Nava v. Peers Marketing Corporation
REITERATIONFacts
1. The Antecedents: Teofilo Po subscribed to eighty shares of Peers Marketing Corporation, with a total par value of P8,000, and paid P2,000. No stock certificate was issued to him. Po subsequently sold twenty of these shares to Ricardo A. Nava for P2,000, representing himself as the absolute and registered owner. Nava's request to register this sale in the corporation's books was denied because Po had not fully paid his subscription, and the corporation claimed a lien on all eighty shares for the outstanding balance. 2. Procedural History: Nava filed a mandamus action in the Court of First Instance of Negros Occidental to compel Peers Marketing Corporation and its officers to register the twenty shares in his name. The corporation argued that shares with unpaid claims against them are not transferable in the corporate books. The trial court dismissed Nava's petition, leading to his appeal to the Supreme Court. Nava's sole assignment of error was that the trial court erred in applying the ruling in Fua Cun vs. Summers to justify the corporation's refusal to register the shares. 3. The Petition: Nava petitioned the Supreme Court, arguing that the trial court erred in dismissing his mandamus action. He contended that the Fua Cun ruling, based on Section 36 of the Corporation Law (now Section 37), was misapplied. Nava asserted that Section 37, as amended, only requires full payment for the subscription in the case of no-par stock, and that for par-value stock, a certificate can be issued for shares fully paid, even if the entire subscription is not settled. He specifically argued that Peers Marketing Corporation should issue a certificate for the twenty shares he purchased, despite the outstanding balance on Po's total subscription, as these twenty shares were fully paid for by him. Nava's core argument was that the corporation's refusal to register the transfer was contrary to law.
Issue(s)
Whether the officers of Peers Marketing Corporation can be compelled by mandamus to register the sale of twenty shares in the corporation's stock and transfer book. Whether the ruling in Fua Cun vs. Summers and China Banking Corporation is applicable to the present case. Whether Section 37 of the Corporation Law, as amended, permits the issuance of a stock certificate for partially paid shares of stock with par value.
Ruling
The Supreme Court affirmed the trial court's judgment dismissing the petition for mandamus. The Court held that the transfer of shares was not validly registrable because no stock certificate had been issued for the shares, and the corporation had an unpaid claim against the subscription for those shares.
Ratio Decidendi
On the issue of compelling registration via mandamus: The Court held that there was no clear legal duty on the part of the corporation's officers to register the twenty shares in Nava's name, thus no cause of action for mandamus. The transfer of shares, as contemplated in Section 52 of the Corporation Law for registration in the stock and transfer book, refers to shares covered by certificates of stock. Since no certificate was issued to Po for the twenty shares, and the corporation held an unpaid claim for the balance of his subscription, the transfer was not registrable. The Court emphasized that a stock subscription is a subsisting liability, and the corporation has a right to demand payment. Furthermore, no share of stock against which the corporation holds an unpaid claim is transferable on the books of the corporation, as explicitly stated in Section 35 of the Corporation Law. On the applicability of Fua Cun vs. Summers and China Banking Corporation: The Court found the Fua Cun case relevant. The rule enunciated in Fua Cun is that payment of one-half of the subscription does not entitle the subscriber to a certificate of stock for one-half of the shares subscribed. While Nava argued that Section 36 of the Corporation Law, as amended by Act No. 3518 (now Section 37), changed this rule, the Court distinguished the present case. The Fua Cun case, and the principle it espouses, remains valid in situations where no stock certificate has been issued and there is an unpaid claim against the subscription. On the interpretation of Section 37 of the Corporation Law: Nava contended that Section 37, which requires full payment for the subscription as a condition for issuing a certificate of stock only in the case of no-par stock, meant that for par value stock, a certificate could be issued for partially paid shares. He relied on Baltazar v. Lingayen Gulf Electric Power Co., Inc. However, the Court clarified that there was no parallelism between the Baltazar case and the present one. Crucially, in the Baltazar case, the stockholder was the holder of a certificate of stock for the shares whose par value had been paid, and the issue was about voting rights. In the instant case, no stock certificate was ever issued to Po. Without a stock certificate, which is the evidence of ownership of corporate stock, the assignment of corporate shares is effective only between the parties to the transaction, not against the corporation. The delivery of the stock certificate is essential for the protection of both the corporation and its stockholders.
Main Doctrine
A corporation cannot be compelled by mandamus to register a transfer of shares in its stock and transfer book when no stock certificate has been issued for the shares, and the corporation holds an unpaid claim against the subscription for said shares.