Ponce vs. Alsons Cement Corporation

A corporate secretary cannot be compelled by mandamus to issue stock certificates to a transferee where the transfer of shares has not been recorded in the corporation's stock and transfer book, as the corporation looks only to its books to determine its shareholders and no clear legal duty to issue certificates arises absent such registration.

Fausto G. Gaid was an incorporator of Victory Cement Corporation (later renamed Alsons Cement Corporation), having subscribed to and fully paid 239,500 shares. On February 8, 1968, Gaid executed a Deed of Undertaking and Indorsement assigning the shares to Vicente C. Ponce. No certificates of stock were ever issued in Gaid's or Ponce's name. Ponce demanded the issuance of certificates in his name, which the corporation refused.

• Incorporation and Subscription: Fausto G. Gaid subscribed to and fully paid 239,500 shares of Victory Cement Corporation (VCC), which was later renamed Floro Cement Corporation, and eventually Alsons Cement Corporation (ACC).
• The Assignment: On February 8, 1968, Gaid and petitioner Vicente C. Ponce executed a "Deed of Undertaking" and "Indorsement" whereby Gaid acknowledged Ponce as the owner of the subscription and indorsed the shares to Ponce.
• Non-Issuance of Certificates: From the time of incorporation, no certificates of stock corresponding to the 239,500 subscribed and fully paid shares were ever issued in the name of Gaid or Ponce.
• Demand and Refusal: Ponce made repeated demands for the issuance of the stock certificates in his name, which respondents refused.

• Mandamus as Proper Remedy: Petitioner argued that mandamus is the proper remedy when a corporation wrongfully refuses to record a transfer and issue certificates, as recording and issuance are part of one continuous process; requesting issuance necessarily includes requesting recording.
• Lack of Requirement for Express Instructions: Petitioner maintained that no law requires a transferor to issue express instructions or a power of attorney before a certificate is issued to a transferee, distinguishing Hager v. Bryan and Rivera v. Florendo on the ground that those cases involved existing certificates, whereas here no certificates were issued even to the original subscriber.
• Accrual of Cause of Action: Petitioner contended that his cause of action accrued only upon the corporation's denial of his request, as he was under no compulsion to register the transfer or secure certificates earlier.

• Invalidity of Unrecorded Transfer: Respondent countered that a transfer not recorded in the stock and transfer book is non-existent as far as the corporation is concerned and cannot be the basis for issuing certificates.
• Real Party in Interest: Respondent argued that Ponce is not the real party in interest, as Gaid is the name appearing in the corporate records.
• Prescription and Laches: Respondent maintained that the cause of action was barred by prescription and laches due to the 24-year delay in making a demand.

• Cause of Action for Mandamus: Whether a complaint for mandamus to compel the issuance of stock certificates states a cause of action absent an allegation that the transfer of shares was recorded in the corporation's stock and transfer book.
• Duty of Corporate Secretary: Whether a corporate secretary has a clear legal duty to issue stock certificates to a transferee based merely on an indorsement, without prior registration of the transfer or express instructions from the registered owner.

• Cause of Action for Mandamus: The complaint was correctly dismissed for failure to state a cause of action. Under Section 63 of the Corporation Code, a transfer of shares not recorded in the stock and transfer book is non-existent as far as the corporation is concerned. Absent such registration, the corporation cannot regard the transferee as a stockholder, and no legal duty arises to issue stock certificates in the transferee's name.
• Duty of Corporate Secretary: The corporate secretary has no clear legal duty to issue stock certificates without prior registration of the transfer. Mandamus will not issue to compel a corporate secretary to register a transfer or issue certificates based merely on an indorsement, without express instructions or a power of attorney from the registered owner. The cases of Rural Bank of Salinas and Abejo v. De la Cruz were distinguished, as the former involved a special power of attorney from the registered owner, and the latter involved jurisdictional issues and duly endorsed existing certificates.

• Validity of Unregistered Transfers of Shares — A transfer of shares of stock not recorded in the stock and transfer book of the corporation is valid only between the parties, but is non-existent as far as the corporation is concerned. The corporation looks only to its books to determine its shareholders, and no duty to recognize the transferee arises until the transfer is recorded.
• Mandamus Against Corporate Secretary — Mandamus will not issue to compel a corporate secretary to transfer stock on the corporate books unless it appears that the secretary failed or refused to do so upon demand of the registered owner or someone holding a power of attorney from the registered owner. A mere indorsee claiming ownership cannot compel registration or issuance of certificates without such authority.

• "Pursuant to the foregoing provision, a transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-existent as far as the corporation is concerned."
• "As between the corporation on the one hand, and its shareholders and third persons on the other, the corporation looks only to its books for the purpose of determining who its shareholders are."
• "Without such recording, the transferee may not be regarded by the corporation as one among its stockholders and the corporation may legally refuse the issuance of stock certificates in the name of the transferee even when there has been compliance with the requirements of Section 64 of the Corporation Code."

• Hager v. Bryan, 19 Phil. 138 (1911) — Followed. Established that mandamus will not issue to compel a corporate secretary to transfer stock on the books absent a demand by the registered owner or someone with a power of attorney, and that a mere indorsee cannot compel such transfer.
• Rural Bank of Salinas, Inc. v. Court of Appeals, 210 SCRA 510 (1992) — Distinguished. While it held that registration is ministerial, that case involved a transferee armed with a Special Power of Attorney from the registered stockholder, unlike the present case.
• Abejo v. De la Cruz, 149 SCRA 654 (1987) — Distinguished. The statement that a stockholder need not be registered for the SEC to take cognizance of a suit addressed the issue of jurisdiction, not the necessity of registration before mandamus for issuance of certificates will lie. Moreover, Abejo involved duly endorsed existing certificates.
• Rivera v. Florendo, 144 SCRA 643 (1986) — Followed. Reiterated that a mere indorsement, without express instructions from the registered owner, cannot be the basis for mandamus.

• Section 63, Corporation Code (Batas Pambansa Blg. 68) — Provides that no transfer of shares shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation. Applied to rule that absent registration, the corporation does not recognize the transferee and has no duty to issue certificates.
• Section 64, Corporation Code — Provides that no certificate of stock shall be issued to a subscriber until the full amount of his subscription has been paid. Noted as having been complied with, but insufficient to compel issuance without registration under Section 63.

Bellosillo, Mendoza, Austria-Martinez, and Callejo, Sr.