RURAL BANK OF SALINAS, INC., MANUEL SALUD, LUZVIMINDA TRIAS AND FRANCISCO TRIAS, PETITIONERS, VS. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION, MELANIA A. GUERRERO, LUZ …

The basic controversy in this case is whether or not the
respondent court erred in sustaining the Securities and Exchange Commission
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. Petitioners maintain that
the Petition for Mandamus should have been denied upon the following
grounds:

(1)  
Mandamus cannot be a remedy cognizable by the
Securities and Exchange Commission when the purpose is to register certificates
of stock in the names of claimants who are not yet stockholders of a
corporation:

(2)  
There exist valid reasons for refusing to register the transfer
of the subject of stock, namely:

(a)  
a pending controversy over the ownership of the certificates
of stock with the Regional Trial Court;

(b)   claims
that the Deeds of Assignment covering the subject certificates of stock were
fictitious and antedated; and

(c)  
claims on a resultant possible deprivation of inheritance
share in relation with a conflicting claim over the subject certificates of
stock.

The facts are not
disputed.

On June 10, 1979, Clemente G. Guerrero, President of the Rural
Bank of Salinas, Inc., executed a Special Power of Attorney in favor of his wife, private respondent 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 (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.

On February 27, 1980, and pursuant to said Special Power of
Attorney, private respondent 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).

Almost four months later, or
two (2) days before the death
of Clemente Guerrero on June 24, 1980, private respondent Melania Guerrero,
pursuant to the same Special Power of Attorney, executed a Deed of
Assignment for the remaining one (1) share of stock in favor of private respondent
Francisco Guerrero, Sr.

Subsequently, private respondent Melania Guerrero presented to
petitioner 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, the cancellation of stock certificates in the name of Clemente G. Guerrero, and the issuance of new stock
certificates covering the transferred shares of stocks in the name of the new owners thereof. However, petitioner Bank denied the request
of respondent Melania Guerrero.

On December 5,
1980, private respondent Melania Guerrero filed with the Securities and
Exchange Commission (SEC) an action for mandamus against petitioners
Rural Bank of Salinas, its President and Corporate Secretary. The case was docketed as SEC Case No. 1979.

Petitioners filed their
Answer with counterclaim on December 19, 1980 alleging that upon the death of
Clemente G. Guerrero, 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 G. Guerrero.

On January 29, 1981, a motion for intervention was filed by
Maripol Guerrero, a legally adopted daughter of the late Clemente G. Guerrero
and private respondent Melania Guerrero, who stated therein that on November
26, 1980 (almost two weeks before the filing of the Petition for Mandamus)
a Petition for the administration of the estate of the late Clemente G.
Guerrero had been filed with the Regional Trial Court, Pasig, Branch XI,
docketed as Special Proceedings No. 9400. Maripol Guerrero further claimed that the Deeds of Assignment for the
subject shares of stock are fictitious and antedated; that said conveyances are
donations since the considerations therefor are below the book value of the
shares, the assignees/private respondents being close relatives of private
respondent Melania Guerrero; and that the transfer of the shares in question to
assignees/private respondents, other than private respondent Melania Guerrero,
would deprive her (Maripol Guerrero) of her rightful share in the
inheritance. The SEC hearing officer
denied the Motion for Intervention for lack of merit. On appeal, the SEC En Banc affirmed the decision of the hearing officer.

Intervenor Guerrero filed a complaint before the then Court of
First Instance of Rizal, Quezon City Branch, against private respondents for
the annulment of the Deeds of Assignment, docketed as Civil Case No.
Q-32050. Petitioners, on the other
hand, filed a Motion to Dismiss and/or to Suspend Hearing of SEC
Case No. 1979 until after the question of whether the subject Deeds of
Assignment ‘are fictitious, void or simulated is resolved in Civil Case No. Q-32050. The SEC Hearing Officer denied said motion.

On December 10, 1984, the SEC Hearing Officer rendered a Decision
granting the writ of Mandamus prayed for by the private respondents and
directing petitioners to cancel stock certificates nos. 26, 49 and 65 of the
Bank, all in the name of Clemente G. Guerrero, and to issue new certificates in
the names of private respondents, except Melania Guerrero. The dispositive portion of the decision
reads:

“WHEREFORE, judgment is hereby rendered in favor of the
petitioners and against the respondents, directing the latter, particularly the
corporate secretary of respondent Rural Bank of Salinas, Inc. to register in the latter’s Stock and Transfer
Book the transfer of 473 shares of stock of respondent Bank and to cancel Stock
Certificate Nos. 26, 49 and 65 and issue new Stock Certificates covering the
transferred shares in favor of petitioners, as follows:

1. Luz Andico ………………………………………… 457 shares

2. Wilhelmina Rosales ……………………………….. 10 shares

3. Francisco Guerrero, Jr.
……………………………. 5 shares

4. Francisco Guerrero, Sr.      ………………………… 1 share

and to pay to the above-named petitioners,
the dividends for said shares corresponding to the years 1981, 1982, 1983 and 1984 without interest.

No pronouncement as to costs.

SO ORDERED.” (p. 88, Rollo)

On appeal, the SEC En Banc affirmed the decision of
the Hearing Officer. Petitioner filed a
petition for review with the
Court of Appeals but said Court likewise affirmed the decision of the SEC.

We rule in favor of the respondents.

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.

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. xxx 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 xxx.”

In the case of Fleisher vs. Botica Nolasco, 47 Phil. 583, the Court
interpreted Sec. 63 in this wise:

“Said Section (Sec. 35 of Act 1459, [now Sec. 63 of the
Corporation Code]) 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. xxx

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.

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

“xxx 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. xxx” (Tomson on
Corporation Sec. 4137, cited in Fleisher vs. Nolasco, Supra).

The right of a transferee/asignee 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” (26, Cyc.
347, Hyer vs. Bryan, 19 Phil. 138; Fleischer vs. Botica Nolasco, 47
Phil. 583, 594).

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.”
(Sec. 5518, 12 Fletcher 394)

For the petitioner Rural Bank of Salinas to refuse registration
of the transferred shares in its stock and transfer book, which duty is
ministerial on its part, is to render nugatory and ineffectual the spirit and
intent of Section 63 of the Corporation Code. Thus, respondent Court of Appeals did not err in upholding the Decision
of respondent SEC affirming the Decision of its Hearing Officer directing the
registration of the 473 shares in the stock and transfer book in the names of
private respondents. 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.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, and Regalado, JJ., concur.

Nocon, J., on leave.

* Penned by Associate Justice
Segundino G. Chua and concurred in by Associate Justices Serafin E. Camilon and
Justo P. Torres, Jr.