Puno vs. Puno Enterprises

Upon the death of a stockholder, the heirs do not automatically become stockholders of the corporation and acquire the rights and privileges of the deceased; the stocks must first be distributed to the heirs in estate proceedings and the transfer recorded in the corporate books before they can exercise such rights. Additionally, the determination of whether a person is an heir to a decedent's estate must be ventilated in a special proceeding for the settlement of the estate, not in an ordinary civil action for specific performance.

Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno Enterprises, Inc. Decades after his death, Joselito Musni Puno claimed to be Carlos L. Puno's illegitimate son with his common-law wife, Amelia Puno, and sought to assert stockholder rights including the inspection of corporate books and the receipt of dividends. This raised issues regarding the proper mode of proving filiation, the automatic succession of heirs to stockholder status, and the proper venue for adjudicating claims of heirship against a corporation.

• Carlos L. Puno died on June 25, 1963. He was an incorporator of respondent Puno Enterprises, Inc.
• On March 14, 2003, petitioner Joselito Musni Puno filed a complaint for specific performance claiming to be the son of Carlos L. Puno with the latter's common-law wife, Amelia Puno.
• Petitioner sought to compel respondent to allow him to inspect its corporate books, render an accounting of all transactions from 1962, and give him all profits, earnings, dividends, or income pertaining to the shares of Carlos L. Puno.
• Respondent filed a Motion to Dismiss arguing that petitioner lacked legal personality because his birth certificate named him "Joselito Musni Muno," requiring a judicial declaration that "Joselito Musni Puno" and "Joselito Musni Muno" were one and the same person.
• Petitioner submitted a corrected birth certificate showing "Joselito M. Puno," certified by the Civil Registrar of the City of Manila, together with the Certificate of Finality thereof.
• The RTC conditionally admitted the corrected birth certificate as genuine and authentic, ordered respondent to file its answer, and set the case for pre-trial.
• On October 11, 2005, the RTC rendered judgment ordering Jesusa Puno and/or Felicidad Fermin to allow the plaintiff to inspect the corporate books and records of the company from 1962 up to the present.
• On appeal, the CA reversed the RTC decision. It found that petitioner was unable to establish the paternity of and his filiation to Carlos L. Puno because his birth certificate was prepared without the intervention of and the participatory acknowledgment of paternity by Carlos L. Puno.
• The CA further ruled that petitioner was not a stockholder of the corporation but was merely claiming rights as an heir of Carlos L. Puno, making his action for specific performance premature; the proper action was to prove paternity and filiation in a petition for the settlement of the estate of Carlos L. Puno.

• The Court of Appeals erred in not ruling that Joselito Puno is entitled to the reliefs demanded, being the heir of the late Carlos Puno, one of the incorporators of respondent corporation.
• The Court of Appeals erred in ruling that the filiation of Joselito Puno is not duly proven or established.
• The Court of Appeals erred in not ruling that Joselito Muno and Joselito Puno refer to one and the same person.
• The Court of Appeals erred in not ruling that respondent merely disputes the surname of the petitioner which was misspelled and that the factual allegations regarding the rights of petitioner as heir of Carlos Puno are deemed admitted hypothetically in respondent's Motion to Dismiss.
• The Court of Appeals erred in decreeing that petitioner is not entitled to inspect the corporate books of defendant corporation.

• Petitioner failed to establish his filiation to Carlos L. Puno because the birth certificate was prepared without the participatory acknowledgment of paternity by Carlos L. Puno; only the mother supplied the data and signed the certificate.
• Petitioner is not a stockholder of the corporation but is merely claiming rights as an heir of Carlos L. Puno.
• The action for specific performance is premature; the proper action is to prove paternity and filiation in a petition for the settlement of the estate of Carlos L. Puno.
• Only directors, trustees, stockholders, or members are entitled to inspect corporate books under Sections 74 and 75 of the Corporation Code.

• Procedural:
  • Whether the Court of Appeals erred in dismissing the complaint when petitioner had submitted a corrected birth certificate establishing his identity.
  • Whether an ordinary civil action for specific performance is the proper vehicle to determine heirship and assert stockholder rights, or whether such determination requires special proceedings for the settlement of the estate.
• Substantive Issues:
  • Whether petitioner established his filiation to Carlos L. Puno sufficient to claim rights as an heir.
  • Whether an heir of a deceased stockholder automatically becomes a stockholder entitled to inspect corporate books and receive dividends under Sections 74 and 75 of the Corporation Code.
  • Whether the determination of heirship can be made in an ordinary civil action for specific performance.

• Procedural:
  • The Supreme Court affirmed the dismissal, holding that factual findings of the Court of Appeals supported by substantial evidence are conclusive and binding in a petition for review on certiorari under Rule 45, as the Court may not review, examine, evaluate, or weigh the probative value of evidence presented.
  • The Court agreed with the Court of Appeals that the action for specific performance was improper. A determination of whether a person is an heir of a deceased must be ventilated in a special proceeding instituted precisely for the purpose of settling the estate of the latter, not in an ordinary civil action for specific performance.
• Substantive:
  • The Court affirmed that petitioner failed to establish filiation to Carlos L. Puno. A certificate of live birth purportedly identifying the putative father is not competent evidence of paternity when there is no showing that the putative father had a hand in the preparation of the certificate. The local civil registrar has no authority to record the paternity of an illegitimate child on the information of a third person. Only the petitioner's mother supplied the data and signed the certificate; there was no evidence that Carlos L. Puno acknowledged petitioner as his son.
  • The Court held that upon the death of a stockholder, heirs do not automatically become stockholders of the corporation and acquire the rights and privileges of the deceased. The stocks must be distributed to the heirs in estate proceedings, and the transfer of the stocks must be recorded in the books of the corporation under Section 63 of the Corporation Code. Until such transfer is recorded, the transfer is not valid except as between the parties.
  • During the interim period between death and final settlement of the estate, the heirs stand as the equitable owners of the stocks, while the executor or administrator duly appointed by the court is vested with the legal title to the stock. Consequently, during such time, it is the administrator or executor who is entitled to exercise the rights of the deceased as stockholder, including the right to inspect books under Sections 74 and 75 of the Corporation Code.
  • Even if petitioner presented sufficient evidence to establish that he is the son of Carlos L. Puno, he would still not be allowed to inspect respondent's books or be entitled to receive dividends absent any showing in the corporate transfer book that some of the shares owned by Carlos L. Puno were transferred to him, which would only be possible if he had been recognized as an heir and had participated in the settlement of the estate.

• Right of Stockholders to Inspect Corporate Books (Sections 74 and 75, Corporation Code) — The stockholder's right of inspection of the corporation's books and records is based upon his ownership of shares in the corporation and the necessity for self-protection. Such right rests upon the stockholder's underlying ownership of the corporation's assets and property. Only directors, trustees, stockholders, or members are entitled to this right.
• Non-Automatic Succession of Heirs to Stockholder Status — Upon the death of a shareholder, the heirs do not automatically become stockholders of the corporation. The stocks must first be distributed to the heirs in estate proceedings, and the transfer of the stocks must be recorded in the books of the corporation. During the interim period, the heirs stand as equitable owners, while the executor or administrator holds legal title and is vested with the right to exercise the deceased's stockholder rights.
• Filiation and Proof of Paternity — A certificate of live birth purportedly identifying the putative father is not competent evidence of paternity when there is no showing that the putative father had a hand in the preparation of the certificate. The local civil registrar has no authority to record the paternity of an illegitimate child on the information of a third person. Baptismal certificates can only serve as evidence of the administration of the sacrament, not of the veracity of entries regarding paternity.
• Special Proceedings for Settlement of Estate — The determination of whether a person claiming proprietary rights over the estate of a deceased person is an heir of the deceased must be ventilated in a special proceeding instituted precisely for the purpose of settling the estate of the latter. The status of an illegitimate child who claims to be an heir to a decedent's estate cannot be adjudicated in an ordinary civil action, such as one for specific performance or recovery of property.

• "Upon the death of a stockholder, the heirs do not automatically become stockholders of the corporation; neither are they mandatorily entitled to the rights and privileges of a stockholder."
• "A certificate of live birth purportedly identifying the putative father is not competent evidence of paternity when there is no showing that the putative father had a hand in the preparation of the certificate."
• "The stockholder's right of inspection of the corporation's books and records is based upon his ownership of shares in the corporation and the necessity for self-protection."
• "Corollary to this is the doctrine that a determination of whether a person, claiming proprietary rights over the estate of a deceased person, is an heir of the deceased must be ventilated in a special proceeding instituted precisely for the purpose of settling the estate of the latter."

• Fernandez v. Tarun — Cited for the rule that factual findings of the Court of Appeals supported by substantial evidence are conclusive and binding.
• Social Security System v. Aguas — Cited for the rule that under Rule 45, the Court may not review the factual findings of the Court of Appeals or evaluate the probative value of evidence.
• Cabatania v. Court of Appeals — Cited for the rule that a certificate of live birth is not competent evidence of paternity without the putative father's participation in its preparation, and that baptismal certificates do not prove paternity.
• Gokongwei, Jr. v. Securities and Exchange Commission — Cited for the principle that the right of inspection rests upon the stockholder's underlying ownership of corporate assets and property.
• Tan v. Sycip — Cited for the rule that until settlement and division of the estate is effected, the stocks of the decedent are held by the administrator or executor.
• Joaquino v. Reyes — Cited for the doctrine that the status of an illegitimate child claiming to be an heir must be determined in special proceedings for settlement of the estate, not in ordinary civil actions.

• Section 74 of the Corporation Code (Books to be kept; stock transfer agent) — Enumerates the persons entitled to inspection of corporate records (director, trustee, stockholder, or member) and mandates that records of business transactions and minutes of meetings be open to inspection at reasonable hours on business days.
• Section 75 of the Corporation Code (Right to financial statements) — Provides that within ten days from receipt of a written request of any stockholder or member, the corporation shall furnish its most recent financial statement.
• Section 63 of the Corporation Code — Provides that no transfer of stocks shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate, and the number of shares transferred.
• Rule 45 of the Rules of Court — Governs petitions for review on certiorari to the Supreme Court, limiting review to questions of law and prohibiting the re-examination of factual findings of the Court of Appeals.