Teng v. Securities and Exchange Commission

G.R. No. 184332, 17 February 2016

FACTS:

This case has its origin in the case entitled TCL Sales Corporation and Anna Teng v. Hon. Court of Appeals and Ting Ping Lay (G.R. No. 129777). Herein respondent Ting Ping purchased 480 shares of TCL Sales Corporation (TCL) from Peter Chiu (Chiu) on February 2, 1979; 1,400 shares on September 22, 1985 from his brother Teng Ching Lay (Teng Ching), who was also the president and operations manager of TCL; and 1,440 shares from Ismaelita Maluto (Maluto) on September 2, 1989.

Upon Teng Ching’s death in 1989, his son Henry Teng (Henry) took over the management of TCL. To protect his shareholdings with TCL, Ting Ping on August 31, 1989 requested TCL’s Corporate Secretary, herein petitioner Teng, to enter the transfer in the Stock and Transfer Book of TCL for the proper recording of his acquisition. He also demanded the issuance of new certificates of stock in his favor. TCL and Teng, however, refused despite repeated demands. Because of their refusal, Ting Ping filed a petition for mandamus with the SEC against TCL and Teng.

The Securities and Exchange Commission (SEC) granted the issuance of an alias writ of execution, compelling petitioner Anna Teng (Teng) to register and issue new certificates of stock in favor of respondent Ting Ping Lay (Ting Ping). The order of the SEC was affirmed by the CA; hence, this petition.

ISSUE:

Whether the surrender of the certificates of stock is a requisite before registration of the transfer may be made in the corporate books and for the issuance of new certificates in its stead.

RULING:

NO. Under Section 63 of the Corporation Code, certain minimum requisites must be complied with for there to be a valid transfer of stocks, to wit: (a) there must be delivery of the stock certificate; (b) the certificate must be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and (c) to be valid against third parties, the transfer must be recorded in the books of the corporation.

It is the delivery of the certificate, coupled with the endorsement by the owner or his duly authorized representative that is the operative act of transfer of shares from the original owner to the transferee. The Court even emphatically declared. in Fil-Estate Golf and Development, Inc., et al. v. Vertex Sales and Trading, Inc. that in “a sale of shares of stock, physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased.

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, whether by sale or some other valid form of absolute conveyance of ownership. Shares of stock may be transferred by delivery to the transferee of the certificate properly indorsed. Title may be vested in the transferee by the delivery of the duly indorsed certificate of stock.

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. The delivery or surrender adverted to by Teng, i.e., from Ting Ping to TCL, is not a requisite before the conveyance may be recorded in its books. To compel Ting Ping to deliver to the corporation the certificates as a condition for the registration of the transfer would amount to a restriction on the right of Ting Ping to have the stocks transferred to his name, which is not sanctioned by law. The only limitation imposed by Section 63 is when the corporation holds any unpaid claim against the shares intended to be transferred.

*Case Digest by Rezeile S. Morandarte, Refresher, Andres Bonifacio College, SY 2019 – 2020

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