ALFONSO S. TAN, Petitioner vs. Securities and Exchange Commission G.R. No. 95696 March 3, 1992

ALFONSO S.
TAN, petitioner ISSUE:

vs.
SECURITIES AND EXCHANGE COMMISSION Whether or not the cancellation of Stock Certificate 2 and the subsequent issuance
G.R. No. 95696 March 3, 1992 of Stock Certificate Number 8 was null and void because of the non-endorsement of Stock
Certificate Number 2 by Alfonso Tan.
Doctrines:
Certificate of stock: The certificate is not stock in the corporation but is merely evidence of the RULING:
holder’s interest and status in the corporation, his ownership of the share represented thereby,
but is not in law the equivalent of such ownership. No. The cancellation and the transfers of stock were valid. There was a delivery of
Stock Certificate No. 2 made by Alfonso Tan to the corporation before it was replaced with Stock
Transfer of shares: “…delivery is not essential where it appears that the persons sought to be Certificate No. 6 for 50 shares to Angel Tan and Stock Certificate No. 8 for 350 shares to the
held as stockholders are officers of the corporation, and have the custody of the stock book ” Alfonso.
FACTS: From the facts deduced in the case, there was already delivery of the unendorsed
Stock Certificate No. 2, which made the issuance of Stock Certificate Nos. 6 and 8 valid. All the
Alfonso Tan was the president of Visayan Educational Supply Corporation when it was acts required for the transferee to exercise its rights over the acquired stocks were attendant
incorporated. Initially, 400 shares of stock was in his name, represented by Stock Certificate and even the corporation was protected from other parties, considering that the said transfer
Number 2. But when two other incorporators, Young and Ong assigned to the corporation their was earlier recorded or registered in the corporate stock and transfer book.
shares, Alfonso sold 50 shares to his brother Angelo, and another incorporator, Alfredo Uy, sold
50 shares to Teodora S. Tan. The above sale was necessary in order to complete the Furthermore, it is necessary to delineate the function of the stock itself form the
membership requirement of the Board of Directors. actual delivery or endorsement of the certificate of stock itself because a certificate of stock is
not necessary to render one a stockholder in a corporation. The certificate is not stock in the
Because of the mentioned transactions, Stock Certificate Number 2 was cancelled, corporation but is merely evidence of the holder’s interest and status in the corporation, his
and the corresponding stock certificates 6 and 8 were issued, with certificate 6 representing 50 ownership of the share represented thereby, but is not in law the equivalent of such ownership.
shares sold to Angelo, and certificate 8 representing the 350 shares for the petitioner Alfonso It expresses the contract between the corporation and the stockholder, but is not essential to
Tan. the existence of a share in stock or the nation of the relation of the shareholder to the
corporation.
A certain Mr. Buzon, was requested by Mr. Tan Su Ching to ask that Alfonso Tan
endorse the cancelled Stock Certificate Number 2. However, Alfonso did not sign Stock The fact of the matter is, the new holder, Angel S. Tan has already exercised his rights
Certificate Number 2 and only returned Stock Certificate Number 8. and prerogatives as stockholder and was even elected as member of the board of directors in
the respondent corporation with the full knowledge and acquiescence of petitioner. Due to the
Later on, Alfonso Tan withdrew from the corporation because he was dislodged by transfer of 50 shares, Angel S. Tan was clothed with rights and responsibilities in the board of
respondent Tan Su Ching as president. Part of the condition of his withdrawal was that he be the respondent corporation when he was elected as officer thereof.
paid with stocks-in-trade equivalent to 33% in lieu of stock value of his shares in the amount of
P35,000.00. Due to the withdrawal, the cancellation of Stock Certificate 2 and 8 was effected
and recorded in the stock and transfer book. Alfonso then filed a case with Cebu SEC,
questioning the cancellation of his aforesaid Stock Certificates 2 and 8.
Petitioner argues that he was deprived of his shares despite the non-endorsement or
surrender of Stock Certificates 2 and 8 which is contrary to Section 63 of the Corporation Code
which requires:
“…No transfer, however, shall be valid, except as between the parties, until the transfer
is recorded to the books of the corporation so as to show the names of the parties to the
transaction, the date of the transfer, and the number of the certificates and the number of shares
transferred.”
ARNALDO F. DE SILVA, plaintiff-appellant
vs.
ABOITIZ COMPANY, INC., defendant-appellee
March 31, 1923 G.R. No. L-19893
FACTS:
De Silva subscribed for 650 shares of stock of Aboitiz of the value of P500 each. He
only paid for the value of 200 shares, for which he became indebted to the corporation in the
amount of P255,000, representing the unpaid value of his subscription. The secretary of the
corporation notified him of the resolution passed by its Board, declaring the unpaid
subscriptions to have become due and demandable. The resolution also stated that all such
shares which remain unpaid will be declared delinquent, and will be advertised for sale at public
auction. De Silva thus filed a complaint in the CFI against the corporation, asking the court to
enjoin the corporation from holding such sale. He said that the corporation exceeded its
authority, as he said that its By-laws stated that the unpaid shares shall be paid out of the 70%
of the profit obtained, which shall be distributed among the subscribers, who shall not receive
any dividend until the shares are paid in full. Further, he contends that the By-laws provide an
operative way of paying for the shares continuously until their full amortization. The CFI
dismissed the case.
ISSUE:
Whether the corporation may declare the unpaid shares delinquent and/or collect
their value by another method different from that prescribed in the By-laws.
RULING:
In the By-laws, it is stated that the directors are authorized to create a special
emergency fund or extraordinary reserve fund, when, in its judgment, and in case all the shares
subscribed to have been fully paid. The directors are given the discretion to do whatever is
stated in the By-laws relative to the application of the 70% profit. They may decide whether or
not such profit shall be used to pay for the unpaid subscriptions. If the Board of Directors does
not wish to make use of such authority, it has 2 other remedies for accomplishing the purpose,
as enunciated in Velasco v Poizat: 1) to sell the stock for the account of the delinquent
subscriber, and 2) to bring a legal action against him for the amount due. In this case, BoDs
elected to avail themselves of the first remedy granted to it by law, and declared that payment
of De Silva’s subscription to 450 shares which had not been fully paid by him was due, and that
said shares were delinquent, and performed all the other acts subsequent to said declaration,
as it deemed it disadvantageous to the corporation to apply a part of the profit realized or to
be realized to the payment of his subscription. De Silva has no right to prevent the Board from
following, any other method than that mentioned in the law, for the very reason that the law
does not give stockholders any right in connection with the determination of the question
whether or not there should be deducted from the 70% of the profit distributable among the
stockholders such amount as may be deemed fit for the payment of subscriptions due and
unpaid.

ALFONSO S. TAN, Petitioner vs. Securities and Exchange Commission G.R. No. 95696 March 3, 1992

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ALFONSO S. TAN, Petitioner vs. Securities and Exchange Commission G.R. No. 95696 March 3, 1992

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ALFONSO S.

TAN, petitioner ISSUE:

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