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Tan vs. SEC

The petitioner's stock certificate was cancelled by the corporation while he was still a board member. He then sold 50 shares to his brother Angel, resulting in the cancellation of his original certificate and the issuance of new certificates to Angel and himself. Later, after petitioner withdrew from the corporation, his remaining certificate was also cancelled. The issue is whether this cancellation and transfer was valid without his endorsement. The court ruled that endorsement is not required where the transfer is recorded in the corporate books and the new holder has exercised shareholder rights with petitioner's knowledge. A stock certificate represents ownership but is not essential, and the transfer clothed Angel with valid rights as a new board member of the corporation.

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Charisma Michelle L. De Jesus
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96 views2 pages

Tan vs. SEC

The petitioner's stock certificate was cancelled by the corporation while he was still a board member. He then sold 50 shares to his brother Angel, resulting in the cancellation of his original certificate and the issuance of new certificates to Angel and himself. Later, after petitioner withdrew from the corporation, his remaining certificate was also cancelled. The issue is whether this cancellation and transfer was valid without his endorsement. The court ruled that endorsement is not required where the transfer is recorded in the corporate books and the new holder has exercised shareholder rights with petitioner's knowledge. A stock certificate represents ownership but is not essential, and the transfer clothed Angel with valid rights as a new board member of the corporation.

Uploaded by

Charisma Michelle L. De Jesus
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Tan vs.

SEC
G.R. No. 95696
March 3, 1992

Facts:
Petitioner's certificate of stock No. 2 was cancelled by the corporate secretary and respondent Patricia
Aguilar by virtue of Resolution No. 1981 (b), which was passed and approved while petitioner was still a
member of the Board of Directors of the respondent corporation.

Due to the withdrawal of the incorporators and in order to complete the membership of the five (5)
directors of the board, petitioner sold fifty (50) shares out of his 400 shares of capital stock to his brother
Angel S. Tan. Another incorporator, Alfredo B. Uy, also sold fifty (50) of his 400 shares of capital stock to
Teodora S. Tan and both new stockholders attended the special meeting.

Accordingly, as a result of the sale by petitioner of his fifty (50) shares of stock to Angel S. Tan on April
16, 1981, Certificate of Stock No. 2 was cancelled and the corresponding Certificates Nos. 6 and 8 were
issued, signed by the newly elected fifth member of the Board, Angel S. Tan as Vice-president, upon
instruction of Alfonso S. Tan who was then the president of the Corporation.

With the cancellation of Certificate of stock No. 2 and the subsequent issuance of Stock Certificate No. 6 in
the name of Angel S. Tan and for the remaining 350 shares, Stock Certificate No. 8 was issued in the name
of Petitioner.

When petitioner was dislodged from his position as president, he withdrew from the corporation on
condition that he be paid with stocks-in-trade equivalent to 33.3% in lieu of the stock value of his shares
in the amount of P35,000.00. After the withdrawal of the stocks, the board of the respondent corporation
held a meeting effecting the cancellation of Stock Certificate Nos. 2 and 8 in the corporate stock and
transfer book. Petitioner then filed the case before the Cebu SEC Extension questioning the cancellation of
his aforesaid Stock Certificates Nos. 2 and 8.

Issue:
Whether or not the cancellation and transfer of petitioner's shares and Certificate of Stock No. 2 as well as
the issuance and cancellation of Certificate of Stock No. 8 was patently and palpably unlawful, null and
void, invalid and fraudulent. Whether or not without the actual delivery and endorsement of the stock
certificate in question, there can be no transfer, or that such transfer is null and void. 

Ruling:
For all intents and purposes, however, since this was already cancelled which cancellation was also
reported to the respondent Commission, there was no necessity for the same certificate to be endorsed by
the petitioner. All the acts required for the transferee to exercise its rights over the acquired stocks were
attendant and even the corporation was protected from other parties, considering that said transfer was
earlier recorded or registered in the corporate stock and transfer book.

Following the doctrine enunciated in the case of Tuazon v. La Provisora Filipina, where this Court held, that
delivery is not essential where it appears that the persons sought to be held as stockholders are officers of
the corporation, and have the custody of the stock book . . . (67 Phi. 36).

Furthermore, there is a necessity to delineate the function of the stock itself from the actual delivery or
endorsement of the certificate of stock itself as is the question in the instant case. A certificate of stock is
not necessary to render one a stockholder in corporation.

Nevertheless, a certificate of stock is the paper representative or tangible evidence of the stock itself and
of the various interests therein. The certificate is not stock in the corporation but is merely evidence of the
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. It expresses the contract between the corporation and the
stockholder, but is not essential to the existence of a share in stock or the nation of the relation of
shareholder to the corporation.
Under the instant case, the fact of the matter is, the new holder, Angel S. Tan has already exercised his
rights 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 transfer of
fifty (50) shares, Angel S. Tan was clothed with rights and responsibilities in the board of the respondent
corporation when he was elected as officer thereof.

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