Joseph Omar O. Andaya, Petitioner, vs. Rural Bank of Cabadbaran, Inc., Demosthenes P. Oraiz and Ricardo D. Gonzales, Respondents; G.R. No. 188769; 03 August 2016
Andaya bought from Chute 2,200 shares of stock in the Rural Bank of Cabadbaran for P220,000. The transaction was evidenced by a notarized document denominated as Sale of Shares of Stocks. Chute duly endorsed and delivered the certificates of stock to Andaya and, subsequently, requested the bank to register the transfer and issue new stock certificates in favor of the latter. Andaya also separately communicated with the bank’s corporate secretary, respondent Oraiz, reiterating Chute’s request for the issuance of new stock certificates in petitioner’s favor. The bank denied the request of Andaya.
In denying the request of Andaya, the bank reasoned that he had a conflict of interest, as he was then president and chief executive officer of the Green Bank of Caraga, a competitor bank. Respondent bank concluded that the purchase of shares was not in good faith, and that the purchase “could be the beginning of a hostile bid to take-over control of the [Rural Bank of Cabadbaran].” Citing Gokongwei v. Securities and Exchange Commission, respondent insisted that it may refuse to accept a competitor as one of its stockholders.
Consequently, Andaya instituted an action for mandamus and damages against the Rural Bank of Cabadbaran; its corporate secretary, Oraiz; and its legal counsel, Gonzalez. Petitioner sought to compel them to record the transfer in the bank’s stock and transfer book and to issue new certificates of stock in his name.
The trial court dismissed the complaint. Citing Porice v. Alsons Cement Corporation the trial court ruled that Andaya had no standing to compel the bank to register the transfer and issue stock certificates in his name. It explained that he had failed to show that the transfer of subject shares of stock was recorded in the stock and transfer book of the bank or that he was authorized by Chute to make the transfer.” According to the trial court, Ponce requires that a person seeking to transfer shares must appear to have an express instruction and a specific authority from the registered stockholder, such as a special power of attorney, to cause the disposition of stocks registered in the stockholder’s name. It ruled that without the sale first registered or an authority from the transferor, it was unmistakably clear that Andaya had no cause of action for mandamus against the bank.
Whether Andaya, as a transferee of shares of stock, may initiate an action for mandamus compelling the Rural Bank of Cabadbaran to record the transfer of shares in its stock and transfer book and to issue new stock certificates in his name.
It is already settled jurisprudence that the registration of a transfer of shares of stock is a ministerial duty on the part of the corporation. Aggrieved parties may then resort to the remedy of mandamus to compel corporations that wrongfully or unjustifiably refuse to record the transfer or to issue new certificates of stock. This remedy is available even upon the instance of a bona fide transferee who is able to establish a clear legal right to the registration of the transfer. This legal right inherently flows from the transferee’s established ownership of the stocks, a right that has been recognized by this Court as early as in Price v. Martin.
Consequently, transferees of shares of stock are real parties in interest having a cause of action for mandamus to compel the registration of the transfer and the corresponding issuance of stock certificates.
Andaya has been able to establish that he is a bona fide transferee of the shares of stock of Chute. In proving this fact, he presented to the RTC the following documents evidencing the sale: (1) a notarized Sale of Shares of Stocks showing Chute’s sale of 2,200 shares of stock to petitioner; (2) a Documentary Stamp Tax Declaration/Return (3) Capital Gains Tax Return; and (4) stock certificates covering the subject shares duly endorsed by Chute. The existence, genuineness, and due execution of these documents have been admitted and remain undisputed.
There is no doubt that Andaya had the standing to initiate an action for mandamus to compel the Rural Bank of Cabadbaran to record the transfer of shares in its stock and transfer book and to issue new stock certificates in his name. As the transferee of the shares, petitioner stands to be benefited or injured by the judgment in the instant petition, a judgment that will either order the bank to recognize the legitimacy of the transfer and petitioner’s status as stockholder or to deny the legitimacy thereof.
This Court further finds that the reliance of the RTC on Ponce in finding that petitioner had no cause of action for mandamus against the defendant bank was misplaced. In Ponce, the issue resolved by this Court was whether the petitioner therein had a cause of action for mandamus to compel the issuance of stock certificates, not the registration of the transfer. Ruling in the negative, the Court said in that case that without any record of the transfer of shares in the stock and transfer book of the corporation, there would be no clear basis to compel that corporation to issue a stock certificate. By the import of Section 63 of the Corporation Code, the stock and transfer book would be the main reference book in ascertaining a person’s entitlement to the rights of a stockholder. Consequently, without the registration of the transfer, the alleged transferee could not yet be recognized as a stockholder who is entitled to be given a stock certificate.
In contrast, at the crux of this petition are the registration of the transfer and the issuance of the corresponding stock certificates. Requiring petitioner to register the transaction before he could institute a mandamus suit in supposed abidance by the ruling in Ponce was a palpable error. It led to an absurd, circuitous situation in which Andaya was prevented from causing the registration of the transfer, ironically because the shares had not been registered. With the logic resorted to by the RTC, transferees of shares of stock would never be able to compel the registration of the transfer and the issuance of new stock certificates in their favor. They would first be required to show the registration of the transfer in their names — the ministerial act that is the subject of the mandamus suit in the first place. The trial court confuses the application of the dicta in Ponce, which is pertinent only to the issuance of new stock certificates, and not to the registration of a transfer of shares. As Ponce itself provides, these two are entirely different events. The RTC’s anomalous reasoning cannot be given legal imprimatur by this Court.