Teng vs. SEC

The surrender of stock certificates by the transferee to the corporation is not a mandatory prerequisite for the registration of share transfers in the corporate books under Section 63 of the Corporation Code; however, surrender is required before the issuance of new certificates to enable cancellation of the old certificates and prevent the existence of duplicate documentation covering the same shares.

The case originated from respondent Ting Ping Lay's purchase of shares in TCL Sales Corporation from various stockholders between 1979 and 1989, including 480 shares from Peter Chiu and 1,440 shares from Ismaelita Maluto. Despite possessing valid deeds of sale, petitioner Anna Teng, as Corporate Secretary, refused to register the transfers in the Stock and Transfer Book and issue new certificates. This refusal led to SEC Case No. 3900, where the SEC ordered registration and issuance. After the Supreme Court affirmed this order in G.R. No. 129777 (2001), execution was delayed by an interpleader case involving competing claims to certain shares previously owned by Teng Ching. Following the resolution of the interpleader, the SEC issued an alias writ of execution for the shares acquired from Chiu and Maluto, prompting the instant petition.

• Respondent Ting Ping Lay purchased 480 shares of TCL Sales Corporation from Peter Chiu on February 2, 1979, and 1,440 shares from Ismaelita Maluto on September 2, 1989, evidenced by deeds of sale and assignment.
• Petitioner Anna Teng, as Corporate Secretary of TCL, refused to register the transfers in the Stock and Transfer Book and to issue new certificates despite demands made as early as August 31, 1989.
• The SEC ordered Teng and TCL to record the transfers and issue new certificates in its Decision dated July 20, 1994 in SEC Case No. 3900.
• After the Supreme Court affirmed the SEC decision in G.R. No. 129777 (2001), Teng filed a complaint for interpleader with the RTC of Manila to determine ownership of certain shares, causing the sheriff to hold the writ of execution in abeyance.
• The RTC decided the interpleader case on March 13, 2003, finding Henry Teng entitled to certain shares but leaving unaffected the shares acquired by Ting Ping from Chiu and Maluto.
• Ting Ping filed an Ex Parte Motion for the Issuance of Alias Writ of Execution with the SEC to enforce the registration and issuance regarding the Chiu and Maluto shares.
• The SEC issued an Order dated August 9, 2006 granting partial enforcement and issued an alias writ of execution.
• Teng opposed the execution, arguing that Ting Ping must first surrender the original stock certificates before registration could be made, and pointed out a discrepancy in the Maluto shares (1,305 shares per photocopies versus 1,440 shares per the SEC order).
• Ting Ping manifested willingness to surrender the original certificates to facilitate the transfer and issuance of new ones.

• The surrender of stock certificates is a mandatory prerequisite before registration of transfers in the corporate books and before issuance of new certificates, as required to protect the corporation from liability to bona fide holders of old certificates.
• The Court of Appeals erred in relying on Tan v. SEC because in that case the certificate was allegedly surrendered, distinguishing it from the present situation.
• The SEC's issuance of the alias writ of execution constituted an amendment or alteration of the final decision in G.R. No. 129777, particularly regarding the number of shares transferred from Ismaelita Maluto.
• The discrepancy between the 1,305 shares shown in the photocopies of Maluto's certificates and the 1,440 shares ordered by the SEC invalidated the execution as it altered the final judgment.

• Section 63 of the Corporation Code does not require the surrender of stock certificates to the corporation as a condition precedent for the registration of transfers in the corporate books.
• The only limitation imposed by Section 63 is when the corporation holds any unpaid claim against the shares intended to be transferred.
• The corporate secretary has a purely ministerial duty to register valid transfers of shares and cannot create restrictions on stock transfers not found in the law.
• The Supreme Court in G.R. No. 129777 already affirmed the validity of the transfers to Ting Ping Lay, making the registration a mere formality.
• The alleged discrepancy in the number of Maluto's shares was due to the corporation's failure to register with the SEC an increase in subscribed capital stock in 1981, not Ting Ping's fault.

• Procedural Issues:
  • Whether the SEC's issuance of an alias writ of execution constituted an amendment or alteration of the final decision in G.R. No. 129777
• Substantive Issues:
  • Whether the surrender of stock certificates is a mandatory prerequisite for the registration of share transfers in the corporate books under Section 63 of the Corporation Code
  • Whether the alleged discrepancy in the number of shares transferred by Ismaelita Maluto (1,305 shares versus 1,440 shares) affects the validity of the execution order

• Procedural:
  • N/A
• Substantive:
  • Section 63 of the Corporation Code requires three minimum requisites for a valid transfer of stocks: (a) delivery of the stock certificate from the transferor to the transferee; (b) endorsement by the owner or his attorney-in-fact; and (c) recording in the books of the corporation to be valid against third parties.
  • The delivery contemplated in Section 63 pertains to delivery from the transferor to the transferee, not from the transferee to the corporation; thus, surrender of certificates to the corporation is not required for registration of the transfer.
  • A corporation, by its board, by-laws, or officers, cannot create restrictions on stock transfers; the corporate secretary acts in a purely ministerial capacity in transferring stock and does not decide questions of ownership.
  • The discrepancy in the number of Maluto's shares was adequately explained as resulting from the corporation's failure to register an increase in subscribed capital stock in 1981, for which Ting Ping cannot be faulted.
  • While surrender is not required for registration, it is necessary before the issuance of new certificates to allow cancellation of the old certificates and prevent duplicate documentation covering the same shares.
  • The Court ordered Ting Ping Lay to surrender the certificates of stock covering the shares from Ismaelita Maluto and Peter Chiu, and ordered Anna Teng or the incumbent corporate secretary of TCL to immediately cancel the old certificates and issue new ones in Ting Ping's name, under pain of contempt.

• Nature of Stock Certificates — A certificate of stock is merely tangible evidence of ownership of shares, not the stock itself; it is prima facie evidence that the holder is a shareholder but represents only the contract between the corporation and the stockholder.
• Transfer of Shares under Section 63 — The operative act of transfer consists of delivery of the certificate from transferor to transferee coupled with endorsement; recording in the corporate books is required only for validity against third parties, not between the parties themselves.
• Ministerial Duty of Corporate Secretary — The corporate secretary has a purely ministerial duty to register valid transfers of stock and cannot refuse registration or impose additional requirements not found in the Corporation Code; the corporation cannot create restrictions on the transfer of shares.
• Surrender of Certificates — Surrender of original certificates is required for the issuance of new certificates (to enable cancellation) but is not a prerequisite for the registration of the transfer itself in the corporate books.

• "A certificate of stock is a written instrument signed by the proper officer of a corporation stating or acknowledging that the person named in the document is the owner of a designated number of shares of its stock. It is prima facie evidence that the holder is a shareholder of a corporation."
• "The delivery contemplated in Section 63, however, pertains to the delivery of the certificate of shares by the transferor to the transferee, that is, from the original stockholder named in the certificate to the person or entity the stockholder was transferring the shares to... It is thus clear that Teng's position - that Ting Ping must first surrender Chiu's and Maluto's respective certificates of stock before the transfer to Ting Ping may be registered in the books of the corporation - does not have legal basis."
• "A corporation, either by its board, its by-laws, or the act of its officers, cannot create restrictions in stock transfers. In transferring stock, the secretary of a corporation acts in purely ministerial capacity, and does not try to decide the question of ownership."
• "The surrender of the original certificate of stock is necessary before the issuance of a new one so that the old certificate may be cancelled. A corporation is not bound and cannot be required to issue a new certificate unless the original certificate is produced and surrendered."

• TCL Sales Corporation and Anna Teng v. Hon. Court of Appeals and Ting Ping Lay (G.R. No. 129777, 402 Phil. 37 (2001)) — Prior decision affirming Ting Ping Lay's ownership of the subject shares and ordering their registration in the corporate books.
• Rural Bank of Salinas, Inc. v. Court of Appeals (G.R. No. 96674, 210 SCRA 510 (1992)) — Established that the right to have stocks transferred to one's name is an inherent right flowing from ownership, and that corporate secretaries cannot create restrictions on stock transfers.
• Fleisher v. Botica Nolasco Co. (47 Phil. 583 (1925)) — Defined the nature, character, and transferability of shares of stock under the old Corporation Law.
• Fil-Estate Golf and Development, Inc. v. Vertex Sales and Trading, Inc. (710 Phil. 831 (2013)) — Held that physical delivery of a stock certificate is an essential requisite for the transfer of ownership of stocks purchased.
• Bitong v. Court of Appeals (354 Phil. 516 (1998)) — Outlined the procedure for issuance of new certificates of stock, including the requirement of surrender of the original certificate.
• Ponce v. Alsons Cement Corporation (442 Phil. 98 (2002)) — Stated that from the corporation's point of view, the transfer is not effective until it is recorded in the stock and transfer book.

• Section 63, Corporation Code (Batas Pambansa Blg. 178) — Prescribes the manner of transfer of shares, requiring delivery and endorsement of certificates and recording in the corporate books for validity against third parties; limits transferability only when the corporation holds unpaid claims against the shares.
• Section 47, Corporation Code — Provides that private corporations may include in their by-laws the manner of issuing stock certificates.