Rural Bank of Salinas, Inc. vs. Court of Appeals

A corporation's duty to register a transfer of shares in its stock and transfer book, upon presentation of a deed of assignment executed by the owner or his attorney-in-fact, is ministerial. Where the corporation refuses without justifiable cause, the transferee may compel registration through a petition for mandamus before the Securities and Exchange Commission, which has original and exclusive jurisdiction over such intracorporate controversy. The pendency of a separate civil action questioning the validity of the underlying deed of assignment does not stay the ministerial duty to register.

Clemente G. Guerrero, President of the Rural Bank of Salinas, Inc., owned 473 shares in the bank. On June 10, 1979, he executed a Special Power of Attorney (SPA) authorizing his wife, Melania A. Guerrero, to sell, dispose of, or mortgage his shares. Pursuant to this SPA, Melania executed two Deeds of Assignment: one on February 27, 1980, assigning 472 shares to Luz Andico, Wilhelmina Rosales, and Francisco Guerrero, Jr., and another on June 22, 1980 (two days before Clemente's death), assigning the remaining one share to Francisco Guerrero, Sr. When Melania presented these deeds to the bank for registration and the issuance of new certificates, the bank refused.

• Nature of the Action: This is a petition for review on certiorari seeking to reverse the Court of Appeals' decision affirming the SEC's order compelling the Rural Bank of Salinas to register the transfer of 473 shares of stock.
• The Special Power of Attorney: On June 10, 1979, Clemente G. Guerrero, then President of the bank, executed an SPA in favor of his wife, Melania A. Guerrero, authorizing her to sell, dispose of, or mortgage his 473 shares (represented by Stock Certificates Nos. 26, 49, and 65).
• The Deeds of Assignment: Pursuant to the SPA, Melania executed two Deeds of Assignment. On February 27, 1980, she assigned 472 shares to Luz Andico (457 shares), Wilhelmina Rosales (10 shares), and Francisco Guerrero, Jr. (5 shares). On June 22, 1980, she assigned the remaining 1 share to Francisco Guerrero, Sr.
• Bank's Refusal to Register: Melania presented the deeds to the petitioner bank, requesting the cancellation of the old certificates and the issuance of new ones in the assignees' names. The bank refused.
• Intervention and Separate Action: Maripol Guerrero, an adopted daughter of the deceased, intervened in the SEC case, claiming the deeds were fictitious and antedated, that they constituted disguised donations, and that a separate estate proceeding (Spec. Proc. No. 9400) was pending. Her motion to intervene was denied. She subsequently filed a separate civil action (Civil Case No. Q-32050) for annulment of the deeds.
• Bank's Defense: Petitioners argued that upon Clemente's death, the shares became part of his estate, requiring settlement and liquidation before any distribution to avoid evasion of estate taxes and liability to creditors.

• Jurisdiction and Propriety of Mandamus: Petitioners argued that mandamus is not a remedy cognizable by the SEC when the purpose is to register certificates of stock in the names of claimants who are not yet stockholders of the corporation.
• Existence of Valid Reasons for Refusal: Petitioners maintained that valid reasons existed to refuse registration, including: (a) a pending controversy over ownership in the Regional Trial Court (the estate proceeding); (b) claims that the Deeds of Assignment were fictitious and antedated; and (c) claims that the transfer would deprive an heir (Maripol Guerrero) of her rightful inheritance share.

• SEC Jurisdiction: Respondents countered that the case involved an intracorporate dispute between a stockholder (through his attorney-in-fact) and the corporation, falling squarely within the SEC's original and exclusive jurisdiction under P.D. No. 902-A.
• Ministerial Duty to Register: Respondents argued that under Section 63 of the Corporation Code, the corporation's duty to register a transfer of shares, upon presentation of a proper deed of assignment, is purely ministerial. The corporation cannot inquire into the validity of the underlying transaction or refuse registration based on extraneous disputes.
• Mandamus as Proper Remedy: Respondents contended that mandamus is the proper remedy to compel the performance of this ministerial duty.

• SEC Jurisdiction: Whether the Securities and Exchange Commission has jurisdiction over a petition for mandamus to compel the registration of a stock transfer.
• Propriety of Mandamus and Grounds for Refusal: Whether mandamus is the proper remedy to compel the registration of shares, and whether the pendency of a separate civil action questioning the validity of the deed of assignment constitutes a valid ground for the corporation to refuse registration.

• SEC Jurisdiction: The SEC has original and exclusive jurisdiction over the case. The controversy is an intracorporate one, defined as arising between a stockholder and the corporation. The case involves the registration, cancellation, and issuance of shares, which is within the SEC's power to adjudicate pursuant to Section 5(b) of P.D. No. 902-A.
• Propriety of Mandamus and Grounds for Refusal: Mandamus lies to compel the registration. The corporation's duty to register a transfer under Section 63 of the Corporation Code is ministerial. The only limitation under the law is when the corporation holds an unpaid claim against the shares, which was not alleged here. The corporation cannot create restrictions on stock transfers not provided by law and cannot pass upon the legality of the transaction between the parties. The pendency of a separate action to annul the deeds does not stay the ministerial duty to register; the registration is without prejudice to the outcome of that ownership dispute.

• Ministerial Duty of Corporation in Stock Transfers — The duty of a corporation, through its corporate secretary, to record a transfer of shares in its stock and transfer book upon presentation of a deed of assignment executed by the owner or his attorney-in-fact is purely ministerial. The corporation acts in an administrative capacity and does not adjudicate ownership. This duty is mandated by Section 63 of the Corporation Code to give effect to transfers between parties. Refusal to perform this duty without justifiable cause (such as an unpaid claim on the shares) may be compelled via mandamus.
• SEC Jurisdiction over Intracorporate Controversies — The Securities and Exchange Commission has original and exclusive jurisdiction to hear and decide cases involving intracorporate controversies, which include disputes between a stockholder and the corporation concerning the exercise of corporate rights, such as the registration of stock transfers.

• "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."
• "A corporation, either by its board, its by-laws, or the act of its officers, cannot create restrictions in stock transfers, because: Restrictions in the traffic of stock must have their source in legislative enactment, as the corporation itself cannot create such impediment."
• "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."

• Fleisher vs. Botica Nolasco, 47 Phil. 583 — Cited as controlling authority interpreting the predecessor of Section 63 of the Corporation Code. The Court reiterated the ruling that the law contemplates no restriction on to whom stocks may be transferred and that the owner is at liberty to dispose of them without limitation other than general provisions of law.
• Rivera vs. Florendo, 144 SCRA 643 (1986) — Cited for the principle that there is no distinction, qualification, nor exception to the SEC's jurisdiction over intracorporate controversies.

• Section 5(b) of P.D. No. 902-A — Granted the SEC original and exclusive jurisdiction to hear and decide cases involving intracorporate controversies. Applied to establish the SEC's jurisdiction over the mandamus petition filed by the stock transferees against the corporation.
• Section 63 of the Corporation Code (Batas Pambansa Blg. 68) — Provides that shares of stock are personal property and may be transferred by delivery of the certificate endorsed by the owner or his attorney-in-fact. No transfer shall be valid, except as between the parties, until recorded in the books of the corporation. Applied to define the ministerial duty of the corporation to register the transfer.

• Chief Justice Andres R. Narvasa
• Justice Teodoro R. Padilla
• Justice Florenz D. Regalado

N/A — The decision indicates unanimous concurrence.