G.R. No. 188769, 3 August 2016

FACTS:

Andaya bought from Chute 2, 200 shares of stock in the Rural Bank of Cabadbaran for P220, 000.00. The transaction was evidenced by a notarized document denominated as Sales Shares of Stocks. Chute endorsed and delivered the Certificate of Stock to Andaya, and, subsequently requested the bank to register the transfer and issue new stock certificate in favor of the latter. Andaya also communicated to the bank’s corporate secretary, respondent Oraiz, reiterating Chute’s request for the issuance of new stock certificate in petitioner’s favor.

After few days, the bank’s corporate secretary wrote to Chute informing her that he could not register the transfer based on previous Stockholder’s Resolution that existing stockholders should be given priority to buy the shares of others in the vent that the latter offered those shares for sale (i.e., right of first refusal).

Meanwhile, the bank’s legal counsel, respondent Gonzales, informed Andaya that the latter’s request had been referred to the bank’s Board of Directors for evaluation. Gonzales also furnished him a copy of the bank’s previous reply to Chute concerning a similar request from her. Andaya responded by reiterating his earlier request for the registration of the transfer of shares of stock in his favor citing Section 98 of the Corporation Code, he claimed that the purported restriction on the transfer of shares of stock agreed upon during the 2001 stockholder’s meeting could not deprive him of his right to transfer.

The bank eventually denied the request of Andaya on the reasoned that he had a conflict of interest as he was the president and chief executive officer of the Green Bank of Caraga, a competitor bank. Consequently, Andaya instituted an action for mandamus and damages against the Rural Bank of Cabadbaran; its corporate secretary, Oraiz; and its legal counsel, Gonzales. Petitioner sought to compel them to record the transfer in the bank’s stock and transfer book and to issue new certificate of stock in his name.

The RTC issued a decision dismissing the complaint citing Ponce v. Alsons Cement Corporation. The court ruled that Andaya had no standing to compel the bank to register the transfer and issue stock certificate in his name. 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 special power of attorney, to cause the disposition of stocks registered in the stockholder’s name.

ISSUE:

Whether Andaya, as 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, as well as issue new stock certificate in his name.

RULING:

YES. It is already a 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 certificate 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:

A person who has purchased stock and who desires to be recognized as a stockholder, for the purpose of voting, must secure a standing by having the transfer recorded upon the books. If the transfer is not duly made upon request, he has, as his remedy, to compel it to be made.

Thus, in Pacific Basin Securities Co., Inc. v. Oriental Petroleum and Minerals Corp., this Court stressed that the registrationof a transfer of shares is ministerial on the part of the Corporation:
Clearly, the right of a transferee/assignee to have stocks transferred to his name is an inherent right flowing from his ownership of the stocks. The court had ruled in Rural Bank of Salinas v. CA that the Corporation’s obligation is ministerial, citing Fletcher, to wit:

In transferring the stock, the secretary of a corporation acts in purely ministerial capacity, and does not try to decide the question of ownership.The duty of the corporation to transfer is a ministerial one and if it refuses to make suc transaction without good cause, it may be compelled to do so by mandamus.

Consequently, transferee of shares of stock are real party in interest having a cause of action for mandamus to compel the registration of the transfer and the corresponding issuance of stock certificates.
Wherefore, premises considered, the instant petition is granted.

*Case Digest by Jelyn C. Ondong, Refresher, Andres Bonifacio College, SY: 2019-2020