Nautica Canning Corp. v. Yumul
REITERATIONFacts
The Antecedents: Nautica Canning Corporation (Nautica) was incorporated on May 11, 1994. Respondent Roberto C. Yumul was an incorporator and subscriber of one share. On December 19, 1994, Yumul was appointed Chief Operating Officer/General Manager and was granted an Option to Purchase up to 15% of the total stocks subscribed by First Dominion Prime Holdings, Inc. (First Dominion) in Nautica. On June 22, 1995, a Deed of Trust and Assignment was executed between First Dominion and Yumul, assigning 14,999 of First Dominion's subscribed shares in Nautica to Yumul, stating these shares were acquired and paid for in the name of First Dominion for convenience, but in trust for Yumul. In March 1996, Nautica declared a P35,000,000 cash dividend, P8,250,000 of which was paid to Yumul. After Yumul's resignation on August 5, 1996, he requested the formalization of the offer to buy his 15% share or the issuance of shares in his name. This was denied, claiming he was not a stockholder. Yumul then requested the recording of the Deed of Trust and Assignment in the Stock and Transfer Book and inspection of corporate books, which were also denied. Procedural History: Yumul filed a petition for mandamus with damages before the Securities and Exchange Commission (SEC) seeking the recording of the Deed of Trust and Assignment and the issuance of stock certificates in his name. The SEC En Banc ruled in favor of Yumul, declaring him a stockholder and beneficial owner of 14,999 shares, and entitled to inspection rights. The Court of Appeals affirmed the SEC decision. The motion for reconsideration was denied. The Petition: Petitioners assail the Court of Appeals' decision, arguing Yumul was not a stockholder but a nominal owner of one share held in trust for Alvin Y. Dee, who allegedly paid for it. They also contend the Deed of Trust and Assignment is void for being simulated, as Yumul failed to exercise the option to purchase and pay for the shares.
Issue(s)
Whether Roberto C. Yumul is a stockholder of Nautica Canning Corporation. Whether the Deed of Trust and Assignment is valid and registrable in the Stock and Transfer Book of Nautica Canning Corporation.
Ruling
The petition is PARTIALLY GRANTED. The September 26, 2001 Decision of the Court of Appeals is AFFIRMED insofar as it declares respondent Roberto C. Yumul as a subscriber and stockholder of one share of stock of Nautica Canning Corporation. The Decision is REVERSED and SET ASIDE insofar as it affirms the validity of the Deed of Trust and Assignment and orders its registration in the Stock and Transfer Book of Nautica Canning Corporation.
Ratio Decidendi
On whether Roberto C. Yumul is a stockholder of Nautica Canning Corporation: The Supreme Court affirmed the findings of the SEC and the Court of Appeals that Yumul is a stockholder of Nautica, owning one share. The Court emphasized that as between the corporation and its shareholders, the corporation looks only to its books to determine who its shareholders are. Nautica's Articles of Incorporation and General Information Sheet listed Yumul as an incorporator and subscriber of one share. Even if there was an agreement between Yumul and Alvin Y. Dee for Yumul to hold the share in trust for Dee, such an agreement is binding only between them and does not bind the corporation unless the transfer is recorded in the Stock and Transfer Book. The Court noted that petitioners failed to show any transfer of subscription from Yumul to Dee after incorporation. Furthermore, Yumul's election as a Director and subsequently as President of Nautica, under Section 23 of the Corporation Code, necessitates ownership of at least one share, reinforcing his status as a stockholder from the corporation's perspective. The Court reiterated the principle that a transfer of shares not recorded in the stock and transfer book is non-existent as far as the corporation is concerned, citing Ponce v. Alsons Cement Corp.. On the validity and registrability of the Deed of Trust and Assignment: The Supreme Court reversed and set aside the ruling of the Court of Appeals affirming the validity of the Deed of Trust and Assignment. The Court held that the issue of whether a contract is simulated or not is a civil matter that falls within the competence of regular trial courts, not the SEC, as it requires the application of provisions of the Civil Code. Citing Intestate Estate of Alexander T. Ty v. Court of Appeals, the Court stated that no special corporate skill is necessary to resolve such disputes. The Court noted that neither the SEC nor the Court of Appeals made a definitive finding on the validity of the Deed of Trust and Assignment. Therefore, due to the nature of the issue and the failure of the lower bodies to make a determinative ruling, the Supreme Court refrained from ruling on the matter, stating it could only be resolved after an appropriate case is filed and decided by the proper forum. The Court also pointed out that the Securities Regulation Code (RA 8799), which took effect on August 8, 2000, transferred jurisdiction over intra-corporate disputes from the SEC to the regional trial courts, making the RTC the proper venue for such controversies.
Main Doctrine
A transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-existent as far as the corporation is concerned. As between the corporation on one hand, and its shareholders and third persons on the other, the corporation looks only to its books for the purpose of determining who its shareholders are. The issue of the validity of a Deed of Trust and Assignment, being civil in nature, falls under the competence of regular courts, not the SEC, especially prior to the effectivity of Republic Act No. 8799.