JUAN B. ESPE, PLAINTIFF-APPELLANT, VS. CENTRAL COOPERATIVE EXCHANGE, INC., DEFENDANT-APPELLEE.

This appeal from a decision of the Court of First Instance of Bulacan
(Civil Case No. 65-V) dismissing a complaint seeking a transfer of a
certificate of stock of the Central Cooperative Exchange was certified to this
Supreme Court by the Court of Appeals, because only questions of law are
involved.

The conceded antecedents of this appeal are described in the
appealed decision in the following manner (Record on Appeal, pages 24-25) :

“It is not disputed that the Bacnotan (La Union) Facoma was
the owner of 607 shares of stock in defendant corporation as per the latter’s
stock certificate No. 57.  In Civil Case
No, 79 of the municipal court of Bacnotan, La Union, entitled Juan B. Espe vs.
Bacnotan (La Union) Facoma,” the plaintiff obtained judgment for sum of
money against the Facoma, and a writ of execution was issued in due
course.  The shares of stock
aforementioned were levied upon and in the execution sale the same were
acquired by plaintiff as highest bidder. 
Thereafter plaintiff, thru counsel, wrote to the corporation informing
it of his acqui­sition of the said shares of stock and re­questing the transfer
thereof to his name in the books of the corporation, or if the same cannot be
granted because of any legal impe­diment, that the Bacnotan Facoma be with­drawn
from membership in the corporation, subject to the conditions stated in its
by-laws, and the equivalent value of the said shares of stock be paid to
him.  The request for transfer of the
stock to Espe’s name was denied by the corporation on the ground that he does
not have the qualifications necessary for ownership of stock in the corporation
as prescribed in its articles of incorporation and by laws.  The alternative request for withdrawal from
member­ship of the Bacnotan Facoma and the payment of the equivalent value of
the stock to the plaintiff was likewise denied on the ground that the requisite
conditions for such withdrawal have not been complied with.  Thereafter Espe instituted this action to
compel the corpora­tion to comply with his demands.”

Because Article VII of the articles of incorporation of the
appellee corporation, as well as Article III of its By Laws, provide, in
conformity with Section 31 of Act 3425 of the Philippine Legislature (known as
the Cooperative Marketing Law), that transfer of the common stock of the
cooperative association is forbidden to persons not engaged in the production
of agricultural products handled by the association, and because it is
undisputed that appellant Espe did not possess the quali­fication of being a
producer of agricultural products, the trial court, after hearing and reception
of evidence, dismissed the complaint. 
Whereupon, plaintiff Espe interposed this appeal.

We find the appeal to be without merit.

Act 3425 (the Cooperative Marketing Law) explicitly prescribes in
its section 31 as follows:

“The By laws shall prohibit the
transfer of the common stock of the association to persons not engaged in the
production of the agricultural products handled by the association and such
restriction must be printed upon every certificate of stock subject thereto.”

The Central Cooperative Exchange, Inc.,
was organized in 1955 as a farmers’ marketing cooperative.  In conformity with the statutory limitation
on stock ownership, Article VII of its Articles of Incorporation (Exhibit “4”)
provides that:

“Shares of stock in the association may be purchased, owned or
held only by farmers’ marketing cooperatives organized and existing under Act
No. 3425, as amended, federations or such cooperatives on a provincial,
regional or national level, and corporations owned or controlled by the
government.

“No stockholder in the association shall be entitled to more
than one vote, regardless of the number of shares of, stock he may own therein,
unless the stockholder be a corporation owned or Controlled by the government,
in which case it shall have votes equal to the number of shares of stock it may
hold therein.

“In the event the Board of Directors should find, following a
hearing, that any of the stock of the association has come into the hands of
any person or entity not eligible for membership, or that the holder thereof
has ceased to be an eligible member, such person or entity shall have no right
or privilege on account of such stock. 
The asso­ciation shall have the right to buy the stock at its book value
as established at the last accounting of the association.  If the association fails to buy the stock,
the holder shall be paid its book value upon the dissolution or termination of
the associa­tion.”

 And Article III of the By
Laws (Exhibit “2”) specify the following:

“Section 2.  Stock
Transfer, Loss or Destruction of Certificates.  Transfer of stock shall be made only to
members and to those eligible for membership with the Exchange upon
approval of the Board of Directors: Provided, that the member making the
transfer is not indebted to the Exchange and that it has already complied with
the terms and conditions of any contract that it may have with the
Exchange.  All transfers of stock shall
be made upon the books of the Exchange upon surrender of the duly endorsed
certificates and the payment of a transfer fee of P1.00 for every
certificate.  No transfer shall be made
within thirty (30) days next preceding the day appointed for distribution of
dividends.”

Since the plaintiff, Juan B. Espe, admittedly is not an agricul­tural
producer, it is plain that he is not entitled to hold shares of stock in the
appellee corporation.  Not only is he
bound to know the provisions of the law on Marketing Cooperatives, but his
attention and that of the Sheriff were called to the apposite restrictions
contained in the corporate by laws by the counsel for the appellee prior to the
execution sale (Exhibit “1”). 
So much so, that the Sheriff’s Certificate of Sale (copy of which was
annexed to plaintiff’s own complaint, Record on Appeal, page 5, et seq) specified
that the sale was made “subject to the provisions of Act 3425 as amended
and the Articles of Incorpora­tion and By Laws of the Central Cooperative
Exchange Inc.” (Record on Appeal, page 5).

When, therefore, appellant purchased the stock certificate held
by the Bacnotan FACOMA in the appellee Corporation, he was aware that
membership therein was limited to agricultural producers, and not being one
such he could not be a transferee of the stock. 
Having voluntarily purchased property with full knowledge that it was
subject to statutory and corporate restrictions, he may not plead that he
should be released therefrom.

WHEREFORE, the decision appealed from is affirmed.  Treble costs are imposed upon appellant to be
paid by his counsel, Attorney Arsenio B. Cruz.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Fernando,
Teehankee, Barredo, and Villamor, JJ., concur.

Castro, J., on leave.