

In Santamaria v. Hongkong and Shanghai Banking Corp.,61 this Court held that when a stock certificate is
endorsedinblankbytheownerthereof,itconstituteswhatistermedas"streetcertificate,"sothatuponitsface,
theholderisentitledtodemanditstransferintohisnamefromtheissuingcorporation.Suchcertificateisdeemed
quasinegotiable, and as such the transferee thereof is justified in believing that it belongs to the holder and
transferor. 1 w p h i1

While there is a contrary ruling, as an exception to the general rule enunciated above, what the Court held in
Neugene Marketing Inc., et al., v CA,62 where stock certificates endorsed in blank were stolen from the
possessionofthebeneficialownersthereofconstrainingthisCourttodeclarethetransfervoidforlackofdelivery
andwantofvalue,thesamecannotapplytoGilbertbecausethestockcertificateswhichGilbertendorsedinblank
wereintheundisturbedpossessionofhisparentswhowerethebeneficialownersthereofandwhothemselvesas
suchownerscausedthetransferintheirnames.Indeed,evenifGilbertsparentswerenotthebeneficialowners,
anendorsementinblankofthestockcertificatescoupledwithitsdelivery,entitlestheholderthereoftodemand
thetransferofsaidstockcertificatesinhisnamefromtheissuingcorporation.63

Interestingly,GilbertalsousedtheabovediscussedreasonsashisargumentsinGilbertGuyv.CourtofAppeals,
eta.l,64acaseearlierdecidedbythisCourt.Inthatpetition,LincolnContinental,acorporationpurportedlyowned
byGilbert,filedwiththeRTC,Branch24,Manila,aComplaintforAnnulmentoftheTransferofSharesofStock
against Gilberts siblings, including his mother, Simny. The complaint basically alleged that Lincoln Continental
owns 20,160 shares of stock of Northern Islands and that Gilberts siblings, in order to oust him from the
managementofNorthernIslands,falselytransferredthesaidsharesofstockinhissistersnames.65ThisCourt
dismissedGilbertspetitionandruledinfavorofhissiblingsviz:

One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that
LincolnContinentalheldthedisputedsharesofstockofNorthernIslandsmerelyintrustfortheGuy
sisters.Infact,theevidenceprofferedbyLincolnContinentalitselfsupportsthisconclusion.Itbears
emphasis that this factual finding by the trial court was affirmed by the Court of Appeals, being
supportedbyevidence,andis,therefore,finalandconclusiveuponthisCourt.

Article1440oftheCivilCodeprovidesthat:

"ART. 1440. A person who establishes a trust is called the trustor one in whom
confidenceisreposedasregardspropertyforthebenefitofanotherpersonisknownas
thetrusteeandthepersonforwhosebenefitthetrusthasbeencreatedisreferredtoas
thebeneficiary."

IntheearlycaseofGayondatov.TreasurerofthePhilippineIslands,thisCourtdefinestrust,inits
technicalsense,as"arightofproperty,realorpersonal,heldbyonepartyforthebenefitofanother."
Differently stated, a trust is "a fiduciary relationship with respect to property, subjecting the person
holdingthesametotheobligationofdealingwiththepropertyforthebenefitofanotherperson."

BothLincolnContinentalandGilbertclaimthatthelatterholdslegaltitletothesharesinquestion.But
recordshowsthatthereisnoevidencetosupporttheirclaim.Rather,theevidenceonrecordclearly
indicates that the stock certificates representing the contested shares are in respondents'
possession.Significantly,thereisnoprooftosupporthisallegationthatthetransferofthesharesof
stock to respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is never
presumedbutmustbeestablishedbyclearandconvincingevidence.Gilbertfailedtodischargethis
burden.WeagreewiththeCourtofAppealsthatrespondentsistersownthesharesofstocks,Gilbert
beingtheirmeretrustee.66(Underliningsupplied).

ThisCourtfindsnocogentreasontodivertfromtheabovestatedruling,thesetwocaseshavingsimilarfacts.

WHEREFORE,premisesconsidered,thepetitionsinG.R.Nos.189486and189699areherebyGRANTED.The
Decisiondated27May 2009 of the Court of Appeals in CAG .R. SP No. 106405 and its Resolution dated 03
September 2009 are REVERSED and SET ASIDE. The Court DECLARES that SECMC08112 now pending
before the Regional Trial Court, Branch 211, Mandaluyong City, is a nuisance suit and hereby ORDERS it to
IMMEDIATELYDISMISSthesameforreasonsdiscussedherein.

SOORDERED.

JOSEPORTUGALPEREZ
AssociateJustice

WECONCUR:

ANTONIOT.CARPIO
AssociateJustice
Chairperson

ARTUROD.BRION MARIANOC.DELCASTILLO
AssociateJustice AssociateJustice

ESTELAM.PERLASBERNABE
AssociateJustice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourt'sDivision.

ANTONIOT.CARPIO
AssociateJustice
Chairperson